California non-competes: what changed in 2024 and what still works

The basic rule and the 2024 changes

Business and Professions Code section 16600 makes void every contract by which anyone is restrained from engaging in a lawful profession, trade or business, unless a statutory exception applies. Since January 1, 2024, the statute says it must be read broadly, in line with the California Supreme Court's decision in Edwards v. Arthur Andersen, to void non-compete agreements in the employment context no matter how narrowly tailored.

Section 16600.5 says a void contract is unenforceable regardless of where and when it was signed, and an employer may not attempt to enforce it even if the contract was signed and the employment was maintained outside California. Entering into or attempting to enforce such a contract is a civil violation. The Attorney General notes that employees can seek damages, injunctive relief and reasonable attorney's fees.

The notice duty

Section 16600.1 made it unlawful to include a non-compete clause in an employment contract, or require one, unless an exception applies. It also required employers, by February 14, 2024, to notify current employees, and former employees employed after January 1, 2022, that any such clause was void. The Attorney General has said failure to give that notice is an act of unfair competition.

Example: A startup hires an engineer who moved from Texas and still has a Texas non-compete with a prior employer. The new California employer should not rely on that clause, and the former employer cannot validly enforce it against California employment under section 16600.5. Separately, if the startup's own older templates contained a non-compete, check whether the notice was sent and remove the clause going forward.

What you can still use

Confidentiality obligations and trade secret protection remain available. Protect specific confidential information, limit access, and use invention assignment agreements that respect Labor Code section 2870. A clause that in practice stops someone from working in their field, even if labeled as confidentiality, can still be void.

Statutory exceptions exist, such as an agreement by a seller of a business's goodwill or of all of their ownership interest not to compete within a specified area, under section 16601. Customer and employee non-solicitation clauses in employment contracts carry real risk under section 16600, so take advice before relying on them. Labor Code section 925 also limits out-of-state choice-of-law and forum clauses for employees who primarily live and work in California.

Your next steps

1. Remove non-compete clauses from California employment templates.
2. Check whether the 2024 notice was sent to current and covered former employees.
3. Rely on targeted confidentiality, trade secret and IP assignment terms instead.