| Many companies seek to protect their business by | | | | Inc. v. Shadow Traffic Network (1994) 22 Cal.App.4th |
| requiring that employees sign agreements to not | | | | 853, 861.) For example, an employee could validly be |
| compete with the company should they leave | | | | required not to use a confidential list of preferred |
| employment. However, unlike in many other states, | | | | customers for one year after leaving employment. |
| non-compete employment agreements are illegal in | | | | (Gordon v. Landau (1958) 49 Cal.2d 690.) |
| California. | | | | By comparison, though, even if a former employee |
| Business and Professions Code § 16600 provides | | | | cannot solicit his or her former employer's clients, |
| that "every contract by which anyone is restrained | | | | merely informing customers of one's former employer |
| from engaging in a lawful profession, trade, or business | | | | of a change of employment, without more, is not |
| of any kind is to that extent void." Section 16600 | | | | solicitation. Neither is discussing business after being |
| invalidates agreements to preclude employment in a | | | | first invited by the former employer's customer. (Hilb, |
| certain line of work. The section has also been | | | | Rogal & Hamilton Ins. Services v. Robb (1995) 33 |
| construed by California courts as invalidating | | | | Cal.App.4th 1812, 1822.) |
| agreements that seek to prevent former employees | | | | An exception to section 16600's prohibitions is when a |
| from accepting work from any of the former | | | | shareholder sells or disposes of their stock. In a typical |
| employer's clients. (Morris v. Harris (1954) 127 | | | | scenario, the owner of ABC company is bought-out by |
| Cal.App.2d 476.) A former employee may also solicit | | | | DEF company. DEF can validly protect its investment |
| employees from his or her former employer if unlawful | | | | by requiring the former owner of ABC to sign a |
| means or acts of unfair competition are not used. | | | | reasonable non-compete agreement. (Business & |
| (Diodes, Inc. v. Franzen (1968) 260 Cal.App.2d 244.) | | | | Professions Code § 16601.) |
| A company is however, permitted to protect their | | | | Another exception exists for partnerships. (Business |
| trade secrets. One type of trade secret is a customer | | | | & Professions Code § 16602.) Recent |
| list. Generally speaking, if a company could prevent a | | | | amendments to California include limited liability |
| former employee from using a customer list or trade | | | | companies within the exception for business owners, |
| secret to prevent unfair competition, the company can | | | | and also create a new exception when an LLC |
| enforce an agreement that former employees will not | | | | dissolves. |
| use the confidential information. (Metro Traffic Control, | | | | |