Employee Not-To Compete (California)

[steele2j]

What is the name of your state? California

I own a Security and Locksmith business in So Cal. with one of my brothers. Another one of my brothers started working for me last week, however while still working for his previous employer he was required to sign a not to compete agreement that stated that he could not work for another company or run calls with in 20 miles of that shop for 2 Years. (Signed it because he was told that bonuses would be withheld if he did not and it stated that if the company was sold he would get 1-3% of the sale.)

I know that we are not permitted to use his customer list (Question about that is to follow), but are we bound to not allow the employee to work in this same area that we also cover?

Customer List?
Does this agreement prevent us from sending solicitations to All (we do not have any copy of his customer list) property management and real estate people within 20 miles of his shop the same area that we also service (even before the hiring)?

Everything that I read states that Not-To Competes are not valid in California.

Please Advise

James

 

[krispenstpeter]

Everything that I read states that Not-To Competes are not valid in California.

And that statement would be wrong. Non-Compete agreements are not, on the face of them, invalid. It depends on their reasonableness and contents.

Your best bet is to stop letting your brother work for you until he has an attorney review the agreement and offer an opinion.

 

[divgradcurl]

Everything that I read states that Not-To Competes are not valid in California.

Basically correct. There are a few exceptions, but very few. California Business and Professions Code Section 16600 basically makes non-compete agreements invalid.

Doesn't mean you or he won't get sued, but it does meanthat they would be extremely unlikely to prevail if they did.

Does this agreement prevent us from sending solicitations to All (we do not have any copy of his customer list) property management and real estate people within 20 miles of his shop the same area that we also service (even before the hiring)?

No, but you should be careful in doing so. Obviously you can't use the customer list, but you could send something out to "all" -- but if you then use your brother to help solicit the customers in his former employee's area, then it will likely look pretty suspicious. If you do solicit customers that you know (or believe) are currently customers of his old firm, then you might want to talk briefly with a local attorney who can review all of the facts and try and work out a scheme that will allow you to intrude on the other's curtomers without appearing as if you are using an ill-gotten customer list.

 

[I AM ALWAYS LIABLE]

My response:

With limited exceptions concerning competition agreements between corporations, such non-compete covenants are void in California concerning employees to the extent they restrain the employee from engaging in his or her lawful business, trade or profession (Ca Bus & Prof § 16600). "Business, trade or profession" means the employee's particular occupational expertise or specialty - - i.e., the covenant is unenforceable if it prohibits the employee from engaging in his or her particular specialty. [See D'Sa v. Playhut, Inc. (2000) 85 Cal.App.4th 927, 929, 102 Cal.Rptr.2d 495, 497- - employer wrongfully discharged employee for refusing to sign employment agreement containing noncompete clause; Boughton v. Socony Mobile Oil Co. (1964) 231 Cal.App.2d 188, 192, 41 Cal.Rptr. 714, 716; and Campbell v. Board of Trustees of Leland Stanford Jr. Univ. (9th Cir. 1987) 817 F.2d 499, 503]


Non-disclosure, nonsolicitation and "anti-raiding" agreements:

Non-disclosure agreements are enforceable as promises by a former employee not to:

• Disclose the former employer's confidential customer lists or other trade secrets; or

• Solicit customers named on such lists; or

• "Raid" (i.e., hire away) former coworkers. [See Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268, 275-276, 219 Cal.Rptr. 836, 841-842; John F. Matull & Assocs., Inc. v. Cloutier (1987) 194 Cal.App.3d 1049, 1054-1055, 240 Cal.Rptr. 211, 214; compare Whyte v. Schlage Lock Co. (2002) 101 Cal.App.4th 1443, 1461, 125 Cal.Rptr.2d 277, 292-293- - "inevitable disclosure doctrine" (former employee who signed non-disclosure agreement may be enjoined from working for competitor upon showing new job duties will necessarily result in disclosure of trade secrets) rejected as contrary to California law]

IAAL