is a Member of Epstein Becker Green in the Employment, Labor & Workforce Management and Litigation practices, in the firm’s Los Angeles office. Mr. Goodman’s practice focuses on employment and business litigation. Mr. Goodman’s experience includes successfully prosecuting and defending numerous unfair competition and trade secret actions involving employees moving from one company to another.
For more information or to speak to Mr. Goodman, please visit his firm webpage.
Employers should think twice before including the unenforceable provisions in employment contracts merely for their deterrent effect. Such a practice is risky. If an employer terminates an employee who refuses to sign an agreement that contains an unenforceable non-compete provision, such action would constitute a wrongful termination in violation of public policy and would entitle the employee to recover tort damages, including punitive damages, as well as economic damages… Given the strong protections against non-competes in California, it is too risky to require employees to sign employment agreements that contain these provisions. All employment agreements entered into with employees who live or work in California should be carefully reviewed to ensure compliance.
There are not many things an employer can do to prevent unfettered competition by a former employee. B&P Section 16600 states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” The statute provides three exceptions, none of which apply to the typical employer/employee relationship: (1) a person who sells the goodwill of a business or sells substantially all of its operating assets may lawfully agree to refrain from carrying on a similar business; (2) a partner may, upon the anticipation of the partnership dissolution or disassociation from the partnership, lawfully agree not to carry on a similar business; and (3) any member of a limited liability company may lawfully agree not to carry on a similar business.
California employers often face an upward battle when it comes to protecting against competitive activity by former employees… In order to safeguard their trade secrets, companies doing business in California need to be on the offensive to ensure that they are properly protected at both the beginning and end of the employment relationship. At the beginning of an employment relationship, employers may set the groundwork for protecting trade secrets by entering into confidentiality and nondisclosure agreements with their employees. These agreements will help establish one element of a claim under the UTSA, which is that the employer took reasonable steps to identify its trade secrets and maintain their confidentiality.