California Non-Compete Clause Law Updates: SB 699 and AB 1076

California Governor Gavin Newsom signed Senate Bill 699 into law on September 1, 2023, and AB 1076 on October 13, 2023, both of which will extend the provisions of The Business and Professions Code Section 16600 that makes non-compete clauses largely unenforceable in the state of California. On January 1, 2024, both SB 699 and AB 1076 will go into effect.

SB 699: Strengthening Non-Compete Clause Prohibitions

SB 699 will add monetary repercussions for employers that present employees with these illegal contracts and it will prevent employers operating outside of California from enforcing non-compete clauses against individuals seeking employment within the state of California. Additionally, AB 1076 will require employers to give notice to affected employees that the non-compete clauses previously signed are not legally binding.

Understanding Non-Compete Clauses in California

A non-compete clause is a provision in a contract where one party agrees not to enter into or start a professional trade in competition with another party. Since 1872, California has held the notion that non-compete clauses in employment contracts are void. The state recognized the need to ban non-compete agreements because the clauses stifle economic mobility and place restraints on trade. The Business and Professions Code Section 16600 explains that California considers non-compete clauses to be void except in specific circumstances. Although some employers in the state continue to present these contracts to employees, California courts have generally voided the non-compete provisions of the contracts. You can read more about non-compete clauses here.

Senate Bill 699: Uncompromising Stance on Non-Compete Clauses

While non-compete clauses have long been unenforceable in California, Senate Bill 699 hardens the stance that they are illegal. The bill includes language that makes it known that these clauses will not be enforced “regardless of where or when the contract was signed.” While many states allow employers to use non-compete clauses in employment contracts, California will not enforce them nor will it allow any other state to enforce them against a California resident. Additionally, employers that present employees with these contracts now face increasing risk of civil litigation since the provisions of SB 699 allow for current, former, or prospective employees to “bring an action to enforce” the law which would allow for the recovery of damages as well as reasonable attorney’s fees and costs.

AB 1076: Employee Notification Requirement

On the other hand, AB 1076 codified existing case law “to void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored, that does not satisfy specified exceptions.” It will also require employers to notify current and former employees who were employed after January 1, 2022, and whose employment contract included a non-compete clause, that the non-compete agreement is void. Employers will have until February 14, 2024, to notify affected individuals.

Seek Legal Assistance from an Employment Law Firm

If you have been subjected to an unlawful non-compete provision in an employment contract, contact us. At TONG LAW, Our employment attorneys are experienced in defending employee rights.