We are a subcontractor and there is a non-compete clause in a contract stating we cannot compete with the general contractor for two years with a specific client. The client has approached us to do work because we are a local and mobile company that fits their needs. The general contractor is saying we cannot accept the work. Is this legal?
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The answer is no. The non-compete that you have is completely invalid and unenforceable in California. You are free to accept the work and the general contractor would not be able to sue you under a completely invalid contractual provision.
Non-competes are specifically invalid in any employment context, as stated in California Business and Professions Code Section 16600, which states:
“Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”
There are only minor exceptions, such as when selling the goodwill of the business, but your agreement with the general contractor does not fit into one of these extremely narrow expections.
See here - http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=16001-17000&file=16600-16607
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What about the packaging company with Disney here in California? The non-compete clause was upheld.
That definitely wouldn't have been in an employment context, and probably wasn't considered a non-compete. I imagine there was some exclusivity agreement that the company had with Disney. If it were a non-compete then it must have fit into one of the narrow exemptions set out in Business and Professions Code Sections 16601-16607. Yours definitely would not.If you tell me what case you're referencing then I can look into this for you, but I'm confident that this court case didn't (nor could it have) invalidated California Business and Professions Code 16600 and its prohibition on non-competes in all but extremely limited circumstances. None of them are employment or independent contractor related.
This article outlines the extremely limited instances where a non-compete would be upheld, all of which have to do with sale of business or LLC and the dissolution of a partnership - http://www.whitecase.com/files/Publication/dcf3d85c-1c1b-4bf5-9806-7a04e2b0e214/Presentation/PublicationAttachment/d734c538-402d-4648-b778-80e6a224b192/article_enforceability.pdf
In this context, yes. More importantly, this non-compete doesn't relate to the sale of a business, LLC, or the dissolution of a partnership. Therefore, it doesn't fit into one of the narrow exemptions where it could possibly be upheld in California.
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