A Little Dictum is a Dangerous Thing: The Post Pandemic Need to Bust the Myth of a So-Called “Trade Secret” Exception to California’s Statutory Ban on Non-Competition Agreements

In the midst of a tight labor market and increased inflation, freedom of movement for employees is a critical right, allowing individuals to seek out the best employment opportunities. Freedom to change jobs, without non-compete restrictions, has a positive impact on innovation and technological progress, enabling the best and brightest minds to migrate to the most innovative employers paying the best wages and offering respectful treatment in the workplace. Concomitantly, employers may view such freedom of employee movement as a negative, due to a perception that the law results in increased turnover and hiring costs, as well as a risk to trade secret protection. California’s Business and Professions Code (“BPC”) section 16600 guarantees the right of employees to be free of non-competition restrictions, thereby granting the ability to work for competitors or start a competing business.

A remnant of careless judicial dictum from the California Supreme Court, over a half century old, refers to a non-existent “trade secret exception” to California’s statutory ban on non-competition agreements. This Article analyzes and demonstrates that there is not a trade secret exception to BPC section 16600.