Many employment agreements contain non-compete and non-solicitation clauses, and nationally, the use of these agreements are becoming increasingly common at work. Employers may insist that employees sign non-compete and non-solicitation agreements as conditions of employment, and refuse to hire or continue to employ workers who are unwilling to enter into these agreements. However, the legality of these practices is dependent on state law. In California, non-compete and non-solicitation are generally illegal. An employment attorney can help you understand your rights if you are asked to sign, or have signed, a non-compete or non-solicitation agreement.
Non-Compete Agreement: Non-compete agreements prohibit workers at one company from going to work for, or starting, a competing business within a certain time period of leaving their job. A “competing” business is typically one that is in the same field as the company the employee originally worked at. Non-compete agreements typically serve businesses and harm workers. The enforcement of non-compete agreements has been shown to generally reduce wage growth as it prevents workers from starting businesses or taking new jobs – opportunities that typically lead to increased income.
Non-Solicitation Agreement: No-solicitation agreements prohibit workers at one company from leaving their job and taking their former employers’ clients or customers with them when they leave. Non-solicitation agreements are most often used in employment agreements for sales and customer centered jobs. Non-solicitation agreements are often coupled with non-compete agreements.
Non-compete and non-solicitation agreements, with a few exceptions, are legally unenforceable in California, North Dakota, the District of Columbia, and Oklahoma. Maine, Maryland, New Hampshire, Rhode Island, and Washington, have banned non-compete agreements specifically for low-wage workers.
Under California Business and Professions Code section 16600, overly broad non-compete and non-solicitation agreements that prevent an employee from working in their chosen profession are invalid and unenforceable in California. The code states that “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” There are few limits to the unenforceability of non-compete and non-solicitation agreements in California.
It is generally illegal in California, and other states that prohibit the use of these agreements, for an employer to fire or refuse to hire an employee who does not agree to the employer’s non-compete or non-solicitation provisions.
It is becoming increasingly common for an employee to work in a different state from the state their employer is headquartered in. The ability of an out-of-state employer to enforce a non-compete or non-solicitation agreement on a former employee who worked in California depends on the specifics of the contract.
Employees who are asked to sign non-compete or non-solicitation agreements should seek legal advice if any questions or concerns arise. It is particularly important to seek legal advice before signing if you live and work in California, but your employer is out-of-state. Additionally, if you face retaliation for refusing to sign an agreement, you may want to contact an employment attorney to determine whether you have a claim for wrongful termination.
Avloni Law is a law firm dedicated to fighting for your rights in the workplace, and has experience dealing with employment contracts. If you have concerns related to a non-compete or non-solicitation agreement, contact Avloni Law. Click here to schedule a free consultation with Navruz Avloni.