In January, our firm published an article detailing the proposed updates by the Federal Trade Commission (FTC) that would ban employee non-compete agreements. This trend continued recently in California when Governor Gavin Newsome signed into law legislation that voids out-of-state non-compete agreements.
Existing law in California already voids most employee non-compete agreements, providing that contract provisions that prevent someone from engaging in a lawful business or profession are unenforceable. The new legislation bars the enforcement of out-of-state non-compete agreements, even if they are legal under the laws of the state where the agreement was made. Some examples of the new provisions include;
- Employers may not enforce contracts that are void under California law regardless of the state the contract was signed in or the state where the employee worked.
- Employers that enter in to a contract or attempt to enforce a contract that is void under the law are committing a civil infraction.
- For violations of this law, employees may bring an action for relief and/or damages and shall be entitled to recover reasonable attorney’s fees from the employer.
In sum, even if a non-compete is otherwise enforceable outside of California, beginning January 1, 2024, it will not be in California. This new law indicates that the trend of voiding non-compete clauses continues to expand and is in line with the proposals being made by the FTC.
The proposed updates by the FTC have not been voted on at this time. The public comment period was extended to allow additional time for public input, but has since closed.
