Are employee non-compete agreements enforceable in Guam?
No. Guam voids employee non-compete agreements by statute. Title 18 of the Guam Code Annotated, section 88105, makes every contract that restrains someone from exercising a lawful profession, trade, or business void to that extent, except for two narrow statutory exceptions — and in Island Eye Center, Inc. v. Lombard the Supreme Court of Guam read that language as a per-se ban.
Guam's restraint-of-trade statute is not the product of local drafting — it is California law transplanted. Section 88105 descends from the former California Civil Code section 1673, since recodified as the heavily litigated Business and Professions Code section 16600, and the Island Eye court said so in the first case to construe the provision.
Because the statutes are nearly identical, the court treats California's interpretation as persuasive and adopted its strict employee-mobility reading for the non-compete before it. That means Guam, like California, does not weigh a covenant's duration or geography the way a reasonableness state does. A clause that restrains a former employee from competing is simply outside the statute and void — the court reads section 88105 as an expression of public policy favoring employee mobility .
Applying that rule, the court struck the non-compete in Island Eye, which barred an ophthalmologist from practicing for 30 months across Guam and the Mariana Islands, as void rather than narrowing it to something enforceable .
This is not a new development. Decades earlier, the Ninth Circuit applied the same statute in Shelton v. Guam Service Games and voided a Guam-wide covenant, holding that a positive legislative declaration overrode any common-law reasonableness argument .
Do not paper a Guam employee with an out-of-state non-compete form and assume a court will blue-pencil it down to something enforceable. The Supreme Court of Guam voided the non-compete in Island Eye outright, and it expressly left open whether blue-penciling an overbroad covenant is even permissible — so reformation is no safe harbor. The only reliable paths to a valid covenant are the narrow sale-of-business and partnership exceptions discussed below.
Sources for this answer
Primary law
A.1 18 GCA § 88105 — Contracts in Restraint of TradePDFSection 88105 voids every contract by which anyone is restrained from exercising a lawful profession, trade, or business, except as provided in the two following sections (sale of good will and partnership dissolution).
Every contract, by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, otherwise than is provided in the next two sections, is to that extent void.
See 18 GCA § 88105.
Case law · 2020-12-31
A.3 Island Eye Center, Inc. v. LombardIsland Eye is the first decision of the Supreme Court of Guam to interpret 18 GCA § 88105, the territory's restraint-of-trade provision.
This is the first time we have been asked to interpret our restraint-of-trade provision.
See Island Eye Ctr., Inc. v. Lombard, 2020 Guam 32.
Case law · 2020-12-31
A.4 Island Eye Center, Inc. v. LombardThe Supreme Court of Guam held that 18 GCA § 88105 derives from former California Civil Code section 1673, now California Business and Professions Code section 16600, so California case law interpreting section 16600 is persuasive.
Our statute is derived from California Civil Code section 1673, since replaced by California Business and Professions Code section 16600.
See Island Eye Ctr., Inc. v. Lombard, 2020 Guam 32.
Case law · 2020-12-31
A.5 Island Eye Center, Inc. v. LombardThe court held that section 88105 evidences a public policy for employee mobility and every citizen's right to pursue lawful employment, mirroring California's open-competition policy.
Therefore, we hold that section 88105 evidences public policy for employee mobility and every citizen's right to pursue lawful employment or enterprise of his or her choice.
See Island Eye Ctr., Inc. v. Lombard, 2020 Guam 32.
Case law · 2020-12-31
A.2 Island Eye Center, Inc. v. LombardThe court held that the employee's post-employment non-compete terms were a restraint of trade in violation of 18 GCA § 88105 and void to that extent — striking the covenant rather than reforming it.
These post-employment terms are undoubtedly a restraint of trade in violation of 18 GCA § 88105 and are to that extent void.
See Island Eye Ctr., Inc. v. Lombard, 2020 Guam 32.
Case law · 1956-09-07
A.6 Shelton v. Guam Service GamesApplying Guam's restraint-of-trade statute, the Ninth Circuit held a covenant restraining a person from the coin-machine business throughout the Territory of Guam void, rejecting the argument that common-law partial-restraint reasonableness could save it.
Since this agreement attempted to make the prohibition and restraint complete within the Territory of Guam, it is to that extent void.
See Shelton v. Guam Service Games, 239 F.2d 902 (9th Cir. 1956).
Are customer and employee non-solicitation clauses enforceable in Guam?
Neither sits on firm ground, and a customer non-solicitation clause likely shares the non-compete's fate. No Guam decision squarely rules on a customer non-solicitation clause, but because Island Eye adopted California's section 16600 framework — under which a covenant that forecloses a former employee's ability to compete for business is an impermissible restraint — a customer non-solicit likely carries the same void risk. For clauses barring the solicitation of a former employer's staff, the Supreme Court of Guam expressly left the question of facial validity open in Island Eye.
