California Further Restricts Employee Non-Compete Agreements

SB 669, effective January 1, 2024, expands California’s restrictions on employee non-compete agreements. Such agreements are already void in California under Bus. & Prof. Code § 16600, with limited exception, such as the sale or dissolution of a business. SB 669 adds Bus. & Prof. Code Sec. 16600.5, which expands these restrictions to include agreements created out-of-state and also creates new enforcement rights for employees to challenge non-compete clauses.

Specifically, Section 16600.5 will bar “an employer or former employer from attempting to enforce a contract that is void regardless of whether the contract was signed and the employment was maintained outside of California.”

California’s prohibition against non-competes is not new. We have long counseled clients, as an alternative to unenforceable non-compete agreements, as well as agreements barring the solicitation of customers, clients or employees, to prohibit the use of confidential or proprietary information to compete or solicit customers or employees. While this remains a legally viable option, it is crucial (1) that confidentially agreements be carefully drafted to protect confidential information and limit its use; and (2) to take steps to ensure such information is demonstrably treated as confidential within the organization.


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