Restrictive covenants in employment agreements can be very useful to companies on the leading edge of technology and business innovation. This document is a general checklist of factors employers should consider with respect to the use of such covenants.
California Employee Restrictive Covenants refer to legal agreements or clauses designed to limit an employee's activities or behaviors after leaving a job. These covenants are an important aspect of employment contracts, offering protection to employers against potential competition or disclosure of sensitive information by former employees. While California has strong public policy favoring employee mobility, certain types of restrictive covenants are still enforceable under specific circumstances. 1. Non-Competition Agreements: These are one form of restrictive covenants in which employees are barred from engaging in similar business activities or working for competitors after leaving their current job. However, in California, non-compete agreements are generally considered unenforceable, with few exceptions such as in limited cases involving the sale of a business or dissolution of a partnership. 2. Non-Solicitation Agreements: These covenants prevent departing employees from soliciting or poaching clients, customers, or fellow employees from their former employer. Non-solicitation agreements are generally enforceable and permissible under California law unless they are seen as an unlawful restraint of trade or prohibit open competition. 3. Confidentiality and Non-Disclosure Agreements: These covenants aim to protect a company's trade secrets, proprietary information, client lists, and other sensitive data from being disclosed by employees. In California, confidentiality and non-disclosure agreements are enforceable to the extent necessary to protect legitimate business interests. However, employers must be cautious not to overreach and include overly broad or unreasonable terms. 4. Assignment of Inventions Agreements: These covenants require employees to assign any intellectual property or inventions developed during their employment to their employer. California generally allows such agreements, but they must be narrowly tailored and exclude inventions created entirely on the employee's own time and without using employer resources. It is important to note that despite certain enforceable employee restrictive covenants in California, courts typically interpret and restrict the scope of such agreements to prevent undue limitation on employees' ability to work and pursue their chosen professions. Employers must ensure that the restrictive covenants they employ comply with California law's extensive restrictions and limitations. Consulting with an experienced employment attorney is highly advised to draft valid and enforceable agreements.
