Assembly Bill 1076 (AB 1076) and Senate Bill 699 (SB 699) both address non-compete clauses and non-compete agreements.
Under existing case law, every contract that restrains anyone from engaging in a lawful profession, trade, or business of any kind is – to that extent – void. AB 1076 codifies existing case law to void the application of any non-compete agreement in an employment context, or any non-compete clause in an employment contract, no matter how narrowly tailored.
A violation of this prohibition is an act of unfair competition pursuant to the Unfair Competition Law (UCL), which makes various practices unlawful and makes a person who engages in unfair competition liable for a civil penalty. Employers must provide written notification, by February 14, 2024, to all current employees and any former employees who were employed after January 1, 2022, who were required to enter into a non-compete agreement or an agreement with a non-compete clause, unless such non-compete agreement/clause satisfied an exception expressly provided for under California law. The written notice must be an individualized communication to the specific employee or former employee, must inform that the non-compete agreement or clause is void, and must be delivered to the individual’s last known address and email address. Failure to comply with the written notice requirements is an act of unfair competition pursuant to the UCL.
Similarly, SB 699 establishes that a non-compete agreement that is void under California law is unenforceable regardless of where and when it was signed, and prohibits current and former employers from attempting to enforce a void non-compete agreement regardless of whether it was signed and the employment was maintained outside of California.
SB 699 makes it a civil violation for an employer to enter into or to attempt to enforce a void non-compete agreement. An employee, former employee, or prospective employee may bring a private action to enforce their rights under these laws for injunctive relief or the recovery of actual damages, or both, and are entitled to recover reasonable attorney’s fees and costs if they prevail in such action.
(AB 1076 amends Section 16600 of and adds Section 16600.1 to the Business and Professions Code and SB 699 adds Section 16600.5 to the Business and Professions Code.)