The Company is based in Indiana but I have worked only in the Southern California area and will continue to work there. 1) Do they have the right to make me sign a "non-solicitation" agreement and 2) the contract also states that the laws of Indiana govern (Shouldnt California law dictate since I am only working in California?)
California courts will not enforce non-competes unless they fall within the specifically enumerated exceptions provided within Business & Professions Code 16600. That said, my understanding of Indiana law is that it permits "reasonable" non-competes, and if a choice-of-law provision dictates that Indiana law shall apply, an Indiana court may find the agreement enforceable.
This creates a potentially cumbersome situation in which the courts of each state may reach opposing conclusions regarding the enforceability of your agreement.
If the non-enforceability of this agreement is particularly important to you and you have the means to hire an attorney, the best course of action would be to seek (1) a declaratory judgment that the agreement is non-enforceable and (2) an injunction restricting your employer from making any effort to enforce your agreement in Indiana court.
The key is to strike preemptively, because if your employer files suit first in Indiana, the Indiana court may issue a ruling of its own that is contrary what a CA court would find, and then you are waist-deep in some very murky water.
To illustrate how complicated the situation can get when an employer seeks to enforce a out-of-state non-compete against a CA employee, check out Advanced Bionics, Inc. v. Medtronic, Inc., 29 Cal. 4th 697 (Cal. 2002).
Again, this situation is highly complex, and if the non-enforceability of your non-compete is important to you, you'd be extremely wise to consult with a local employment law attorney to discuss your options in further detail.
No, your employer can not force you to sign the non-solicitation agreement. Generally, non-compete clauses and other restrictions inhibiting competition are unenforceable in California. However, there are limited exceptions authorized by statue. The exceptions can be found in California’s Business and Profession’s Code Sections 16601-16602.5. I am not familiar with Indiana law.
No one can "make" you or anyone sign a contract. However, if you are an at-will employee (without a written contract specifying how long you will be employed), your employer can fire you for any lawful reason, including not signing an agreement with a non-soliticiation clause. The other responses address non-compete clauses/agreements, which I don't believe your question necessarily refers to. A non-solicitation agreement is different than a non-compete agreement and if you are employed in CA, CA labor laws apply to you. Contract clauses which refer to not soliciting employees, not using the employer's trade secrets, including customer lists, etc. are upheld in CA whereas noncompete agreements are not. As such, the matter may be more complicated than you believe and the contract must be read in its entirety to be able to analyze it from a legal standpoint. I strongly suggest that you retain an employment law attorney to read the contract before you sign it - she/he may be able to revise it to protect you, especially with regard to which law applies. In addition, if the contract states that Indiana law governs, it is possible, but not necessarily certain, to have a court rule that CA governs since you were employed in CA which triggers the interest of CA, but it could be costly and time consuming for you to have to deal with that issue in litigation. I always suggest that individuals have an attorney read a contract and advise before signing - better safe than sorry.
There is a somewhat famous 2001 case in California, Walia v. AETNA, where a SF based employee was required to sign a non-compete after a corp take-over by a Pennsylvania based employer. The agreement said she could be sued in Penn or Conn if she violated the terms, as I recall. She refused to sign, was subsequently fired, sued for wrongful termination and won over a million dollars in punitive damages, affirmed on appeal. But keep in mind that every situation is fact specific, and the language of the agreement is critical, ..and the law is fluid. If you want to be confident in planning your actions and prepared for the repercussions, you should sit down with an attorney. Getting legal opinions from web posts is not nearly enough. But...a great question nonetheless.
The practical problem is that if you refuse to sign, you will likely be terminated by the Indiana company and will be faced with no income. On the other hand, if you sign, there may be defenses if and when you do leave the company should you choose to ignore the agreement. For example, I have seen a Washington state court that would otherwise enforce a non-compete provision refuse to enforce the provision because the non-compete was signed by an existing employee without the benefit of additional consideration.
This is a great question and you would do well to show the contract to an attorney for a quick complementary review, or better yet, pay the attorney a modest fee to do a thorough review.
1) I agree with Attorney Karila that non-solicitation is distinct from non-compete. In particular, CA courts will enforce provisions that preclude solicitation of other employees.
2) I also agree with Attorney Phillips that in many cases where another state's law is specified in a non-compete, a preemptive strike in a CA court is necessary (declaratory relief that a non-compete is unenforceable under CA law), although as Mr. Phillips suggests, the facts here might not warrant.
Many states -- even states that will otherwise enforce non-compete/non-solicitation
Any contract can specify which State law is to apply w/o regard to where the parties actually are domiciled. In your case, Indiana law seems to be less favorable than CA law as my colleague points out. See enclosed article which discusses the validity of non-compete covenants in Indiana.
Perhaps your best recourse is to only sign if CA law is put into agreement and stand fast that is because you live and work in CA.
Consider what happens if you choose not to sign....they will perhaps terminate you and this is a real risk you need to evaluate.
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