On September 1, 2023, California Governor Gavin Newsom signed Senate Bill 699, which amends California Business & Professions Code Section 16600 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. Section 16600 of the California Business and Profession Code states 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.” 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.
The legislative findings in the bill detail the public policy interests driving the expansion of Section 16600. While non-compete clauses in employment contracts are extremely common throughout the United States, research has shown that they “stifle economic development, limit firms’ ability to hire[,] and depress innovation and growth.” The legislature suggested that California has “benefited significantly[]” from prohibiting non-compete agreements, “fueling competition, entrepreneurship, innovation, job and wage growth, equality, and economic development.” Since “the market for talent has become national and remote work has grown, California employers...
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