These clauses are frequently inserted in employment contracts and purport to restrict the employee from working for competitors after termination or change of employer. However, California is a right to work state and prohibits enforcing these restrictive provisions. California’s Business & Professions Code section 16600 advances the fundamental public policy favoring competition and an individual’s right to be employed in his or her profession of choice.
This topic arose since the author was recently requested to review a modeling contract which contained a provision prohibiting the model from engaging her services with a competitor of the modeling agency. The restriction was void and unenforceable, and she was free to work with a competitor. This would also be important to people working in computer game graphics, film production or collaborative authorship since employment contracts in those industries may also contain such restrictive provisions.
There is a narrow exception to the rule. It applies only in instances where the owner of a company sells her interest in it. In such cases, the purchaser is buying the goodwill of the company, which includes the seller’s knowledge of customers, purchasing habits and other company information. But even this exception is only enforceable for a few years demonstrating the policy of free and open competition for the betterment of the public.
This policy is to be differentiated from provisions which prohibit the use of an employer’s confidential, commercial trade secrets. The definition of trade secrets is complex, but typically include customer identification, buying habits, key employees and product development/processes.
These employment provisions are enforceable and can be used to restrict a former employee from benefiting from taking advantage of confidential information learned from a former employer. However, general information of a non-confidential nature can still be used by an employee while working with a new employer.
It is important to understand your rights as an employee and as a potential business owner.
And, to understand that not all provisions contained in contracts are enforceable.
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Law Art With Intellectual Property Attorney Tom O’leary
[Tom O’Leary is a downtown intellectual property attorney in Downtown Los Angeles