Many insightful points raised in this discussion. I'm a California lawyer so the subject is straightforward here: Covenants not to compete are unenforceable except in connection with the sale of a business (i.e., after selling your company, the buyer can prohibit you from turning around and founding a competitor the next day).
I haven't seen much come of the absence of enforceable non-competes here. The primary reasons, I suspect, are that (1) other means exist to similar ends, and (2) contracts don't enforce themselves. I flog this point endlessly in business because lawyers and dealmakers so often treat provision X in a contract as if it's a sure thing. "They can't do that!" Sure they can; it would put them in breach of contract, but we'd have to sue them to enforce it. Is it a big enough deal to merit entangling the company in a lawsuit?
Litigation is incredibly expensive, disruptive, and distracting to executives and technical experts whose time is very valuable. (It's also a matter of public record, which is another subject.) Even if the contract says the loser is required to pay the winner's legal costs, those provisions don't enforce themselves either, there can be a lengthy time lag, and they still don't compensate for things like hours of senior management time wasted in depositions, document production, etc.
I've written similar comments about NDAs
. In practice, they are virtually never litigated except in situations that are truly flagrant or high-stakes. This gets back to the point others have made about trade secrets. When Company A goes after competitor B for hiring away its best people, in a state where non-competes don't exist, it makes the case based on IP, such as suspected use or disclosure of A's trade secrets. Proving
that isn't always easy, but something called the "inevitable disclosure doctrine
" (which is what it sounds like) can apply if dealing with direct head-to-head competitors where the person(s) in question have extremely specialized knowledge from A that couldn't magically be forgotten when serving in a similar role at B.
Another helpful item is the non-solicitation covenant, which is generally enforceable in CA, referring to the solicitation (after moving to B) of A's employees or customers. A strict no-hire clause won't fly, but it's common to prohibit the employee who moves to company B from actively recruiting others to come along, or from actively soliciting A's customers, for some reasonable period of time.
Returning to the point about enforcement, the cost and resource drain of litigation to enforce any of these agreements is roughly equal on both sides. If you're a startup and your 10X ninja engineer who knows all the secrets of solving problem X leaves to work on something similar at Company B, sure, you may have a case (without a non-compete). If B is another startup, litigation could hold up or tank its next round of funding, or at least tax its resources, giving A some leverage. On the other hand, if B happens to be Apple or Google, a six- or even seven-figure bill and many hours of management time soaked up by litigation are a gnat on the elephant's hide.
Obligatory disclaimer: This is legal information, not advice.