Non-Competition Agreements at Work

By signing a non-competition agreement, the employee is saying that they will not work for or help the company’s competition. These agreements are typically part of another business contract (e.g. non-disclosure agreements). Non-competition agreements may be signed at the time of hiring, during employment, or upon an employee’s exit of the company as part of a severance agreement. The benefit (or penalties) an individual receives from signing a non-competition agreement is dependent on when the contract is signed. If the contract is offered prior to employment, the individual may be denied employment at the company if they choose not to sign. If the contract is offered while the employee is working with the company, it could impact their chances of receiving a promotion. If the contract is offered at termination, the decision to sign or not sign the agreement could affect the quality of the severance package.

California is different than most states in that non-competition agreements are difficult to enforce, and they do not apply in most cases. Most commonly, they are used between businesses at time of sale. In these instances, the previous owner agrees to not interfere with the new ownership of the company. In order for a non-competition agreement to be enforceable, the content of the document as well as the context surrounding the signing must meet standards. First, the agreement must have been signed willingly; forcing an individual to sign a non-competition agreement is grounds for the agreement to be voided and the terms in it suspended. Second, the contents must be lawful – asking an individual to go beyond what is reasonable and legal in order for the contract to be binding is also terms for suspension of the terms.

There are a couple of circumstances where breaking a non-competition agreement is possible. Such circumstances typically involve the legality of the document and whether it is enforceable; in the state of California, it is likely that a non-competition agreement has grounds to be dismissed. Additionally, if the contract provider has done something illegal while conducting business, an individual may have grounds to break an otherwise reasonable contract. The legality of the agreement comes down to the interpretation of the judge working the claim, and it is important to have a proficient team defending you in court.