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Non-Compete and Solicitation

Discussion in 'Starting a Business, Incorporation' started by Sammy1234, Jul 21, 2020.

  1. Sammy1234

    Sammy1234 Law Topic Starter New Member

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    Hi!

    I've recently left a business and am considering starting a competing business. I had signed a non-compete and agreed not to use trade secrets. What rights do I have when it comes to reaching out to potential clients for sales? Will I need to go out of my way to avoid clients I remember? Do I need to hope I don't accident reach out to their clients that I don't remember?

    I am in California, so I know the laws are different here.

    Any advice or insight would be appreciated!
     
  2. Zigner

    Zigner Well-Known Member

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    You really ought to have your non-compete reviewed in its entirety by a local attorney. A message forum is not the appropriate place to get answers to your questions.
     
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  3. zddoodah

    zddoodah Well-Known Member

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    What was the nature of your affiliation with this business before leaving? Owner? Officer? Employee? Independent contractor? Something else?

    It's a bit more detailed than that, right? Might be helpful to quote the relevant language.

    I would hope it obvious that folks who have never read your agreement won't have the slightest idea about these things.

    Different than what? Obviously, every state's laws are different.

    With all of the above being said, California Business & Professions Code section 16600 states that, "[e]xcept as provided in this chapter [i.e., Chapter 1 of Part 2 of Division 7 of the Code, commencing with section 16600], every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."
     
  4. welkin

    welkin Active Member

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    The enforcement of a non-compete agreement is dependent for the most part on what you got for signing it and if it is reasonable.

    If you owned a business and you sold it and the non-compete agreement was part of the negotiation, then you were compensated for the agreement as long as it was reasonable. Saying you could not compete for 10 years in a large geographical area would not be reasonable.

    If you were an employee and your boss one day came to you with a non-compete agreement and said sign it or your fired and you were not going to be compensated in any way for signing it, that would generally be non-enforceable.
     
  5. Zigner

    Zigner Well-Known Member

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    Your comment, while true in some locations, is not true in California. Review the law that was posted above.
     
  6. welkin

    welkin Active Member

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    And I find nothing that would render my post incorrect. So will you kindly point where what I posted is in conflict with the statute>
     
  7. PayrollHRGuy

    PayrollHRGuy Well-Known Member

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    Continued employment would be considered compensation in many of the states that require such compensation.
     
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  8. Zigner

    Zigner Well-Known Member

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    That is false in CA insofar as this poster is concerned.
     
  9. zddoodah

    zddoodah Well-Known Member

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    I disagree. Nothing in the applicable statutory law supports the assertion that the enforceability of a non-compete agreement is at all dependent on what the person against whom enforcement is sought received for signing it. In most contexts, including this one, courts do not attempt to pass on the reasonableness of consideration -- only whether consideration was given. Are you aware of a California case that supports this assertion?

    That's only partly correct. Cal. Bus. & Prof. Code section 16601 states that "[a]ny person who sells the goodwill of a business, or any owner of a business entity selling or otherwise disposing of all of his or her ownership interest in the business entity . . . may agree with the buyer to refrain from carrying on a similar business within a specified geographic area in which the business so sold, or that of the business entity, division, or subsidiary has been carried on, so long as the buyer, or any person deriving title to the goodwill or ownership interest from the buyer, carries on a like business therein."

    In other words, while the geographic area must be limited, the time is unlimited as long as the buyer is carrying on the business that has been sold.

    California is not "most states," and "welkin" is correct that a non-compete agreement with an employee is generally unenforceable under California law (specifically, B&P 16600, which I quoted and linked to in my prior response).
     
  10. Zigner

    Zigner Well-Known Member

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    It wasn't welkin who made that assertion. It was you, reiterated by me.
     
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  11. zddoodah

    zddoodah Well-Known Member

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    Neither you nor I said anything about non-competes vis-a-vis employees in our first responses in the thread (posts #2 and #3). In fact, you said nothing about employee non-competes in any of your responses in the thread other than the most recent one (#10) "Welkin," on the other hand, wrote the following in post #4:

    That is the statement on which "PayrollHRGuy" was commenting ("Continued employment would be considered compensation in many of the states that require such compensation.") and with which I was agreeing. So, yeah, it was "welkin" who made that assertion.
     
  12. Zigner

    Zigner Well-Known Member

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    Since the entire thread is related to a non-compete signed by an employee, it seems that there is no need to repeat it.


    The point is that, in CA, regardless of consideration (or lack thereof), the non-compete would be invalid.
     
  13. zddoodah

    zddoodah Well-Known Member

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    Yes, exactly, as was first noted by "welkin" in post #4 in this thread. I'm still at a loss to understand the comment made in your post #10 in the thread that "It wasn't welkin who made that assertion. It was [me], reiterated by [you]." No, it was not made by me; it was made by "welkin," and you did not "reiterate" it; you disagreed with it when you wrote, in post #5 in the thread, in response to "welkin's" entire post #4, "Your comment . . . is not true in California."
     
  14. Sammy1234

    Sammy1234 Law Topic Starter New Member

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    I appreciate all your feedback.

    Based on CA law, regardless of contract, am I legally able to start a competing business in the same area?
     
    Last edited: Jul 22, 2020
  15. army judge

    army judge Super Moderator

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    That is the first question that you should ask of a CA licensed attorney once you've engaged her/his services.
     
  16. Zigner

    Zigner Well-Known Member

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    Hi Sammy -

    In response to your PM, you need to take your contract and speak with a local attorney. I am not an attorney, and even if I was, it would be improper for me to advise you through an internet forum.
     
  17. Zigner

    Zigner Well-Known Member

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    I find it amazing that you feel the need to argue with a post that was SUPPORTING a previous post made by you.

    Re-read the thread. Or don't. I don't care.
     
  18. zddoodah

    zddoodah Well-Known Member

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    There's no law that restricts you. It's entirely a matter of contract. Unfortunately, you chose to ignore the questions I asked, so there isn't anything more I can tell you.

    I find it amazing that you post things that simply aren't true and then, when you get called on it, cannot simply acknowledge it and move on (which is what I'll be doing now).
     
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