No Harm, No Foul? No Way!

Here’s a risk management tip for employers who aren’t located in California but decide they need to hire people residing in the Golden State.

 

Many states permit employers to include non-compete clauses in their employment agreements. With rare exception, California law prohibits them.

 

Some employers may be tempted to include them anyway, thinking “What’s the harm in trying?”

 

The harm could be measured in 6 figures (or more).

 

California doesn’t just make the provision unenforceable.  It affirmatively makes it illegal for employers to use them, and allows aggrieved employees to sue for torts, not just breach of contract. Tort law (think – Personal Injury) permits recovery of punitive damages and attorney’s fees!

 

This can be a trap for an out-of-state employer who hires, e.g., a sales rep in Silicon Valley. California courts won’t allow choice-of-law provisions in employment contracts to override important legal principles and California courts have held that free mobility of workers is a fundamental public policy.

 

Managing a company’s growth means thinking about and quantifying the likely risks along the way.  Some states have higher than average regulatory and litigation risks. Consult with business lawyers who know the territory before you expand outside your home turf.

 

Stuart Blake

Mobile – (949) 842-9379

sblake@innovacounsel.com

 

Michael Oswald

Mobile – 208.914.3086

moswald@innovacounsel.com

 

www.innovacounsel.com

 

 

 

© 2017 InnovaCounsel

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