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Golden Gate University Law Review

Abstract

Unlike traditional for-profit entities, whose main goal is profit maximization, charitable nonprofits are organized and operated to benefit some greater good. As a result, charitable nonprofits receive donations from philanthropic individuals and corporations, as well as various tax breaks from the government, which are unavailable to for-profit entities. At the same time, charitable nonprofits exploit many of the same tools that for-profit firms utilize to maximize profits, including noncompetition agreements. Thus, charitable nonprofits are able to benefit from an anti-competition, profit-maximizing tool while also reaping the rewards of their tax-exempt status. In short, charitable nonprofits wrongly enjoy the best of both the for-profit and nonprofit worlds.

Part II of this Article discusses charitable nonprofits, focusing on their unique philanthropic missions and the tax benefits conferred on them by the federal and state governments. Part III provides a general overview of employee noncompetition agreements. Part IV demonstrates that charitable nonprofits’ use of noncompetition agreements is contrary to their missions and tax-exempt statuses, as well as to the public interest, because the noncompetition agreements restrict individuals’ abilities to serve society. Moreover, alternative and less intrusive means of protecting an employer’s interests exist. Finally, Part IV proposes that Congress should adopt a law rendering unenforceable any language in a noncompetition agreement that would prevent an individual from leaving the employment of one charitable nonprofit for employment at another.

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