California Non-Compete Agreement Overview
Non-Competes Are Banned in California
California prohibits non-compete agreements for employees. Any such agreement is void and unenforceable under state law. The only exception is non-competes entered into in connection with the sale of a business. Employers should use non-disclosure agreements (NDAs) and non-solicitation agreements instead.
California has the strongest prohibition on non-compete agreements in the United States. Under Business and Professions Code Section 16600, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is void. This is not merely a presumption against enforcement — non-compete agreements are per se illegal in California, with only one narrow exception for the sale of a business (Bus. & Prof. Code Sections 16601-16602).
In 2023, California further strengthened its prohibition by enacting SB 699 and AB 1076 (effective January 1, 2024). SB 699 makes it unlawful for employers to enter into or attempt to enforce any non-compete clause that is void under California law, regardless of where the contract was signed or what state's law the contract specifies. AB 1076 requires employers to notify current and former employees (employed after January 1, 2022) in writing that any non-compete clause in their agreements is void. Violations can result in civil penalties and the employee may recover attorney's fees. Employers who attempt to enforce void non-competes may face unfair competition claims.
Banned
Enforceability
N/A — Non-competes are void
Max duration
N/A
Blue-pencil
N/A
Consideration
California Enforceability Requirements
California prohibits most non-compete agreements. However, understanding what is and is not permitted helps employers and employees navigate the state's restrictions.
Key Provisions
- Non-compete agreements for employees are VOID under Bus. & Prof. Code Section 16600
- Employers CANNOT require employees or contractors to sign non-competes
- Out-of-state non-competes cannot be enforced against California-based workers (SB 699)
- Employers must notify employees that existing non-compete clauses are void (AB 1076)
- Sole exception: non-competes in connection with the sale of a business or dissolution of a partnership
- Violations may result in civil penalties and liability for attorney's fees
- Non-solicitation agreements that effectively function as non-competes may also be void
Alternatives to Non-Competes in California
Since California bans non-competes, employers should use these alternative restrictive covenants to protect their business interests.
Use Non-Disclosure Agreements
Draft comprehensive NDAs to protect trade secrets, confidential information, and proprietary business data. NDAs are enforceable in all 50 states including California.
Implement Non-Solicitation Agreements
Non-solicitation agreements prevent former employees from soliciting your clients or recruiting your employees. These are generally enforceable in California when reasonable in scope.
Strengthen Trade Secret Protections
Leverage the Uniform Trade Secrets Act and the federal Defend Trade Secrets Act to protect proprietary information through legal action rather than restrictive covenants.
Use Confidentiality Agreements
Confidentiality agreements protect specific categories of proprietary information and are enforceable in California. They offer strong protection without restricting where the employee can work.
Document Intellectual Property Ownership
Use invention assignment agreements and work-for-hire clauses to ensure the company owns all intellectual property created during the employment relationship.
Recent Legal Changes in California
SB 699 (effective January 1, 2024) prohibits enforcement of non-competes regardless of where signed. AB 1076 (effective January 1, 2024) requires employers to notify current and former employees that non-compete clauses are void. These laws added teeth to California's existing prohibition by creating specific penalties and notification requirements.
Employer Tips for California
Do NOT use non-compete agreements for California-based workers. Instead, use non-disclosure agreements (NDAs) to protect trade secrets, and non-solicitation agreements (though even these face scrutiny). Focus on trade secret protections under the California Uniform Trade Secrets Act and the federal Defend Trade Secrets Act.
Employee Rights in California
California employees cannot be required to sign non-compete agreements as a condition of employment. If you signed one, it is void and unenforceable. If your employer is attempting to enforce a non-compete against you, contact the California Labor Commissioner or an employment attorney. You may be entitled to attorney's fees under SB 699.
Sample California Non-Compete Agreement
Below is a preview of our California-specific non-compete agreement. Your customized document will include all provisions required for enforceability in California.
NON-COMPETE AGREEMENT
STATE OF CALIFORNIA
Covenant Not to Compete
EMPLOYER:
Company Name: [Legal Entity Name]
Address: [California Address]
Business Type: [Industry]
EMPLOYEE:
Name: [Full Legal Name]
Position: [Job Title]
Start Date: [Date]
NON-COMPETE TERMS
Restricted Activities: [Specific Activities]
Geographic Scope: [Area]
Duration: [Time Period] following termination
Consideration: [What Employee Receives]
Governing Law: State of California
California Non-Compete Agreement FAQ
Answers to common questions about non-compete agreements in California, including enforceability, duration limits, and employee rights.
Official California Resources
Use these official resources to verify California non-compete enforceability rules and access state employment law information.
California Department of Labor
State labor law information and employment resources
California Attorney General
Consumer protection and employment law guidance
FTC Non-Compete Rulemaking
Federal non-compete rule status and developments
ABA Labor and Employment Law
American Bar Association employment law resources
Related California Documents
Depending on your situation, you may need additional documents alongside your California non-compete agreement.
California Non-Disclosure Agreement
Protect confidential information and trade secrets
California Non-Solicitation Agreement
Prevent poaching of clients and employees
California Employment Agreement
Comprehensive employment terms and conditions
California Severance Agreement
Separation terms with non-compete provisions
Create your California Non Compete Agreement in under 5 minutes.
Answer a few questions and download a California-compliant document, ready for the state agency.