California Voids Out-of-State Non-Competes and Requires Employee Notice

What Changed

Governor Newsom signed two bills that significantly strengthen California's already aggressive stance against non-compete agreements:

SB 699 makes it unlawful for employers to enter into or attempt to enforce any non-compete agreement with a California employee, including agreements signed in other states. This extends California's existing non-compete prohibition to void out-of-state agreements applied to employees working in California.

AB 1076 adds a notice requirement: employers must provide individualized written notice to:

• Current employees who are or were subject to non-compete or similar restrictive covenant agreements

• Former employees who were employed at any time after January 1, 2022, and who were subject to such agreements

The notice must inform recipients that the non-compete provisions in their agreements are void under California law.

Who Is Affected

All employers with current or former California employees who have non-compete, non-solicitation (to the extent they function as non-competes), or similar restrictive covenant agreements. This includes employers headquartered outside California whose employees perform work in the state.

Where It Applies

California statewide. Notably, SB 699 applies to agreements executed in any state if the employee works in California.

When It Takes Effect

Both laws took effect January 1, 2024. The required notice under AB 1076 must be provided by February 14, 2024, delivered in writing to the last known address and email address of each affected employee and former employee.

Why It Matters

Failure to provide the required notice constitutes unfair competition, subjecting the employer to civil penalties of up to $2,500 per violation, plus injunctive relief, restitution, and recovery of attorney's fees and costs. Given that notice must go to both current and former employees going back to January 2022, the aggregate exposure for larger employers could be substantial.

Beyond the notice requirement, SB 699's voiding of out-of-state non-competes is a first-of-its-kind provision that will affect multi-state employers nationwide.

The Humareso Take

California just drew a line in the sand on non-competes, and this time they are reaching across state borders to do it. If you have ever had a California employee sign a non-compete — even if it was signed in Texas, New York, or anywhere else — you likely need to send a voiding notice by February 14, 2024. The penalty is $2,500 per missed notice, and the scope includes former employees back to January 2022. This is a high-priority compliance task with a hard deadline. Get your employee records together and start sending notices now.

Recommended Action Steps

1. Identify all current employees and former employees (employed after January 1, 2022) who are or were subject to non-compete or similar restrictive covenant agreements.

2. Prepare individualized written notices informing each identified person that their non-compete provisions are void under California law.

3. Deliver notices by February 14, 2024 via the employee's last known mailing address and email address.

4. Document all notices sent and retain proof of delivery.

5. Review and revise your standard employment agreements to remove non-compete provisions for California employees.

6. Contact your Humareso representative for assistance identifying affected employees and preparing compliant notices.