Your Company’s Employment Agreement May Now Be Illegal.   Many employers try to protect their business by requiring their employees to agree not to compete for a specified time if they leave the company. However, employee noncompetition agreements are now invalid in California. Last week the California Supreme Court in the case of Edwards vs. Arthur Anderson, LLP, reaffirmed that employers may not require an employee to agree to a limited restriction (i.e., no contact or solicitation of the company’s client for a specified time). The Court held that with only a couple of exceptions, noncompetition agreements are illegal in California. If an employer terminates employment because of a refusal of an employee to sign a noncompetition agreement, the employer may be liable to an employee for wrongful termination damages. 

What To Do.   Have your attorney review and revise or amend your employment contracts and employee handbook if necessary.   

Exceptions.   There are only two circumstances in which noncompetition agreements may be enforced in California now: (1) in partnership agreements or (2) in agreements selling an ownership interest in a business. Additionally, employers can require agreements that protect their trade secrets and confidential information, but they are not able to restrict competition by former employees.   

We at Martinez Law Group want our clients to be up to date and protected. If your company values personal service and can use our level of expertise, contact us. We would be pleased to serve you and advance your business objectives.