California’s Crackdown on Noncompetes Requires Letters Sent Before Valentine’s Day

Last year, California lawmakers double-downed on the state’s hostility to noncompete agreements. One of the new provisions requires written notice to current and former employees that their noncompete is void—unless an exception applies—by Feb. 14.

Two new bills restrict noncompetes in California.

First, Senate Bill 699 extends the reach of the state’s ban on noncompetes to contracts signed out of state; creates a private right of action for employees whose agreements include restrictive covenants and provides for attorney fees for any current, former, or even prospective employee who successfully brings suit against an employer’s use of those restrictive covenants.

Second, Assembly Bill 1076 codifies the 2008 Edward v. Arthur Andersen decision that invalidated all employment noncompetes, including narrowly tailored ones, unless they satisfy a statutory exception. In addition, the legislation requires California employers to individually notify current and former employees employed since Jan. 1, 2022, in writing by Feb. 14, 2024, that their noncompete clauses are void. Individualized notice must be sent to the employee’s last known mailing and email addresses.

Letter Violations = More than Sour Grapes

Failure to send the required noncompete notices will be deemed an act of unfair competition under the statute, which may subject employers to civil penalties up to $2,500 per violation. Notice is not required for lawful noncompete agreements that satisfy one of California’s narrow exceptions.

Caroline Burnett, Michael Brewer and Robin Samuel are attorneys with Baker McKenzie in San Francisco and Los Angeles. © 2024 Baker McKenzie. All rights reserved. Reprinted with permission via Lexology.