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What Is a California Non-Compete Agreement?

A non-compete in California is a document with a premise of accepting a party’s written promise that they will not disclose trade secrets, intellectual property, and will not engage in competitive behavior for a specified period of time and within a certain geographic location. However, California courts generally consider the use of most non-competition agreements void. Before creating one, business owners should first seek legal advice from licensed attorneys who understand the state's laws.

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Sample California Non-Compete Agreement

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Applicable State Laws -  Sections 16600 through 16607 of California State Code (Business and Professions Code). 

While there are California state laws located in the California Business and Professions code regarding the use of non-competition agreements, most California courts consider the documents as void. They are, by and large, considered banned. This also includes using non-California laws in the choice of law provisions or jurisdiction clause as a means of attempting to improve the enforceability as a California employer.

As a result, it is imperative to seek legal advice from a law firm in the State of California if you are interested in drafting a non-compete agreement or if you want to use a non-compete clause in your employment agreement.

Protect your California business by also using a California non-disclosure agreement form. Download a California non-disclosure agreement form now!

How to Write a California Non-Compete Agreement

California courts consider the use of non-compete agreements void, except in very specific situations outlined in Sections 16600 through 16607 of California State Code (Business and Professions Code). If you choose to create a non-compete agreement or clause in California, ensure that you comply with these laws.

  • Purpose. This clause explains the purpose of the non-compete agreement, which is to protect the confidential information of the business. It also defines the parties and includes an effective date. It refers to confidential information as proprietary information. Proprietary information may include current customers' information among other things.
  • Non-compete. This section of the agreement may include the time period, geographical restrictions, business practices, clients or customers, general competitors, business activities, specific competitors, specific activities, and employee solicitation.
  • Time period. Some non-compete agreements may have a specific clause that outlines the time period as well as when the time period begins.
  • Purchase option. A purchase option clause states whether your company will or will not allow the recipient to be released from the agreement for a specific payment amount. If so, the amount of the payment is listed in this clause.
  • Jurisdiction. The jurisdiction clause is used to set the laws that will govern the agreement to California laws.
  • Confidential information. This clause states that the term "confidential information" as it is used throughout the agreement means any and all technical and non-technical information provided by your business that includes and is not limited to any data or other proprietary information related to products, inventions, plans, methods, processes, developmental or experimental products, intellectual property, software, databases, customer lists, vendor or supplier lists, marketing methods, reports, business plans, financial information, or other matters pertaining to your business or any of your clients, consultants, or licensees that is disclosed to the recipient under the terms of the non-compete agreement.
  • Permitted disclosure. This clause explains when confidential information is no longer confidential. This generally occurs when information becomes public through no fault of the recipient, when the information is discovered by the recipient on their own without a breach of another person, is released to the public after the written consent of the business, etc.
  • Confidentiality. This clause states that the recipient acknowledges that they have access to is confidential and that they agree that they will not directly or indirectly disclose or communicate it directly or indirectly to another party without the written consent of the business. They also agree that they may not use the information for any other purpose except to further the business without the written consent of the business.
  • Return of materials. This clause states that when the agreement is terminated or when the business requests it, that the recipient will promptly return all documents and other tangible material that represents the confidential information of the business and any copies that exist. The business will also notify the recipient upon discovery of any loss or unauthorized disclosure of the confidential information.
  • Remedies. This clause explains the remedies that the business is entitled to pursue if the recipient breaches the agreement. Examples include the recovery of court costs and reasonable attorney fees, the award by a court of a temporary restraining order or preliminary injunction against the unauthorized use, etc., as well as all other remedies available under California law or equity.
  • Choice of law. This clause states that the non-compete agreement is governed by the laws of the State of California.
  • Entire agreement. This final clause states that the entire agreement may be amended in writing and only if the parties sign it. Both parties must sign and print their names. The signatures must also be dated. Each party should receive a copy of the agreement for their records.

Both parties should retain a copy of the document for their records.

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