I believe it's actually unenforceable, rather than illegal. The difference being that California courts will refuse to enforce the contract, while if the contracts were actually illegal, they'd punish companies for asking people to sign them.

I've heard that some companies still offer them anyhow, hoping that you won't know they're unenforceable and will obey it anyhow. I also seem to remember a case where a company sued to enforce the non-compete in a non-California court. I don't know how that played out, exactly, and that case might still be pending, but the plaintiff seemed to think that another court might enforce the non-compete even if California's courts wouldn't.

They are void under Cal. Bus. & Prof. Code § 16600.

The California courts have decided that California's policy against them is so strong that when California is applying another state's law under California's choice of law rules, they will be treated as void even if they are acceptable in that other state's law.

(A lot of people don't realize that courts will use law from other states when appropriate. For example, if you and I enter into a contract in Washington, and then we get into a dispute over that contract in Nevada and one of us sues the other in Nevada, the Nevada court will apply Washington contract law. It will use Nevada rules of civil procedure. I don't recall, but I think it uses Nevada rules of evidence, too).

There's one unsettled situation, I believe. That would be where we have a non-compete, and it goes to court in a state that enforces non-competes, and plaintiff wins, and then plaintiff tries to have the judgement enforced in California. The Full Faith and Credit clause of the Constitution would seem to require California to enforce the judgement, assuming that the other state's court had personal jurisdiction over the defendant when it ruled. (States generally have to enforce judgements from other states, even if the case would not have gone the same way under their law).

There have been some really, really interesting cases where California's non-compete laws collide with other states:

http://www.cooley.com/57476

So if someone signs a non-compete in Washington, it's practically null and void if they go move to California for a job in California? What if they move back 3 years later to Washington and the non-compete was for 1 year?

Contracts generally have a clause that indicates which state's laws they follow. If you go to work for Microsoft, your non-compete will say that the contract is enforceable under the laws of the state of Washington. You can't escape it by vacationing in California or even by taking a job there.

If you have a non-compete with Microsoft, and the terms of the non-compete say Washington law is to be used, and you take a job in California, and Microsoft sues in California, California's strong policy against non-competes will apply. Those parts of the Microsoft contract will be treated as void by the California court. Whatever remains will be interpreted using Washington law as construed by the California court.

Interesting. So they're actually void and not merely voidable?

BTW, the bit about out of state enforcement in California came up in an earlier discussion. IANAL, but here was a link I found interesting...

http://lawzilla.com/content/noncompete.shtml

The section under "Out-of-State Agreements and Multi-State Employer Strategies"

"Who wins often depends upon a race to the courthouse. For multi-state employers it is often a rush to the courthouse to determine if a non-compete agreement is valid. The employer's strategy is to get an order outside of California in their favor. The employee or California prospective employer's strategy is to get an order within California in their favor. In the face of dueling, and opposing orders, the first to the courthouse may win because states often must give effect to orders from other courts."

The site gives a few cases that illustrate this as well as some strategies.

They're apparently enforceable in Texas, although they don't seem to often be enforced (to the point that most people I've spoken with have the false notion that they are unenforceable). So it really depends on the state.

Not to mention that even if it is unenforceable, I would imagine that most employers would rather just hire someone else than deal with the legal issues involved in hiring that employee.