Can I Sue My Former Employer for Wrongful Termination in California for a Non-Compete Clause?
The California Division of Labor Standards Enforcement is responsible for administering the state's employment discrimination laws. The federal Equal Employment Opportunity Commission administers the federal equal employment opportunity laws. California is an employment-at-will state, so an employer in California can terminate employees for any legal reason or no reason. A non-compete agreement with an employer is not legal in California, so will not provide a legal cause of action to sue him for wrongful termination based on such agreement.
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Overview
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Non-compete agreements are business agreements that restrict competition by former employees. They are commonly used in business arrangements between partners of firms, but many employers sign them with their employees to reduce the employees' opportunities to find clients within competing markets. The agreements are subject to state laws, and many states enforce only certain types of non-compete agreements. California is unusual, in that it prohibits the use of non-compete clauses or contracts between employers and their employees entirely.
Non-Compete Agreements
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To encourage competition and employment opportunities, most states place restrictions on the types of non-compete clauses that state courts will enforce. Typically, non-compete clauses are enforceable if they are geographically limited, limited in duration, and not unduly restrictive. For instance, courts may uphold a non-compete agreement between an employer and his employee that is restricted to a one-year duration after termination, and that limits the employee from contacting former clients or from engaging in the same line of work within five miles of the employer's workplace.
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California Law
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In California, non-compete clauses are void and against public policy. Specifically, Section 16600 of the California Business and Professions Code prohibits employers from using them. An employee in California cannot use the terms of an illegal non-compete clause as the basis of a wrongful termination claim. Legally, parties to an illegal contract cannot sue one another to enforce the terms of the illegal document. Even in states where non-compete agreements are legal, they generally cover business restrictions, not termination restrictions.
Exceptions
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In limited circumstances, California law allows partners of a business to use non-compete clauses if they are reasonably limited in geography and duration. Additionally, California courts may uphold non-compete clauses that limit the sale of assets or business ownership to certain individuals. The California General Assembly enacted the prohibition to encourage competition and to help employees find alternate employment upon termination.
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