Non-Compete Bans in California

The New Non-Compete Bans in California: SB 699 and AB 1076

California, known for its robust employment laws, has taken a significant step forward in limiting employee mobility restrictions with the enactment of two groundbreaking bills: Senate Bill (SB) No. 699 and Assembly Bill (AB) No. 1076. These bills, effective from the beginning of 2024, not only render non-compete agreements unenforceable but also establish a clear mandate for employers to cease using such restrictive clauses altogether.

 

SB 699 Overview:

SB 699 reinforces existing California law while expanding its scope. According to the bill, any non-compete contract void under California Business & Professions Code section 16600 is deemed unenforceable, regardless of where and when the agreement was signed. This means that non-California employers will face challenges enforcing non-compete agreements within the state, and non-competes signed by California residents while living and working out of state may also be voided.

 

AB 1076 Overview:

Building upon the foundation laid by SB 699, AB 1076 imposes additional obligations on employers. The bill mandates that employers notify current and former employees, employed after January 1, 2022, and subject to a non-compete agreement, that the agreement is void unless it falls within specific statutory exceptions. Employers must provide this notice by February 14, 2024.

Non-compliance with AB 1076 carries substantial penalties. Given the potential financial consequences, employers must promptly inform affected individuals that their non-compete clauses are void, ensuring compliance with the deadline. Legal counsel is recommended to assess existing agreements and determine if new ones need to be drafted.

 

What should employers do?

  1. Employee Notifications: Employers should promptly notify current and former employees in California about the voiding of their non-compete clauses, addressing both mail and email communication. The deadline for this notification is February 14, 2024.
  2. Review Existing Agreements: Employers should thoroughly review non-compete clauses in existing contracts and collaborate with legal counsel to create new agreements that comply with the updated legislation.
  3. Strengthen Internal Protections: Since non-compete agreements are now unlawful, companies should focus on strengthening internal safeguards for trade secrets and confidential information. Reviewing and reinforcing processes related to confidentiality and non-disclosure is crucial.

In conclusion, SB 699 and AB 1076 mark a paradigm shift in California’s approach to non-compete agreements, emphasizing the state’s commitment to employee mobility, competition, and innovation. Employers must act swiftly and prudently to navigate these new laws, ensuring compliance and protecting their interests in this transformed legal landscape.

 


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