How do the California antitrust laws limit covenants not to compete?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 15, 2021

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One area in which the California antitrust laws differ from many other jurisdictions’ laws concerns how they restrict covenants not to compete. A covenant not to compete is an agreement that limits the extent to which businesses or persons will compete with one another. For example, an employee is often asked to sign a covenant not to compete with his or her employer for a certain time period after the employment ends.

Covenants not to compete are often held to be outside the antitrust laws. However, California has a statute that voids any contract that restrains anyone from engaging in a lawful business or profession. Although the statute has some exceptions, including a prohibition on “unfair competition,” it can serve to void covenants not to compete that would be effective under federal law or the laws of other states.

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