California law voids all non-compete agreements in employment contexts, no exceptions for "reasonable" scope, duration, or geographic limits. Two bills signed in 2023, AB 1076 and SB 699, took effect on January 1, 2024, and replaced decades of judicial interpretation with an explicit statutory ban. If you work in California and signed a non-compete clause, whether with a California employer or one based in another state, the clause is almost certainly unenforceable.
The FTC's proposed federal non-compete ban was struck down in August 2024 and officially removed from the books in February 2026, leaving state law as the only framework governing these agreements in the United States. California's approach is the most aggressive in the country, and its extraterritorial reach under SB 699 affects workers and employers across state lines.
Table of Contents
- What Changed on January 1, 2024
- The Three Exceptions That Still Allow Non-Competes
- The Employer Notification Deadline
- Out-of-State Non-Competes and California Workers
- The Federal Non-Compete Ban That Did Not Survive
- Is My Non-Compete Void?
- Non-Competes, NDAs, and Non-Solicitation Agreements
- Frequently Asked Questions
What Changed on January 1, 2024
California has restricted non-competes since 1872 under Business and Professions Code Section 16600, which declares 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." For over a century, that language was broad but judicially interpreted. Federal courts, particularly the Ninth Circuit, carved out exceptions for "narrowly tailored" restraints: non-competes limited in scope, geography, or duration.
The California Supreme Court rejected those exceptions in Edwards v. Arthur Andersen LLP, 44 Cal.4th 937 (2008), ruling that Section 16600 prohibits any non-compete outside the statute's enumerated exceptions. But Edwards was a court decision, not legislation. Employers and out-of-state courts did not always follow it.
AB 1076 and SB 699 closed those gaps.
AB 1076 amended Section 16600 and added new Section 16600.1:
- Codified Edwards: Section 16600 "shall be read broadly" to void "any noncompete agreement in an employment context... no matter how narrowly tailored"
- Extended the ban to people who aren't even parties to the contract, preventing companies from restraining third parties through internal policies
- Required employers to send written notice to current and former employees by February 14, 2024 informing them that their non-compete clauses are void
- Made violations an act of unfair competition under California's UCL (Section 17200), with civil penalties up to $2,500 per violation
SB 699 added new Section 16600.5:
- Declared non-competes void "regardless of where and when the contract was signed"
- Prohibited employers from even attempting to enforce void non-competes
- Gave employees a private right of action to sue for injunctive relief, actual damages, and attorney's fees
| Before January 1, 2024 | After January 1, 2024 | |
|---|---|---|
| Legal basis | Section 16600 (1872) + case law | Section 16600 (amended) + §16600.1 + §16600.5 |
| Narrow restraints | Debated; Ninth Circuit courts allowed them | Explicitly void per AB 1076 |
| Out-of-state agreements | Uncertain; varied by court | Void regardless of where signed (SB 699) |
| Employer obligations | None specific | Must notify employees by Feb 14, 2024 |
| Employee remedies | Declaratory judgment, injunction | Private right of action + damages + attorney's fees |
| Violations | Contract dispute | Unfair competition (UCL §17200), up to $2,500 per violation |
The Three Exceptions That Still Allow Non-Competes
California's ban has three narrow statutory exceptions, unchanged by the 2024 amendments:
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Sale of a business (Section 16601). A seller can agree not to compete with the buyer within a defined geographic area and timeframe. This protects buyers who pay for goodwill.
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Dissolution of a partnership (Section 16602). A departing partner can agree not to compete within the partnership's geographic area of business.
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Dissolution or sale of an LLC (Section 16602.5). Same principle, applied to LLC members.
These exceptions share a common thread: the person accepting the restraint received direct compensation, the sale price or buyout, in exchange. Employment non-competes lack this dynamic. The employee's consideration is the job itself, which California law has never considered sufficient justification for restricting future employment.
If you're reviewing a contract tied to one of these transactions, understanding how non-compete clauses work will help you assess whether the scope and duration are reasonable even within these permitted categories.
The Employer Notification Deadline
AB 1076 created a one-time obligation that a large share of employers missed. By February 14, 2024, employers had to send individualized written notice to:
- All current employees
- All former employees who were employed after January 1, 2022
The notice had to state that any non-compete clause or non-compete agreement the employee signed is void. Employers were required to send it to both the employee's last known mailing address and email address.
