In situations where employers also make their employees, or certain employees, agree to restrictive covenants, particularly noncompetes, companies expect the same uniformity and predictability regarding their enforceability as to each employee, regardless of where the employee works or lives. Employees, on the other hand, often expect (as we learned through a recent case) that even with another state’s choice of law provision, they will still be afforded the protection of the laws of their own state. This disconnect is no clearer than where non-California headquartered companies hire California residents as employees and require them to sign noncompetes governed by another state’s law. In California, noncompete agreements are generally unenforceable (with some limited exceptions). This is well-known, particularly by California residents. So, what happens in this situation if the California employee violates their noncompete? Continue reading →
By Jason Guss
Restrictive covenants are contractual clauses that limit an employee’s post-employment activities for a specified length of time and geographic area. Their enforceability varies by state and by profession. For example, restrictive covenants are unenforceable in the legal profession but are enforceable in the medical profession. The American Medical Association, however, discourages restrictive covenants between physicians. Yet it deems them ethical unless they are excessive in geographic scope or duration, or fail to reasonably accommodate patients’ choice of physician.
The determination of whether a restrictive covenant is reasonable is a factual one that is assessed on a case-by-case basis: courts weigh the competing interests of the employee versus the employer, and typically the burden is on the employer to demonstrate that the restrictive covenant protects the employer’s interests without posing an undue hardship on the employee.