California Employers, Forget About Non-Compete Agreements for Your Employees!
Published: September 27, 2023
On September 1, 2023, California Governor Gavin Newsom signed SB 699 into law, which will bolster California’s prohibition of non-compete agreements.
The prohibition of non-compete agreements is not new news. Non-compete agreements were not enforceable prior to SB 699 being signed into law under California Business and Professions Code section 16600. The Code section explains how every contract restraining anyone from engaging in a lawful profession, trade, or business of any kind is void, except under limited statutory exceptions. SB 699, which will be codified as Business and Professions Code section 16600.5 and go into effect on January 1, 2024, reiterates existing law and extends the reach of California’s restriction on non-compete agreements. The new law:
- Provides that any contract void under Business and Professions Code section 16600 is unenforceable regardless of where and when the agreement was signed;
- Prohibits employers or former employers from attempting to enforce a contract that is void regardless of whether the contract was signed and the employment was maintained outside of California;
- Prohibits employers from entering into a contract with an employee or prospective employee that includes a provision unenforceable under Business and Professions Code section 16600; and
- Provides that employees, former employees, or prospective employees may bring a private right of action for enforcement, and should they prevail, recover attorney’s fees.
Takeaway:
More than ever, California employers face greater risks when having employees sign non-compete agreements or in seeking to enforce such agreements. Employers should review their employee contracts and practices and ensure they comply with Business and Professions Code section 16600 and 16600.5. If faced with any questions, employers should contact their Weintraub Tobin employment lawyer to ensure they are complying with the law.