Noncompete Agreements - Free Information on Non-compete Noncompetition

First, a few questions:

Notice the above California law banning "noncompete" agreements is one sentence. You know there's going to be trouble with all this when "the law" is one sentence and nowhere in the statute is the word "noncompete" mentioned. Sidenote: The law needs to be clarified and amended. While we are working on that, just bear with. The law in all its non-splendor is what it is. We have to work with it, dirt clod that it is.

If the law so simple, why are there millions of printed pages dealing with an obscure one-sentence statute that seems somewhat clear on the noncompete issue. The statute even has the word "void" in it. That sounds pretty certain, doesn't it.

If the law is clear, why is this such a contentious area of employment and business law? Why have billion dollar businesses been shut down because of this statute? Why have some people gone to prison?

Why have companies paid lawyers billions in attorneys' fees and costs to fight noncompete wars?

And the most important question of all, why do you have to be on this page?

And some answers:

Despite the law being clear on its face, the reason why noncompete wars are still taking place can be metaphorically explained: "oil and water do not mix." In noncompete wars the "oil" can be the ex-employer -- the water being a fired ex-employee going to work for a competitor, or perhaps a budding entrepreneur who quits her job to pursue her dream of opening a business, a company that will (unfortunately) be in direct competition against the former employer.

Generally, these people have severely opposed expectations, beliefs, arguments and interests (see below).

Add into the equation that both sides in noncompete wars are extremely emotional, especially if the employment relationship went bad.

Add all or some of the above to a noncompete war and you have the "perfect storm" for contentious, scorched earth litigation.

DETAILS:

Ex-employees and Budding Entrepreneurs Argue:

Business & Professions Code Section 16600 is quite simple and means what it says: California law treats as "not worth the paper it is written on" any provision, contract term or other purported "agreement" that prevents (or has the affect of preventing or restricting) an ex-employee from working for a competitor or opening up his or her competing enterprise.

In other words, restricting a California employee's right to work is illegal. Any agreement or employer behavior that violates the ex-employee's right to work is void. The former employer cannot, through any means, take away an ex-employee's right to work for a competitor or to operate a competing business.

While this "pro employee" concept sounds simple enough, matters become complicated because California's noncompete law does NOT allow the resigning or fired employee to steal or use the former employer's confidential, proprietary or trade secret information.

Trade secrets, confidential data and proprietary information are relevant in noncompete wars because:

1) Some employees maliciously steal a company's confidential information (for reasons set forth herein);

2) Employers disingenuously use trade secret protection and other arguments to get around California's noncompete law.

3) To gain leverage in noncompete wars or to unlawfully squash competition by ex-employees, some employers will falsely accuse the ex-employee of stealing company trade secrets or confidential information.

Employers and Companies Argue:

While California's "right to work" statute appears extremely restrictive, it nevertheless permits reasonable agreements or contracts to protect a company's or employer's confidential or proprietary information. This is a true statement of the law.

Company concerns are valid because since the beginning of commerce there have been dishonest ex-employees who think it's OK to steal an ex-employer's customer list, ideas, methods, techniques, processes or products and to use such to set up his or her own shop, so to speak.

Despite company concerns about employee thieves and liars, history has also shown that some companies have acted dishonestly when utilizing methods to protect their business interests. In other words, they use the legal system to squash lawful competition, e.g. by implementation and enforcement of illegal noncompete agreements.

Businesses and employers justify their behavior because they feel that a departing or fired employee should not be allowed to work for a competitor or compete against them, no exceptions. Many companies justify their machinations and illegal behavior because they genuinely believe that California's "noncompete law" is unreasonable or unjust, so getting around the law's prohibitions through self-help is justified.

Moreover, many employers are aware that in most States various form of noncompete agreements are 100% legal and enforceable. They know that California is one of the few states that prohibit non-compete agreements.

Since noncompetes are legal in most States, California employers have no problem with a little self-help when ignoring or violating California's noncompete law.

When you are done fuming over an employer's cavalier attitude toward the law, remember that many people (including YOU) have no problem justifying their breaking of laws.

These people (including you, again) disobey laws perceived as unreasonable or unfair. Some think the law should not apply to them.

Consider, for example:

Do YOU ever drive over the posted speed limit? When you do, what excuses do you come up with to justify your cavalier breaking of the law?

Everyone does it;

Posted limits are too low;

Speed limits are more for generating income than a concern for safety, I speed to protest this method of taxation;

The unwritten rule is that 5-10 mph is OK, speed limits are set with the assumption that we can drive about 10 mph over posted limits;

I am a skilled driver, safer than most people on the road, so it's OK for ME to speed;

I can handle a speeding ticket once a year, worst case I go to traffic school;

I am in a hurry, on important business;

If I am late it will cost me money, better to gamble on not getting a ticket;

Speeding is good for business;

Real men speed;

Only losers drive in the slow lane, they are lazy and have nowhere to go.

You get the idea. Any one of the above excuses is sufficient to make you feel a sense of entitlement to speed or justify your breaking the law.

When violating California's noncompete law a company can just as easily justify its unlawful conduct, in much the same way you daily justify your breaking the law on the highway.

