By: Jizell Lopez

For several years noncompete agreements have been largely unenforceable in California, subject to narrowly tailored exceptions. However, this has not dissuaded employers from including noncompete agreements in employment contracts nor has it dissuaded employers from drafting broad policies that function as noncompete agreements. Thus, in October of 2023, Governor Newsom signed Senate Bill 699 (“SB 699”) and Assembly Bill 1076 (“AB 1076”) to enhance and clarify California’s prohibition against noncompete agreements which took effect on January 1, 2024.

SB 699 now prohibits employers from enforcing employee noncompete agreements that do not fit within one of the exceptions under Business and Profession Code section 16600—this includes the sale of a business, the dissolution of partnership, or upon a termination of interest in a limited liability company. SB 699 clarifies that noncompete agreements that do not fit within a statutory exception are void, regardless of where the agreement was signed or where the employee worked when the agreement was signed. Further, SB 699 bans employers from entering into a contract with an employee or prospective employee that includes a prohibited noncompete provision.

More importantly, AB 1076 requires employers to provide a written and individualized notice advising employees that their prohibited signed noncompete provision is void. Employers must provide this written and individualized communication by February 14, 2024, to any current or former employees who were employed after January 1, 2022. Violation of the notification requirement could result in a penalty of $2,500 per violation, plus additional sanctions. Should you be uncertain of these new requirements, please consult with an experienced employment attorney.