What are California’s 2024 Non-Compete Laws?

California non-compete laws are some of the strictest in America, and they haven’t stopped pushing new legislation to tighten the reins further. While it’s well known that non-competes are unenforceable in California, we dive in this week to explain what that means and the evolution of California’s non-compete law.

California’s Non-Compete Law: Section 16600

California Code Section 16600 is the primary legislation that manages non-competes, specifically that:

“Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

The exceptions typically refer to Business-to-Business interactions (sale, dissolution, or termination of interests in a business) where California does honor reasonable non-competes, but individuals facing non-competes from their employers are held strictly as void. Coverage of this law includes all California businesses and out-of-state businesses that employee California residents.

SB 699 Amends Section 16600 on January 1, 2024

Section 16600 has been in place since 1872 (as Section 1673 of the Civil Code). While it has been amended over the century and a half it has been in place, the most sweeping change may be SB 699, which Governor Newsom signed on September 1, 2023.

SB 699 voids all non-competes signed and executed out-of-state if that individual subsequently moves to California for employment. In other words, that employee can now successfully work for a competitor as their non-compete is null and void in California. When SB 699 goes into effect on January 1, 2024, it’s unclear whether the bill will retroactively apply to existing contracts. The language states “regardless of … when the contract was signed”, which may be used in court to push for covering prior contracts.

AB 1076 Requires Non-Compete Notice

AB 1076 was signed into law on October 13, 2023 to further codify the unlawful nature of employment contract non-competes. The bill requires any employers with unlawful noncompetes to notify past and current employees via writing that such noncompetes are void. Notice is required to be sent out by February 14, 2024 and retroactively covers all existing contracts.

Applicability to Non-Solicits

Prior to SB 699, non-solicitation agreements were already generally unenforceable in California due to a broad interpretation of Section 16600. As SB 699 updates this section, the legal community has speculated that out-of-state agreements covered by SB 699 will include non-solicits as well. However, it will only be when the law becomes active next year that will decide the full extent of applicability to customer and employee non-solicits.

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We hope this week’s post explains the current state of California’s non-compete laws, but also highlights the constant change and momentum in employment-related legislation across the US. California has led the way for continuously restricting non-competes, and this year has seen nearly 100 non-compete bills in progress across 29 states and Washington D.C. As we roll into 2024, we’ll continue to keep our user community posted of critical new legislation!

For advocacy and beyond,
The Ask Ginkgo Team