Noncompete Agreements in California: Should California Courts Uphold Choice of Law Provisions Specifying Another State's Law?

Abstract

Unlike most states, California generally prohibits noncompete agreements between an employer and its employees through section 16600 of the California Business and Professions Code. In recent years, state and federal courts in California have encountered noncompete agreements that contain choice of law clauses specifying the law of a state that allows reasonable noncompete agreements. When deciding whether to uphold choice of law provisions in such agreements, California courts apply various but similar tests. In a typical evaluation, courts will look to whether the application of the chosen state's law would violate fundamental California public policy and which state has a materially greater interest in the outcome.

California state and federal courts have reached conflicting decisions concerning whether to uphold choice of law clauses in noncompete agreements. While a case-by-case analysis can be sensitive to factual distinctions, it can also result in arbitrary and inconsistent outcomes. This Comment argues that, rather than applying a case-by-case analysis to choice of law clauses in noncompete agreements, California courts should instead apply a bright line rule that upholds choice of law provisions for employees who have not worked in California. While a bright line rule would reduce the sensitivity to factual distinctions, it would nevertheless produce fair and consistent outcomes.

25_51UCLALRev5932003-2004
By uclalaw