With the proliferation of wineries in California, it’s not uncommon for an owner to find one of its winemakers deciding to leave and set up shop on their own. Is there anything you can do up front to prevent them from taking the craft they’ve honed at your winery elsewhere? The short answer is, in most cases, no. But as with almost everything in the law, there are some exceptions you should know.
California public policy strongly favors free and open competition in the marketplace. Business and Professions Code section 16600 states clearly that contractual restraints on competition or trade are void, except as otherwise provided. California courts interpreting this statute emphasize that it protects the right of Californians to pursue any business, occupation, or lawful employment of their choosing. Contract provisions which attempt to place restrictions on a person’s ability to work for a competitor, or open a competing enterprise, are generally unenforceable.
That said, you should be aware of the “as otherwise provided” part of the Code. The primary exceptions to the prohibition on non-compete agreements apply to “owners” of a business and arise in the following contexts.
First, if you are selling all of your ownership interest, or all of most of the operating assets together with the goodwill of the business, you can agree with the buyer to refrain from “carrying on a similar business within a specified geographic area” so long as the buyer is going to be carrying on the same or a similar business in that area.
Second, if you are leaving a partnership or an LLC, you can agree not to carry on a similar business within the geographic area where the business is operating.
If you fall within one of the above exceptions, you should consult with an attorney to make sure any non-compete agreement complies with California law and is narrowly tailored both in geographic scope and duration.