California Business and Professions Code Section 16600
Business and Professions Code Section 16600 states:
"Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."
There are only three statutory exceptions to this prohibition on noncompete agreements: One who sells the goodwill of a business, or all of one's ownership interest in a business entity (which includes partnerships or corporations), or substantially all of its operating assets and goodwill, to a buyer who will carry on the business may agree with the buyer not to carry on a similar business within a specified geographic area, if the business will be carried on by the buyer ( 16601); upon dissolution of a partnership or dissociation of a partner, such partner may agree not to carry on a similar business within a specified geographic area, if the business will be carried on by remaining partners or anyone deriving title to the business or its goodwill ( 16602); and a member of a limited liability company may agree not to carry on a similar business within a specified geographic area, so long as other members or anyone deriving title to the business or its goodwill carries on a like business ( 16602.5).
Section 16600 expresses California's strong public policy of protecting the right of its citizens to pursue any lawful employment and enterprise of their choice. (Advanced Bionics Corp. v. Medtronic, Inc. (2002) 29 Cal.4th 697, 706; Weber, Lipshie & Co. v. Christian (1997) 52 Cal.App.4th 645, 659 "section 16600 was adopted for a public reason".)
California courts "have consistently affirmed that section 16600 evinces a settled legislative policy in favor of open competition and employee mobility." (Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 946 (Edwards).)
"The interests of the employee in his own mobility and betterment are deemed paramount to the competitive business interests of the employers, where neither the employee nor his new employer has committed any illegal act accompanying the employment change." (Diodes, Inc. v. Franzen (1968) 260 Cal.App.2d 244, 255; D'Sa v. Playhut, Inc. (2000) 85 Cal.App.4th 927, 933 (D'Sa).)
An employer's use of an illegal noncompete agreement also violates the UCL ( 17200 "unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising".) (Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881, 906-908 section 17200 "borrows" violations of other laws and treats them as unlawful practices independently actionable under section 17200.)