Covenants Not to Compete

Q: Can I have my employees sign an agreement not to compete with my company if and when they stop working here?

A: The general rule is that covenants not to compete are void and unenforceable in California. The reason for this is because it is viewed as overly restrictive on a person’s ability to practice his or her vocation. The only time that a covenant not to compete may be enforced is if it is highly limited in scope. For instance, the court may enforce the non-compete if you place a reasonable geographical restriction on it (i.e. the employee agrees not to open a competing company within a 5 mile radius of yours).

The court is more likely to enforce a confidentiality agreement than a non-compete agreement. You can have your employees sign an agreement that they will maintain the confidentiality of your customer list and will not solicit your customers if they leave your employment. In order to make this kind of agreement enforceable, you will need to take reasonable steps to maintain the secrecy of your customer list. Also, you cannot take advantage of this type of agreement if your customers are already known or readily ascertainable by competitors.