Restrictive Covenant Law Lessons in HBO’s Silicon Valley

Have you been laughing and cringing along with Silicon Valley on HBO? This half-hour comedy skewers the achievements and missteps of a technology startup, and the eccentric characters they encounter along the way. Set in the famous, eponymous region of northern California, Silicon Valley is an audacious comedy, and many of the situations that the characters face are wild and unrealistic. However, the most significant event of the second season hinged on a very real piece of California employment law.

Restrictive Covenant Law in California

California has several unique laws relating to employment. One of them concerns restrictive covenants. Since the 19th century, any contract clause that prohibits employees from fair competition with their former employer has been void in California. Not only are the covenants unenforceable, but having them in your contracts can call into question the validity of the employment agreement, and expose your business to possible accusations of unlawful business practices.

Restrictive Covenant Law on HBO

In the second season of Silicon Valley, the protagonist, Richard, is being sued by his former employer, Hooli. In his personal time—but while employed by Hooli—Richard starts his own company, Pied Piper, and develops a very valuable piece of software. Hooli is suing Richard, claiming that they own this software due to the fact that Richard once tested it on a Hooli-owned computer.
That part of the claim was valid, and Richard appeared doomed. – Spoiler alert! – In a surprising twist at the end of the episode, the judge revealed an un-enforceable non-compete in Richard’s former contract with Hooli, rendering his employment agreement (and therefore Hooli’s claim to his work as an employee) invalid.

Will The Restrictive Covenant Laws in California Help or Hurt You?

This Silicon Valley storyline perfectly illustrates how California’s restrictive covenant laws can hurt or help you, depending on which side you are on. In fact, this ability to move easily from job to job in the same industry is most likely a huge part of what fueled the explosive growth of the tech industry in California. It helped create the startup culture as well. What would happen if there was nothing stopping you (or your employees)  from striking out on your own?
The ruling in favor of Pied Piper will now allow Richard and his friends to go on to make many more hilarious mistakes and gains for our entertainment. Outside of the fictional world, are you sure that your employment agreements will stand up to California contract law? This can be a unique concern for companies that have employees living or working in multiple states, and warrants review by your employment law counsel.