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Recent Court Decisions Further Limit Use of Competitive Contractual Restrictions With California Employees and Demonstrate Need For Employers To Develop Effective Trade Secret Protection Plans


By Robert Milligan M


ost California employers know that they should not ask their California employees to sign non- competition agreements. Some employers


may be surprised though by two recent California Court of Appeal decisions that cast doubt on the continued use of post-employment non-solicitation of customer provisions with California employees. Employers that use non-solicitation of customer provisions, and other competitive contractual restrictions, in their written agreements with California employees that run afoul of these new decisions may have exposure for unfair business practice claims. Another recent California Court of Appeal decision also reminds employers not to terminate California employees because they have non- competition agreements with their former employers because they may be liable for wrongful termination claims should they honor such unlawful agreements.


Prudent employers operating in California should ensure that they have effective trade secret protection plans in place that adequately protect company assets, including lawful written agreements with those who have access to their trade secret and confidential information. At a minimum, employers should review their current employment agreements to make sure that their agreements do not run afoul of these recent decisions.


Aside from a few narrow exceptions, non-competition agreements are presumed void under California law in the typical employment context. California Business and Professions Code section 16600 states: “[e]very contract by which anyone is restrained from engaging in a lawful profession, trade or business of any kind is


March 2011 CA Employer 19


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