Significant Changes to Non-Compete Clauses in California for both Employees & Employers

Effective January 1, 2024, two new laws under the California Business and Professions Code provide even stronger employee protections against unlawful non-compete clauses or agreements. Post-employment non-compete agreements are generally void in California. That has been settled law since Edwards v. Arthur Andersen, LLP, 44 Cal. 4th 937, 942 (2008)). However, now employers must provide notice of a void non-compete provision to both current and former employees (Cal. Bus. & Prof. Code § 16600.1). By February 14, 2024, employers must provide notice of a void non-compete clause or agreement to all current and former employees who were employed after January 1, 2022 that either: (a) the current and former employees have contracts that include an unlawful non-compete clause ; or (b) the current and former employees were required to sign a non-compete agreement that is void.

California Employers Must Provide Written Notice of Their Non-Compete Clauses To Both Current & Former Employees

The required notice must be a “written individualized communication” to current and former employees. It must be delivered to these employees at both their: (a) last known address, or (b) email address.

California Business and Professions Code Violations May Carry Penalties

Failure to comply with these requirements constitutes an act of unfair competition in violation of California’s Business and Professions Code Sections 17200 to 17210, which is known as the Unfair Competition Law. Employers may be liable for civil penalties up to $2,500 for each violation (though the law does not specify whether each individual notice or agreement constitutes a separate violation). There are also potential penalties under the California Labor Code for failing to provide notice of a void non-compete clause or agreement. Section 432.5 of the Labor Code prohibits an employer or its agent from requiring an employee or applicant to agree, in writing, to any employment-related term or condition which is known by the employer or its agent to be “prohibited by law.” A violation of Article 3 of the Labor Code governing contracts and applications of employment is considered a misdemeanor.

Trust Preovolos Lewin For Guidance With Your Written Employment Agreements

If you have written employment agreements, confidentiality agreements, non-disclosure agreements, and proprietary information assignment agreements that have any non-compete language, you are required to comply with the notice requirement.

Please contact Olin Lewin to discuss the California Non-Compete Notice Requirements.