Advocating For California Employee Rights

Can California employers add restrictive covenants to contracts?

On Behalf of | Jan 7, 2024 | Employment Law

Employment contracts typically include a host of important details, ranging from job expectations to clear standards for compensation. Businesses and workers alike often seek to include specific terms that protect them from the liabilities inherent in an employment relationship. 

Workers may ask for severance pay, for example, while employers may try to prevent workers from competing with the business in the future. Restrictive covenants are contract inclusions that prohibit certain activities even after employment relationships end. 

Non-compete agreements, for example, prevent a worker from taking a job with a competing business or starting a competing company of their own. Can California businesses include restrictive covenants in their contracts? 

The courts do not enforce most restrictive covenants

Technically, employers can include restrictive covenants in their contracts with workers. Doing so can clarify their expectations for those workers and deter them from certain kinds of misconduct. 

However, those clauses serve only as a deterrent. They usually do not hold up in civil court, with rare exceptions for special circumstances. If an employer seeks to enforce a restrictive covenant against a former employee, the courts may dismiss the lawsuit in many cases. 

The California civil courts generally does not uphold non-compete agreements involving employees but may consider cases involving former business partners or owners who sign contracts with restrictive covenants. The same is often true for non-solicitation agreements. 

Non-disclosure agreements are sometimes enforceable, provided that the issue a worker must avoid disclosing does not relate to some kind of actionable misconduct, like sexual harassment. Workers who understand how state rules limit employment contracts may feel more confident about utilizing their rights after the end of an employment arrangement.