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
Fillpoint
Another Door Closes on Non-Compete Agreements
By: James Kachmar
Readers of this blog will note that we frequently remind them that California law generally prohibits non-compete agreements. There are very limited exceptions to this general rule, one being that the seller of goodwill in a business can be bound by a valid non-compete agreement to protect the goodwill that is being purchased. Sometimes, the buyer of a company will want to continue to employ certain key employees, who can also be the sellers of the goodwill of the former company. We have seen instances where the purchasing company gets creative and subjects the seller/key employee to two covenants not to compete, one in the purchase agreement and the other in an employment agreement. Last week, a California appellate court shut the door on this approach in the case Fillpoint, LLC v. Maas.…
Continue Reading Another Door Closes on Non-Compete Agreements