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socrateaser
socrateaser, Lawyer
Category: California Employment Law
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Experience:  Retired (mostly)
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I have an agressive non-compete in North Carolina with a North

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I have an agressive non-compete in North Carolina with a North Carolina based company. If I take a position in a California division of another NC company, can my current employer sue either me or the new employer?
Under California Bus. & Prof. Code 16600, all employee noncompete agreements are void and unenforceable as against public policy. However, California case law demonstrates conclusively that where a former employee with a preexisting noncompete from a non-California employer accepts employment with a California employer, the court will enforce the noncompete against the employee (though, not against the employer).

In short, you are, regrettably, wide open to being sued, unless you accept employment with a California employer that does not compete with your current employer.

Please understand that I "justanswer" questions “about” the law. I have no interest in providing you with anything less than a completely satisfying answer. However, if the law does not favor your unique circumstances, then the best that I can do is to explain what the law "is" and what it "is not."

 


Hope this helps.


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Customer: replied 4 years ago.
I'm a little confused by your answer and may need additional explanation. Specifically, you stated that 'All employee noncompete agreements are void and unenforceable" and you say that the court will enforce the noncompete against the employee. These seem to be contridicting statements.
My understanding was California would not enforce out of state noncompete agreements (Application Group, Inc. v. Hunter Group, Inc., 61 Cal. App. 4th 881 -1998). Assuming this is true, my question related to the exposure of the hiring company to lawsuit from the former company. Both are based outside of California, both have offices in California.
If my assumption is not true, could you please provide additional information to help me understand.

Thanks,
JK
Companies located in states where covenants not to compete are enforceable may sue in their home state to enjoin an employee who has signed such an agreement from going to work for a California competitor. At the same time, that employee and the new employer may sue in California to invalidate the covenant. The result may be an unseemly “race to judgment” because the first final judgment on the merits will be entitled to full faith and credit even if it is contrary to local public policy. Baker by Thomas v. General Motors Corp. (1998) 522 US 222, 233, 118 S.Ct. 657, 664.

Your facts show that you are working for an North Carolina (NC) employer, and that you wish to work for a new NC employer with offices in California (CA). If you take the new job, and the former employer decides to sue you and the new employer in an NC court, and if the NC court gives judgment to your former employer, then that judgment would be enforcible both in NC and in CA.

In order to defend against this possibility, you would have to sue the former NC employer in CA to invalidate the noncompete clause. This could be quite an expensive option for you as an individual. But, unless you do so, then you remain open to legal action by your former employer to enforce the noncompete.

Hope this helps.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!

Customer: replied 4 years ago.
Thank you. So to be sure I understand, filing suit first against the former employer would invalidate the noncompete clause (in CA) and protect both me as an individual and the hiring company from legal action?

As to you and the employer while in California, "yes. But, your prospective employer has offices outside of California, and that could create problems for the employer.

Declaratory relief to invalidate a contract provision is not the same as a money judgment for damages. Money judgments are uniformly entitled to full faith and credit under the U.S. Constitution, throughout the USA -- and inversely, they can be uniformly invalidated throughout the USA, under the same full faith and credit theory.

But a decree for injunctive relief is a different matter. Sister-state courts do not necessarily have to recognize the decree of a sister state, if enforcement would impair an important public policy in the sister state.

I'm not trying to be difficult, but this is a very complicated issue, that goes way outside the lines of mere employment law -- into constitutional matters which can be quite expensive to litigate finally (since the final arbiter of such matters is the U.S. Supreme Court).

Fortunately, it's not up to you to determine your prospective employer's risk.

Hope this helps.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!

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