In California, businesses often ask employees to sign non-competition and non-solicitation agreements. These agreements typically prevent the employee from working for a competitor of the employer or from soliciting the employer's customers.
However, these agreements cannot violate California BPC section 16600. This section provides that contracts that limit someone's ability to work in any profession, trade or business are null.
As a result, non-competition and non-solicitation agreements that are overly broad or would prevent an employee from working in their chosen profession are invalid and unenforceable.
It is essential to understand what a non-solicitation agreement is and when it may or may not be enforceable.
The Use of Non-Solicitation Agreements
Non-solicitation agreements are often used in employment contracts to protect an employer's business interests. However, California courts have held that these agreements are void and unenforceable because they restrain trade in violation of public policy. Under California law, non-solicitation agreements are invalid and unenforceable if they:
- Prohibit an employee from engaging in lawful, off-duty conduct;
- Restrict an employee's right to terminate their employment;
- Violate an employee's right to work in a particular profession or field; or
- They are overly broad in scope or duration.
If you are employed in California, and your employer has a non-solicitation clause in your contract, you can lawfully solicit their clients or customers without fear of being sued.
This is because these agreements are designed to restrict individuals from engaging in trades, professions, and business. However, there are narrow exceptions to this law that have been made over the years.
A Non-Solicitation Agreement Can be Valid Under Specific Circumstances
In California, courts have determined that a non solicitation is invalid and not enforceable. However, there are cases where these agreements have been upheld under certain situations. For a court to deem non solicitation agreements valid, they will consider the following:
- Is the contract as lawful as is reasonably possible?
- What impact would the non solicitation agreement have on a business and worker if invalidated?
- What impact would the non solicitation agreement have on the company and worker if upheld?
When considering the order's validity, courts often reference the case Loral Corp v Moyes, in which the court determined that the agreement does not have any significant negative impact on the business or trade, is lawful and is reasonable. It can be held valid and ultimately enforceable. This ruling upheld the anti-raiding provisions as an exception to the general restrictions imposed under non-solicitation agreements.
Exceptions of Non Solicitation Agreements
As previously stated, non-competition and non solicitation agreements cannot violate BPC section 16600. This code section provides that these agreements are void and unenforceable unless they fall within certain limited exceptions.
- The first exception is agreements between an employer and an employee designed to protect the employer's trade secrets.
- The second exception is for agreements not to compete that are ancillary to the sale of a business.
- The third exception is for partners who agree not to compete with the partnership or solicit its partners or clients after the dissolution of the partnership.
These exceptions allow employers and businesses to protect their legitimate interests while allowing employees and partners to move freely in the marketplace.
Seeking Legal Guidance
There are some essential things to keep in mind if you are asked to sign a non solicitation agreement in California. First, you should ensure you understand the deal before signing it. If there is anything you do not understand, be sure to ask questions to be clear on what the agreement entails.
Secondly, remember that these agreements are usually binding for a while after you leave the company, so you will want to be sure that you are comfortable with the terms before you agree to them. Finally, if you decide to sign the agreement, get a copy of the signed agreement for your records.
If you have any questions about your legal rights when forced to sign a non solicitation agreement in California, or if you need help understanding the terms of such an agreement, please contact our experienced employment law attorneys at Krogh & Decker for assistance.