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New CA legislation makes non-compete agreements unenforceable

Updated: Dec 6, 2023

On September 1, 2024, Governor Newsom signed SB 699, preventing California employers from enforcing non-compete agreements against employees.

California has long disfavored non-compete agreements...

Until now, California employers were able to require their employees to sign non-compete agreements (although courts generally only enforced them in extremely limited circumstances).

What changed with SB 699?

Effective January 1st, 2024, SB 699 will prohibit CA employers from using non-compete agreements, and will increase liabilities for employers who attempt to enforce non-compete agreements. Under the new law, if an employee sues to void a non-compete agreement, the employer may be liable for damages, attorney fees, and other costs accrued by the former employee.

The new regulations may apply beyond CA borders

SB 699 covers both prospective AND out-of-state employees – not just former or current employees residing in California. This mean employers in other states where non-compete agreements might otherwise be legal must be cautious if their former employee is subsequently hired by a California employer who seeks to void the non-compete agreement.

Employers: Review your agreements!

Before January of next year, California employers and other employers nationwide must consider whether their current non-compete and non-solicitation agreements will violate SB 699. The increased legal exposure that SB 699 poses could lead many employers to void current restrictive agreements and avoid issuing them in the future.

If you have questions about using non-compete or non-solicitation agreements with your employees, let us know!

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