Non-Compete Agreements in California: Why They Are (Almost) Never Enforceable
Your employment agreement contains a clause that says you cannot work for a competitor for twelve months after leaving the company. In California, that clause is almost certainly void. The law on this is not ambiguous, and the Legislature has recently made it even clearer.
California’s rule on non-compete agreements can be stated in a single sentence: they are void. Business and Professions Code section 16600 provides 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.” The statute has been in effect, in substantially the same form, for over a century. It is one of the broadest prohibitions on non-compete agreements in the country, and it means what it says.
An employer that asks a California employee to sign a non-compete agreement — a clause restricting the employee from working for a competitor, starting a competing business, or soliciting the employer’s clients after the employment ends — is asking the employee to agree to a provision that California law will not enforce. The agreement may be signed. The clause may appear in an otherwise valid contract. But the non-compete restriction itself has no legal force.
The narrow exceptions
Section 16600 is subject to three statutory exceptions, none of which applies to the ordinary employment relationship.
The first allows a non-compete in connection with the sale of a business or the goodwill of a business. Business and Professions Code section 16601. A person who sells their company and agrees not to compete with the buyer for a defined period in a defined geographic area has made an enforceable promise — because the restriction protects the value of what was purchased.
The second allows a non-compete when a partner withdraws from or dissolves a partnership. Section 16602. The third allows a similar restriction when a member withdraws from a limited liability company. Section 16602.5.
Outside these three contexts, a contract that restrains a person from engaging in a lawful profession, trade, or business is void. There is no exception for “reasonable” restrictions. There is no exception for restrictions limited to a specific geographic area or a short duration. There is no exception for highly compensated employees, executives, or workers with access to trade secrets. The statute draws a bright line, and the California Supreme Court has repeatedly declined to adopt the “reasonableness” analysis that other states apply.
The 2023 legislation
In 2023, the Legislature reinforced section 16600 with two bills that eliminated any remaining ambiguity.
SB 699 makes it unlawful for an employer to enter into or attempt to enforce a non-compete agreement that is void under California law, regardless of where or when the agreement was signed. It also makes it unlawful to threaten enforcement of a void non-compete. This addresses the situation — common in practice — where an employer knows the clause is unenforceable but uses the threat of litigation to deter the employee from competing. Under SB 699, the threat itself is a violation.
AB 1076 codified the prohibition explicitly and required employers, by February 14, 2024, to provide individualized written notice to any current or former employee (who was employed after January 1, 2022) that any non-compete clause in their agreement is void. An employer that failed to provide this notice violated the statute.
Together, these bills signal the Legislature’s intention not merely to maintain the prohibition but to actively eliminate the chilling effect that void non-compete clauses continue to have on worker mobility.
Non-solicitation agreements
A related but distinct question is whether an employer can restrict a departing employee from soliciting the employer’s clients, customers, or other employees.
California courts have generally applied section 16600 to non-solicitation clauses as well, treating them as restraints on the practice of a lawful business. A clause that prohibits a former employee from contacting the employer’s customers — or that restricts the employee from hiring former colleagues — is a restriction on how the employee conducts their business, and it is evaluated under the same framework.
Not every court has treated non-solicitation clauses as categorically void, and some factual distinctions have been drawn. But the weight of California authority, particularly after the 2023 legislation, treats non-solicitation provisions with deep skepticism and enforces them only in narrow circumstances, if at all.
An employee who has signed a non-solicitation agreement and is unsure of its enforceability should have the specific language reviewed. The analysis is fact-dependent, but the presumption in California runs strongly against enforcement.
Out-of-state employers and choice-of-law provisions
A recurring issue arises when a California employee signs an agreement governed by the law of another state — New York, Delaware, Texas — that enforces non-competes. The employer includes a choice-of-law clause specifying that the agreement will be interpreted under the law of the employer’s home state, not California.
California’s strong public policy against non-compete agreements generally prevails in this conflict. Labor Code section 925, enacted in 2016, provides that an employer cannot require a California-based employee to agree to a provision that would deprive the employee of the protections of California law, including the prohibition on non-competes. SB 699 reinforced this by making it unlawful to enforce a void non-compete against a California employee regardless of where the contract was formed.
An employee who works in California, even for an out-of-state employer, is generally protected by California’s prohibition on non-competes. The choice-of-law clause does not override the state’s public policy.
What to do if your employer invokes a non-compete
An employee who is threatened with enforcement of a non-compete agreement — whether by a demand letter, a lawsuit, or an implicit warning during or after employment — should understand that the threat is almost certainly legally baseless in California.
That said, the practical effect of a threat can be real even when the legal basis is not. An employer that sends a demand letter to the employee or to the employee’s new employer may cause disruption, delay a new hire, or create anxiety that alters the employee’s behavior. This is precisely the chilling effect the 2023 legislation was designed to address. An employee who receives such a threat may have a claim against the employer for attempting to enforce a void provision.
The first step is to have the specific agreement reviewed by an attorney. If the restriction falls within the ordinary scope of section 16600 — as the vast majority do — the employee can proceed with confidence that the clause is unenforceable, and can take appropriate action if the employer persists in asserting it.
If you have signed a non-compete agreement and are wondering whether it will prevent you from taking a new job, starting a business, or soliciting clients, the answer in California is almost always no. The law has been clear on this for over a century, and the Legislature has recently made it clearer still.
This article is general information about California law and is not legal advice. Every situation turns on its particular facts.