Written by Galen T. Shimoda and Justin P. Rodriguez
Here?'s the scenario: your employment has recently been terminated. Either voluntarily or not, you are out of a job and your employer is offering you a severance agreement, which includes a lump sum payment of a few months wages to help you get by while between jobs. However, included in this severance agreement is a covenant not to work for your former employer?s competitors for one year. The dilemma is clear. You want to take the money in order to provide you and/or your family stability while between jobs, but your long term ability to provide for yourself and/or your family is jeopardized because you cannot take a job in the line of work you are likely the most experienced in.
Non-competition agreements (sometimes also referred to as covenants not to compete) are one of the most common scenarios we see in consulting with clients on severance agreements. This is especially the case when a person was employed by an out of state company. As many California companies already know, as a general matter, non-competition agreements are simply null and void. California courts provide broad protection in allowing employees the ability to practice in their chosen profession with whatever company they desire. This does not mean an employer won?t threaten (or sometimes initiate) a court action to uphold a non-competition agreement. We have experienced that as well.
What the California prohibition does mean is that employees have a very real, concrete recourse to challenge their employer if the employer seeks to limit the employee?s right to earn a living. Furthermore, an employee can initiate an action for declaratory relief to remove the non-competition language from a severance agreement even if it has already been signed.
If you need advice concerning a severance agreement or the validity and scope of a non-competition agreement, please contact our office to discuss your claims further.