As the legal landscape continually evolves, it has become evident that many states are increasingly limiting the use of non-competition and non-solicitation restrictions. Especially noteworthy is the recent development in California, where a new law was enacted on September 1, 2023, to further restrict these contractual provisions. The law, known as SB 699, significantly expands the state’s ban on non-competition agreements included in employment contracts.
SB 699’s extended scope now encompasses contracts signed out-of-state, effectively voiding noncompliant provisions irrespective of where and when they were entered. This significant development raises a number of implications for corporations and law firms, who need to navigate these new aspects of the legal framework regarding non-competition and non-solicitation clauses across state lines.
California’s recent move is emblematic of a broader trend, where an increasing number of states tighten restrictions related to these contractual provisions. Concerns have been raised about the potential impact on freedom of movement and the potential stifling effect on innovation, since these provisions often restrict employees from joining competitor companies or starting their own businesses in the same field.
It is critical that legal professionals stay vigilant and informed of these dynamic changes, to proactively manage potential risks both within and across state borders. Similarly, corporations and law firms need to ensure that their contractual agreements are compliant with the latest laws in all the jurisdictions they operate, to safeguard their legal and business interests.
For more details, you can read the full article published by Orrick, Herrington & Sutcliffe LLP on JD Supra.