Earlier this month, the Ninth Circuit rejected a “will not reapply” clause in a settlement agreement under Business & Professions Code Section 16600, the California state statute that makes most non-compete provisions unenforceable. It is unclear if the holding is limited to the particular facts or if all “will not reapply” clauses are at risk. Such clauses are typical features of settlement agreements arising from employment-based disputes. In settling such disputes, the employer does not want to risk another lawsuit on the same grounds brought by the same person in connection with another job. The employer will bargain for the “will not reapply” clause, giving the employer a contractual basis to reject future employment for that same person, and thus avoiding the risk of another suit. The Ninth Circuit decided, in the case at bar, that Section 16600 precludes such a provision as unenforceable restraint of a substantial character on the ability to work within a particular field or industry.
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