Updates on New Non-Compete Laws in California

CATHERINE LUI
Orrick, Herrington, & Sutcliffe LLP

As of January 1, 2024, the California Business and Professions Code has been amended to create stronger prohibitions against non-compete agreements. These amendments come in the form of Senate Bill (SB) 699 and Assembly Bill (AB) 1076.¹

Summary – Section 16600.5 (Amended by SB 699)

Under the newly amended Section 16600.5, it is now unlawful for employers to enforce non-compete agreements irrespective of where or when the agreement is signed, and regardless of whether the employee carried on their employment outside California. This means California’s non-compete ban now extends beyond the State’s own geographical confines by prohibiting non-compete agreements even if the agreement was signed outside California or if the employment occurred outside California. Not only does the new law forbid enforcement of non-compete agreements, but it also prohibits employers from even entering such contracts with employees. These prohibitions apply to any agreement that would limit competition, which may include client non-solicitation clauses.