Employers using restrictive covenants, particularly noncompetition agreements, face potential liability due to a new law set to take effect in California on January 1, 2024. According to JD Supra, this law, Senate Bill 699, recently signed by Governor Newsom, may put employers at risk, even if an employee entered into such agreements outside California, in a state where the restrictions are lawful.
The implications of this new law extend beyond noncompetition agreements. Other covenants that may have been deemed acceptable in states other than California may now expose employers to liability. Defendants found to be on the wrong side of this legislation may face costly consequences, such as damage awards and attorney’s fees, payable to the employees or former employees seeking to invalidate such restrictions.
It’s crucial for employers to understand that the scope of this legislation extends beyond the borders of California. The sheer geographical spread of staff, clients, and operations means that multinational corporations and large law firms should stay abreast of employment legislation changes in all territories where they have a presence. This bill serves as a timely reminder for legal professionals to ensure their clients’ practices are updated and in line with the evolving legal landscape.
This landmark law presents an opportune moment for legal professionals to review, amend, and potentially rewrite employment contracts, restrictive covenants, and other relevant HR documents to mitigate potential exposure to legal risk. The value of a proactive approach, particularly in labor and employment law cannot be understated, given the complex interplay of state, federal, and international laws in an increasingly global workforce.