The Dibs Factor - Another sad reality on why employers choose to violate California's noncompete law is that companies simply want "dibs" on all prospective customers, current customers, ex-customers, old accounts, new accounts, and generally any old, current or prospective business the ex-employee may have come into contact with in any manner while working for the company, any time before that, or forever in the future. If you get the sense the former employer, business or competitor would prefer you to simply fold up your tent and go into another line of work, you are right.

The Emotions Factor (both employer and employee): Remember that human emotions play a BIG part in workplace disputes. While emotions can flare in most all employment law disputes, in non-compete litigation parties often engage in scorched earth tactics [either side or both have no problem taking steps to destroy the other, including seeing that the opposing side is carted off to prison].

We cannot discuss in detail the interplay of human behavior on all this. However, considering that you found this page and have read this far, you are smart enough to figure out how the following behaviors, traits, or factors fit into disputes over noncompete agreements or in competitive business litigation:

Money, greed, corruption, envy, ego, jealousy, incompetence, delusions, bad temperament, blaming others for one's own failings, fraud, dishonesty, lack of ethics, soul black as coal, agent of the devil, lack of focus or vision, moron, or "he is on express train to the gates of hell."

Disclaimer: The above list is NOT exhaustive. The terms may apply to any business, corporation, employer, employee, or anything disguised as a decent human being or ethical business.

Sidenote: California's Uniform Trade Secret's Act, California Civil Code Section 3426, et seq. [UTSA] prohibits a person from stealing or misappropriating confidential or proprietary business information. If all else fails in protecting their interests, meaning aspects of an employment agreement are deemed an unenforceable noncompete, employers often "play the misappropriation card." Now what is this?

When a company gets caught implementing illegal noncompete agreements, it typically justifies its unlawful activity by emphasizing that its actions were NOT meant to prohibit ex-employees from lawfully competing, rather the company was just trying to protect its confidential, proprietary, or trade secret information.

In the employment or business context, if the opposition [meaning a business or ex-employer] wants to "take you out" or gain negotiation leverage in a lawsuit, they simply allege that when you were fired or resigned you stole confidential or proprietary information [also known as "trade secrets"]. Generally, the perception in the business community is that accusing the employee of stealing trade secrets is an easy strategic move.

21st Century Realities

Unlawful noncompete language continues to be craftily "hidden" or "buried" by company lawyers in legal/official looking documents, often titled: Employment Agreement; Non-disclosure Agreement; Confidentiality and Proprietary Information Agreement; or Non-solicitation Agreement. Despite such proper sounding labels, an agreement may constitute an unlawful restriction on a person's right to work where or for whom one chooses.

Even though noncompete clauses or agreements may be unlawful and unenforceable in California, many employers or businesses still include disguised noncompete language in agreements because they are willing to gamble that:

1) Most employees will not seek an attorney's opinion on the validity of the provision;

2) Most employees will assume noncompete restrictions are valid; or

3) Most employees will not challenge or question the employer about the provision. At the end of the day, the employer or business will reap the benefits of an illegal noncompete because employees will assume it's valid and abide by it, or the employee wisely decides it's best not to make trouble because he or she knows that troublemakers are eventually fired.

Think of all this as conduct similar to the homeowner who posts a "Beware of Dog" sign, but who does not have a dog because the homeowners' association prohibits pets.

Or think about the business owner who displays a sign that warns "Premises Alarmed" when in fact there are no alarms [perhaps because system costs were too high].

In both these examples, the owners keep burglars and trespassers away for the price of cheap plastic signs. Employers benefit in the same manner. The illegal noncompete agreement is equivalent to a cheap plastic sign. While ultimately unenforceable, the employer benefits by giving it to employees. And it's 99.9% certain that the illegal agreement will never be questioned by employees, ex-employees, nor "outsiders" [aka lawyers, judges and juries.]

Out-of-Context WARNING: If you are an ex-employee who is in possession of company property or confidential information, regardless of the reasons you have it, IMMEDIATELY contact an attorney to arrange return of the property or data to your ex-employer. You must do this because under the eyes of the law you are most likely a criminal. How can this be?
I am not aware of any California law that permits an ex-employee to steal company property or information, regardless of how good a person you are, how great a case you have nor how big a thieving, corrupt asshat your ex-employer was to you or others.
Permit me to be clear. There are NO LAWS that say "If you have a million dollar case against an employer, it is OK on your last day of employment to take with you the Company's confidential information and trade secrets."
The law does NOT: allow you to steal confidential company information to hold "hostage" during severance negotiations; to retaliate against the employer by misappropriating trade secrets; nor steal company data or property to set up your own shop. If you do any of this, IN THE EYES OF A LAW YOUR ARE A CRIMINAL.
Retain counsel and have him or her advise you on how to arrange to get the information and property back to the employer IMMEDIATELY IF NOT SOONER! The longer you keep the "hot goods" the more likely you will be arrested and eventually end up in prison, regardless of how great a noncompete case you might have.
Think I am being overly dramatic. Click here, here, and here.

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Insights on Noncompete Issues

First - Take a look at California's "one-liner" noncompete law.
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