Trade Secret Exception and California Non-Competes

According to California Business & Professions Code Section 16600:

"Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, orbusiness of any kind is to that extent void."

What this means for a California employer is that California protects its citizens by allowing them to pursue employment of their choice.

But, is this law entirely one-sided?

No, according to California law, an exception is around the protection of trade secrets used by an employee to compete with the former employer.

In California, trade secret means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and

(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

However, the employer must take certain steps to keep the valuable trade secrets confidential. Think about it, what would you do if you were an employer in this case? You would probably keep the info password protected and/or place the hard-copy info in a safe locked environment. What else? You might want to stamp everything as confidential. An additional step would be the process of emphasizing and re-enforcing the confidential nature of the valuable info. For instance, you could have an attorney draft a confidential agreement describing and explaining the policy behind keeping your trade secrets confidential, then have the employees sign the agreement at the start of their employment.

This is a complicated area of law, if you are an employer who has made a lot of effort and gone through a lengthy process to derive at certain valuable information and you have taken reasonable steps to keep this information non-public, please educate yourself and consult with an attorney to protect this information to avoid future hurdles and legal battles.