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

UPDATED: May 2, 2012

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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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