Non Competes

[Thormond]

I am introducing a client that is in California to my lender in california.  I have sent my non compete and my business development agreement to him to sign.  However, my company is based in Illinios where non compete are honored, whereas in California they are not.

Since he is signing my non compete from illinois, is that valid, as all disputes shall be handled in Illinois as stated in the non compete.  

[Feivel]

Dear Kenneth,

This may help, Enforceability in the State of California

Unlike the situation in other states, non-compete agreements are illegal in California and against public policy.(California Business and Professions Code Section 16600).

[edit] Out of state agreements are not enforceable

The preeminent court decision discussing the conflict between California law and the laws of other states is Application Group, Inc. v. Hunter Group, Inc., 61 Cal.App.4th 881(1998). In Hunter, a Maryland company required that its Maryland based employee agree to a one-year non-compete agreement. The contract stated that it was governed by and to be construed according to Maryland law. A Maryland employee then left to work for a competitor in California. When the new California employer sued in California state court to invalidate the covenant not to compete, the California court agreed and ruled that the non-compete provision was invalid and not enforceable in California. Business and Professions Code Section 16600 reflects a "strong public policy of the State of California" and the state has a strong interest in applying its law and protecting its businesses so that they can hire the employees of their choosing. California law is thus applicable to non-California employees seeking employment in California.

Whether California courts are required by the full faith and credit clause of the United States Constitution to enforce equitable judgments from courts of other states, having personal jurisdiction over the defendant, that enjoin competition or are contrary to important public interests in California is an issue that has not yet been decided.

[edit] Exceptions - valid non-compete agreements in California

There are limited situations where a reasonable non-compete agreement may be valid in California.

(1) If an owner is selling the goodwill in their business.(Business & Professions Code Section 16601).

(2) When there is a dissolution or disassociation of a partnership.(Business & Professions Code Section 16602).

(3) Where there is a dissolution of a limited liability company.(Business & Professions Code Section 16602.5).