Meaning
A statutory provision in California law renders void any contract that restrains an individual from engaging in a lawful profession, trade, or business. In commercial transactions and employment, business and professions code 16600 operates as a strict prohibition against post-employment non-compete agreements. This regulation ensures high talent mobility and fosters regional economic competition.
Restrictive Covenant
Employment contracts outside California frequently include provisions that restrict employees from working for competitors after departure. However, the presence of business and professions code 16600 invalidates these non-compete clauses within the state, making them completely unenforceable. Employers cannot circumvent this rule by using choice-of-law clauses to apply the laws of other states.
The restriction protects workers from being locked out of their industries.
Enforcement Limit
Protecting proprietary information requires a careful balance when non-compete clauses are unavailable. While business and professions code 16600 bars general non-compete agreements, it does not prevent companies from safeguarding actual trade secrets. Businesses use narrow non-disclosure agreements to protect their intellectual property.
Litigation Risk
Attempting to enforce void covenants can lead to counterclaims for unfair business practices. When an organization tries to bind local employees with restrictive terms, business and professions code 16600 gives those employees the right to seek declaratory relief. This legal exposure makes the inclusion of standard non-competes in California contracts a liability.
Courts routinely strike down these provisions and may award attorney fees to the challenging party.
