You don’t have to be a legal expert to know that non-compete clauses are largely unenforceable in California. The law nullifying this type of clause, in which an employer tries to prevent terminated employees from working for competing businesses, has been on the books for years. And if you’re an advocate of employee rights, the law is a bright spot in California’s Business and Professions Code.
Over the years, California employers have tried to test the strength of California’s non-compete law, with little success. However, in July of 2018, an employee turned the tables and sought to test the law’s strength in a case that didn’t specifically involve a non-compete clause.
The United States Court of Appeals for the Ninth District ruled on the case, which involved a doctor whose former employer wanted him to sign a non-rehire agreement. The federal court looked to California’s non-compete law to rule in favor of the doctor. Continue reading to learn more about the court’s decision, non-compete clauses and related areas of employment law.
If you have questions about your own employment situation, don’t hesitate to contact our officeto learn how we can help.
California’s Non-Compete Law
The Golden State’s non-compete law is found in Business and Professions Code §16600. It states:
“Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”
Golden vs. California Emergency Physicians Medical Group
Physician Donald Golden was an emergency room surgeon employed by California Emergency Physicians Medical Group (CEP) at its Seton Coastside Medical Facility. He was fired in May 2008, and filed a discrimination suit against the company.
The case ended up in Federal District Court in 2010, but before the trial had a chance to begin, CEP offered to settle the case. In return for a large settlement, the company wanted Golden to waive any rights to future employment with the company.
This meant that Dr. Golden wouldn’t be rehired at any facility owned by the company, as well as any facility CEP might own in the future. Dr. Golden refused to sign the printed agreement. The court ruled that Dr. Golden should be compelled to sign the agreement, but the doctor appealed the decision, and the case moved to the appellate court.
During his appeal, Dr. Golden argued that the non-rehire provision of the settlement violated California’s law against non-compete clauses.
In its ruling, the Federal Court noted that California’s no compete law has been broadly interpreted over the years. The court further argued that the lower court had abused its discretion in narrowly interpreting the law.
The appellate court argued that the simple question at hand was whether or not the settlement agreement in Dr. Golden’s case restrained anyone from engaging in a lawful profession, trade, or business of any kind.
“We have no reason to believe that the State has drawn section 16600 simply to prohibit ‘covenants not to compete’ and not also other contractual restraints on professional practice,’” the court wrote in its decision.
Accordingly, the appellate court reversed the lower court’s judgment and remanded the case “for further proceedings not inconsistent with this opinion.”
What This Means for California Workers
This case once again reinforces the strength of California’s non-compete law and actually demonstrates that the law goes beyond non-compete clauses in protecting an employee’s right to earn a living.
To be clear, this doesn’t mean every employee who’s been unlawfully compelled to signed a non-compete clause has a shot at a million-dollar judgment. But it does mean that non-compete clauses, with few exceptions, are unenforceable.
Unfortunately, this doesn’t stop employers from asking workers to sign these agreements. In 2016, the Office of Economic Policy, a division of the US Treasury Department issued a report on the prevalence of non-compete contracts. According to the report, California workers were found to have signed these agreements at 19 percent higher than the national average. Acknowledging that such agreements are largely unenforceable in court, the report noted that the trend suggests “firms may be relying on a lack of worker knowledge.”
Employers and employees often sign non-compete clauses that include trade secret language. Employers are very much allowed to prohibit the theft/taking of valid trade secrets, and employers frequently sue former employees who steal customer lists or valuable and secretive manufacturing plans. When you have a mixed clause like this, contact a lawyer especially if you think your employer may try to enforce the provision.
When an Employee Blows the Whistle on Non-Compete Contracts
If an employee realizes that a company he or she works for is violating the law by requiring other workers to sign non-compete contracts, and that employee notifies the authorities (a state agency, the District Attorney, the police), it’s possible the company will retaliate against that employee (fire, demote, harass, etc.). It’s important to note that the employee in this situation is a whistleblower, and whistleblowing activities are protected by law. A worker who experiences retaliation as the result of whistleblowing activities could be entitled to monetary damages. For more information on whistleblowing, contact our office or visit our whistleblowing page.
When to Contact an Employment Attorney
If you work in California, and have been asked to sign a non-compete clause, chances are good your employer has violated state law. It could be worth your time and effort to discuss your situation with an employment attorney. Additionally, if you’ve received notice of legal action from a former employer stating you have violated the company’s non-compete clause, you’ll want to contact an attorney right away.
If you have questions about anything discussed in this article, or another employment law related question, contract the office of Branigan Robertson to learn more about your rights under the law.