If you are a California business owner hoping to prevent a departing employee from competing with you, there is one thing you need to know: non-compete agreements are void in California. Period. Under Business and Professions Code Section 16600, any contract that restrains someone from engaging in a lawful profession, trade, or business is unenforceable. Recent legislation (AB 1076 and SB 699) has strengthened this prohibition even further, making it unlawful to even include a non-compete clause in an employment agreement.

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So what can you do to protect your business when employees leave? You have several options that California courts do enforce.

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Non-solicitation agreements can restrict a departing employee from soliciting your existing clients or customers for a period of time. These are enforceable in California in certain circumstances, particularly when they protect trade secrets or confidential relationships rather than broadly restricting competition.

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Confidentiality and trade secret agreements protect your proprietary information. Employees can be prohibited from using or disclosing your trade secrets, customer lists, pricing strategies, proprietary processes, and other confidential business information. California's Uniform Trade Secrets Act provides strong protections if you have properly identified and protected your trade secrets.

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Invention assignment agreements ensure that any intellectual property created by employees during their employment belongs to the company. This is critical for technology companies, but applies to any business where employees create proprietary work.

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Garden leave clauses pay the employee during a transition period after departure, during which they agree not to work for a competitor. Because the employee is compensated, these provisions are more likely to be enforceable.

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The key takeaway: you cannot stop someone from competing with you in California, but you can protect your confidential information, your client relationships, and your intellectual property through properly drafted agreements.

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Have questions about employee agreements? Schedule a free consultation with Newmen Law to discuss your specific situation.

If your business provides ongoing services to clients, a Master Services Agreement (MSA) can save you time, reduce risk, and make your client relationships smoother.

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An MSA is a foundational contract that establishes the general terms governing the relationship between two parties. Once signed, individual projects are documented through shorter Statements of Work (SOWs) or Work Orders that reference the MSA. The SOW covers the specific scope, timeline, and pricing for each project, while the MSA handles everything else: payment terms, intellectual property, confidentiality, indemnification, limitation of liability, termination, and dispute resolution.

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The advantage is efficiency. Instead of negotiating a full contract every time you take on a new project for the same client, you negotiate the MSA once and then attach simple SOWs as new work comes in. This speeds up the engagement process and reduces legal costs for both parties.

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A good MSA should clearly allocate responsibilities and risk. It should define payment terms (net 30 is standard, but negotiate what works for your cash flow). It should address who owns the work product. It should include a reasonable limitation of liability. And it should include a clean termination provision that allows either party to exit with appropriate notice.

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One common mistake is making the MSA too one-sided. If you hand a client an agreement that puts all the risk on them and none on you, they will either push back (costing you time in negotiations) or sign it without reading it (which can create enforcement problems later if they claim they did not understand the terms). A fair, balanced agreement gets signed faster and holds up better.

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If you are sending the same type of contract to multiple clients, it is time to invest in an MSA template. One well-drafted template can serve your business for years.

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Have questions about service agreements? Schedule a free consultation with Newmen Law to discuss your specific situation.

California has some of the strictest worker classification rules in the country, and getting it wrong can be very expensive. Under AB 5, California uses the ABC test, which presumes that every worker is an employee unless the hiring entity can prove all three of the following conditions.

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A: The worker is free from the control and direction of the hiring entity, both under the contract and in fact. This means you cannot dictate how and when the work is performed. You can specify the desired result, but not the method.

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B: The worker performs work that is outside the usual course of the hiring entity's business. This is the hardest prong to satisfy. If you run a marketing agency and you hire a freelance copywriter, that copywriter is performing work that is within your usual course of business, which means they likely fail the B test and should be classified as an employee.

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C: The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. The worker should have their own business, serve multiple clients, and hold themselves out to the public as an independent professional.

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If you cannot prove all three prongs, the worker is an employee under California law, regardless of what your contract says. Misclassification penalties include back wages, overtime, benefits, employment taxes, and penalties that can reach into the tens or hundreds of thousands of dollars.

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There are limited exemptions to the ABC test for certain professions (licensed professionals, certain business-to-business relationships, etc.), but these exemptions have specific requirements that must be carefully met. Do not assume you qualify for an exemption without consulting an attorney.

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The safest approach: if you are not sure, talk to your employment attorney before engaging the worker.

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Have questions about worker classification? Schedule a free consultation with Newmen Law to discuss your specific situation.

Whether you are buying a business to grow or selling one you built, the transaction is more complex than most people expect. Here is a high-level overview of what to anticipate.

