On September 1, 2023, California Governor Gavin Newsom signed Senate Bill 699, which amends current state law that voids contracts that restrain an employee from engaging in a lawful profession, trade or business of any kind. California’s Business and Professions Code section 16600 provides that, “Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” Under the new law, Section 1600 is expanded to prohibit an employer from entering into or attempting to enforce a non-compete agreement regardless of whether the contract was signed outside of California. The law goes into effect on January 1, 2024.
Previously, California law banned non-compete agreements, subject to limited exceptions. By adding Section 16600.5 to the Business & Professions Code, SB 699 expands the restrictions on non-compete agreements to contracts entered outside of California.
Under the new law, any contract that is void under Section 16600 is unenforceable “regardless of where and when the contract was signed.” In addition, it prohibits “an employer or former employer from attempting to enforce a contract that is void regardless of whether the contract was signed and the employment was maintained outside of California.” Furthermore, the law provides that an employer who violates the law commits a “civil violation” It further authorizes an employee, former employee, or prospective employee to bring a lawsuit to enforce the law by seeking injunctive relief, actual damages, or both, and entitles a prevailing employee to recover reasonable attorneys’ fees and costs.