Employment Contracts & Non-Competes in California
California has strong employee-protective contract laws. Non-compete agreements are generally void under Business & Professions Code § 16600, making California unique among states. The state also limits employer claims to employee inventions and protects employee mobility. Most employment in California is 'at-will,' meaning either party can end the relationship at any time for any lawful reason.
Frequently Asked Questions
Are non-compete agreements enforceable in California?
No. Under Business & Professions Code § 16600, non-compete agreements are void and unenforceable in California, with very limited exceptions for the sale of a business. As of January 1, 2024, employers are prohibited from even requiring employees to sign non-competes, and must notify current and former employees that any existing non-compete clauses are void. Violation can result in a lawsuit for injunctive relief and attorney's fees.
What does at-will employment mean in California?
At-will employment means either the employer or employee can end the employment relationship at any time, for any lawful reason, with or without cause or advance notice. However, at-will employment does not allow termination for an illegal reason (discrimination, retaliation, etc.). An implied contract limiting at-will termination may be created through employer policies, handbooks, or oral promises.
Does my employer own inventions I create on my own time?
Under Labor Code § 2870, employers cannot claim ownership of inventions you develop entirely on your own time, without using the employer's equipment, supplies, or trade secrets, unless the invention relates to the employer's business or results from work performed for the employer. Any employment agreement requiring you to assign such inventions is unenforceable to that extent.
Can my employer require me to sign an arbitration agreement?
California has attempted to ban mandatory employment arbitration agreements (AB 51, Labor Code § 432.6), but federal courts have largely blocked enforcement of this law under the Federal Arbitration Act. As a practical matter, most employers can still require arbitration as a condition of employment. However, the arbitration agreement must be procedurally and substantively conscionable to be enforceable.
What is a trade secret and what are the limits on NDAs?
Trade secrets are information deriving independent economic value from not being generally known, and which the owner takes reasonable steps to keep secret. Employers can require NDAs to protect legitimate trade secrets. However, NDAs cannot be used to prevent employees from disclosing information about unlawful acts in the workplace, including harassment and discrimination, under California's Silenced No More Act (SB 331).
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