Failure to send this notice is itself a violation of California's Unfair Competition Law. At least one class action has been filed on behalf of employees whose employers failed to meet this deadline. California Attorney General Rob Bonta also issued a consumer alert in early 2024 reminding workers of their rights under the new laws and directing them to file complaints at oag.ca.gov/report.
If you were employed in California after January 1, 2022, signed a non-compete, and never received this written notice, your employer may be in violation, regardless of whether they've tried to enforce the clause itself.
Out-of-State Non-Competes and California Workers
SB 699 states that non-competes are void "regardless of where and when the contract was signed" and "regardless of whether the contract was signed and the employment was maintained outside of California." On paper, a California resident cannot be bound by a non-compete signed in Texas, Massachusetts, or anywhere else.
In practice, the reach has limits. The leading test case is Hermalyn v. DraftKings (2024). Michael Hermalyn, a DraftKings executive based in New York, signed a non-compete governed by Massachusetts law. He moved to California and attempted to join Fanatics, a California-based competitor. DraftKings sued in Massachusetts federal court to enforce the clause.
The First Circuit upheld the non-compete in September 2024. The court found Hermalyn had "only a minimal connection" to California, he became a resident days before resigning, and ruled that the contractual choice of Massachusetts law was enforceable. SB 699's policy didn't override another state's law when the employee's California ties were that thin.
The practical takeaway: SB 699 provides strong protection for established California residents and employees of California-based companies. It offers less protection when the employee recently relocated to California, the contract specifies another state's law, and litigation happens outside California. If your situation involves cross-border employment, the governing law clause in your contract matters more than it used to.
The Federal Non-Compete Ban That Did Not Survive
The FTC voted 3–2 in April 2024 to ban non-competes nationwide. The rule was set to take effect September 4, 2024. That same day, Ryan LLC sued in the Northern District of Texas.
The timeline:
- August 20, 2024: The district court vacated the rule nationwide, finding the FTC exceeded its statutory rulemaking authority
- September 4, 2024: The rule did not take effect as scheduled
- September 2025: The FTC voted to dismiss its own appeal
- February 12, 2026: The FTC officially removed the Non-Compete Rule from the Federal Register
The federal ban is dead. Non-compete enforcement is now governed entirely by state law, and the rules vary sharply. Four states, California, Minnesota, North Dakota, and Oklahoma, ban them outright. At least six more, including Washington, impose income-threshold restrictions that function as near-complete bans for most workers. The remaining states impose partial restrictions through duration caps, industry-specific carve-outs, or judicial scrutiny. Florida and Kansas moved in the opposite direction in 2025, enacting laws that strengthen non-compete enforcement.
If you work across state lines, the enforceability of your non-compete depends on which state's law governs the agreement and where a dispute would be litigated. There is no federal floor or ceiling.
Is My Non-Compete Void?
Work through these questions in order:
1. Are you employed in California, or is your employer based in California? If yes, any employment non-compete you signed is void under Section 16600, regardless of the contract's choice-of-law provision, as long as a California court has jurisdiction.
2. Does the non-compete fall within one of the three exceptions? If it's tied to the sale of a business (Section 16601), dissolution of a partnership (Section 16602), or dissolution of an LLC (Section 16602.5), and you received direct compensation for the restraint, it may be enforceable. All other employment non-competes are void.
3. Was the non-compete signed in another state? Under SB 699, it's still void in California. But if your employer sues in another state's court, that court may apply its own law, especially if you recently moved to California or the contract specifies another state's jurisdiction.
4. Has your employer attempted to enforce it? If so, that attempt itself may violate Section 16600.5, giving you a cause of action for damages and attorney's fees under SB 699.
5. Did your employer send you a notice by February 14, 2024? If you were employed in California after January 1, 2022 and signed a non-compete, your employer was required to notify you that the clause is void. Failure to notify is a separate UCL violation.
If you want to check your contract for non-compete language before consulting an attorney, Pact's AI contract review can flag non-compete clauses and note whether they may be void under California law. The app is available on iOS. For complex cross-border situations or active enforcement threats, an employment attorney is the right next step, and the fee-shifting provision in SB 699 leads a good number of attorneys to take these cases on contingency.
Non-Competes, NDAs, and Non-Solicitation Agreements
California's non-compete ban does not void all restrictive covenants. Two related agreement types remain enforceable under different rules.
Non-disclosure agreements (NDAs) restrict what information you can share, not where you can work. California enforces NDAs that protect legitimate trade secrets under the California Uniform Trade Secrets Act. A solid NDA defines specific confidential information, sets a reasonable duration, and includes standard exclusions for publicly available information and independent development. Our NDA agreement guide covers how to review these terms in detail.
