The Trade Secret & Employee Raiding Blog Focusing on legal trends in data security, cloud computing, data privacy, and anything E

Category Archives: Covenants Not to Compete in California

Subscribe to Covenants Not to Compete in California RSS Feed

Two Things You Can Do To Reduce the Likelihood That Your Company Will Be Found Liable For Conspiring Or Aiding And Abetting In An Employee’s Breach of Duty To A Former Employer

Posted in Breach of Fiduciary Duty/Duty of Loyalty, Covenants Not to Compete in California, Covenants Not to Compete in Other Jurisdictions, Employee Raids, Hiring a Competitor’s Employees, Other Restrictive Covenants, Protecting Trade Secrets and Other Business Information, Unfair Competition

When companies sue their former employees for theft they often claim that the former employee’s new employer has conspired with the former employee to misappropriate trade secrets, or that that new employer has aided and abetted the former employee’s breach of duty he/she owed to his/her former employer. Like Woodward and Bernstein, liability “follows the… Continue Reading

Senate and House of Representatives Pass the Defend Trade Secrets Act

Posted in Covenants Not to Compete in California, Covenants Not to Compete in Other Jurisdictions, Employee Raids, Hiring a Competitor’s Employees, New Legislation, Other Restrictive Covenants, Protecting Trade Secrets and Other Business Information, Unfair Competition

Senate and House of Representatives Pass the Defend Trade Secrets Act (DTSA).  First federal trade secret bill awaiting presidential signature.  More details can be found at the following Forbes article:  “The New Defend Trade Secrets Act is the Biggest IP Development in Years,” dated April 28, 2016.

California Court Confirms No Absolute Public Policy Against Non-Competes Entered into by Partners

Posted in Covenants Not to Compete in California, Other Restrictive Covenants, Protecting Trade Secrets and Other Business Information, Unfair Competition

California’s prohibition on non-competition agreements is less than absolute.  For example, non-compete agreements may be enforced against partners or sellers of businesses.  Additionally, in SingerLewak LLP v. Andrew Gantman (2015) 241 Cal.App.4th 610, a California Appellate Court affirmed an arbitration award that would be considered by most to be a misapplication of California’s non-competition law…. Continue Reading

Are “No Rehire” Provisions in Settlement Agreements at Risk?

Posted in Breach of Fiduciary Duty/Duty of Loyalty, Covenants Not to Compete in California, Covenants Not to Compete in Other Jurisdictions, Hiring a Competitor’s Employees, Protecting Trade Secrets and Other Business Information, Unfair Competition

The use of “No Rehire” Provisions in settlement agreements between employers and their former employees allow employers to protect themselves against “boomerang” lawsuits.  For instance, a former employee who claims he/she was terminated because of discrimination would be prevented from later submitting a new job application and then suing the employer again claiming he/she was… Continue Reading

Tech Companies Reach New Settlement in Anti-Poaching Cases

Posted in Covenants Not to Compete in California, Hiring a Competitor’s Employees, Other Restrictive Covenants, Protecting Trade Secrets and Other Business Information, Unfair Competition

This blog has previously reported on the anti-poaching cases involving various tech companies in Silicon Valley.  The cases arise out of alleged agreements between various tech companies not to recruit each other’s employees.  The U.S. Department of Justice brought antitrust actions as a result of these alleged agreements which resulted in the companies entering into… Continue Reading

A Noncompete To Go With Your Sandwich?

Posted in Covenants Not to Compete in California, Covenants Not to Compete in Other Jurisdictions, Protecting Trade Secrets and Other Business Information

A few months ago, this blog noted that there was press coverage about the nationwide increase in the use of noncompete agreements in various industries.  A story that has made the rounds in the past week illustrates this point clearly.  Jimmy Johns, a “gourmet sandwich” franchise, has apparently been inserting noncompete provisions in its employment… Continue Reading

“No-Poaching” Lawsuits Come to Hollywood

Posted in Covenants Not to Compete in California, Hiring a Competitor’s Employees, Protecting Trade Secrets and Other Business Information, Unfair Competition

Readers of this blog are familiar with our coverage of the various cases involving high tech firms in Silicon Valley such as Google and Adobe involving alleged “no poaching” agreements that they would not solicit each other’s employees for possible employment.  Both the U.S. Government and plaintiff class action attorneys have alleged that such conduct… Continue Reading

New York Times Article: Noncompete Clauses Increasingly Pop Up in Array of Jobs

Posted in Covenants Not to Compete in California, Covenants Not to Compete in Other Jurisdictions

What do yoga instructors, event planners and exterminators have in common?  These are fields that are reportedly witnessing an increase in the use of noncompete provisions in employment agreements.  Details of this increase in the use of noncompete provisions were reported in a New York Times article this Sunday.  Click here to view article. While… Continue Reading

