It is well-settled that California has a strong public policy against the enforcement of restrictive covenants against employees. Because of this, there has been a recent trend where employers have sought to circumvent California’s public policy by invoking Delaware law in restrictive covenant agreements with their employees. However, in a number of recent opinions, the Delaware Court of Chancery has resisted those efforts, instead choosing to invalidate the Delaware choice-of-law provisions and apply California law to void the restrictive covenants.

Indeed, despite the fact that Delaware is typically a contractarian state, the Court of Chancery has reasoned that, unless one or more conditions (summarized below) are met, California-based companies will not be permitted to effectuate an end run around California’s strict public policy by invoking Delaware law in contracts with their employees. Furthermore, although not directly addressed by the Court of Chancery’s recent decisions, it is likely, based on the court’s reasoning in these decisions, that Delaware courts will apply California law to void noncompetition and nonsolicitation provisions within an agreement between employers with their principal places of business outside of California and their employees that live and work primarily in California, notwithstanding the existence of a Delaware choice-of-law provision.

California Public Policy