On September 1, 2023, Governor Gavin Newsom signed Senate Bill 699 (“SB 699”), which reinforces California's prohibition of employee noncompetition agreements. The law voids such agreements, regardless of where or when they were signed, and prohibits employers from enforcing them. SB 699 goes into effect on January 1, 2024, and will be codified as Section 16600.5 of the California Business and Professions Code. Here are some key points of the bill:
- Void Contracts Anywhere: SB 699 establishes that any contract that is void under existing law is unenforceable, regardless of where or when it was signed. In essence, this means that if a contract restricts a person's right to work in California, it cannot be enforced, irrespective of where it was signed or the location of the employment.
- Prohibition on Enforcement: The bill goes further by prohibiting employers, including former employers, from attempting to enforce these void contracts, even if the contract was signed outside of California. This provision aims to prevent California employers from circumventing the state's public policy on noncompete agreements by having employees sign such contracts elsewhere.
- Restrictions on New Contracts: SB 699 also makes it clear that employers cannot enter into new contracts with employees or prospective employees if these contracts contain provisions that are void under existing law. This reinforces the ban on noncompete agreements in employment contracts.
- Civil Violation: The bill establishes that employers who violate these provisions commit a civil violation. This means they could face legal consequences for attempting to enforce void noncompete contracts.
- Legal Action by Employees: SB 699 empowers employees, former employees, or prospective employees to take legal action against employers who violate these provisions. They can seek injunctive relief to prevent enforcement of the void contracts and/or recover actual damages resulting from the violation.
- Attorney's Fees and Costs: In addition to injunctive relief and damages, the bill allows prevailing employees, former employees, or prospective employees in legal actions to recover reasonable attorney's fees and costs. This provision encourages legal challenges against employers who try to enforce void noncompete agreements.
- Policy Considerations: The bill's introduction emphasizes that noncompete clauses are common in the U.S. and can have a chilling effect on employee mobility. It underscores California's long-standing policy against such clauses, highlighting their negative impacts on economic development, innovation, wages, and equality. The bill aims to protect California's interest in allowing free movement of employees for the benefit of competitive business interests.
Compliance with SB 699 requires that employers refrain from having employees enter into noncompetition agreements. SB 699 reinforces California's stance against noncompete agreements, ensuring their unenforceability regardless of the contract's origin.
If you have any questions regarding your company's policies or need guidance on California employment law, contact the Law Office of Catherine Chukwueke and schedule a consultation. We are here to help you navigate the complexities of employment law with confidence.
Disclaimer: This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice.