When sellers in California dynamic transition of the tech economy between jobs, the value they bring to their new company is often their customer relationships. Start-up founders and vendors looking to join the competition often feel that continuing to maintain these customer relationships is not controversial, given California's well-known policy of promoting job mobility and prohibiting non-compete agreements. .
However, California's trade secret law relating to the ability of sellers to solicit these customers once they switch to a competitor is increasingly confusing and fails to provide meaningful guidance on what type of conduct is permitted. Therefore, a vendor's transition from his current company to a competitor is risky as it is unclear whether and to what extent he can continue to serve customers or contacts he has previously worked with.
A sales employee working for a value-added reseller (VAR), for example, should understand what they are getting into before moving on to a competitor - they could risk long-standing relationships with original equipment manufacturers (OEMs) and users. endings. This article explains the conflicting law on this issue so that sellers who intend to abandon ship and companies that are considering hiring them can be informed about the current legal landscape.
California law invalidates non-compete agreements
In the vast majority of states, employers can, and do, require employees to enter into some form of non-compete agreement in exchange for continued employment. 1 In contrast, California has a longstanding policy aimed at encouraging job mobility over employer concerns. California policy is contained in section 16600 of the Code of Business and Professions, which provides: "Except as provided in this chapter, any contract whereby someone is prevented from exercising a legal profession, business or an activity of any kind is null and void in that sense. "
California courts "have consistently held that Section 16600 highlights an established legislative policy in favor of open competition and employee mobility" which is intended to "ensure that every citizen retains the right to pursue any legal and corporate employment of theirs. choice". 2 The policy also allows California employers to "compete effectively for the most talented and qualified employees in their industries, wherever they reside." 3 As a result, unlike most states, the "employee's interests in [their] own mobility and improvement "generally outweigh the" competitive business interests of employers ". 4
Courts have broadly enforced section 16600, invalidating non-compete agreements, which would prohibit or restrict an employee from leaving work for a competitor. 5 Importantly, the courts have also invalidated contractual provisions that purport to limit an employee's ability to leave and thus solicit the company's customers. 6 In other words, a salesperson cannot be contractually barred from leaving their company, joining a competitor, and continuing to solicit, service, and communicate with the former company's customers. Also, with limited exceptions, California courts will ignore a "choice of law" provision that purports to require the court to follow a state's law that requires non-competitors. 7
