Yes, Virginia, California does allow employers to prohibit employees from competing

It's common knowledge that California prohibits noncompetition agreements. Except in the context of some business sales, Business and Professions Code Section 16600 renders void every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind. The Golden State has long taken the position that competition is healthy—it encourages innovation and entrepreneurship, and that's a good thing. As frustrating as it may be when a trusted former employee competes head to head, it's hard to argue with the numbers: If California were a country, it would be the fifth largest economy in the world, and the state makes up 14 percent of the U.S. economy.

But as recently confirmed by the California Court of Appeal, the prohibition against noncompete agreements doesn't apply to current employees. Those on the company's payroll owe the company a duty of loyalty, and that duty trumps the right to compete.

Candidates for chutzpah of the year

Scott Drucker and Arik Nirenberg were long-time employees of Techno Lite, a company that sold lighting transformers. In 2006, Techno Lite experienced financial difficulties. Because they feared the company might cease operations, Drucker and Nirenberg founded their own business, Emcod. According to Drucker and Nirenberg at the time, Emcod made custom transformers that had nothing to do with Techno Lite's market or customer base.