By Pavel Kolmogorov, California Business Litigation Attorney (State Bar No. 321018). Founder of Kolmogorov Law, P.C., recognized in Chambers and Partners 2026 Spotlight Guide for Litigation: General Commercial in Orange County.

If you run a business in California and have asked a departing employee to honor a non-compete clause, you have likely encountered one of the most misunderstood areas of California employment law. Unlike the majority of U.S. states, California prohibits virtually all non-compete agreements. The prohibition is broad, the penalties for attempting enforcement are real, and recent legislation has strengthened employee protections even further.

This guide explains what California law actually says, what happened when AB 1076 and SB 699 took effect, which restrictive covenants remain enforceable, and how business owners can protect their competitive interests without running afoul of the statute.

The Core Rule: Business and Professions Code Section 16600

California Business and Professions Code § 16600 states: "Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." The California Supreme Court has interpreted this provision broadly. In Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, the court rejected the "narrow restraint" exception that other states recognize and held that Section 16600 invalidates any agreement that restricts an employee's ability to pursue their profession after leaving an employer, regardless of how reasonable the restriction might appear.

This means that a clause prohibiting an employee from working for a competitor for any period, in any geographic area, for any reason, is void and unenforceable in California. It does not matter that the employee signed the agreement voluntarily, that the employer paid separate consideration for it, or that the restriction applies only to a narrow market segment.

AB 1076 and SB 699: The 2024 Statutory Overhaul

AB 1076 (effective January 1, 2024) codified existing case law by adding Section 16600.5 to the Business and Professions Code, expressly stating that any non-compete clause that does not satisfy a statutory exception is "void and unenforceable." This may seem redundant, but the legislative history clarifies that AB 1076 was enacted specifically to eliminate any lingering ambiguity about whether narrow or "reasonable" non-competes might survive Edwards.

SB 699 (also effective January 1, 2024) went further by adding Section 16600.5(b), which prohibits California employers from entering into or attempting to enforce non-compete agreements "regardless of whether the contract was signed and the employment was maintained outside of California." This means a California-based employer cannot require employees in other states to sign non-competes governed by that other state's law and then attempt to use them. It also means an employee who moves to California from a state where non-competes are enforceable can invoke California law to void the restriction.

What IS Enforceable: The Narrow Exceptions

Section 16600 contains three statutory exceptions, all of which apply in the context of a business sale or ownership transition rather than employment:

•        Sale of a business (§ 16601). A person who sells the goodwill of a business, or an owner who sells their ownership interest, can be bound by a reasonable non-compete limited to the geographic area in which the business operated.

•        Dissolution of a partnership (§ 16602). Partners can agree that a departing partner will not carry on a similar business within a specified geographic area where the partnership previously operated.

•        Dissolution or sale of an LLC (§ 16602.5). The same principle applies to members of a California LLC upon dissolution or sale of the LLC.

Outside these three narrow contexts, non-compete restrictions are void. Period.

Non-Solicitation Agreements: A Gray Area

California courts have taken an increasingly skeptical view of non-solicitation agreements—clauses that prohibit a departing employee from soliciting the former employer's customers or employees. In AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, the court held that a customer non-solicitation clause was invalid under Section 16600 because it effectively restrained the employee from practicing their profession.

Employee non-solicitation agreements (prohibiting recruitment of former colleagues) are on somewhat firmer ground, but they remain vulnerable to challenge if a court concludes the restriction is broad enough to function as a de facto non-compete.

The practical takeaway: do not rely on non-solicitation agreements alone to protect your business. They may or may not survive judicial scrutiny, and the trend in California is against enforceability.

How to Protect Your Business Without Non-Competes

California law does not leave employers without tools. The following mechanisms are fully enforceable and, when properly implemented, often more effective than non-compete clauses:

•        Trade secret protections. The California Uniform Trade Secrets Act (CUTSA, Civ. Code § 3426 et seq.) and the federal Defend Trade Secrets Act (DTSA, 18 U.S.C. § 1836) provide robust remedies against misappropriation of trade secrets, including injunctive relief, actual damages, and attorneys' fees. Properly identify and protect your trade secrets with confidentiality agreements, access controls, and exit protocols.

•        Confidentiality and NDA agreements. Agreements that protect specifically identified confidential information (not general skills or industry knowledge) are enforceable. The key is to define "confidential information" narrowly and specifically, not as a catch-all that would effectively prevent the employee from working in the field.

•        Invention assignment agreements. Under California Labor Code § 2870, employers can require employees to assign inventions made during employment using company resources, provided the agreement complies with the statutory limitations on what inventions can be claimed.

•        Garden leave provisions. A garden leave clause pays the departing employee their full salary during a transition period in exchange for the employee not beginning new employment. Because the employee is still technically employed and being compensated, this arrangement is generally considered enforceable, though it has not been extensively litigated in California.

Penalties for Employers Who Attempt to Enforce Void Non-Competes

SB 699 and AB 1076 created a private right of action for employees who are subjected to void non-compete agreements. An employee may sue for injunctive relief, actual damages, and reasonable attorney's fees. Additionally, attempting to enforce a void non-compete may constitute an unfair business practice under California Business and Professions Code § 17200, exposing the employer to additional liability.

Courts have also awarded sanctions against employers who file lawsuits to enforce agreements that are clearly void under California law, treating the enforcement action as frivolous.

Frequently Asked Questions

Q: I signed a non-compete in another state before moving to California. Is it enforceable?

A: Almost certainly not if you now work in California. Under SB 699, California law applies regardless of where the agreement was signed or where employment was maintained. If you are currently working in California, a non-compete clause is void under Section 16600.

Q: Can I include a non-compete in a contract for the sale of my business?

A: Yes. Section 16601 permits non-compete agreements in the context of selling a business and its goodwill. The restriction must be reasonable in geographic scope and limited to the area where the business operates. This is the most common enforceable non-compete in California.

Q: What should I do if my former employer is threatening to enforce a non-compete against me?

A: Document the threat in writing and consult a business litigation attorney immediately. Under current law, you may be entitled to injunctive relief, damages, and attorney's fees. The employer's threat itself may violate SB 699.

Q: Are non-compete clauses in independent contractor agreements also void?

A: Generally, yes. California courts have applied Section 16600 to independent contractor relationships as well as employment relationships. The statute applies to "anyone" restrained from engaging in a lawful business or profession.

Need help? Contact Kolmogorov Law, P.C. at (909) 235-6116 or visit the contact us page to schedule a consultation with our business litigation team in Irvine, California.