Learn this earlier than you soar ship or rent a salesman who already has
When salespeople in California’s dynamic tech economic system transition between jobs, the worth they bring about to their new firm is usually their buyer relationships. Startup founders and salespeople contemplating becoming a member of rivals usually assume persevering with to keep up these buyer relationships is noncontroversial given California’s well-known coverage favoring employment mobility and outlawing non-competition agreements.
But California commerce secret legislation relating to the power of salespeople to solicit these clients as soon as they soar to a competitor is more and more confused and fails to offer significant steering on what kind of conduct is permissible. Thus, a salesman’s transfer from their present firm to a competitor is dangerous given it’s unclear whether or not and to what extent they will proceed servicing shoppers or contacts they beforehand labored with.
A salesman working for a value-added reseller (VAR), as an illustration, ought to perceive what they’re entering into earlier than transferring to a competitor — they could threat longstanding relationships with authentic gear producers (OEMs) and finish customers. This text explains the conflicting legislation on this situation in order that salespeople planning on leaping ship, and the businesses contemplating hiring them, may be knowledgeable relating to the present authorized panorama.
California legislation invalidates non-competition agreements
Within the overwhelming majority of states, employers can, and do, require workers to enter into some type of non-competition settlement in alternate for continued employment.1 In distinction, California has a long-standing coverage of favoring employment mobility over an employer’s considerations. California’s coverage is embodied in Enterprise and Professions Code part 16600, which offers: “Besides as supplied on this chapter, each contract by which anybody is restrained from participating in a lawful occupation, commerce, or enterprise of any variety is to that extent void.”
California courts “have constantly affirmed that part 16600 evinces a settled legislative coverage in favor of open competitors and worker mobility” that’s meant to “be certain that each citizen shall retain the suitable to pursue any lawful employment and enterprise of their alternative.”2 The coverage additionally permits California employers to “compete successfully for essentially the most proficient, expert workers of their industries, wherever they could reside.”3 Accordingly, in contrast to in most states, the “pursuits of the worker in [their] personal mobility and betterment” usually outweigh the “aggressive enterprise pursuits of the employers.”4
Courts have broadly utilized part 16600, invalidating non-competition agreements, which might prohibit or prohibit an worker from leaving to work for a competitor.5 Importantly, courts have additionally invalidated contractual provisions purporting to limit an worker’s skill to depart after which solicit the corporate’s clients.6 In different phrases, a salesman can’t be contractually precluded from leaving their firm, becoming a member of a competitor and persevering with to solicit, service and talk with their former firm’s shoppers. Moreover, with restricted exceptions, California courts will disregard a “alternative of legislation” provision purporting to mandate that the courtroom observe the legislation from a state that enforces noncompetes.7