Updates to California Noncompete Law


Agreements which purport to prohibit separating employees from taking up employment with a competing company have been void and unenforceable in California for many years. California is one of very few states in the nation that has enacted laws banning such “noncompete agreements” except in very limited circumstances. California Business & Profession Code (B&P Code”) Section 16600 already declares void “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind”.  Historically, if an employee had executed a noncompete agreement it was simply deemed void and unenforceable and any attempt by a former employer to enforce the agreement was meritless.

On January 1, 2024, two new laws become effective which will make California’s prohibition on noncompete agreements even more impactful. Assembly Bill 1076, approved by Governor Newsom on October 13, 2023, will be codified as Business & Professions (B&P) Code Section 16600.1, and Senate Bill 699, approved by Governor Newsom on September 1, 2023, will be codified as B&P Code 16600.5.

B&P Code Section 16600.1 will now make it unlawful to include a noncompete clause in an employment contract or to require an employee to enter into a noncompete agreement. The section will also require that by February 14, 2024, employers notify current employees, and for former employees who were employed after January 1, 2022, whose contracts include a noncompete clause, or who were required to enter a noncompete agreement that does not satisfy limited exceptions, that the noncompete clause or noncompete agreement is void. The required notice must be in the form of a written individualized communication to the employee or former employee and must be delivered to the last known address and email address of the employee or former employee. A violation of section 16600.1 will constitute unfair competition under California law and be actionable.

B&P Code 16600.5 will prohibit employers from attempting to enforce any noncompetition agreement that is void under California law, even if the agreement was signed in connection with employment maintained outside of California. The law will bar enforcement of noncompetition agreements entered into between parties located outside of California if the employee has since relocated to California or if a separated employee is seeking employment in California. Section 16600.1 makes it a civil violation for any employer to enter into, or attempt to enforce, an invalid noncompete agreement. The law creates a private right of action for an employee or former employee to sue for injunctive relief and damages and provides that a prevailing employee in such an action is entitled to recover attorney’s fees and costs.

Therefore, as of January 1, 2024, noncompete agreements will not be just void and unenforceable under California law, but the attempted use or enforcement of such agreements will expose employers to legal liability. If you have questions about these upcoming changes to the law or how to navigate the new requirements, please contact an SSCE lawyer to discuss.