California Employers and Non-Competes: A Crucial Deadline Approaches
California employers have until Feb. 14, 2024 to send notices to current and certain former employees that their non-compete clauses or agreements are void.
California’s Recent Action Reinforcing its Ban on Non–compete Clauses and Agreements
California has a long-standing prohibition on non-compete agreements across the state. In the fall of 2023, California governor Gavin Newsom signed California Senate Bill 699 (SB 699) which reinforced California’s ban by emphasizing that non–compete agreements are void and “unenforceable regardless of where and when the contract was signed” – even outside California. This law took effect on Jan. 1, 2024.
Following quickly on the heels of SB 699, California passed California Assembly Bill 1076 (AB 1076) which further expounded on the law by codifying existing California case law specifying that the provision voiding non-compete agreements is to be broadly construed to “void the application of any non-compete agreement in an employment context, or any non-compete clause in an employment contract, no matter how narrowly tailored.” This law also took effect on Jan. 1, 2024.
Employer’s Notice Obligations
AB 1076 requires employers to notify their current and certain former employees that post-employment non-compete clauses in employment contracts are void. Here are the detailed requirements:
- Notice must be sent by Feb. 14, 2024
- Notice must be sent to current employees and former employees who were employed after Jan. 1, 2022, whose contracts include a non–compete clause or who were required to enter into a non–compete agreement
- Notice must be a written, individualized communication
- Notice must indicate the non–compete clause or non–compete agreement is void
- Notice must be delivered to the last known address and the email address of the employee or former employee
These two bills have further solidified the status of non–compete agreements in California. More broadly, the banning of non-compete agreements has been a growing trend throughout the nation, with other jurisdictions limiting or banning non–compete agreements, although the California notice requirement is the most extensive to date.
Employers in California should have these notices ready to be distributed to employees and former employees next week. In addition, California employers may also want to consider modifying current agreements that may contain potentially void non–compete clauses going forward.