§ 1. The Ban: What It Covers
Cal. Bus. & Prof. Code § 16600; SB 699 (2024); AB 1076 (2024). Non-competes are void and unenforceable under Business & Professions Code § 16600. Employers cannot even require employees to sign them. Choice-of-law clauses selecting another state are also void for CA residents.
Recent legislative developments: SB 699 (2024): employers cannot enforce out-of-state non-competes against CA residents. AB 1076: void even if signed in another state.
§ 2. Exceptions to the Ban
While California broadly prohibits non-compete agreements, the following exceptions remain:
- Sale-of-business exception only (owners selling a business can agree not to compete)
§ 3. Choice-of-Law Clauses: The Hidden Risk
Even though Californiabans non-competes, your agreement may contain a choice-of-law clause selecting another state's law — for example, "This agreement shall be governed by the laws of Delaware." If your employer is headquartered in a state that enforces non-competes, they may argue that state's law applies to your agreement. Whether such a clause is enforceable against a California resident depends on several factors, including where you performed work, where the employer is located, and recent legislation addressing this exact issue.
§ 4. Non-Solicitation & NDAs: Still Enforceable
California's ban on non-competes does not extend to non-solicitation agreements or non-disclosure agreements (NDAs). Employers can still prohibit you from soliciting their clients, customers, or employees after you leave. These restrictions can be broad enough to function as de facto non-competes, depending on how they are drafted. If your agreement includes non-solicitation or confidentiality provisions, those may remain fully enforceable even though the non-compete clause itself is void.
Practitioner Notes
Most employee-friendly state in the US for non-competes. Even attempting to enforce one may expose the employer to liability.