On September 1, 2023, California Governor Gavin Newsom signed Senate Bill 699, which amends California Business & Professions Code Section 16600 to prohibit an employer from entering into or attempting to enforce a non-compete agreement regardless of whether the contract was signed outside of California.  The law goes into effect on January 1, 2024.

Previously, California law banned non-compete agreements, subject to limited exceptions.  Section 16600 of the California Business and Profession Code states 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.”  By adding Section 16600.5 to the Business & Professions Code, SB 699 expands the restrictions on non-compete agreements to contracts entered outside of California.

The legislative findings in the bill detail the public policy interests driving the expansion of Section 16600.  While non-compete clauses in employment contracts are extremely common throughout the United States, research has shown that they “stifle economic development, limit firms’ ability to hire[,] and depress innovation and growth.”  The legislature suggested that California has “benefited significantly[]” from prohibiting non-compete agreements, “fueling competition, entrepreneurship, innovation, job and wage growth, equality, and economic development.”  Since “the market for talent has become national and remote work has grown, California employers increasingly face the challenge of employers outside of California attempting to prevent the hiring of former employees.”  SB 699 preserves California’s competitive business interests by “protecting the freedom of movement of persons whom California-based employers wish to employ to provide services in California.”

Under the new law, any contract that is void under Section 16600 is unenforceable “regardless of where and when the contract was signed.”  It prohibits “an employer or former employer from attempting to enforce a contract that is void regardless of whether the contract was signed and the employment was maintained outside of California.”  Furthermore, the law provides that an employer who violates the law commits a “civil violation.”  To that end, it authorizes an employee, former employee, or prospective employee to bring a lawsuit to enforce the law by seeking injunctive relief, actual damages, or both, and entitles a prevailing employee to recover reasonable attorneys’ fees and costs.

Notably, SB 699 cements California’s public policy interests against non-compete agreements and expands employees’ enforcement rights for challenging non-compete agreements in California.  The law will likely lead to even more legal battles between California employers and out-of-state employers seeking to prevent former employees from working for California competitors.  It will be interesting to see the effect that SB 699 will have on out-of-state employers that have secured a judgment enforcing a non-compete in another state, such as in Advanced Bionics Corp. v. Medtronic, Inc., 29 Cal. 4th 697 (2002), in which the California Supreme Court held that comity principles impose limits to the scope of Section 16600 and to the reach of California’s public policy disfavoring non-competes.

In Advanced Bionics, an employee signed an enforceable non-compete in Minnesota with Medtronic and thereafter resigned his employment and went to work for Advanced Bionics, a California competitor to Medtronic.  Simultaneous litigation ensued in both California and Minnesota, but the California Supreme Court declined to apply California law voiding non-competes to the Minnesota agreement, explaining that “exceptional circumstances [did not exist] that outweigh[ed] the threat to judicial restraint and comity principles.”  While it remains to be seen how if at all SB 699 will be harmonized with the comity principles set forth in Advanced Bionics, the new law will make it more likely than ever that out-of-state employers will commence litigation early and often against employees in their home jurisdictions who are moving to California in an effort to enforce the non-compete before a California court can get around to striking down the provision.

We will continue to closely monitor these developments.

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Photo of Tony Oncidi Tony Oncidi

Anthony J. Oncidi is the co-chair of the Labor & Employment Law Department and heads the West Coast Labor & Employment group in the firm’s Los Angeles office.

Tony represents employers and management in all aspects of labor relations and employment law, including…

Anthony J. Oncidi is the co-chair of the Labor & Employment Law Department and heads the West Coast Labor & Employment group in the firm’s Los Angeles office.

Tony represents employers and management in all aspects of labor relations and employment law, including litigation and preventive counseling, wage and hour matters, including class actions, wrongful termination, employee discipline, Title VII and the California Fair Employment and Housing Act, executive employment contract disputes, sexual harassment training and investigations, workplace violence, drug testing and privacy issues, Sarbanes-Oxley claims and employee raiding and trade secret protection. A substantial portion of Tony’s practice involves the defense of employers in large class actions, employment discrimination, harassment and wrongful termination litigation in state and federal court as well as arbitration proceedings, including FINRA matters.

Tony is recognized as a leading lawyer by such highly respected publications and organizations as the Los Angeles Daily JournalThe Hollywood Reporter, and Chambers USA, which gives him the highest possible rating (“Band 1”) for Labor & Employment.  According to Chambers USA, clients say Tony is “brilliant at what he does… He is even keeled, has a high emotional IQ, is a great legal writer and orator, and never gives up.” Other clients report:  “Tony has an outstanding reputation” and he is “smart, cost effective and appropriately aggressive.” Tony is hailed as “outstanding,” particularly for his “ability to merge top-shelf lawyerly advice with pragmatic business acumen.” He is highly respected in the industry, with other commentators lauding him as a “phenomenal strategist” and “one of the top employment litigators in the country.”

“Tony is the author of the treatise titled Employment Discrimination Depositions (Juris Pub’g 2020; www.jurispub.com), co-author of Proskauer on Privacy (PLI 2020), and, since 1990, has been a regular columnist for the official publication of the Labor and Employment Law Section of the State Bar of California and the Los Angeles Daily Journal.

Tony has been a featured guest on Fox 11 News and CBS News in Los Angeles. He has been interviewed and quoted by leading national media outlets such as The National Law JournalBloomberg News, The New York Times, and Newsweek and Time magazines. Tony is a frequent speaker on employment law topics for large and small groups of employers and their counsel, including the Society for Human Resource Management (“SHRM”), PIHRA, the National CLE Conference, National Business Institute, the Employment Round Table of Southern California (Board Member), the Council on Education in Management, the Institute for Corporate Counsel, the State Bar of California, the California Continuing Education of the Bar Program and the Los Angeles and Beverly Hills Bar Associations. He has testified as an expert witness regarding wage and hour issues as well as the California Fair Employment and Housing Act and has served as a faculty member of the National Employment Law Institute. He has served as an arbitrator in an employment discrimination matter.

Tony is an appointed Hearing Examiner for the Los Angeles Police Commission Board of Rights and has served as an Adjunct Professor of Law and a guest lecturer at USC Law School and a guest lecturer at UCLA Law School.

Photo of Jennifer McDermott Jennifer McDermott

Jennifer McDermott is an associate in the Labor & Employment Law Department and a member of the Employment Litigation & Arbitration Practice Group and Counseling, Training & Pay Equity Practice Group.  Jennifer defends employers in a variety of labor and employment matters in…

Jennifer McDermott is an associate in the Labor & Employment Law Department and a member of the Employment Litigation & Arbitration Practice Group and Counseling, Training & Pay Equity Practice Group.  Jennifer defends employers in a variety of labor and employment matters in both state and federal courts, including wage and hour single-plaintiff lawsuits and class, collective, and Private Attorneys General Act (PAGA) representative actions.

Jennifer received her B.A. from UCLA, where she graduated summa cum laude and was elected Phi Beta Kappa, and she earned her J.D. from UCLA School of Law. While in law school, Jennifer completed a judicial externship for the Honorable Richard A. Paez of the U.S. Court of Appeals for the 9th Circuit. She also served as a legal writing advisor to first-year students and worked as a legal advocate at the Lanterman Special Education Law Clinic. Jennifer received a Dean’s Merit Scholarship, the B. Epstein and C. Kim Tax Law Scholarship, and two Masin Family Academic Excellence Gold Awards for the highest grade in Legal Research & Writing and Disability Law.