Guam took its restraint-of-trade rule from California, where post-employment covenants that foreclose a worker's ability to compete are impermissible restraints regardless of how they are labeled — including the former-client service restriction the court invalidated in Edwards, the decision Island Eye adopted. Island Eye itself distinguished employee anti-raiding clauses from client non-solicits and did not separately rule on a customer non-solicitation clause, so the customer-restriction conclusion is a prediction from the adopted framework rather than a Guam holding .
Employee anti-raiding clauses — barring a departing worker from soliciting the employer's remaining staff — are the open question. In Island Eye, the employer conceded that such clauses are typically invalidated under California law, and the court resolved the dispute without deciding whether they facially violate section 88105.
Treat a customer non-solicitation clause in a Guam employment agreement as carrying the same void risk as a non-compete, and recognize that an employee anti-raiding clause rests on unsettled ground after Island Eye — the court declined to rule on its facial validity, and the employer there conceded California voids such clauses. Protect customer relationships and workforce stability through a properly scoped trade-secret and confidentiality program instead.
Sources for this answer
Case law · 2020-12-31
B.1 Island Eye Center, Inc. v. LombardThe court adopted California's interpretation that post-employment covenants not to compete are impermissible restraints violating the section 16600 / section 88105 rule, relying on Edwards (which invalidated a former-client service restriction); the court did not separately decide the validity of a customer non-solicitation clause.
California courts interpret post-employment covenants not to compete as impermissible restraints of trade which violate section 16600.
See Island Eye Ctr., Inc. v. Lombard, 2020 Guam 32.
Case law · 2020-12-31
B.3 Island Eye Center, Inc. v. LombardIn Island Eye, the employer conceded that employee non-solicitation (anti-raiding) clauses are typically invalidated under California law as unlawful restraints of trade.
Island Eye concedes that employee non-solicitation clauses are typically invalidated under California law as unlawful restraints of trade.
See Island Eye Ctr., Inc. v. Lombard, 2020 Guam 32.
Case law · 2020-12-31
B.2 Island Eye Center, Inc. v. LombardBecause of the employer's concession, the court limited the appeal and did not decide whether employee non-solicitation clauses facially violate 18 GCA § 88105 — leaving the facial-validity question open.
Because of Island Eye's concession, the parties' arguments on appeal are limited to whether non-solicitation clauses facially violate 18 GCA § 88105.
See Island Eye Ctr., Inc. v. Lombard, 2020 Guam 32.
Are non-competes tied to the sale of a business enforceable in Guam?
Yes, within a narrow statutory exception. Section 88106 lets a person who sells the good will of a business agree not to carry on a similar business within a specified district, city, or a part thereof, so long as the buyer continues a like business there — but courts read the geographic limit strictly.
The sale-of-business exception exists so a buyer can protect the good will it pays for; without it, a seller could reopen next door and take back the customer base just sold. But the covenant must be tied to a genuine sale of good will and confined to a specified district, city, or part of one .
That geographic limit has teeth. In Shelton v. Guam Service Games, the Ninth Circuit refused to fit a Territory-wide covenant within the good-will exception, reasoning that a restraint covering the entire Territory of Guam is too broad to be the specified district, city, or part the statute allows .
“By no theory could it include the entire Territory of Guam or any major portion thereof.”
Tie a Guam sale-of-business covenant to the good will actually sold and confine it to a specified district, city, or part of one — not the whole island. A covenant scoped to the entire Territory of Guam falls outside section 88106 and, under Shelton, leaves section 88105 to void it.
Sources for this answer
Primary law
C.1 18 GCA § 88106 — Exception: Sale of Good WillPDFSection 88106 permits a seller of business good will to agree not to carry on a similar business within a specified district, city, or part thereof, so long as the buyer carries on a like business there.
One who sells the good will of a business may agree with the buyer to refrain from carrying on a similar business within a specified district, city, or a part thereof, so long as the buyer, or any person deriving title to the good will from him, carries on a like business therein.
See 18 GCA § 88106.
Case law · 1956-09-07
C.2 Shelton v. Guam Service GamesThe Ninth Circuit held that the good-will exception's geographic limit cannot stretch to cover the entire Territory of Guam, so a Territory-wide covenant falls outside the exception and is void under the general ban.
By no theory could it include the entire Territory of Guam or any major portion thereof.
See Shelton v. Guam Service Games, 239 F.2d 902 (9th Cir. 1956).
Can partners agree not to compete on dissolution of a Guam partnership?
Yes, within the second statutory exception. Section 88107 lets partners, on or in anticipation of dissolving a partnership, agree not to carry on a similar business within the same city or town where the partnership did business, or a specified part of it .
This is the partnership analogue to the sale-of-business exception, and it is drafted just as narrowly: the permissible restraint is bounded to the same city or town — or a specified part of it — where the partnership transacted business .
Scope a partnership non-compete to the same city or town — or a specified part of it — where the partnership actually did business, and tie it to dissolution. A clause reaching beyond that geography, or imposed outside the dissolution context, falls outside section 88107 and is exposed to the section 88105 ban.