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The process typically starts with a Letter of Intent (LOI), which outlines the key deal terms: purchase price, structure (asset sale vs. stock sale), payment terms, and major contingencies. The LOI is usually non-binding on the business terms but binding on exclusivity and confidentiality. This document sets the framework for everything that follows.

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The biggest structural decision is whether the deal is an asset purchase or a stock purchase. In an asset purchase, the buyer acquires specific assets and assumes specific liabilities. In a stock purchase, the buyer acquires the ownership interests of the entity itself, including all assets and liabilities. Sellers generally prefer stock sales for tax reasons; buyers generally prefer asset purchases for liability protection. The right structure depends on both parties' tax situations.

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Due diligence is where the buyer digs into the business. This includes reviewing financial statements, tax returns, contracts, employee agreements, intellectual property, regulatory compliance, litigation history, and more. Sellers should prepare for this process in advance by organizing their records and identifying potential issues before the buyer finds them.

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The definitive purchase agreement is the final contract. It includes representations and warranties (factual statements both parties make about the business), indemnification provisions (who covers losses if those statements turn out to be false), closing conditions, and post-closing obligations like non-compete agreements and transition services.

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One critical point: get your own attorney. Do not rely on the other side's attorney to protect your interests, and do not try to do this without legal counsel. The cost of an attorney in a business sale pays for itself many times over.

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Have questions about buying or selling a business? Schedule a free consultation with Newmen Law to discuss your specific situation.

Non-disclosure agreements are one of the most common business contracts, and also one of the most misunderstood. Here is when you actually need one and what a good NDA should include.

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You need an NDA before sharing confidential information with a potential business partner, investor, vendor, contractor, or any third party. This includes trade secrets, customer lists, financial data, proprietary processes, product development plans, and pricing strategies. If the information would give a competitor an advantage, protect it with an NDA before sharing.

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You generally do not need an NDA for basic business discussions, publicly available information, or when talking to your own attorney or CPA (they already have confidentiality obligations). Asking every person you meet to sign an NDA before a casual conversation can create friction and signal inexperience.

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A well-drafted NDA should define confidential information clearly. Vague definitions like "any information shared" are difficult to enforce. Be specific about what categories of information are covered.

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The agreement should specify the duration of the confidentiality obligation. Two to three years is standard for most business relationships. Trade secrets should be protected indefinitely or for as long as they remain secret.

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Use a mutual NDA whenever possible. If both parties are sharing information, both should be protected. One-sided NDAs can create resistance from the other party and may signal an unequal relationship.

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Include standard exclusions: information that was already public, information the receiving party already knew, information received from a third party without restriction, and information independently developed. These exclusions are standard and expected.

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Finally, specify the remedy for breach. Most NDAs allow the disclosing party to seek injunctive relief (a court order to stop the disclosure) in addition to monetary damages. This is important because money damages alone often cannot undo the harm of a confidentiality breach.

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Have questions about NDAs and confidentiality? Schedule a free consultation with Newmen Law to discuss your specific situation.

Before you sign any contract, there are a handful of provisions you should review carefully, even if you think the deal is straightforward. These are the clauses that cause the most problems when things go wrong.

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Start with the termination clause. How can either party end the agreement? Is there a notice period? Are there penalties for early termination? Can you get out if the other party is not performing? A contract that is easy to get into but hard to get out of is a liability.

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Next, look at the indemnification provision. Indemnification means one party agrees to cover the other's losses in certain situations. Many contracts include broad indemnification language that could make you responsible for things outside your control. Make sure indemnification is mutual and limited to each party's own actions.

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Review the limitation of liability. This caps the maximum amount either party can recover in a dispute. Ideally, liability is capped at the fees paid under the contract. Watch out for contracts that have no liability cap for you but cap the other party's exposure.

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Check the intellectual property assignment clause. If you are hiring someone to create something for your business (software, content, designs), the contract should clearly state that you own the work product. Without explicit assignment language, the creator may retain ownership rights even though you paid for the work.

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Finally, check the dispute resolution clause. Where will disputes be resolved? Some contracts require arbitration, which can be faster but also more expensive than court. Others specify that disputes must be resolved in a different state, which could force you to litigate across the country.

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Contract review is one of the most cost-effective legal services a business can invest in. A few hundred dollars in review can prevent tens of thousands in disputes.

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Have questions about contract review? Schedule a free consultation with Newmen Law to discuss your specific situation.