What is a noncompete agreement and how does it relate to unfair competition law?

A noncompete agreement is an agreement between an employer and employee that prohibits the employee from seeking employment from a competitor of the employer. This type of agreement is used to protect a company’s trade secrets and other confidential information from being taken by an employee to a new job with a competitor. In California, such noncompete agreements are generally prohibited, except for certain narrow exceptions. The California Business and Professions Code prohibits certain forms of what it considers to be “unfair competition.” This includes any activity that attempts to unlawfully take advantage of another business’s goodwill, or invades the privacy of another company’s customers. Noncompete agreements are considered to be unfair competition and are therefore illegal, except in certain limited cases. The exceptions include situations where the employee is being terminated or laid off and the employer wants to protect its confidential information, or when the employee is an owner or officer of the company, or has access to trade secrets or valuable confidential information. The noncompete agreement must also be reasonable in terms of the amount of time that it restricts the employee from working for a competitor. In general, it is very difficult for noncompete agreements to be enforced in California and, therefore, companies should avoid using them. Employers should focus instead on using other methods, such as confidentiality agreements and employee training, to protect their confidential information. Additionally, employers should always seek legal advice to ensure that any agreements they do use are in compliance with California’s unfair competition law.

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What is a noncompete agreement and how does it relate to unfair competition law?

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