California Noncompete Regulation Requires Employer Action by Feb. 14, 2024
California Business and Professions Code Section 16600 was recently amended to "void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored." (Emphasis added.) The regulation has sweeping implications for businesses with employees located in California as in tandem with California's ban on noncompetes, the state also imposed a notice requirement on all businesses. Specifically, Assembly Bill (AB) 1076 requires notice to all current and former employees that have signed noncompete agreements and who now live in California.
AB 1076 Notice Requirement
AB 1076 requires employers to send a notice to employees informing them that any noncompete agreements or noncompete provisions in their employment contract are void in California. The notice must be written and delivered to the employee's last known postal address and email address. Employers must notify applicable employees by Feb. 14, 2024. Failure to provide notice constitutes a violation of the UCL Bus. & Prof. Code §§ 17200, et seq., and civil penalties of up to $2,500 per violation may be imposed on noncompliant employers.
Who Is Bound by AB 1076?
Employers with any connection to California – a California presence or California employees – should be prepared to comply with AB 1076. Employers bound by AB 1076 include, but are not limited to:
- employers with a California presence that must notify employees who are California residents
- employers with a California presence that must notify employees who are not California residents
- employers with no California presence that must notify employees who are California residents
The notice requirement applies even if the noncompete provision was enforceable in another state at the time it was executed, such as in a case where an employee signed an enforceable noncompete agreement outside California but has since relocated to California without signing a new agreement compliant with California law. (See Holland & Knight's previous alert, "California's New Nationwide Focus on Noncompetition Agreements," Oct. 4, 2023.)
Employees who require notification pursuant to AB 1076 include current employees and former employees who were employed after Jan. 1, 2022, and signed an employment agreement containing a noncompete provision, customer nonsolicitation provision or other similar provision.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.