Preservation and Regulation of CompetitionContracts in Restraint of Trade
Section § 16600
In California, any contract that stops someone from working in their profession or trade is generally considered invalid. This includes noncompete agreements in work settings, even if they're carefully designed, unless they clearly fit into an exception. The law is interpreted based on a court case (Edwards v. Arthur Andersen LLP) to make sure noncompete agreements are usually not allowed. This rule applies even if the person being restricted isn't part of the contract.
Section § 16600.1
This law makes it illegal for employers in California to put noncompete clauses in employment contracts unless they fall under specific exceptions. If a contract with a noncompete clause doesn't meet these exceptions, employers must inform current and former employees (employed after January 1, 2022) by February 14, 2024, that these clauses are invalid. The notice must be sent to the employee's last known physical and email addresses. Violating this law is considered unfair competition.
Section § 16600.5
This law states that any contract that is considered void is unenforceable, no matter where or when it was signed. Employers cannot try to enforce such contracts, even if they were signed outside California. Employers are also prohibited from including void provisions in contracts with current or potential employees. If an employer does so or tries to enforce a void contract, it is a civil violation. Employees, former employees, or prospective employees can take legal action to stop such violations and can claim damages. If they win, they can also recover attorney's fees and costs.
Section § 16601
If you sell the goodwill of your business or give up your ownership in a company, you can agree not to start a similar business in certain areas where your business used to operate. This rule helps protect the buyer, as long as they continue running a similar business there. "Business entity" includes partnerships, LLCs, and corporations. "Owner" means those with a partnership stake, membership, or stock in these entities, and "ownership interest" refers to those stakes or stocks. A "subsidiary" is any business a parent company controls or benefits from financially upon its closure.
Section § 16602
This law section says that if a partner leaves a partnership, either because the partnership ends or the partner leaves for some reason, the partner can agree not to start or run a similar business in the same area where the partnership operated. This agreement is valid as long as the remaining partners or anyone who takes over the business still operates there.
Section § 16602.5
This law allows a member of a limited liability company (LLC) to agree not to start a similar business in the same area when they leave the LLC. This agreement only applies if another member or someone who got the business rights from another member is still running the same type of business there.
Section § 16603
This law makes it illegal to force someone to buy horror comic books as a condition of purchasing other magazines or books. If you do this, you could be fined up to $1,000, sent to jail for up to six months, or both. But it's okay to require someone to buy a certain number of copies of the same issue of a publication. A horror comic book is defined as one with a sequence of drawings or photos that depict crimes like murder or robbery, combined with a storyline or character dialogue. This rule applies to individuals, businesses, and organizations.
Section § 16604
This law makes it illegal for someone to force a buyer or consignee to accept additional magazines, books, or publications when they buy or receive a magazine or book. If someone does this, they're committing a misdemeanor and can face up to six months in jail, a fine up to $1,000, or both. The law doesn't prevent deals requiring a certain number of copies of the same edition to be bought. This rule doesn't apply to contracts involving newspapers of general circulation. The term 'person' here includes businesses like corporations or partnerships.
Section § 16605
If a distributor delivers books, magazines, or any publications to a retail dealer that weren’t specifically requested by the dealer, the distributor must pick them up within 10 days if the dealer says they don't want them within 48 hours of receiving them. If a distributor refuses to do business with a dealer because the dealer used these rights, the distributor can be charged with a misdemeanor. 'Person' here means any individual or business entity like a corporation or partnership.
Section § 16606
This law says that the customer list of a telephone answering service, which includes names and addresses, is considered a trade secret. This information is confidential and belongs to the owner of the service.
Section § 16607
This law says that an employment agency's customer lists, which include names and contact details of clients and job applicants, are considered confidential trade secrets. However, a former employee can legally use that customer list if they start their own employment agency at least one year after leaving their previous job.