It is not news that employee noncompete agreements are highly disfavored and usually invalid under California law, with limited exceptions for certain unique personal talent contracts and for sellers of a business. Noncompetition agreements are generally forbidden by statute (Bus. & Prof. Code § 16600) and are sufficiently disfavored in California courts that, for example, sister-state noncompete judgments may be unenforceable; non-California choice of law provisions in an employment agreement may not be effective; and it has been held an actionable, unlawful business practice (Bus. & Prof. Code § 17200) to include an unenforceable noncompete clause in an employment contract, for its intimidation or “in terrorem” impact.
In a further extension, a California Court of Appeal has now held that a terminated employee may have an actionable claim for wrongful termination against public policy, for her employer’s termination of employment after learning that she had signed a noncompete agreement with her previous employer. The new employer’s CEO communicated the termination with an unfortunate letter referring to the noncompete agreement with the prior employer and stating that his company “is unable to continue your employment today … although we believe that the non-compete clauses are not legally enforceable here in California, we would like to keep the same respect and understanding with colleagues in the same industry.” The court found the submission to be “tantamount to a no-hire agreement” and allows the employee’s case to proceed as a claim for wrongful termination in violation of public policy (Silguero v. CreteGuard, Inc., Cal. Courts of Appeal No. V215179, July 30, 2010)