Introduction: A non compete clause is a provision in an employment agreement or contract
in which the employee agrees not compete with the employer of work for
a competition after termination of the employment relationship. Many companies
use this to prevent their trade secrets from leaking out or prevent their
good employees from being taken by others offering a higher salary or
benefit. But can an employer really prevent their prior employee from
working somewhere else? Read on to find the answer.
Question: Dear Attorney Cheng, I am a low level employee in a big construction
company. To work here, I am required to sign a contract that says that
if I quit or am fired I cannot work in the industry for the next five
years. I think that this is really unreasonable but really want this job.
What do I do?
Steven – Ontario
Answer: Dear Steven, unlike many states, California has frowned upon non-competition
agreements. California Business and Professions Code 16600 reflects that:
“[E]very contract by which anyone is restrained from engaging in
a lawful profession, trade or business of any kind is to that extent void.”
Generally, the interest of employee mobility and career choice is favored
over the employer’s interest in restraining competition. Therefore,
many of these non-competition agreements are routinely invalidated. However,
the Courts have enforced such agreements where the position of the employee
is very high. For instance, the vice president of Nike more likely would
be restrained from moving companies, for example like Reebok, compared
to a low level Nike employee; like one that sells shoes at a store.
I also wanted to address your concerns about being required to sign this
agreement so that you can work. An employer cannot require their employee
to sign a non competition agreement as a condition of employment. In addition,
an employer who terminates an employee for refusing to sign such an agreement
will be held liable for wrongful termination.
There is another issue to consider. Reasonable Non competition agreements
that pertain to trade secrets can be enforced if they are necessary to
protect such secrets. I always recommend the business-clients that want
to use non competition agreements to limit it to trade secrets. Furthermore,
I tell them that if the secrets are so important that they specifically
list them out. If you think about it your employee will end up knowing
about the secret anyway. It is better to list it out so that a Court can
see that in advance of employment your employee knew what the secret was
and decided, knowing the secret that they were going to work anyway. I
hope this helps.
Introduction: Terminating a bad employee is like a bad marriage. It is easy to get
into it and after it ends it haunts you for years to come. There are over
10,000 employment laws that employers need to comply with. What should
one do with a problem employee? Let me give you one of our best kept secrets
here at my law firm.
Question: I have a problem employee that I really need to get rid of. He has told
me that if I fire him he will sue me for sure. What do I do? John –
Answer: John, many employers ask me this question all the time. When you fire
an employee offer them 2 weeks worth of salary in exchange for their contractual
promise not to sue you. Hence, they have exchanged all their rights to
sue the employer for the 2 weeks salary. Most problem employees are short-sighted.
They will be so happy with your money that they will easily give up their
other rights. Then when they try to sue you, you can present the contract
and the case, many times will end immediately. Problem solved. Good luck!