Non-compete clauses are a confusing and perhaps restrictive aspect of employment contracts for many employees. Fortunately, California’s recent updates to the Business & Professions Code Section 16600 have brought about a major change in employment law.
With limited exceptions, non-compete agreements – previously regarded as null and invalid in the state – became officially outlawed on January 1, 2024.
Senate Bill 699 (S.B. 699) and Assembly Bill 1076 (A.B. 1076) are amendments made to protect the rights of workers who have been subjected to unjust non-compete clauses.
What Is a Non-Compete Agreement?
A non-compete agreement is a contract that limits an employee’s ability to work for competitors or start a competing business within a specified time period and geographic area after leaving the company.
Non-compete contracts are typical throughout many businesses, particularly in the consulting, sales, and technology sectors. The purpose of a non-compete agreement is to safeguard the company’s trade secrets, partners, and other intellectual information as well as other proprietary information.
Your Rights Under California’s Non-Compete Agreement Law
California has long been known for its unique law against non-compete agreements. Why, therefore, have amendments to this law against non-compete agreements been passed?
Unfortunately, some companies have tried to enforce such agreements under the radar. Some employ covert strategies, including subtly coercing their employees into signing non-compete clauses.
Other times, non-compete agreements are deliberately worded to trick employees into signing, while hiding the true purpose of such clauses. For these and other reasons, non-compete clauses in California were made unenforceable and unlawful regardless of where, when, and why the contract was signed – with few exceptions.
Employers are now banned from forcing an employee to sign any contract that limits his or her ability to work for competitors or start a business venture. The law also invalidates non-compete agreements that were signed previously.
Businesses must also notify former employees hired after the year 2022 of these changes. Also, under the new amendments, employers were required to notify employees that there was no need to follow the terms of their non-compete clauses.
Expanded Worker Protections Beyond Traditional Employees
The ban on non-compete agreements is not limited to traditional employees. Independent contractors and hourly workers are also intended to be protected. What are your civil rights if you are a telecommuting employee?
Remote work has added new layers of complexity to non-compete laws. According to some interpretations of the new law, remote workers – including those who have never lived or worked in the State of California – may be protected.
Here is what you need to know:
- California residents working remotely for out-of-state companies: If you are working remotely for a company based outside California, the ban protects you if you live in California. Employers cannot enforce non-compete clauses, even if their headquarters are in another state.
- Out-of-state residents working for California-based companies: If you live and work outside California but are employed by a California-based company, your situation may be more complex. While California law may apply to your contract, courts in your state may not enforce the California ban. The applicability of § 16600.5 and its amendments may depend on your state’s laws and whether your employer seeks to enforce the non-compete outside California.
- Dual jurisdiction conflicts: When jurisdictional disputes arise, the court’s interpretation of jurisdiction and applicable non-compete laws may be handled on a case-by-case basis until further clarification is offered.
The Difference Between Non-Competes and Other Agreements
Employees often encounter various types of agreements in their professional journeys. Non-compete agreements differ from other employment-related contracts like confidentiality clauses.
While non-competes typically restrict a former employee’s ability to work for competitors or work as a competitor, confidentiality agreements focus on safeguarding:
- Proprietary information
- Trade secrets
- Sensitive business data, etc.
Intellectual property agreements protect an employer’s innovations but should not restrict an employee’s career mobility. Similarly, non-solicitation clauses may be enforceable if they solely protect legitimate business interests, such as preventing the misuse of trade secrets. Non-compete bans do not automatically nullify the enforceability of such No-Poach agreements.
No-Poach agreements remain valid as long as they do not unfairly restrict an employee’s ability to seek new job opportunities. Of course, such contracts could be nullified if they are considered too broadly worded or unfairly restrictive.
Additionally, if an employer thinks that you have acted unfairly during the course of your employment, they may argue that you violated the “duty of loyalty” that all employees have to seek an employer’s interests ahead of personal business pursuits. It remains to be seen how such an argument will stand in court alongside the updated non-compete laws.
What If a Current or Former Employee Signed a Non-Compete Agreement Before 2024?
If you signed a non-compete agreement before January 2024, and your employer is attempting to enforce it, you have good reason to be concerned. Check the date and jurisdiction of your agreement.
California law voids non-competes, but agreements tied to other states may still hold weight outside California. Since you are free to work for a competitor or start your own business, under California law, you should not have to worry about legal action from a former employer.
Reviewing the terms of your employment contracts with the aid of an employment law attorney can clarify any ambiguous clauses in your contract. He or she can clarify the enforceability of agreements. If your employer insists on enforcing a non-compete, your lawyer can help you take legal action to protect your civil rights.
What If Your Employer Made You Sign a Non-Compete After 2024?
If you are an employee who was hired after January 2024, you should not be asked to sign a non-compete agreement. If you did sign one or are currently being asked to do so, you can refuse, knowing that the agreement will not be enforceable.
What if your new employer insists on having you sign such an agreement? An employment law attorney can guide you on additional steps you can take to protect your legal rights.
What to Do If You Experience Retaliation for Refusing to Sign
Retaliation is a serious concern for employees challenging non-compete agreements. Retaliation can take various forms, such as termination, demotion, or harassment. Any form of retaliation against an employee who refuses to sign a non-compete agreement is illegal.
If you are being retaliated against, keep records of any written communication with your employer about the non-compete clause. In the case of face-to-face or phone conversations on the subject, consider following up with a written summary of what was discussed. This documentation helps establish a clear timeline of events and shows that you made an effort to resolve the situation professionally.
Additionally, document any instances where you feel that you were targeted or mistreated. Record the dates, times, and specifics of each incident. Review these incidents with your lawyer.
Protecting Your Career in California
Challenging a non-compete agreement should not put your career in jeopardy. Non-compete agreements are no longer enforceable, and you have the right to work for a competitor or start your own business without restrictions.
If you find yourself dealing with a non-compete agreement, whether you signed it before or after 2024, California law is on your side. Don’t hesitate to assert your rights and stand up against unfair treatment in the workplace.
Contact the law offices of Allred, Maroko & Goldberg today to discuss your rights and legal options. Complete our online form or dial 323-746-1853 to reach our Los Angeles office. Our compassionate, skilled employment law attorneys can help you understand and protect your civil rights.