California is a highly competitive state which can be a struggle for employers and employees, particularly for an employee who has moved on to a new position. Common employer concerns at such a junction involve former employees divulging information they witnessed or heard while working for the company, such as prototypes, trade secrets, upcoming product launches, and other knowledge considered valuable and intellectual property. A non-compete agreement’s purpose is to prevent an employee from working for a competitor of their current employer or divulging information. A non-compete must, however, be back by power and authority to be enforceable. Therefore, the question is, do employers in California have the ability to enforce non-compete agreements, and are they legal?
Non-competes in the eyes of California
Your job prospects can be adversely affected by a non-compete agreement, which prohibits you from utilizing your talents and may jeopardize your career by narrowing opportunities for your future. Fortunately, in California, employers cannot legally enforce non-compete agreements. Some exceptions are included, such as agreements between two entrepreneurs, business owners, and partners.
If you have been asked to sign a non-compete agreement or have already signed one in California, the employer is violating the law, and the agreement is not enforceable. You should speak with an attorney if your employer has proposed a non-compete agreement.
Confidentiality Agreements: What are they, and are they enforceable?
In a confidentiality agreement, the parties agree not to disclose confidential or proprietary information, including protected and sensitive information, especially trade secrets. A confidentiality agreement may be implemented when using a manufacturer to build a “prototype” of a company design or between prospective business partners and potential investors. However, employees are frequently asked to sign confidentiality agreements or non-disclosure (NDA) agreements to ensure trade secrets remain protected.
Confidentiality Agreement vs. an NDA
Although the two terms are often used interchangeably, there are differences between the two. A confidentiality agreement requires parties to sign the legal document which outlines they are not to reveal, take advantage of, or profit from information marked as classified. The document blocks the parties from sharing such data with third parties and the public.
While an NDA is a legally binding contract, a non-disclosure agreement prevents the unauthorized sharing of sensitive material between parties creating and defining a “confidential relationship.” In a confidential relationship, a party is bound not to divulge information without explicit authorization.
It is easy to see how the two are often confused as both specify sensitive information and work to protect classified data, materials, and information.
Typically, confidentiality agreements are used when sensitive and classified information is passed between multiple parties back and forth, for example, on a project. In addition, NDAs are commonly used when classified information is being disclosed in one direction.
Deciding which is best for a particular situation, project, or relationship depends on many subtleties. Therefore, it is best determined and resolved with a knowledgeable and skilled attorney.
Note: NDA’s and confidentiality agreements cannot block an individual in California from speaking up against sexual abuse or assault, discrimination, or other unlawful activities an employee may have witnessed.
Trade Secrets in The Workplace
As a result of their prior employment and employer, the employee is likely to be privy to intellectually valuable information, e.g., trade secrets.
Companies make every effort to keep their trade secrets confidential from third parties, the public, competitors, and anyone else who is not allowed authorized access to the information. Trade secrets are typically not widely known to others and have established or potential economic value. A trade secret could be a particular process, methods, formulas, recipes, marketing materials, techniques, unpatentable devices or prototypes, programs or frameworks, and even customer lists. In essence, trade secrets provide a company with an edge over competitors and are heavily guarded and protected. It is important to note that not all confidential information is considered a trade secret, but trade secrets are always confidential.
How are trade secrets protected?
Though non-compete agreements are not enforceable in California, trade secrets are protected from theft, bribery, other improper means of obtainment, and misappropriation under the Uniform Trade Secrets Act. Most trade secrets have their confidentiality and protection provided for by NDAs. Under California law, if the information or content is economically valuable and the owner or business has made reasonable efforts to keep it private and secret, it may constitute a trade secret. In protecting a trade secret, what are “reasonable efforts”? The information is shared only with employees who need to know and otherwise kept private under NDAs. A confidentiality agreement or non-disclosure agreement is the only way to maintain data confidentiality and utmost secrecy. An employer who wishes to protect trade secrets would have employed the use of an NDA or confidentiality agreement with the employee(s) in question at the start of their working or business relationship.
A knowledgeable attorney should review a non-compete agreement, NDA, or confidentiality agreement, especially if you are unsure of the terms. If you are moving on from a former employer and concerned about mobility options or opportunities due to one of these documents or issues surrounding trade secrets, schedule a free and confidential consultation with an experienced California employment litigation attorney.
