Limitations of California Non-Compete Law

Unlike almost all other states, employee non-compete agreements are unlawful and unenforceable in California. This protects the ability of California residents to find work where they are most skillful. It also allows California employers to hire the best and most productive work force.

The prohibition against restraints on trade, found in Business and Professions Code Section 16600, applies to anyone in California.

It has also been held to apply to employees who may be subject to a non-compete in another state, when they are seeking employment in California. This means a non-compete agreement that may be enforceable against someone in Missouri is not enforceable against them if they move to California and seek to work in the Golden State.

Although California employers are subject to this law, this only applies to their California workforce. Continuing the example, if a California based company has an office in Missouri, then the employees in Missouri are subject to Missouri law. Not California law. This makes sense when one considers other laws such as overtime and minimum wage. It is the laws of the state where one works that regulate their employment in that state. Not where the employer may be based or have other offices.

Another limitation of California non-compete agreements is that the ability to compete is not an open door to unfairly compete. This typically means not being able to take and use confidential, private, and trade secret information from a prior employer.

Ultimately then, a former employee in California is in the same position as any other competitor. They are not in a worse position by not being able to compete just as other competitors are not prohibited from competitiveness. On the other hand they are not in a better position by being able to use confidential information from a prior employer just as other competitors are not privy to that information.