California’s public policy provides that agreements that restrain workers from engaging in a lawful profession, trade, or business is void, except under narrow statutory exceptions. The Legislature has established that California benefits significantly from this policy, “fueling competition, entrepreneurship, innovation, job and wage growth, equality, and economic development.”
Still, some employers continue to utilize broad noncompete agreements and pressure employees to enter void contracts that impact future employment opportunities. In response, the Legislature enacted SB 699 and AB 1076 to help bolster California’s strong interest in protecting freedom of employment and maintaining competitive business interests.
What Does SB 699 Do?
Effective January 1, 2024, SB 699 (codified as Section 16600.5 in the California Business and Professions Code) prohibits employers from enforcing non-compete agreements regardless of where the agreement was signed or where the employee worked when the agreement was signed. The law declares it unlawful for employers to enter and enforce non-compete provisions that are void under Section 16600. SB 699 also provides employees a private right of action for injunctive relief and/or actual damages, including reasonable attorney’s fees and costs of a prevailing party.
What Does AB 1076 Do?
AB 1076 requires employers to notify current and former employees in writing by February 14, 2024, that any noncompete agreements they may have signed previously are void. The law applies only to employees who were employed after January 1, 2022. Failure to deliver timely notice constitutes a violation of the Unfair Competition Law under Section 17200.
Ensuring Compliance with the Law
- Review all existing employment agreements and templates. Remove any noncompete clauses, which are void and unenforceable.
- If you have noncompete agreements in place for employees who started after January 1, 2022, you must notify these employees, in writing by February 14, 2024, that any such noncompete clauses are void.
