Restrictive covenants, including non-solicitation and non-competition agreements, are commonly used by employers across the country to protect business interests when employees move on. However, California has long taken a strong public policy stance against restraints on employee mobility, and recent legislation has made that stance even stronger. Employers and employees alike should understand the state’s broad statutory restrictions on non-competes and non-solicitation agreements, the narrow exceptions, and the implications for businesses operating in California.
What is California’s Statutory Ban on Non-Competes?
California’s Business and Professions Code section 16600 states that, with limited exceptions, “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” This sweeping language leaves little room for enforcement of non-compete agreements. Unlike courts in many states, California courts rarely enforce non-competes, even if narrowly tailored to protect trade secrets or goodwill. The primary exceptions arise in the context of a sale, dissolution, or termination of an ownership interest in a business. In those situations, non-competes may be enforced if they are reasonably limited in scope and necessary to protect the value of the business being sold. Outside these exceptions, non-compete agreements are generally unenforceable in California.
Do Non-Solicitation Agreements Have Limits?
For a time, some California employers sought to sidestep the non-compete ban by relying on non-solicitation agreements. These provisions restrict former employees from soliciting the company’s clients, customers, or employees for a period of time after departure. However, California courts have increasingly invalidated non-solicitation clauses as well, reasoning that they too restrain employees from engaging in their profession.
That said, when a non-solicitation clause is directly tied to the protection of trade secrets, it can be enforceable. Examples are calling on customers from a list that the employer created through investment of time or money or using proprietary formulas for identifying customers. If an employee improperly uses such proprietary information to solicit customers, the employer may have a viable claim against its former employees under California’s trade secret laws. Nevertheless, even these cases are difficult for employers to pursue successfully, as the confidentiality or proprietary nature of customer lists can be difficult to prove, and will not be allowed to merely circumvent non-competes.
Recent California Legislation Reinforcing the Ban
California lawmakers have reinforced the state’s stance against restrictive employee covenants. Section 16600.5 of the California Business and Professions Code was expanded in 2023. Employee protections were expanded by providing explicit remedies against employers who attempt to enforce non-competes. Current, former, and prospective employees now have the right to seek injunctive relief, damages, and attorneys’ fees when employers violate the ban. Another provision added from Assembly Bill 1076 further strengthened the law by requiring employers to notify current and former employees that any non-compete clauses they signed are void under state law.
Senate Bill 699, effective January 1, 2024, also significantly expanded California’s non-compete ban. Most notably, the law bans any non-compete agreements regardless of whether the agreement was signed in another state. California Legislature made its intent explicit in the bill, stating that California’s public policy “trumps other state laws when an employee seeks employment in California, even if the employee had signed the contractual restraint while living outside of California and working for a non-California employer.”
Together, these legislative developments underscore California’s unwavering commitment to ensuring that employees retain full freedom to pursue new employment opportunities, unencumbered by restrictive covenants.
What Should You Consider with Non-Solicitation and Non-Competition Agreements?
For employers, California’s strict legal environment means that non-competes and broad non-solicitation provisions are not viable tools for protecting business interests. Instead, companies must focus on alternative strategies, such as carefully drafted confidentiality agreements, robust trade secret protections, and internal policies that safeguard sensitive information.
For employees, California law provides a strong shield against contractual restrictions that might otherwise limit job mobility. Employees who are presented with non-compete or non-solicitation agreements should be aware that such provisions are typically unenforceable, and they may even have recourse against an employer that attempts to enforce them.
Conclusion
California remains firmly opposed to restrictive covenants that hinder employee mobility, with non-compete agreements declared void in nearly all circumstances and non-solicitation clauses viewed with skepticism. If you have questions about the enforceability of non-compete or non-solicitation agreements in California, or if you are facing a dispute involving restrictive covenants, our experienced employment attorneys can help. Contact Romano Law today to discuss your situation and protect your rights.
Contributions to this blog by Hannah Warther
