When Non-Compete Agreements Are Enforceable in California: What Employees and Employers Should Know

When Non-Compete Agreements Are Enforceable in California: What Employees and Employers Should Know

Steven McLellan & Claire Melehani

California is famously hostile to non-compete agreements—but that doesn’t mean every restriction on post-employment conduct is automatically illegal.

Both employees and employers are often surprised to learn where the real legal boundaries are.

The General Rule in California

Under California Business & Professions Code section 16600, contracts that restrain someone from engaging in a lawful profession, trade, or business are void as a matter of law. In plain terms, most non-compete agreements are unenforceable.

This rule exists to promote employee mobility and competition—but it is not absolute.

The Exceptions Most People Miss

While traditional non-competes are generally unenforceable, California law does allow certain post-employment restrictions, including:

• Sale of a business: Non-competes may be enforceable when tied to the sale of goodwill or ownership interests
• Trade secret protection: Employers may prohibit the use or disclosure of confidential information
• Narrow customer non-solicitation provisions (when carefully drafted and tied to trade secrets)
  
  

What matters is how the restriction is written and enforced, not just the label used.

The Risk of Overreaching Agreements

Employers who rely on outdated or overly broad non-compete language risk more than unenforceability. They may face:

• Claims for unfair competition
• Exposure under California’s Private Attorneys General Act (PAGA)
• Civil penalties for attempting to restrain lawful employment
  
  

Employees, on the other hand, may unnecessarily limit career opportunities because they assume an agreement is valid when it is not.

What To Do If You’re Facing a Non-Compete

Before signing—or relying on—a non-compete agreement, it’s critical to evaluate:

• Whether the restriction is tied to a lawful exception
• Whether it actually protects trade secrets
• Whether it goes beyond what California law allows

At McLellan Law Group, LLP, we help both employees and businesses navigate these issues strategically, before they turn into litigation.