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Ask the Attorney - Topic: Business

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 – Hacienda Heights

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!