Report: Non-Compete Agreement Lawsuits on the Rise Nationally

The terms of California employment contracts are increasingly finding their way into courtrooms, as companies sue former workers for violation of “non-compete agreements.” papercrumple

Our Costa Mesa employment lawyers recognize that such agreements are serving to limit entrepreneurial growth, with businesses defending the practice as a simple protection of their own investments and interests.

Really, it’s a way to stifle potential competition (which could prove harmful to consumers). It may also serve to keep workers tethered to a potentially toxic work environment because they fear the legal ramifications if they leave to seek other related employment or strike out on their own.

A recent analysis of court data culled by the Wall Street Journal reveals that just in the last decade, there has been a more than 60 percent increase in the number of departing employees who have been sued in the U.S. by former bosses for violating the terms of such agreements.

Largely, the success of a case is going to depend on where in the country it is filed. The good news for employees in California is that here, non-compete agreements can prove tough if not impossible for companies to enforce.

In fact, non-compete agreements extended to employees and independent contractors are illegal here. While most states hold that “reasonable” non-compete agreements are valid and enforceable, this is not true in California.

Of course, this hasn’t stopped companies from taking retaliatory action against workers who refuse to sign such agreements – up to and including firing. These would be considered cases of wrongful termination, and those negatively affected could well be entitled to compensatory and punitive damages.

The case that laid forth this standard was D’Sa v. Playhut Inc. (2000), 85 Cal. App. 4th 927. The court held that no California employer could lawfully require a worker to sign an employment contract that includes a contract not to compete. That means even if other parts of the contract are enforceable, the entire thing may be considered void if it contains an illegal non-compete agreement.

Of course, there are exceptions (there always are). Those include for owners of a business, LLC, corporation or partnership.

However, even if you aren’t one of these parties, you should have your attorney review any employment contract before you sign it, bearing in mind that not all employment contracts are “non-compete.” What you don’t want to have happen is to refuse to sign it, be fired and then find out later you have no legal recourse.

Any reasonable employer will understand if you want to have the document first reviewed by your lawyer. However, you need not even necessarily tell them that. Only that you would like the opportunity to look over it yourself before returning it to them.

You might also have a solid case of wrongful termination if your new California employer refuses to hire you because of a non-compete agreement you had with an old employer. Such was the case in Silguero v. Creteguard, Inc., 2010, Court of Appeals of California, Second District Division One.

Costa Mesa employment lawsuits can be filed with the help of the Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 714-937-2020.

Additional Resources:

Litigation Over Noncompete Clauses Is Rising, Aug. 14, 2013, By Ruth Simon and Angus Loten, The Wall Street Journal

More Blog Entries:

California Workplace Bullying Unfortunately Not Illegal, Aug. 10, 2013, Costa Mesa Wrongful Termination Lawyer Blog