The Federal Trade Commission (FTC) has announced a proposed rule that would ban all non-competition clauses in employment contracts nationwide.
The proposal is the latest in a series of actions by the FTC and encouraged by the Biden Administration that demonstrate a renewed dedication to protecting workers’ interests instead of large employers. While the FTC ruling would be a significant win for workers nationwide, it would not significantly impact California residents.
Why? Because California has already implemented laws that ban these agreements from being enforced. If you live in California, your employer is already forbidden from requiring you to sign a non-compete agreement to acquire or retain a job. If it tries to intimidate or threaten you with adverse action due to your refusal, it is in the wrong, and you may have the right to take legal action. Here’s why these clauses are bad for workers, how to identify an unlawful non-compete clause, and what you can do if your employer tries to enforce one in California.
How Non-Compete Clauses Limit Workers’ Rights
Non-compete agreements and other restrictive covenants clearly restrict workers’ rights. By definition, they prevent the signer from using their skills, knowledge, or connections freely to participate in a given industry.
Historically, non-compete clauses were considered justified under the argument that they protected businesses’ right to freedom from unfair competition. However, in practice, California legislators determined that their use only minimally protected businesses in ways that common laws, such as intellectual property protections, did not. As such, California has opted to ban them almost entirely to protect workers.
How to Identify an Unfair Non-Compete Agreement
Non-competition clauses are used around the country to prevent employees from leaving businesses to form their own companies or work for competitors. As such, many employers attempt to use them in California despite the ban. This may occur due to ignorance or in hopes that their employees will abide by them despite their unenforceable nature.
If you are subject to one of these agreements as a worker in California, it cannot be enforced in most cases. You can identify an unenforceable non-compete clause by reading your contract for things like:
- Requirements not to work in a particular industry after leaving employment.
- Prohibitions on working another job in the same sector after leaving employment.
- Bans on using your training, skills, knowledge, or connections for a period or “indefinitely.”
Even if the contract or clause is not explicitly called a non-compete agreement, it is still considered one if it contains any of these elements.
Fight Back Against Unlawful Non-Competition Clauses
If you are being held to an unfairly restrictive non-competition clause, you do not have to follow it in California. Learn more about your rights regarding non-competition clauses and what you can do if your employer attempts to hold you to one by scheduling your consultation with our California employment law firm.