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California Non-Compete Agreement Template

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California Non-Compete Agreement Template

Updated February 29, 2024

A California non-compete agreement prohibits a person from engaging in a similar business for a specific duration and geographic area. A non-compete is enforceable only to a seller of the goodwill of a business in its entirety. Employees, independent contractors, and remote workers are strictly forbidden from entering into a non-compete.[1]

Legally Enforceable?

A California non-compete is not enforceable to:

  • Employees
  • Remote workers
  • Independent contractors

A California non-compete is enforceable to:

  • Seller of goodwill of a business
  • Partners involved in the dissolution of a partnership


A non-compete made with an employee is unenforceable. The statute specifically restricts, in any way, an individual’s ability to work in a specific industry.

“Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”[2][3]

Remote Workers

A California company cannot make the governing law in a non-compete to be in another State to get around State law. If the company is located in California, the remote worker will have the same protections as a resident.[4]

Independent Contractors

Independent contractors are ineligible to enter into a non-compete and falls under the same category as employees under the statute.[2]

Sale of a Business

A non-compete is enforceable against a seller that sells the goodwill of a business (corporation, LLC, partnership, etc.) that agrees to sell to a buyer that carries on the business therein.

The seller must “refrain from carrying on a similar business within a specified geographic area in which the business is so sold.”

Required Language: The law states specifically that it is for the “goodwill” of a business. Therefore, it is required to use the term “goodwill” in a purchase agreement or non-compete.[5]

Dissolution of Partnership

The partners of a dissolving partnership can agree to sign a non-compete amongst themselves to prohibit one another from opening a similar business in the same area. The agreement should include a specific geographical area and duration.[6]


If an employer includes a non-compete clause into an ineligible employee’s contract for employment, they will be penalized $100 for each pay period for the initial violation and $200 for each pay period thereafter.[7]

Maximum Term

5 years has been determined to be reasonable for a non-compete for the sale of a business covering the entire State of California.[8]

Blue Penciling

California courts will not amend a non-compete agreement that is too broad or if the terms are unreasonable.

“Courts reform contracts only where the parties have made a mistake, and not for the purpose of saving an illegal contract.[9]