In most states, non-compete agreements are upheld by courts. In California, non-competes are almost always thrown out by courts [1]. In other states, such as NY or OH, non-competes are always interpreted in favor of the company.

What was being done by the companies is an informal arrangement to make non-compete agreements exist even in the cases where the employee didn't sign one.

Notes: 1 - Pretty much the only non-competes upheld in CA courts are ones where the signing party sells a business or is a major partner.