What Is a Non-Compete Clause?
Sometimes referred to as “No-Competition Clauses”, these are agreements employers draw up and expect their employees to sign, usually during the hiring process. The terms of these agreements usually are that, as a new employee or member of the staff, you are not to become direct competition to the enterprise by switching and working for the competition. Oftentimes, these agreements expect that employees refrain from working for the competition within a field, within a distance, or within a certain timeframe.
These clauses have long caused professionals extreme anxiety in their workplaces, feeling as though their choices are to swallow the current mistreatment they receive or find a new industry in which to work. The State of California has recently banned these, freeing up the private sector for good reason.
California’s Decision to Void Non-Competes
California lawmakers felt that these contracts were stifling the job market. Employees should have the ability to, in at least some regard, leverage their value against their employer in order to be sure that they are being treated fairly. Restricting an employee’s ability to compete restricts their ability to provide for themselves. Not only does this stifle the individual job market, but enterprise as a whole.
California’s industrial pillar, Silicon Valley, is a common case example for California’s decision to ban non-competes. The fear is that innovation and ingenuity will suffer if valuable employees are stuck where they are. Today, employees of Silicon Valley are not bound by these contracts, and talent is free to move, create, and build for the betterment of themselves and consumers who enjoy their products.
Exceptions to the California Ban
It isn’t quite a free-for-all in terms of competition. One of the most important features of the logic behind non-compete clauses is retaining clients and protecting industry secrets. Employees are free to move, but owners can be placed under a different set of restrictions.
Certain aspects of non-competes still apply for owners of an LLC, business, corporation, or partnership. A partner of a legal firm may be held to their contract if they wish to sell their stake in the enterprise, start a new one using others’ tricks of the trade, and attempt to take away clients from the previous enterprise.
If you’re currently involved in a dispute with your employer or partners about a non-compete contract, retain the legal counsel of Harvard Law graduate, Alan Burton Newman by reaching our offices today at (310) 986-2792.