The Edwards v. Anderson decision has recently further liberalized competition, holding that almost all non-compete agreements between an employee and the employer are invalid and unenforceable.
However, a number of significant exceptions to this rule remain in effect. One such exception is that it is illegal for a former employee of a company to engage in unfair competition, including using trade secrets or proprietary information of their former employer. This exception is often applied to the situations were the sales people who leave a company, take the company's customer lists, and start their own company, using the subjects lists of customers in order to solicit business from them.
In 1985, California adopted a Uniform Trade Secret Act for misappropriation of trade secrets. It defines a trade secret as "information, including a formula, pattern, compilation, program, device, method, technique, or process that (1) derives independent economic value from not being generally known to the public..., and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. The legislature meant to codify that a customer list procured by substantial time, effort, and expense is a protectable trade secret. Thus, one case held that a list of customers or subscribers "built up by ingenuity, time, labor and expense of the owner over a period of many years is property of the employer," and "knowledge of such a list, acquired by an employee by reason of his employment, may not be used by the employee as his own property or to his employer's prejudice." Greenly v. Cooper (1978) 77 Cal.app.3d 382, 392.
On the other hand, if the information about potential clients is generally available to the public, and the compilation process of the subject list that the employer used is neither sophisticated not diffcult or particularly time consuming, then there will likely not be a violation. This may include making cold calls or consulting phone directories in a competitive industry, where many other business target the same customers the same way. (See American Paper & Packaging Products, Inc. v. Kirgan 183 Cal.App.3d 1318 (1986)). For more information about non-compete agreements and their validity in a specific situation, feel free to contact San Francisco & Sacramento Employment Lawyer.
