As most labor attorneys know, California has a strong public policy—codified in California Business & Professions Code §16600—disfavoring post-employment covenants not to compete. While out-of-state employers have tried to avoid or minimize California’s prohibition on non-competes by using choice of law provisions to select a more favorable jurisdiction’s law, those jurisdictions (including New York) that follow the Restatement (Second) of Conflict of Laws (the Restatement) often find that California’s fundamental public policy prohibiting restrictive covenants overrides the parties’ contractual choice of law. See, e.g., Ascension Ins. Holdings, LLC v. Underwood, No. CV 9897-VCG, 2015 WL 356002 (Del. Ch. Jan. 28, 2015) (declining to enforce Delaware choice-of-law provision for Delaware LLC where application of Delaware law would violate California’s “fundamental policy” prohibiting post-employment restrictive covenants).
Times may be changing. The Delaware Court of Chancery recently found in NuVasive, Inc. v. Miles, that California’s policy against non-competes is not so fundamental when the employee is represented by counsel and knowingly bargains away such protections—seemingly opening the door for employers to enforce non-compete covenants against California employees. See NuVasive, Inc. v. Miles, No. CV 2017-0720-SG, 2018 WL 4677607 (Del. Ch. Sept. 28, 2018.
