November 26, 2020

Volume X, Number 331

Advertisement

November 25, 2020

Subscribe to Latest Legal News and Analysis

November 24, 2020

Subscribe to Latest Legal News and Analysis

November 23, 2020

Subscribe to Latest Legal News and Analysis

Broad Confidentiality Restriction Void As Illegal Non-Compete Provision

Section 16600 of the California Business & Professions Code declares "every contract" that restrains "anyone . . . from engaging in a lawful profession, trade, or business of any kind is to that extent void".  There are only three statutory exceptions to this ban.  

Often, non-compete provisions are explicit, providing that a party may not engage in a specified activity.  In those cases, the question will be whether the provision falls within a statutory exception.  A recent decision by the California Court of Appeal, however, demonstrates that sometimes the question will be whether a provision is in fact a covenant not to compete.

Brown v. TGS Management Co., LLC, 2020 Cal. App. LEXIS 1074, is an appeal from a judgment confirming an arbitration award in favor a the plaintiff's former employer.  The plaintiff contended that the arbitration award should be vacated because it exceeded the arbitrator's powers.  Specifically, the plaintiff claimed that the arbitrator should have declared the non-compete provisions of his employment agreement void under Section 16600.  

Pigs get fed, hogs get slaughtered

The Court of Appeal agreed, finding that the overly broad confidentiality provisions in the plaintiff's agreement operate as a de facto noncompete provision, plainly barring the plaintiff in perpetuity from doing any work in his field, much less his chosen niche.  The Court noted that its holding will not strip the employer of its ability to enforce a properly drafted confidentiality agreement.  The Court further noted that the employer can stop former employees from disclosing trade secrets by pursuing injunctive and tort remedies under the Uniform Trade Secrets Act (Cal. Civ. Code § 3426 et seq.) and the Unfair Competition Law (Cal. Bus. & Prof. Code § 17200 et seq.).  

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume X, Number 321
Advertisement

TRENDING LEGAL ANALYSIS

Advertisement
Advertisement

About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

949-851-5428
Advertisement
Advertisement