A non-compete agreement is a contract between a company (corporation, LLC, partnership, etc.) and an owner, employee, or independent contractor that seeks to prevent the owner, employee, or contractor from competing with the company after that person’s relationship with the company ends. For example, a jewelry store may require its employees to sign an agreement stating they will not operate their own jewelry business within a certain geographical area for a period of time after their employment ends.
In many states, a non-compete agreement that is “reasonable” in scope and duration is valid and enforceable. And it is very common, in my experience, to see non-compete agreements or non-compete clauses in employment agreements here in California. As with many things, however, California is different. California law explicitly voids all non-compete agreements for employees and independent contractors. These agreements are simply not enforceable, no matter how reasonable they may seem.
Of course, there is an exception. Non-competition agreements are enforceable against owners / shareholders selling or disposing of all their interest in the company. This is not a blanket exception, however. The exception applies