California has updated its non-competition law to give employees more freedom to work with competitors. This means that any agreements that restrict someone from working with a competitor in California are now invalid, except in limited cases. This change is expected to promote healthy competition between businesses and provide employees with better job opportunities.
California Senate Bill 699
California has passed two new items of legislation, Senate Bill 699 and Assembly Bill 1076, which will further regulate and restrict the enforcement of employment non-compete agreements in California and expand the scope of remedies for those affected by them. These new laws will become effective on January 1, 2024, and now is the time for employers to assess and revise their employment-related agreements and restrictive covenants accordingly.
What does this mean for states that have valid non-competes under their own state laws – when a former employee moves to California? Such an employee could work for a competitor of the former employer.
For example, under Texas law – where an employer has a non-compete agreement enforceable against an employee/former employee – the agreement would be unenforceable in California, per California Senate Bill 699. Of note: should the Texas employer attempt to enforce the non-compete agreement, the former employee could bring a private civil action against that employer. PLUS, if the employee succeeds, the employee could recover a) injunctive relief, or b) actual damages, or c) both – as well as reasonable attorney's fees and expenses. Thus, Senate Bill 699 creates a private right of action for employees that courts previously held did not exist despite the inclusion of restrictive covenants.
The new California law will likely lead to disputes between it and other states' employers. Therefore, it is important for non-California employers and their HR/leadership teams to carefully review their employment contracts and any non-compete agreements.
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