Non-compete agreements have long been a controversial part of employment contracts around employment, especially in California. Essentially, these agreements are clauses in employment contracts which forbid an employee to compete with an employer for a period of time after their employment comes to a close. In addition, this agreement ensures that the employee will not expose any private information that he or she learned while working at the company and generally prevents that employee from starting a similar business or working for a competitor. The attitude and perception of these non-compete agreements in California employment contracts have continued to develop and evolve with the enactment of the new rules.

           Throughout most of California’s history, the state has generally not allowed agreements which prevent employees from leaving their employer to compete with them in their industry or area. In fact, non-compete agreements in employment are mostly void under Sections 16600, 16601, and 16602.5 of the California Business and Professional Code. The state has emphasized that non-compete agreements are generally too restrictive contractually. In addition, these agreements go against California policies and laws which encourage and promote economic growth, employee freedom, healthy business competition, and employment mobility. California is one of the few states in the country that prohibits almost all non-compete agreements, other than a small number of exceptions.

           The new laws regarding non-compete agreements are meant to build on what the state already prohibits regarding employment contracts. The two new amendments which were passed on January 1, 2024, S.B. 699 and A.B. 1076, continue to ban almost all non-compete agreements, but they now also allow employees to sue an employer for trying to or actually enforcing a non-compete agreement against them. The extent to which an employee can sue even extends to non-compete agreements which were created in another state. If an employee wins a case involving a non-compete agreement, he or she will be granted recovery for their damages and they are also immune from paying any attorney fees. Furthermore, the amendments require that employers give a written notice to any present or former employees who were employed after January 1, 2022, that any previously signed non-compete agreements are now void. An employer who fails to provide this particular notice may be fined $2,500 per violation. Essentially, these new laws regarding non-compete agreements continue to ban them in California, while also increasing consequences for employers who fail to comply.

           California’s future regarding employment contracts will be complex, as the state, their employers, and employees attempt to navigate the new, complex non-compete rules and its consequences. Employers now need to be even more careful when drafting employment contracts which are compliant with the law, while also ensuring that the company is not susceptible to losing the privacy of their private employment details and secrets. In addition, more issues and questions may rise regarding non-compete agreements for remote employees or contract workers. While there will continue to be uncertainty surrounding the legal issues of the new non-compete rules, there is confidence that both California policymakers and the state’s workers will find a balance, ensuring continued economic growth for one of the most economically fruitful states in the country.

JAHANGIRI LAW GROUP handles matters involving contracts (written and oral), trials and appeals in the areas of business, corporate, commercial, and real estate litigation, and transactional law. We offer services in Urdu, Hindi, Punjabi and Spanish. We are located in San Ramon. We are open from 9:00 a.m. to 5:00 p.m., Monday to Friday. To make an appointment please call 925-574-0100.