California’s Governor signed Assembly Bill (AB) 1076 on October 13, 2023, which adds new Business & Professions Code §16600.1, making it unlawful to impose non-compete clauses on employees – which contractual restrictions already are void under Business & Professions Code §16600. 

AB 1076 codifies existing case law in Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, regarding the prohibition on noncompete agreements being broadly construed to void such agreements and clauses in the employment context when they do not meet specific exemptions.

New Section 16600.1 states, in full:

16600.1. (a) It shall be unlawful to include a noncompete clause in an employment contract, or to require an employee to enter a noncompete agreement, that does not satisfy an exception in this chapter.

(b) (1) For current employees, and for former employees who were employed after January 1, 2022, whose contracts include a noncompete clause, or who were required to enter a noncompete agreement, that does not satisfy an exception to this chapter, the employer shall, by February 14, 2024, notify the employee that the noncompete clause or noncompete agreement is void.                                          

(2) Notice made under this subdivision shall be in the form of a written individualized communication to the employee or former employee, and shall be delivered to the last known address and the email address of the employee or former employee.

(c) A violation of this section constitutes an act of unfair competition within the meaning of Chapter 5 (commencing with Section 17200).

AB 1076 follows the passage of another bill reiterating California’s ban on restrictive covenants, Senate Bill 699, which provides that the ban extends to agreements regardless of the state in which it was signed and or the state in which the employee worked.  SB 699 also creates a private right of action.

Under AB 1076, employers must notify current employees and former employees (employed after January 1, 2022), that any noncompete agreement or noncompete clause contained within an agreement the current or former employee signed is void unless the agreement or clause falls within one of the statutory exceptions set forth in Business and Professions Code section 16600, et seq.  

Such notices must be an individualized communication to the employee or former employee, delivered to the last known address and email address the employee provided to the employer, and must be provided by next Valentine’s Day, February 14, 2024.

AB 1076 also provides that a violation of the prohibition on noncompete agreements in employment also constitutes unfair competition under California’s Unfair Competition Law, Business & Professions Code section 17200, et seq.

New Business & Professions Code §16600.1 takes effect on January 1, 2024.

If you have questions about AB 1076 or related issues, contact a Jackson Lewis attorney to discuss.