B&P Code Section 16600
California has never liked non compete covenants. Existing law in California states under B&P Code Section 16600 states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” California courts interpret this statute broadly and have routinely invalidated covenants not to compete as violating Section 16600 based on the theory that such covenants contravene California’s public policy in favor of free competition and the right of employees to pursue any calling of their choosing. There are very narrow exceptions to this statute, such as partnerships that dissolve for example, but this provision applies strongly to employees who leave (voluntarily or involuntarily) from their employment.
Starting January 1, 2024, B&P Code 16600.1 states:
16600.1. (a) It shall be unlawful to include a noncompete clause in an employment contract, or to require an employee to enter a noncompete agreement, that does not satisfy an exception in this chapter.
(b) (1) For 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 an exception to this chapter, the employer shall, by February 14, 2024, notify the employee that the noncompete clause or noncompete agreement is void.
(2) Notice made under this subdivision shall be in the form of a written individualized communication to the employee or former employee. employee, and shall be delivered to the last known address and the email address of the employee or former employee.
(c) A violation of this section constitutes an act of unfair competition within the meaning of Chapter 5 (commencing with Section 17200).
What does this mean for employees? The contract of employment doesn’t need to be in California to be enforced; employers MUST communicate to all employees that a noncompete clause in their employment is VOID. In short, it never was, no longer exists. And in fact, enforcing this clause (non compete) comes with attorney fees if an employee has to sue to free themselves of any such agreement. Again, the employee and employer should look very carefully at any exceptions to this rule (they are very narrow), but all employees should be notified of this change in the law by their employer. Furthermore, it reinforces Californias repugnance to limitations in an employee’s ability to seek employment and work somewhere else. This is a powerful enhancement to existing law to protect employees ability to seek and secure work.
