UPDATE: As of January 1, 2024 all non-compete agreements and covenants not to compete are unenforceable and essentially illegal in the State of California.  Any employer who attempts to require a worker to sign any such agreement, paragraph, clause or phrase will be exposed to extensive civil and in some cases criminal exposures. 

California employers must notify in writing all employees, past and present, by February 14, 2024 that any non compete contract, clause or agreement they have entered into or signed in the past (and specifically from 1/1/2022) is void.  Employers are required to notify these employees in writing at their last known address in the employee file.  It is ok to email them, but employers are required to send physical notice through the mail (certified mail with receipt or attempt to deliver notice is highly recommended). 

There is no specific language or clause you must communicate under the law.  Simply inform any employee who has signed a non-compete agreement of any sort in the past (except a trade secret agreement) of the name of the contract they signed, or the specific provisions, paragraphs or clauses contained within any employment-related document that they are void, no longer enforceable and that you will take no action to enforce them going forward.

Is a non-compete or covenant not to compete enforceable in San Diego.  Is there a way to tailor employment contracts and supporting documents to protect your company and customers against former employees, partners and others who would take what they’ve learned from you to compete against you or sell your valuable corporate information?

In September of this year Governor Newsom signed a new law that prohibits any California employer from “entering into or attempting to enforce noncompete agreements which are void under state law.  The fact is California has all but dismantled the protections of non-compete agreements other states enjoy.  California laws generally void any contract or agreement restraining an individual from taking part in a lawful business, trade or profession with very few exceptions.  This new law requires employers to notify any current or former employee in writing that any noncompete agreement(s) they may have signed in the past are void.

However, a well-constructed non-disclosure agreement which leverages trade secrets and other protections will protect your company’s interests and prevent employees from taking your proprietary information, customers, trade secrets and the skills you’ve taught them to go compete against you.

Or, worse yet, take your customers.

The Uniform Trade Secrets Act (U.T.S.A.)

The majority of states in the US, including California, have adopted the Uniform Trade Secrets Act or UTSA.  Trade secrets are the key to protecting the confidential unique information (not generally known within your field, market or profession) that would be valuable or potentially valuable if provided to a competitor or used to compete against you.

Here in California, the UTSA protects against improper access to or theft of trade secret information, as well as the misappropriation of trade secret information by inappropriate means without the your consent as the owner of the trade secret(s).  The fact that something is a “secret” actually carries a few obvious limitations.

A secret cannot be available to or accessed by every employee in your company.  Secrets are valuable, and valuables are protected.  Trade secrets, therefore, must be secured in a manner that prevents access to most who work in the company and limits that access to those who specifically need access to the trade secret information.

While the current cases and statutes of California law will not make a non-compete or covenant not to compete enforceable in San Diego, a misappropriation of trade secrets is absolutely enforceable.  The “Defend Trade Secrets Act of 2016” provides federal jurisdiction and relief as well as the potential to collect “enhanced damages and attorneys fees.  However, the employment agreement or trade secret agreement must contain verbiage that informs the employee who signs it of this federal law’s “Safe Harbor” provisions in order to retain the right to enhanced damages and attorneys fees.

What makes a trade secret / non-disclosure policy or agreement enforceable in San Diego is a combination of legal strategies, procedures and documents designed to secure, protect and limit access to the information and practices of your company as well as the products you sell within a given market.

What Can Be Established as a Trade Secret in California?

What types of information or assets can be established as a trade secret in California?  The information or asset must be proprietary and not “reasonably or independently ascertainable.”  A trade secret can be your list of customers and/or suppliers, costs, internally developed marketing strategies, intellectual property, presentations, video, software, programs, algorithms, unique technology or secret recipes, inventions, product mix or components.

It must be possible to prove the information or asset was “secret” and that it was accessed dishonestly or unfairly and then disclosed or used against your company and its interests. non-compete or covenant not to compete enforceable in San Diego

You may have heard there are no valid ways to structure a non-compete in California.  California needs revenue, and as a general rule they do not want to see potential taxpayers eliminated from the local work force.  It is certainly possible to limit the ability of a present employee to go out on their own and compete against you in specific markets for an effective period of time.

Is a Non-Compete or Covenant Not to Compete Enforceable in San Diego or Southern California?

Is a non-compete or covenant not to compete enforceable in San Diego or Southern California?  In most cases probably not.  However, The misappropriation of trade secrets is against California and federal law and can absolutely prevent an employee from inappropriately taking secrets from your company and disclosing them or using the trade secret information they’ve illegally taken or learned to compete against you.

We work to ensure that your private and proprietary corporate trade secret information is protected, and that there are ramifications to a former employee who would attempt to use it.  There are substantial protections which must be put in place as well as changes to many internal documents including the employee handbook and the employment agreement itself.

Medical practices and healthcare facilities have a unique brand of non-compete agreement to preserve the integrity of the practice and to protect its patients.  We invite you to review our podcast as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.