Employers usually want to insert either a Non-Compete Agreement or a Non-Solicitation Agreement into every employment contract with a new employee. What’s the difference between a Non-Compete Agreement and a Non-Solicitation Agreement?
A Non-Compete Agreement is a provision within an employment contract whereby the employee is prohibiting from accepting a job within the competing industry or in some cases from starting a new business within the competing industry in which the employee is employed. A Non-Solicitation Agreement within an employment contract is a provision whereby the employee agrees not to approach existing customers and clients of the employer regarding a potential move to a new job by the employee.
From the employers point of view, these provisions are practical and protect the employers business. From an employees point of view these provisions prohibit freedom of employment. Who is right? In California the employee is right.
California does not allow either a Non-Compete Agreement or a Non-Solicitation Agreement in employment contracts. There is a limited exception whereby Non-Compete Agreements and Non-Solicitation Agreements are enforced against a person selling business goodwill or against a partner upon dissolution of a business, but neither of these exceptions generally apply in employment contracts.
Even though the law is very clear, it is still common to see Non-Compete Agreements and Non-Solicitation Agreements inserted within California Employment Contracts. However, as discussed above, these provisions will mostly likely not be recognized by the California courts.