In a notable move, California Governor Gavin Newsom has expanded the existing prohibition against non-compete agreements by signing the Senate Bill 699 into law on September 1, 2023. The new amendment notably affects the California Business & Professions Code Section 16600, outlawing an employer’s option to initiate or attempt enforcement of a non-compete agreement, notwithstanding the location these agreements were signed.
This new legislation scheduled to kick in on January 1, 2024, reinforces California’s already stringent stand on non-compete agreements. Known for its robust employee protection stand, this move underlines California’s intent to restrict practices that may limit a former employee’s mobility and freedom to pursue employment.
Non-compete agreements are typically contracts between an employer and an employee where the employee agrees not to enter into competition with the employer after they part ways. This can include understanding that the employee will not start a similar business or work for a competitor for a particular duration post-employment.
However, with this new law in place, employers based out of California or having operations there need to rethink their approach to such agreements. It key to note that this law could potentially render non-compete agreements ineffective even if signed outside of California, by the virtue of its jurisdictional reach. This might require companies and legal practitioners to reconsider their legal strategies for future contractual agreements involving non-compete clauses.
For readers who wish to delve into the details of this new enactment, you can find the complete summary of the law here.