California has strict rules outlawing covenants not to compete.
But there are exceptions.
California is notorious for outlawing non-competition
agreements. It is one of the few states that generally prohibits
the unlawful restraint of one's profession or business, with
limited exceptions. Knowing how to navigate these limited
exceptions is critical for companies that utilize employment
agreements to protect trade secrets and other valuable business
assets.
The Right to Compete Under Edwards
In the seminal case Edwards v. Arthur Andersen LLP, 44
Cal. 4th 937 (2008), the California Supreme Court reinforced the
state's long-standing public policy favoring employee mobility
and confirmed, as a general rule, that employee non-competition
agreements are unenforceable in California. This public policy is
codified in section 16600 of the California Business and
Professions Code, which provides that, "every contract by
which anyone is restrained from engaging in
