Non-Compete and Solicitation

[Sammy1234]

Jurisdiction

California

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!

 

[Zigner]

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.

 

[zddoodah]

I've recently left a business

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

I had signed a non-compete and agreed not to use trade secrets.

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

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

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

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."

 

[welkin]

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.

 

[Zigner]

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.

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

 

[welkin]

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

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>

 

[PayrollHRGuy]

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.

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

 

[Zigner]

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.

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

 

[zddoodah]

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

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?

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.

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.

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

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).

 

[Zigner]

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).

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

 

[zddoodah]

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

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:

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.

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.

 

[Zigner]

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:

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

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.

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

 

[zddoodah]

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

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."

 

[Sammy1234]

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?

 

[army judge]

Based on CA law, regardless of contract, am I legally able to start a competing business in the same area?

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

 

[Zigner]

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.

 

[Zigner]

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."

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.

 

[zddoodah]

Based on CA law, regardless of contract, am I legally able to start a competing business in the same area?

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 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.

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).