By Brooke M. Pollard, Esq.

The California legislature has recently passed two significant bills – Senate Bill 699 and Assembly Bill 1076 – that profoundly impact the enforceability of non-compete agreements within the state. TLD Law strives to ensure its clients are fully informed about these changes and the necessary steps to maintain compliance.

Key Changes in Legislation

1. Senate Bill 699 extends California’s non-compete ban to agreements signed outside the state. It grants employees, including current, former, or prospective ones, the right to sue if their agreements contain restrictive covenants. Successful plaintiffs are entitled to attorney fees.

2. Assembly Bill 1076 follows the precedent set in the 2008 Edward v. Arthur Andersen decision, invalidating all non-compete agreements, unless they fall under specific statutory exceptions. Critically, it requires employers to notify, in writing by February 14, 2024, any employee employed since January 1, 2022, about the void nature of their non-compete clauses. This notification must be sent to both their last known mailing and email addresses.

Immediate Action Required

Employers are now under a tight deadline to send out these notifications. Failure to do so may result in penalties under the Unfair Competition Law, which can be as high as $2,500 per violation.

Exemptions to the Rule

It’s important to note that non-compete agreements that meet certain narrow exceptions under California law are still enforceable. This exemption is crucial for certain strategic employment contracts and needs careful legal examination.

Why This Matters

These legislative changes underscore California’s stringent stance on employment mobility and highlight the need for meticulous compliance in drafting and enforcing employment contracts.

Next Steps for Employers

1. Review Existing Agreements: Assess all employment-related contracts for employees employed by the company since January 1, 2022, for non-compete provisions.

2. Prepare and Send Notifications: Ensure that all affected current and former employees receive the mandated notification by the February 14, 2024, deadline.

3. Update Employment Contracts: Revise your standard employment contracts to align with the new legal landscape.

How We Can Help

Understanding and navigating these changes can be complex. As your corporate attorney, I’m here to provide expert guidance and support. We can assist in reviewing your current agreements, preparing the necessary notifications, and updating your contract templates to ensure full compliance with these new legal requirements.

Contact TLD Law for Guidance and Assistance

Your proactive response to these changes is crucial. Contact me at bpollard@tldlaw.com or at (949) 756-0684 for personalized assistance and guidance on how these legislative changes impact your business and how to best move forward. All of us at TLD Law are committed to helping you navigate these legal waters smoothly and efficiently.