California NonCompete Termination Issues

Quick Summary

In California an employee cannot be terminated if they refuse to sign a non-compete agreement.

An employee can also not be fired if they signed a noncompete with a prior employer.

Law Review

Employee noncompete agreements are illegal and not enforceable in California.

This is a matter of statute and public policy. The purpose is to allow employees to work where they want, and to allow employers to hire the very best employees.

A "noncompete" is anything restricting or imposing a penalty on future employment.

Some examples:

- Not being able to work for a competitor.

- Not being able to work in a geographic area.

- Not being able to solicit customers.

- Not being able to work for a customer.

- Paying a fee to work for another company.

Despite this longstanding rule and public policy, some employers still try to get away with noncompete terms.

If an employee is presented with an agreement containing an illegal noncompete restriction, can they be fired for not signing the agreement? Even if the agreement has other, legal terms?

The answer is yes.

In D'Sa v. Playhut (2001) 85 Cal.App.4th 927, this issue was considered and the court ruled a business cannot terminate an employee who refuses to sign an agreement containing an illegal noncompete term.

(Note: since the noncompete restriction is not enforceable the employee could have signed the agreement and assumed the term would be void and not enforceable later, but they simply decided not to take that risk and declined to sign.)

Additionally, the court ruled this type of action is not a "basic" termination, but rather a tort called wrongful termination in violation of public policy.

The importance is the employer risks paying substantial punitive damages for this type of employment action.

A Former Employer's NonCompete

In a later case, called Silguero v. Creteguard, Inc. (2010) 187 Cal.App.4th 60, a different type of termination occurred.

An employee had signed an unenforceable contract with a former employer and them moved on to a new job.

The old boss told the new boss about the noncompete, and the employee was fired to effectively enforce the old employer's non-compete.

The court held this also was a wrongful termination in violation of public policy.

Even though the employer did not itself have a non-compete agreement, that was the practical result when it fired an employee because of a prior non-compete agreement.

In this situation the employee would also have a claim against the former employer for intentionally interfering with their employment contract to work for the new company

Attorney Brian Kindsvater specializes in employee noncompete issues.

If you have been fired for signing an illegal employment contract, contact Mr. Kindsvater right away:

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