Breaking Down California’s New Non-Compete Laws: AB 1076 and SB 699 Explained

In the United States of America, the enforcement of noncompetes varies from state to state. California is one of the states in the U.S. that has been against non-compete agreements. For a long time, the Golden State has believed in letting workers move between jobs easily. Non-compete agreements limit employee mobility by restricting their ability to work for competing companies or set up businesses in the same industry after leaving their current job voluntarily or involuntarily. Often, non-competes specify a period and geographical areas where a worker cannot work for competitors. This can significantly restrict a person’s job options and career advancement opportunities. Two laws, Assembly Bill (AB) 1076 and Senate Bill (SB) 699, passed in 2023, expand the scope of the state’s prohibition on non-competes and expose employers to an increased risk of liability.

Understanding AB 1076

The Governor of California signed Assembly Bill (AB) 1076 in October 2023, expanding the provisions of Section 16600 of The Business and Professions Code. This is the section that makes non-compete clauses largely unenforceable in California. AB 1076 went into effect at the beginning of 2024. AB 1076 brought about two new significant changes. First, this new rule states that all non-compete agreements in California are void. Even if a non-compete is narrowly drawn, it is considered void in the state of California. Previously, non-competes were allowed in California if they contained narrow restraints. Second, AB 1076 introduced a notice requirement. Employers must notify current and former employees with non-compete clauses in their employment contracts that those provisions are void. The first notification was to be done by February 14, 2024. Employers were required to send notices to both employees’ emails and physical addresses. If an employer violates AB 1076, it is considered unfair competition.

Understanding SB 699

Senate Bill (SB) 699 was signed into law in September 2023. This law also went into effect at the beginning of 2024. This new law bars employers from entering into or enforcing non-compete agreements regardless of whether the contracts were signed in California. This means the prohibition applies even if a worker signed an employment contract in another state. For instance, suppose a worker signed a non-compete agreement in Florida, then moved to California and got a job. In such a case, the non-compete signed in Florida is void under SB 699, and the worker must be notified pursuant to AB 1076.

SB 699 gives employees the right to file lawsuits against employers who include unenforceable non-competes in employment contracts and fail to properly notify employees pursuant to the new laws. Employees can seek injunctive relief, actual damages, or both. Injunctive relief involves the court ordering an employer to stop enforcing or using non-competes that are deemed illegal under the law. Workers who file successful lawsuits are also entitled to recover attorney fees. 

Exceptions

There are only two exceptions to the unenforceability of non-competes in California. The only non-competes that remain enforceable in California are those relating to the sale of a business or dissolution or disassociation of members or partners of a corporation, partnership, or LLC.

Contact a California Employment Lawyer

Contact a California employment lawyer if you have questions about AB 1076 and SB 699 or if an employer has violated your rights under these new laws.