Can I work with my co-worker on a new startup?

I currently work in California and have signed a non-compete, which prohibits me from soliciting any co-workers for work. However, my co-worker and I have known each other for a long time and have worked together at a different company before we starting working for my current employer.

My employment agreement states: "...directly or indirectly, solicit the employment or consultancy of any employee or consultant of the Company for any other business."

Is the non-compete enforceable?

If

• neither of you are essential to the company's business ( i.e. not CEO, CFO, VP, etc. ),
• you are not starting a competing company
• you are not using current company IP ( even technology the current company has abandoned ),
• you don't talk about your plans with anyone else (i.e. don't rub the current company's nose in it so they have to react ),
• you are not doing anything on your current company's time.

Chances are good that you will be fine especially in california.

For the current company to stand a chance in court they would have to prove who recruited who, they would have to care to spend money on lawyers, prove damages, etc.

Since you know who your co-founder will be you should be talking to a lawyer to incorporate your new company and set up the bylaws etc. Use the opportunity to ask for advise on how to handle the separation from your current employer. Ultimately, document everything. But it is pretty rare for a noncompete clause to be used for non-executive management employees.

This is a non-solicitation provision rather than a non-compete.

I think you can successfully argue that you did not solicit your co-worker (unless you did) if the two of you are pursuing a business opportunity that does not compromise company property in any way.

More importantly, the
California Business and Professions Code section 16600 says that "every contract that restricts anyone is retrained from engaging in a lawful profession, trade or business of any kind, is to that extent void".

Court cases have reinforced this since a landmark 2008 case.

Non-solicitation clauses are typically only enforceable in California to the extent necessary to protect employers trade secret information.

It is public policy in the State of California to not restrict anyone from pursuing their lawful trade or business. Unless you are using any proprietary property of the employer, you should be fine. There are exceptions for LLCs and dissolving a company, so contact a lawyer if either of those issues are present.

You would be in violation of your non-compete.

Whether it is enforceable would be settled by a judge. But yes you are working / consulting with a co-worker. If you are doing work completely unrelated to your day job you would have the best possibility of it being 'ok.' But if it is related in any way I imagine they would frown upon it and could seek legal action if you guys went full time with it and it pissed them off.

Read Joel Spolsky's post on this page and it will provide some perspective to what most employers expect from their employees regarding their 9-5 dedication and also their after hour dedication.

*If it is completely un-related, then you could bring it up to them and see if they would sign something to allow you to do it.

I would not characterize the quoted language as a non-compete provision. Instead, it appears to be a non-poaching provision, i.e., you will not solicit the company's employees or consultants to act as employees of or consultants to any other business. In my experience, this type of provision generally is enforceable.

However, based on the facts that you have provided, it appears that you may not violate that provision. In working on the new startup, you apparently will not be "solicit[ing] the employment or consultancy" of your co-worker - you will be soliciting him to be a co-founder.

Furthermore, the point of such a provision is to protect the employer against your poaching personnel you have met through the employer. The fact that you know your co-worker from before the employment relationship is significant.

That said, you still need to be careful. Neither of you should use any of the employer's trade secrets in your new venture, and you should not do any work for the new venture on the employer's time or using the employer's facilities or equipment. You will be in a much safer position if you new venture is in a different line of business from the employer's.

You should discuss this matter in detail with a qualified lawyer, who will be able to provide more-specific guidance based on the details of your situation.

Disclaimer: This information does not constitute legal advice and does not establish an attorney-client relationship.