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California Business and Professions Code Section 16600 has provided one of the country’s most employee-friendly non-compete regimes for over a century: contractual restrictions on an employee’s right to work after leaving employment are void as a matter of public policy. Recent legislation strengthened this position further. Yet both employers and employees routinely misunderstand what California’s non-compete law actually prohibits and what it permits.
What California Prohibits
SB 699, effective January 1, 2024, made California’s non-compete prohibition explicit and strengthened it in two important ways. First, it applies to non-compete agreements regardless of where the agreement was signed or where the employee worked — a California employer cannot enforce a non-compete against a California employee even if the agreement was signed in a state where non-competes are legal and the employee previously worked there. Second, it created a private right of action for employees to sue to void non-compete agreements and recover attorney’s fees. The prohibition is not merely a defense — it’s now an affirmative claim.
What California Permits
California does permit: non-disclosure agreements protecting genuine trade secrets (but not general knowledge and skills acquired during employment); non-solicitation of customers the employee directly worked with (narrowly construed); non-solicitation of co-workers in some circumstances; and non-compete agreements in connection with the bona fide sale of a business or a substantial ownership interest. The sale of business exception is the most significant carve-out — a seller of a business can agree not to compete with the buyer in the same type of business for a reasonable time and geographic area.
The Practical Implications
For California employers: stop including non-compete clauses in employment agreements — they are void and their inclusion may now create liability. Focus instead on robust confidentiality agreements covering specific trade secrets, and non-solicitation provisions drafted carefully within the narrow scope California permits. For California employees who signed non-competes (especially those who moved to California from other states): those agreements are void and unenforceable against you in California, and under SB 699 you can sue to have them voided and recover attorney’s fees.
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