Have you ever entered into a non-compete agreement as a boss or an employee, or are you currently considering doing so? If so, you may be worried about the standard business contract, and whether yours is completely valid or legally enforceable. We have you covered.Here we will address your concerns and answer your questions regarding non-compete agreements:
What is a Non-Compete Contract?
A non-compete contract is an agreement that will prohibit employees, contractors, or equity holders (owners)from competing in business, now, or in the future, with the company that they are currently working for or in which they hold or held an equity interest. They may be restricted from doing so while employed or for a particular time period after selling their equity ownership.
Many times, a non-compete clause within a standard employment contract is insufficient. They are often combined with non-disclosure and non-solicitation provisions, as well. Non-disclosure contracts keep confidential company information and trade secrets from being leaked. Non-solicitation provisions prohibit an employee from soliciting other employees, customers, or clients of the business for a period of time after termination of employment.
How to Determine if the Agreement is Legally Binding?
In California, non-compete agreements that apply to employees after they resign or are terminated are not enforceable as a matter of public policy. California Business and Professions Code Section 16600 sets out the general rule in California – covenants not to compete are void.
Section 16601 provides one of the narrow exceptions to Section 16600. Pursuant to Section 16601, in certain defined circumstances, persons who sell the goodwill of a business or any shareholder of a corporation selling or otherwise disposing of all his shares in said corporation may agree to refrain from carrying on a similar business within a specified county or counties, city or cities, or part thereof, in which the business so sold, or that of said corporation has been carried on, so long as the buyer, or any person deriving title to the goodwill or shares from him, carries on a like business therein.
How to Draft a Non-Compete Agreement?
While there are commonalities across different companies, it would be erroneous to state that there is a non-compete agreement template that works perfectly for everyone. Every business is unique in how it operates and the products or services it sells.
Hence, in order to create a document that covers all your bases, it is best to consult with a reputable business attorney in Los Angeles who will take stock of your organization and draft an agreement that reflects your needs while simultaneously protecting your interests.
That said, any non-compete agreement worth its salt will address each of the following key points:
- Market or niche – the particular product or service a company offers or the specific line of business;
- Geographic area – the physical space limitations placed on the undersigned; and
- Duration – the overall amount of time that the undersigned is restricted from directly competing with the company.
Have Questions About Drafting a Professional Business Contract?Contact an Experienced Business Lawyer in Los Angeles Today
Hakim Law Group stands ready to help small business owners and entrepreneurs. Our team of skilled and highly reputable business attorneys have worked in top tier international law firms and served as general counsel to major companies. This high level of diverse legal and business experience is paramount to our boutique approach – which produces more efficient, responsive and, ultimately, more effective results. For further information or to schedule an appointment with a leading business attorney in Los Angeles please contact HLG at 310.993.2203 or visit www.HakimLawGroup.com to learn more.