Legal Question in Business Law in California

We are company A, and we are hiring a sub-contractor (individual) who will be creating a sole proprietorship, LLC referred to as company B. Company A is asking company B to sign a 6 month non-compete clause. Company B will be selling company A's services, but will have 100% interaction with the customer. Company B will also use company A's collateral, contracts, and billing systems. If company B decides to quit, move to a similar company, or decides to fulfill services internally, which company would own that customer, based on the information provided above?


Asked on 8/07/14, 9:30 am

1 Answer from Attorneys
William Christian Rodi Pollock

First, no one "owns" the customer. The customer goes with the party they determine. This may create claims between the vendors, but not against the customer. . Second, in general, non compete clauses are unenforcable in California unless entered into in connection with the sale of a business and its goodwill. California Business and Professions Code. There are possible agreements which you may be able to utilize to discourage this type of conduct, but the circumstances you describe make it very difficult to protect yourself ( assuming you are Company A. You need to engage counsel with expertise in the area to guide you through this and discuss in detail the alternatives available to you. .

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Answered on 8/07/14, 10:03 am


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