Non-Competes and the “Trade Secret Exception” Revisited

Posted in Covenants Not to Compete in California, Covenants Not to Compete in Other Jurisdictions, Hiring a Competitor’s Employees, Unfair Competition

We periodically discuss California law regarding non-compete provisions in this Blog. The California Supreme Court has made clear that non-compete provisions are unenforceable unless they fall within one of the statutory exceptions set out in sections 16601 et seq. (i.e., in connection with the sale of a business, goodwill, etc.).  Over the years, courts have… Continue Reading

Another Non-Compete Held Unenforceable

Posted in Covenants Not to Compete in California, Injunctions, Protecting Trade Secrets and Other Business Information

Under California law, non-compete provisions with an employee are generally unenforceable.  Statutory exceptions to this rule include the seller of a business’s goodwill or a membership interest in an LLC.  Courts have also recognized a judicial exception to this rule: where the non-compete is necessary to protect an employer’s trade secret information.  This judicial exception… Continue Reading

Covenants Not To Compete: Restraining a Seller/Employee Against Competition – Not As Easy As it Looks

Posted in Covenants Not to Compete in California, Protecting Trade Secrets and Other Business Information, Uncategorized, Unfair Competition

Section 16601 of the California Business and Professions Code provides a well-known exception to California’s statutory refusal to enforce contractual commitments not to compete.  Under that section, Courts will enforce “reasonable” restrictions on the seller of a business to engage in competition against the buyer of that business.  This is a commonsense approach: a buyer… Continue Reading

Covenants Not to Compete: Five “Exceptions” That Do Not Swallow the Rule

Posted in Covenants Not to Compete in California

Everybody who cares probably knows that, in California, covenants not to compete (agreements that restrain an individual from pursuing a lawful trade of profession) are generally unenforceable.  There are only five “exceptions” to this rule.  I put “exceptions” in quotes because two of them really aren’t exceptions at all. They are independent legal doctrines that… Continue Reading

Trade Secret Defendants Beware: The Danger of Stipulated Injunctions

Posted in Covenants Not to Compete in California, Hiring a Competitor’s Employees, Injunctions, Protecting Trade Secrets and Other Business Information, Uncategorized, Unfair Competition

The Cruel Lessons of Wanke, Industrial, Commercial, Residential, Inc. v. Keck  (2012) 209 Cal.App.4th 1151 By:      Charles L. Post Defendants in trade secret and unfair competition cases often have fewer resources than the plaintiff companies that bring them.  This is often the case in “classic” trade secret misappropriation scenarios: former employees form a new company… Continue Reading

Government Targets eBay’s Alleged “No Hire” Agreements

Posted in Covenants Not to Compete in California

One focus of this blog is how an employer’s use of non-compete agreements often runs afoul of California’s Business and Professions Code section 16600. Generally, the employer finds that its “non-compete” agreement will be held unenforceable by a court should it seek to enforce one against a former employee. But what can happen when one… Continue Reading

Another Door Closes on Non-Compete Agreements

Posted in Covenants Not to Compete in California, Unfair Competition

Readers of this blog will note that we frequently remind them that California law generally prohibits non-compete agreements.  There are very limited exceptions to this general rule, one being that the seller of goodwill in a business can be bound by a valid non-compete agreement to protect the goodwill that is being purchased.  Sometimes, the… Continue Reading

Claims and Consequences

Posted in Covenants Not to Compete in California, Protecting Trade Secrets and Other Business Information

If location is the most important word in the restaurant business, then the three most important words for a plaintiff in a trade-secret or unfair-competition practice must be theory, theory, and theory.  Each legal theory must be supported by its own facts and evidence and a thorough understanding of the legal consequences of asserting and… Continue Reading

Recent Court of Appeal Decisions

Posted in Covenants Not to Compete in California, Protecting Trade Secrets and Other Business Information

Corrales v. Corrales, 198 Cal.App.4th 221 (August 10, 2011) Just as employees owe a duty of loyalty to their current employers, partners owe a duty of loyalty to one another. When one partner opens a secret “side business” (that does the same thing as the partnership) that partner breaches the duty of loyalty.  When that… Continue Reading

Often But Not Always Void: Covenants Not to Compete in California

Posted in Covenants Not to Compete in California

California’s prohibition on covenants not to compete is well established.  The statute that reflects this public policy, Business and Professions Code §16600 generally permits such covenants only in narrowly prescribed circumstances.  Those exceptions are all identified by statute at Business and Professions Code §§16601, 16602 and 16602.5.  These exceptions permit covenants not to compete when… Continue Reading