Unfair competition agreements are extremely common among business transactions. These contracts are intended to limit unfair competition or avoid the theft of trade secrets. Unfair competition also involves deceptive sales practices. However, such agreements, depending on the state involved, often concern non-compete and confidentiality agreements in employment contracts.
Nevertheless, employees cannot be excessively restricted in their rights to work for competing businesses after leaving a particular company. Former employees have the right to work for a competing business; however, there are some limits. Generally, employees are restricted from the following examples of unfair competition:
Breaching confidentiality: This might involve stealing trade secrets or downloading secretive customer lists.
Soliciting customers with whom the employee had worked: Generally, an employer that pays an employee to build customer relationships often has the right to protect such dealings.
Breaching the duty of loyalty: This might include company equipment or materials to compete against the employer.
While these restricts exist in many states, many unfair competition rules depend on the particular jurisdiction in question.
California and agreements in employment contracts
California generally disfavors non-compete agreements. Specifically, such covenants are viewed as restrictive on the engagement of lawful employment, trade or business. Such limitations are also seen as harmful to the state’s economy. However, there are some agreements not to compete, which considered valid under California’s laws. Such covenants include those concerning the sale of a company and the pulling out of a partner.
In such cases, the factors used to establish the validity of the agreement are its duration and geography. For example, a purchase agreement for a business may include a clause, which limits the seller from operating a substantially similar company within the specific area where the purchased company engages in business. The agreement is usually limited to a couple of years.
Very similar standards apply to non-compete accords regarding partnerships. Courts will often enforce agreements among partners in particular professions, including lawyers, physicians and other trades. Such contracts are typically enforced by requiring the violating employee to compensate his or her former coworkers for any business that has extracted from the original partnership.
If a business must enforce a non-compete agreement, the plaintiff may get restitution for any loses that resulted from the employee’s unfair competition activities. In some cases, an injunction could be issued, which would ask the employee to stop such practices.
If you are interested in learning more about unfair competition laws in your area, contact the experienced business law attorneys at the Watkins Firm or call 858-535-1511 for a free and substantive consultation. Our lawyers can help you assess any applicable laws, and ensure the protection of your trade secrets through unfair competition agreements.