{"id":31472,"date":"2016-03-31T19:21:32","date_gmt":"2016-04-01T00:21:32","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/uncategorized\/non-competition-agreements.html"},"modified":"2017-12-01T12:46:45","modified_gmt":"2017-12-01T17:46:45","slug":"non-competition-agreements","status":"publish","type":"corporate","link":"https:\/\/corporate.findlaw.com\/business-operations\/non-competition-agreements.html","title":{"rendered":"Non-Competition Agreements"},"content":{"rendered":"
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Many clients inquire whether non-competition<\/a> agreements are actually legally binding. The answer to this question varies from state to state. However, there is some commonality among many state statutes.<\/p>\n

Non-Compete Clause Can Void Entire Contract<\/b><\/p>\n

The case of Kolani v. Gluska<\/a><\/i>, 64 Cal.App.4th 402, 75 Cal.Rptr.2d 257 (1998) underscores the importance of paying attention to the validity of a particular non-competition agreement. In this case, a covenant not to compete contained in an employment contract<\/a> was construed as an outright prohibition on competition, and hence was held to be void and unenforceable<\/a>. The contract at issue included a "savings clause", which expressly authorized a court to revise the non-compete covenant if it was deemed to be "unfair" or "commercially unreasonable."<\/p>\n

Court Most Likely Will Not Re-Write a Non-Compete That it Finds Void<\/b><\/p>\n

But the court refused to rewrite the illegal broad covenant into a narrower contractual constraint on the departing employee to prohibit him from using confidential information taken from the former employer. Such a prohibition on the misappropriation of confidential customer lists and trade secrets would have been legal. However, the court declined to undermine the important public policy of promoting competition, noting that employers would have no disincentive to use the broad, illegal clauses if they were permitted to retreat to a narrow, lawful construction in the event that an employee was tenacious enough to resort to litigation.<\/p>\n

Non-Compete Agreements Not Favored<\/b><\/p>\n

Basically, public policy in America favors open, unfettered competition. In keeping with promoting the basic freedom to pursue one’s livelihood and to facilitate free competition, contractual arrangements which prohibit former employees or independent contractors from competing against their former employers often violate these fundamental public policies.<\/p>\n

Instances Where They Might be Enforced<\/b><\/p>\n

Most states, including California, permit non-competition agreements to be enforceable in certain situations, such as:<\/p>\n