Restrictive Covenants For Independent Contractor In San Jose
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FAQ
Noncompete agreements are void and prohibited by law in California.
California's wage and hour laws (e.g., minimum wage, overtime, meal periods and rest breaks, etc.), workplace safety laws, unemployment insurance, and retaliation laws protect employees, but not independent contractors.
On April 23, 2024, the FTC passed a final rule to ban most non-compete clauses in employment agreements, finding such agreements to be unfair methods of competition (the “FTC Rule”).
As with many things, however, California is different. California law explicitly voids all non-compete agreements for employees and independent contractors. These agreements are simply not enforceable, no matter how reasonable they may seem.
Although non-competes are banned by California law, you can still have robust protections for confidential information and trade secrets. These provisions are critical and should be tailored enough to avoid being considered “de facto” non-competes.
For more than 150 years, California has declared non-compete agreements unenforceable. In 1941, California codified its prohibition on non-competes in California Business and Professions Code sections 16600-16607.
Under California Business and Professions Code Section 16600, unless you were an owner of the business, any “non-compete clause” which forbids an employees who is fired or resigns from working for a competitor or starting a competing business is illegal and unenforceable.
Current and Future Agreements Agreements containing impermissible covenants are “unenforceable regardless of where or when the contract was signed” (BPC § 16600.5(a)), and regardless of whether “the employment was maintained outside of California” (BPC § 16600.5(b)).
Clawback provisions are legally permissible because the bonus is not “earned” until the employee fulfills the contractual obligations. However, under California law, the employer cannot withhold the bonus from the employee's final wages, even if the employee fails to meet the conditions.
Noncompete agreements are void and prohibited by law in California. QUICK SUMMARY: In California, noncompete agreements that are intended to prevent or restrain an employee from engaging in another lawful possession, trade or business during their employment have long been unenforceable.
