Are Non-Compete Agreements Enforceable in California?

If you're working in California or considering a job there, you're in luck when it comes to non-compete agreements. California has the strongest anti-non-compete laws in the United States, making most non-compete clauses completely unenforceable.

California's Clear Stance on Non-Competes

California Business and Professions Code Section 16600 is remarkably clear: "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 means that in California:

• Traditional non-compete agreements are void and unenforceable
• Employers cannot prevent you from working for competitors after you leave
• You cannot be stopped from starting a competing business
• Geographic restrictions on future employment are not enforceable

Recent Strengthening of California Law (2024)

In 2023, California passed two new laws (AB 2872 and SB 699) that took effect January 1, 2024, making non-compete protections even stronger:

• Retroactive Application: Even non-competes signed before you worked in California may be void
• Notice Requirements: Employers must notify current and former employees that any non-compete clauses in their contracts are void
• Private Right of Action: Employees can sue employers who try to enforce non-competes
• Out-of-State Employers: California law applies to California-based employees regardless of where the employer is located

What California Employers CAN Still Protect

While non-competes are void, California employers can still protect legitimate business interests through:

Trade Secret Protection

Under the California Uniform Trade Secrets Act, employers can prevent employees from misappropriating actual trade secrets. However, general knowledge and skills you develop are yours to keep.

Non-Solicitation of Customers

Courts have split on customer non-solicitation agreements in California. Some narrowly-tailored restrictions may be enforceable, but broad customer non-solicits often fail.

Non-Solicitation of Employees

Employee non-solicitation agreements are generally more likely to be enforced than customer non-solicits, but courts scrutinize these closely.

Confidentiality Agreements

NDAs protecting genuinely confidential information remain enforceable, but they cannot be used as disguised non-competes.

The Sale of Business Exception

California does recognize one major exception to its non-compete ban: when selling a business. If you sell your business (or a substantial stake in it), you can agree not to compete with the buyer. This makes sense because:

• You're being compensated directly for giving up your right to compete
• The goodwill you're selling includes your agreement not to undermine it
• This is a negotiated transaction between business owners, not an employment condition

What If You Signed a Non-Compete Anyway?

Many California employees have signed employment agreements containing non-compete clauses. Here's what you should know:

1. The clause is likely void: Signing doesn't make an unenforceable clause enforceable
2. You may have a claim: Under the new 2024 laws, you may be able to seek damages if your employer tries to enforce a non-compete
3. Get the notice: Your employer should have notified you by February 14, 2024 that any non-compete in your contract is void
4. Document everything: If your employer threatens enforcement, document the threats

Choice of Law Provisions Don't Help Employers

Some employers try to avoid California law by including "choice of law" provisions selecting another state's laws. California courts have consistently rejected these attempts when:

• The employee lives and works primarily in California
• California has a materially greater interest in the employment relationship
• Enforcement would violate California's fundamental public policy

Practical Advice for California Workers

If You're Offered a Job with a Non-Compete:

• You can sign it knowing it's likely unenforceable
• Better yet, ask for it to be removed to avoid any ambiguity
• Focus your negotiation on other terms that matter

If You're Leaving for a Competitor:

• Don't take trade secrets or confidential documents
• Honor legitimate confidentiality obligations
• Know that your general skills and knowledge are yours
• Don't solicit coworkers using confidential information

If Your Employer Threatens You:

• Respond in writing citing California B&P Code 16600
• Reference the 2024 law changes (AB 2872 and SB 699)
• Consult with an employment attorney about your options
• Consider whether you have claims against your employer

Conclusion

California's strong stance against non-compete agreements reflects the state's belief that employee mobility drives innovation and economic growth. If you work in California, you have powerful protections that most American workers don't enjoy.

However, remember that related agreements like NDAs and trade secret protections are still enforceable. The key is understanding what your employer can and cannot restrict.