Non-solicitation agreements restrict you from soliciting your former employer's clients or employees. California courts treat these with more nuance. Customer non-solicitation clauses have been struck down in cases where they effectively prevent someone from practicing their profession, making them de facto non-competes. Employee non-solicitation clauses generally face less scrutiny but are not guaranteed to survive a challenge. The enforceability depends on how broadly the clause is written and how practically it restricts the person's ability to work.
The key distinction: restricting what you know (trade secrets via NDA) is lawful. Restricting where you work (non-compete) is not. Restricting who you contact (non-solicitation) falls in between and depends on the specific language.
Contracts that bundle multiple restrictive covenants together are common. A single employment agreement may contain a void non-compete alongside an enforceable NDA. Voiding one clause doesn't void the entire contract, provisions like force majeure clauses and indemnification terms remain in force. If your contract stacks multiple restrictions, review each one separately.
Frequently Asked Questions
Are non-compete agreements legal in California?
No. Section 16600 voids them, and AB 1076 made the ban explicit, "no matter how narrowly tailored." The three exceptions (business sales, partnership dissolutions, LLC dissolutions) are detailed in the section above.
What happens if I signed a non-compete before 2024?
It is void retroactively. Your employer was also required to send you written notice by February 14, 2024, if you never received that notice, the employer may be in separate violation of the UCL regardless of whether they tried to enforce the clause.
Can my California employer enforce a non-compete if I move to another state?
It depends on where the lawsuit is filed. In California, the clause is void. In another state, that court may apply its own law, especially if the contract specifies a choice-of-law provision. The Hermalyn analysis above covers the leading test case and the practical limits of SB 699's reach.
Did the FTC ban non-competes nationwide?
No. The FTC's April 2024 rule was vacated in August 2024, the appeal was dropped in September 2025, and the rule was removed from the Federal Register in February 2026. The full timeline is in the federal ban section above.
What should I do if my employer threatens to enforce a non-compete in California?
Document the threat, save every email, letter, and text. Under SB 699, the attempt itself is a civil violation that gives you a private right of action for injunctive relief, actual damages, and attorney's fees. The fee-shifting provision leads a good number of employment attorneys to take these cases on contingency.
Do non-compete bans apply to independent contractors in California?
Section 16600 covers "any contract by which anyone is restrained from engaging in a lawful profession, trade, or business", language broad enough to include contractors. However, the 2024 amendments reference "employment context" in key provisions, which may create ambiguity for 1099 arrangements. If your services agreement includes a non-compete, consult an attorney.
Sources
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AB 1076 Bill Text. California Legislature, 2023. leginfo.legislature.ca.gov
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SB 699 Bill Text. California Legislature, 2023. leginfo.legislature.ca.gov
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Business and Professions Code Section 16600. California Legislative Information, current through 2024 amendments. leginfo.legislature.ca.gov
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Edwards v. Arthur Andersen LLP, 44 Cal.4th 937 (2008). California Supreme Court. scocal.stanford.edu
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"Beating the Odds: First Circuit Doubles Down on Massachusetts Decision Enforcing Noncompete." WilmerHale, October 2024. wilmerhale.com
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FTC Noncompete Rule. Federal Trade Commission, 2024. ftc.gov
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"FTC Files to Accede to Vacatur of Non-Compete Clause Rule." Federal Trade Commission, September 2025. ftc.gov
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Removal of the Non-Compete Rule from the Federal Register. Federal Register, February 12, 2026. federalregister.gov
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"District Court in Texas Sets Aside FTC Non-Compete Rule." Holland & Knight, August 2024. hklaw.com
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Attorney General Bonta Issues Consumer Alert on Non-Compete Rights. California Attorney General, 2024. oag.ca.gov
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"Noncompete Agreements: Status of Laws Nationwide — March 2026 Update." Katz Banks Kumin, 2026. katzbanks.com
Frequently Asked Questions
About Vlad Kuzin
Founder & CEO, Shepherdstack LLC
Vlad Kuzin is the founder of Shepherdstack LLC and creator of Pact, an AI-powered contract review tool. He builds software that helps individuals and small businesses understand the documents they sign.
Disclosure: Founder of Shepherdstack LLC, the company behind Pact. All comparison articles use a standardized evaluation methodology applied equally to all tools, including Pact.