Our employment agreement of the large technology firm was signed prior to 2008 and does contain a two-year non solicitation clause. However, that should be invalid since the 2008 clause, right? The start-up is currently not incorporated, we have worked on a business plan competition together with the idea
It might. However, it is not possible to tell you for sure without having reviewed the employment agreement and the non-solicitation clause.
In 2008, the California Supreme Court ruled that post-employment restrictions on an individual’s ability to solicit a former employer’s customers are invalid under Section 16600 of California’s Business and Professions Code, which bans any restriction on the right to pursue a profession, trade or business, unless they fall within the statutory exception for the sale of a business. (Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937.)
In 2009, following the lead of the California Supreme Court’s decision in Edwards v. Arthur Andersen, the Fourth District of the California Court of Appeal held that contracts prohibiting former employees from soliciting customers are not enforceable, unless tied to protecting the employer’s trade secrets. (The Retirement Group v. Galante (2009) 176 Cal. App. 4th 1226.)
Generally, a "trade secret" is information that is closely guarded by the company, and cost the company a considerable amount of effort and expense to develop, and is not generally available to the public.
In short, it all comes down to the method and manner your current company takes to protect the customer lists and customer information as "trade secrets". Just calling the customer list a trade secret does not make it so. And simply inserting a contractual provision in your employment agreements is not enough to protect your company's valuable information.
Frank W. Chen has been licensed to practice law in California since 1988. The information presented here is general in nature and is not intended, nor should be construed, as legal advice. This posting does not create any attorney-client relationship with the author. For specific advice about your particular situation, consult your own attorney.
The term non-solcitation can refer to solicitation of customers or solictation of your employer's employees. As Mr. Chen points out, post employment solicitation of customers has been declared invalid and as he further points out, dangers in you agreement would require review of the agreement. Since your future business will benefit from having an attorney, this is one of many points you will want to raise. Avvo cannot be a substitute for an attorney when it comes to details.
The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.
I agree with my colleagues' responses and add a word of caution. Since you and your co-worker are currently planning to compete with your current employer while you are still employed with that employer, you have created an inherent conflict of interest. California law requires employees to place their employer's interest before their own, as you owe a duty o loyalty to your employer. The concern is that duty of loyalty no longer exists.
If your current employer ever learns of any action undertaken by you or your co-worker that is adverse to their interests that may cause them harm, such as the loss of business, you are inviting a lawsuit. You must tread carefully, be careful who you talk to and what you say. I cannot emphasize enough how important it is that you retain your own counsel to assist you. Obtaining free, general legal advise is no substitute for the assistance you will need to make for a smooth and legal transition, which will include reviewing your contract for a true legal opinion. Good luck with your new venture.
They say you get what you pay for, and this response is free, so take it for what it is worth. This is my opinion based on very limited information. My opinion should not be taken as legal advice. For true advice, we would require a confidential consultation where I would ask you questions and get your complete story. This is a public forum, so remember, nothing here is confidential. Nor am I your attorney. I do not know who you are and you have not hired me to provide any legal service. To do so would require us to meet and sign written retainer agreement. My responses are intended for general information only.
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