On September 1, 2023, Governor Newsom signed SB 699 into law that adds additional prohibitions on employer’s use of non-competition agreements and another restrictive covenants. This legislation has several key components that employers both within and outside California should be keenly aware of:
1. Implementation Date: The law will take effect from January 1, 2024.
2. Restrictions on Non-Compete Agreements: AB 699 introduces additional prohibitions on the use of non-compete agreements by employers. This is codified under section 16600.5 of the Business and Professions Code. Significantly, this section renders any such agreement unenforceable by an employer or former employer, irrespective of the location and time of signing or even if the employee’s role was maintained outside California. The new provision empowers employees, ex-employees, or potential hires to seek a private action for injunctive relief, damages, or both. Moreover, a prevailing employee or potential employee is also entitled to attorney’s fees and costs.
3. Implication for Current Agreements: Employers in California who currently employ non-competition agreements should assess and possibly modify or annul these agreements before January 1, 2024. Historically, there were no monetary repercussions for California employers maintaining unenforceable non-compete agreements. If contested, courts would simply deem such agreements void. The landscape has now changed. Employees, including prospective ones, have...
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