In various states, limitations on the practice of a trade, profession, or business are justifiable if realistic. California, however, has for a long while rejected this route since 1872.

California's rule favoring flexible competition is embodied in Business and Professions Code section 16600 which provides that 'every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.'

California courts have regularly declared section 16600 to be an illustration of public principle which makes sure that each person keeps the right to pursue any allowed employment and enterprise of his or her selection. Thus, 16600 sets forth the over-arching tenet in California: Covenants not to compete are unenforceable.

Some statutory exemptions to 16600 exist. Sections 16001 and 16002 let broad covenants not to compete in two narrow conditions: where a person sells the goodwill of a business and where a partner agrees not to compete in preparation of dissolution of a partnership.

Section 16601 safeguards the purchaser of a business from subsequent competition from the seller, which may hurt the magnitude of the property right received. Section 16602 safeguards partners from the likelihood that a partnership's goodwill will be diminished by competition from a withdrawing partner.

Section 16602.5, allows that a member of a limited liability company may, in anticipation of dissolution of the organization, concur not to carry on a like company within a precise geographic area.

California courts have held a range of non-compete agreements unenforceable under section 16600. For example, an agreement not to deliver services to any person in connection with competing services for one year, or a veto on competing with an employer for one year within a 40-mile radius or soliciting previous employer's past, current, or potential clientele.

Likewise, covenants that penalize employees for competing with a previous employer are unenforceable under section 16600.

Moreover, it has for a while been documented that section 16600 does not cancel noncompetition agreements where necessary to guard the employer's trade secrets. Equity will repeatedly cover against the inequitable disclosure of trade secrets and confidential communications. The abuse of trade secrets can comprise solicitation of an employer's customers when confidential information is employed.

In the trade secret setting, the 'trade secret exception' to the proscription against non compete agreements does not mean that an employee can be banned from working for an employer, or be barred from soliciting the employer's clientele.

The California courts have also expressly refused the 'inevitable disclosure doctrine' under which it could be said that an employee going to work for a competitor might essentially give away his prior employer's confidences.

Rather, the exception means that a company can bad its leaving employees from competing against it by using its trade secret and confidential information. Departing employees are able to still compete, but are required to do so fairly, on the same footing as any other competitor. Similarly, an organization cannot place previous employees on a poorer footing than other competitors by preventing or penalizing any competition or customer solicitation.