A noncompete agreement is a standard agreement for many businesses to protect their interests in regard to former employees. What a noncompete agreement does is stipulate what actions an employee can do once they’ve left. A typical noncompete would limit the geographical area or time an employee may pursue work in a given field. In most states, these are regularly utilized restrictive covenants, but in California, all noncompetition agreements are illegal.
There are some important exceptions
The goal of a noncompete is to limit your exposure to vulnerabilities by forbidding your employees from taking certain actions. The exceptions to the noncompete include:
- Former owners: It is statutorily expressed that a former owner that sells their interests in the company can be forbidden from starting a similar company.
- Poaching: While you cannot make a former employee sign a noncompete, you can enforce an agreement barring them from pursuing your current employees.
- Trade secret protection: The final option is to protect our trade secrets with an agreement. As trade secrets are intellectual property, you can forbid a former employee from utilizing them.
While these are fairly limited exceptions, utilizing them limits how much the former employee can impact your business.
Careful use of protective agreements
California law and the regulators employed by the state are aggressive in their steps to limit noncompete or noncompete adjacent actions. You must take special care in pursuing a restrictive covenant. If you face litigation due to the agreements your employees sign around their post-employment actions, a skilled litigator can help you control costs and protect yourself.