These bills, effective January 1, 2024,
(1) reach beyond state lines to ban non-competes regardless of whether the non-compete was signed, and employment was maintained, outside of California; and
(2) mandate that employers must provide notices to certain employees by February 14, 2024.
While California’s ban on non-competes has been codified for over 150 years, courts might have enforced restrictive covenants if, for example, the agreement was entered into by an employee who worked out of state and the agreement was governed by, and enforceable under, another state’s law. SB 699 and AB 1076 have now cast significant doubt on the scope and permissibility of this going forward in California.
AB 1076 goes further, mandating that all employers must affirmatively provide notice, no later than February 14, 2024, to both current and former employees that were employed after January 1, 2022 if they are subject to a non-compete, or any other provision in violation of Business and Professions Code §16600, which would potentially include non-solicitation provisions as well.
The notices must be:
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in writing,
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individualized,
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delivered to the individual’s last known physical address and email address, and
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must inform the employee that the non-compete is void.
SB 699 and AB 1076 also create further exposure for employers. Specifically, employers that violate California’s non-compete laws or fail to provide notice under AB 1076 face civil penalties up to $2,500 per violation. Additionally, SB 699 creates a private cause of action permitting a prevailing employee, former employee, or prospective employee to be awarded injunctive relief, actual damages, and reasonable attorneys’ fees and costs.
Moving forward, employers located in California AND employers located outside of California that currently have, or previously had, employees in California, should prepare for the February 14th deadline by:
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auditing their employee-related agreements with non-compete or non-solicitation provisions to determine their permissibility under California law;
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compiling a list of current and former employees who must receive notice under AB 1076; and
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preparing and sending written, individualized notices for such employees.
If you have questions about the significant ramifications of California’s expanded non-compete laws, feel free to contact an author of this post or another Hogan Lovells lawyer with whom you work.
In addition, the Hogan Lovells Employment team will be presenting a more detailed webinar on February 29, 2024, regarding the nuances of these laws, as well as the evolving legal landscape of non-competes and forfeiture for competition provisions. Register for this webinar here.
Authored by Tao Leung and Ronnie Arenas.
