In some states, non-compete agreements are a major way that businesses try to protect their own interests. A business owner may be worried that an employee is going to stay for a year or two, develop skills to work in the industry and then leave that business – either to start their own or to work for the competition. A non-compete agreement prohibits them from doing this within a certain geographical region or a certain timeframe.
However, California has prohibited these non-compete agreements and will not honor them. If they are in an employment contract, it will not stand if that case ends up in court. Why is it that California does not allow these agreements even though other states do?
The reason that lawmakers in California have cited is that they want the workplace to promote competition, and that includes competition in labor.
For example, if an employee is only making a low wage but knows that they are not legally allowed to leave the business to work anywhere else, then they may feel that they have no choice but to accept that low wage. California doesn’t allow this because the fact that employees can easily switch jobs means that employers do have to compete – through higher wages and benefits – for the services of the best employees.
Additionally, these contracts are seen as prohibitive to someone’s career. They prioritize the business over the worker, and that is simply not allowed under the laws within the state.
It’s very important for both employees and employers to know how this works and all of their legal options if a dispute should arise or if a contract needs to be written.