Section 16601 of the California Business and Professions Code provides a well-known exception to California’s statutory refusal to enforce contractual commitments not to compete.  Under that section, Courts will enforce “reasonable” restrictions on the seller of a business to engage in competition against the buyer of that business.  This is a commonsense approach: a buyer

In Edwards v. Arthur Andersen, LLP, Case No. BC294853 (August 7, 2008) the California Supreme Court holds that non-solicitation of customer agreements are per se unenforceable unless they fall within the statutory or other exception permitted under the law. California law has long protected the rights of employees to lawfully pursue any trade or profession. For more than 100 years California law has invalidated any agreement between an employer and an employee which purports to limit or restrict an employee’s ability to work in their trade or profession following the employment. Many other states permit such “non-compete” agreements between employers and employees as long as the restraints on competition are reasonable. In the Arthur Andersen case, the California high court rejected arguments that more narrow agreements – those that limit a former employee’s ability to solicit the former employer’s customers for some specified period of time – did not run afoul of Business and Professions Code §16600 and thus, were valid.

California’s Business and Professions Code §16600 provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void, except as provided in this Chapter [§§16600-16602.5].”
 Continue Reading California Supreme Court Rejects Contracts Restricting Former Employee’s Ability To Solicit Customers: Edwards v. Arthur Andersen, LLP