California Further Strengthens Limits on Noncompete Agreements
Author: Michael Cardman, XpertHR Senior Legal Editor
October 27, 2023
California will soon bolster its already-considerable limitations on the use of noncompete agreements.
Effective January 1, 2024, two new laws - SB 699 and AB 1076 - will:
- Codify existing case law to provide that any noncompete agreement or clause, no matter how narrowly tailored, is null and void unless it meets one of the narrow statutory exemptions, such as when an owner sells their business;
- Clarify that noncompete agreements are unenforceable, regardless of where and when the contract was signed, and whether or not work is performed outside of the state;
- Require employers by February 14, 2024, to notify current and former employees employed after January 1, 2022, who were previously subject to a noncompete agreement that it is no longer in effect; and
- Allow employees, former employees, or prospective employees to file a private lawsuit seeking to stop an employer from using noncompete agreements and/or recover damages that resulted from a noncompete agreement.
"Although noncompete agreements are not enforceable in California, employers continue to include them in contracts which misleads employees and threatens their job prospects," said Rebecca Beth Bauer-Kahan, author of AB 1076.
SB 699 and AB 1076 are the latest in a string of new employment laws recently passed in California, including measures involving sick leave, leave for reproductive loss, workplace violence prevention and retaliation.