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Maverick, Attorney
Category: Business Law
Satisfied Customers: 6421
Experience:  20 years of professional experience
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I m an employee in California from a LLC registered in Delaware.

Customer Question

Hi i m an employee in California from a LLC registered in Delaware. It s a shop located in California ... there is this clause
" 6. Competitive Activities
During the employment term, Employee shall not, directly or indirectly, whether as partner, employee, creditor, shareholder, or otherwise, promote, participate, or engage in any activity or other business competitive with Company's business."
in my contract .... from my understanding (wikipedia research) it seems CNC are void in California ?? I just wanted to make it sure as i want to start the same business than my employer...
Submitted: 2 years ago.
Category: Business Law
Expert:  Maverick replied 2 years ago.
Welcome! My name is Maverick. I very much enjoy what I do and I hope that you will benefit from this information.
Are you wanting to start this WHILE still employed with the LLC or after your employment is terminated?
Customer: replied 2 years ago.
i d like to create the company while still working ... by starting i mean create the llc and find the retail place ...
Customer: replied 2 years ago.
the business will b up and running after the termination
Expert:  Maverick replied 2 years ago.
California Business and Professions Code section 16600 provides that, “[e]xcept 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.”
California courts have routinely invalidated agreements purporting to preclude employees from working for competitors upon completion of their employment. See, e.g., Application Group, Inc. v. Hunter Group, Inc., 61 Cal. App. 4th 881, 895 (Cal. Ct. App. 1998); Metro. Traffic Control, Inc. v.
Shadow Traffic Network, 22 Cal. App. 4th 853, 859-60 (Cal. Ct. App. 1994);
NOTE HOWEVER, that the CA rule embodied in section 16600, invalidates only those restraints that apply AFTER termination of employment. During the term of employment, of course, you owe a common-law duty of loyalty to the employer precluding you from competing with the employer in any way,
whether by soliciting the employer’s customers or employees, by using the employer’s trade secrets, or otherwise.
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Customer: replied 2 years ago.
What could be the consequences of not honoring this clause and starting the business ?
Expert:  Maverick replied 2 years ago.
You would be sued for breach of the fiduciary duty and may get at a minimum a court injunction placed against you, you would get fired, and you may have to pay for the company's monetary damages, if any. I would just wait till you leave to start.