A Non-compete clause limits the employment of the employee after termination for a specific amount of time in a given area and field of expertise. Its purpose is typically to: (1) protect trade secrets, and (2) limit employees who possess the knowledge and skills in the given area.
(1) Trade secrets are limited by a non-disclosure agreement, which contains a list of particular secrets of the trade. It may also contain sales strategies and client lists. (2) Employment limitation is focused on the market niche and geographic area, usually for up to three years. Overbroad limitations will be stricken and deemed unenforceable, especially where they are overly restrictive.
A provision should be included, which clearly states that “in the absence of any provision thereof deemed unenforceable,” the remaining portion of the Agreement shall be enforced.
What is more, non-compete agreements must involve some give-and-take (consideration). If a non-compete is signed only after the employment began, without any extra payment or advantage to the party, the proffering party (employer) is running the risk of the clause being stricken by the court (for lack of consideration). The employer is traditionally the drafter of the non-compete, thus bears the burden of proof that any restriction is reasonable and necessary to protect against unfair competition.
In California, the employer must show that the non-compete agreement actually concerns proprietary information (objectively understood, not merely because the employer says so). If this information, be it client lists or sales tactics or pure data, can be obtained by some other means (e.g. internet search), the non-compete will be deemed invalid.
Finally, the employer may not force the employee to sign a non-compete under threat of termination. Such a forced clause would be held unconscionable and invalid, and the employer would be liable to the employee for damages in a wrongful termination action.
From her office located in Cerritos, California, near Los Angeles, Sarah Patricia Condor, Attorney at Law, provides advice and representation to individuals and businesses throughout California and the European Community in Internet and business law. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. See our profile at lawyers.com.
Sarah Patricia Condor, Esq., LL.M.,
Attorney at Law
13301 Holly Oak Circle
Cerritos (Los Angeles/Orange)
Bar # 281643