California has long taken the position that non-compete agreements are unwelcome in the Golden State — a stance the Legislature has solidified through the recent passage of Senate Bill (SB) 699 and Assembly Bill (AB) 1076.
Non-compete provisions are contractual clauses that prohibit a former employee from working for a competitor or starting their own competing business in the same field or industry as their former employer. These provisions are typically located in employment contracts or severance agreements, and are tailored to restrict competition for a certain period of time and/or within a certain geographic area.
But while California businesses may already be aware of the state’s broad prohibition against non-competes, what they might not know is that AB 1076 imposes a strict notice requirement that must be satisfied early this year.
Specifically, covered California businesses — which is any California business that may have previously had non-compete agreements or clauses — must give notice to current employees and certain former employees by February 14, 2024, that their non-compete agreements are void and unenforceable.
To solidify California’s long-standing prohibition on non-compete agreements, the Legislature added new language to the Business & Professions Code by passing SB 699 and AB 1076 in 2023, both of which went into effect on January 1, 2024:
- SB 699 both expanded California’s prohibition on non-competes and created a private right of action whereby employees can sue their employer for attempting to enforce an unlawful non-compete agreement.
- AB 1076 codified existing case law that addresses California’s broad prohibition on non-competes in the employment context — specifically, Edwards v. Arthur Andersen LLP (2008) — and creates a notice requirement for California employers who entered into a non-compete agreement with certain employees.
Specifically, employers have until February 14, 2024, to notify any current employee, or any former employee who was employed after January 1, 2022, who signed a non-compete agreement, that the non-compete is void. The required notice must be in the form of a written, individualized communication to the current or former employee (this notice cannot, for example, be in the form of a company-wide email blast or a posted notice), and it must be delivered to both the employee’s last known address and last known email address.
Lisa V. Ryan, J.D., Partner at COOK|BROWN LLP
CalChamber members can find more information on California’s prohibition against non-competes in the HR Library, and read more about these new laws and the notice requirement in the latest HRCalifornia Extra article titled, Valentine’s Day Deadline: Have You Sent Your AB 1076 Non-Compete Notices? Not a member? Learn how to power your business with a CalChamber membership.