Sources for this answer
Primary law
D.1 18 GCA § 88107 — Exception: Partnership AgreementPDFSection 88107 permits partners, on or in anticipation of dissolution, to agree not to carry on a similar business within the same city or town where the partnership did business, or a specified part thereof.
Partners may, upon or in anticipation of a dissolution of a partnership, agree that none of them will carry on a similar business within the same city or town where the partnership business has been transacted, or within a specified part thereof.
See 18 GCA § 88107.
Primary law
D.2 18 GCA § 88105 — Contracts in Restraint of TradePDFSection 88105 voids every restraint on a lawful profession, trade, or business except as provided in sections 88106 and 88107, so a partnership covenant that exceeds the section 88107 exception is void.
Every contract, by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, otherwise than is provided in the next two sections, is to that extent void.
See 18 GCA § 88105.
Can a liquidated-damages or penalty clause back up a Guam covenant?
Generally no. Guam's contract statute voids a clause that fixes damages for breach in advance, except where actual damages would be impracticable or extremely difficult to fix — so a penalty bolted onto a covenant cannot do work the covenant itself cannot.
Section 88103 sets the default rule: a contract that fixes the amount of damages in anticipation of a breach is void to that extent .
The lone exception, section 88104, permits a genuine liquidated-damages estimate only where actual damages would be impracticable or extremely difficult to fix .
Do not try to rescue a Guam non-compete with a liquidated-damages or penalty clause. The covenant itself is void under section 88105, and section 88103 independently voids a damages-fixing clause unless it meets the narrow section 88104 standard for situations where actual damages are impracticable to calculate.
Sources for this answer
Primary law
E.1 18 GCA § 88103 — Contract Fixing DamagesPDFSection 88103 makes a contract that fixes the amount of damages for breach in anticipation of the breach void to that extent, except as provided in section 88104.
Every contract by which the amount of damage to be paid, or other compensation to be made, for a breach of an obligation, is determined in anticipation thereof, is to that extent void, except as expressly provided in the next section.
See 18 GCA § 88103.
Primary law
E.2 18 GCA § 88104 — ExceptionsPDFSection 88104 permits a presumed-damages (liquidated-damages) amount only where, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.
The parties to a contract may agree therein on an amount which shall be presumed to be the amount of damage sustained by a breach thereof; when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.
See 18 GCA § 88104.
What can a Guam employer protect instead of a non-compete?
Trade secrets and narrowly drawn confidentiality. Guam has not adopted the Uniform Trade Secrets Act, so in Island Eye the Supreme Court of Guam borrowed the trade-secret definition from the territory's criminal code — 9 GCA § 43.10(f) — to govern civil misappropriation claims; that protection guards genuine secrets without restraining the employee's right to compete .
Because the Island Eye employer had no statutory trade-secret regime to point to, the court had to decide what definition applies to a civil claim. It adopted the criminal-code definition as a matter of first impression .
A confidentiality or trade-secret program protects the information rather than the employment relationship, which is why it is the durable tool a Guam employer has after section 88105 takes a non-compete off the table. The discipline it requires is precision: a confidentiality clause cannot be written so broadly that it functions as a back-door non-compete barring the employee from the field, because that would be the very restraint section 88105 voids.
The court drew that line itself. Island Eye rejected the inevitable disclosure doctrine — the theory that a departing employee will inevitably use trade secrets in a new job — precisely because it would convert trade-secret protection into a de facto covenant not to compete, and stressed that such protection is a shield rather than a sword .
Do not define confidential information so broadly that it sweeps in the employee's general skills, knowledge, and industry experience — a confidentiality clause that effectively prevents the worker from practicing their profession is a non-compete in substance and void under section 88105. Tie confidentiality to genuine secrets that meet the 9 GCA § 43.10(f) definition the Supreme Court of Guam adopted, and remember that hiring a former competitor's at-will staff is not itself misappropriation absent an identifiable trade secret.
Sources for this answer
Case law · 2020-12-31
F.1 Island Eye Center, Inc. v. LombardBecause Guam has not adopted the Uniform Trade Secrets Act, the Supreme Court of Guam held, as a matter of first impression, that the trade-secret definition in the criminal code at 9 GCA § 43.10(f) governs civil trade-secret-misappropriation claims.
Therefore, we hold that the definition of trade secrets in 9 GCA § 43.10(f) is the definition of trade secrets for civil trade-secret-misappropriation claims.
See Island Eye Ctr., Inc. v. Lombard, 2020 Guam 32.
Case law · 2020-12-31
F.2 Island Eye Center, Inc. v. LombardThe Supreme Court of Guam rejected the inevitable-disclosure doctrine for trade-secret claims, reasoning that it would operate as a de facto covenant not to compete; trade-secret protection must be a shield, not a sword used to render departing employees unemployable in their field.
Trade-secret protection should be a shield, not a sword used by employers to retain its employees by threat of rendering them substantially unemployable in their field of experience or prevent workers from pursuing their livelihoods when they leave their current positions.
See Island Eye Ctr., Inc. v. Lombard, 2020 Guam 32.