Non Compete Game Changer – Calif. Labor Code Section 925, SB 1241 (October 2016)
One dirty little secret of Silicon Valley companies is the hiring of leased employees, contract employees, subject to non-competes / non-employment restrictions by their primary “vendor” employers. These are inserted in leasing organization / tech vendor employment contracts. These contract employees are prohibited from quitting to join certain named employers, and these restrictions often last for a year or more after their termination of employment from the vendor.
How can this be possible, California abhors non-compete type restrictions, right? It is possible because clever out-of-state headquartered employers and attorneys have drafted employment contracts subjecting employees to legal venue and forums outside of California. In other words, violate the agreement, find yourself served with a lawsuit for breach of contract filed in Texas, New Jersey, etc. But you can legally declare these contracts to be void in California, right? In the last few years you were likely to get the legal advice to get out your checkbook and hunker down for a protracted legal battle.
Thanks to SB 1241, signed into law as Labor Code Section 925 by Governor Brown a few Sundays ago, these forum shifting clauses are voidable for contracts entered into, modified, or extended on or after January 1, 2017. In the new year, California law will prevents enforcement of new out-of-state non-competes and clauses that require the employee be subject to the courts or arbitration of non-California forums. The will be genuine relief for many burden by these oppressive contracts.
Great news, but note: There are fine points, exceptions and ambiguities in this brand new law. Be sure to run your scenario past a competent legal professional before committing to a course of action.