Legal Issues




Covenantsnot to compete are usually annulled except with restricted as well asproper physical and time limitations. According to the general law,covenants to compete are void unless an exemption applies. Business&amp Professions Code 16600nullifies any form of employment contract that inhibits a person frominvolving in a legitimateprofession or even business. The code notonly applies to involvement in a profession, but also to restrictionson employees’ aptitude to practice their occupation. Under the lawof business&amp professions Code 17200, actionmay be taken against an employer who uses a void covenant to restrictformer employees from employment by a rival employer. This action istermed as Unfair Business Practice. Nevertheless, there areexceptions that apply to this rule. Covenant not to compete isenforceable if a company demonstrates that:

  • The covenant not to compete was supported by ‘consideration’ when it was signed.

  • The covenant protects a ‘lawful trade interest’ of the employer.

  • The covenant is ‘practical’in extentto safeguard the employer, without being ‘excessively troublesome on the former employee`s privilegeto make a living.

Inthe case of Ginger and Heap, Big and Company, the covenant not tocompete will be valid and enforceable if Ginger received something ofvalue like a promotion or any benefit from the company in exchangefor the promise she made. It will as well be enforceable to preventGinger from using customer relationships, in case of any, to competewith Heap, Big and Company. Ginger will be practicing the samevocation as she was in the former company. This can as well beenforceable. It can be enforceable to prevent Ginger from exposingsecret info of the company to the public or for the benefit ofCenterville.