Alert: California Law Renders Noncompete Agreements Virtually Unenforceable

By Adam Nathaniel Arce

As of January 1, 2024. California has placed further restrictions on when a California employer can enforce a noncompete language in either a noncompete agreement, or as part of a larger contract. Additionally, employers with preexisting noncompete agreements must notify employees that these agreements are no longer valid. Here is what you need to know.

What Noncompete Agreements are Void?

All noncompete agreements are now considered a violation of Business and Professions Code section 16600 (the unfair competition law), unless one of the following circumstances is present:

  1. When part of the sale of goodwill of a business;
  2. As part of a dissolution of a partnership or LLC; or,
  3. For the limited purpose of protecting confidential information and trade secret information.

The new law also prevents a California employer from enforcing a noncompete agreement for employees working outside the state of California.  Accordingly, whether the contract is formed or signed in California, or whether the employment is maintained or performed outside of California, all noncompete provisions are unenforceable for California employers. 

Any attempt to enter into a noncompete agreement is considered a civil violation for which employees may file a civil lawsuit and be entitled to attorney’s fees and costs if an employer attempts to enforce a noncompete agreement. 

Notice Requirement

Employers with pre-existing noncompete agreements must provide notice to affected employees that noncompete agreements are no longer enforceable. 

By February 14, 2024. employers with unenforceable noncompete agreements (i.e., an agreement that does not fall into an exception outlined above) are required to provide a “written individualized communication” to the current employee or former employee that the noncompete agreement is unenforceable. This notice must be delivered to the last known address and the email address of the current employee or former employee.

Please let Ferber Law know if you need any help providing notice to employees. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Ferber Law is available to help answer questions relating to California noncompete agreements.