Understanding California’s Non-Compete Agreements: What Employers and Employees Need to Know
August 19, 2025
Understanding California’s Non-Compete Agreements: What Employers and Employees Need to Know
Non-compete agreements are contracts that restrict employees from working for a competitor or starting a similar business after leaving a job. While they are common in many states, California has taken a unique stance. In fact, California law is among the most employee-friendly when it comes to non-compete clauses.
Are Non-Compete Agreements Enforceable in California?
Under California Business and Professions Code Section 16600, nearly all non-compete agreements are unenforceable. The state strongly favors open competition and employee mobility. This means that employers generally cannot prevent employees from seeking work with a competitor or starting their own business after leaving.
Exceptions to the Rule
Although most non-compete agreements are invalid in California, there are limited exceptions, such as:
- Business sales: If an owner sells their business, they may agree not to compete within a certain area.
- Partnership or LLC dissolution: Former partners or LLC members may agree not to compete in certain situations.
Outside of these narrow exceptions, courts consistently strike down non-compete provisions.
What Employers Should Know
Employers should avoid using broad non-compete agreements, as they are likely unenforceable. Instead, they can consider other legal tools such as:
- Confidentiality agreements
- Trade secret protections
- Non-solicitation agreements (though these are also scrutinized closely by California courts)
By focusing on protecting legitimate business interests without restricting employee mobility, employers can reduce legal risks.
What Employees Should Know
If you are asked to sign a non-compete agreement in California, it is important to understand that it will likely not hold up in court. However, related agreements, such as those involving confidentiality or non-solicitation, may still be enforceable. Employees should carefully review any contracts before signing and seek legal advice if uncertain.
Legal Guidance for Employers and Employees
Non-compete agreements in California can be confusing for both employers and employees. At Daryl Reese Law Group, we provide legal assistance to help Californians understand their rights and obligations under state law. Whether you are an employer seeking to protect your business or an employee asked to sign a contract, our firm can help you navigate the complexities.
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