You took a new job and signed a stack of onboarding paperwork. Somewhere in that stack was a clause saying you cannot work for a competitor for two years after you leave. You signed it. You moved on. And now, when you are ready to take a better opportunity with a competitor or start your own business in the same field, your former employer is threatening to sue.

Here is what California law says: that clause is almost certainly void. Not voidable. Not unenforceable in most circumstances. Void. As in, it never had legal force in the first place. California has prohibited non-compete agreements in employment for over a century, and in 2024, the Legislature made that prohibition sharper, broader, and more expensive for employers who ignore it than at any point in the law's history.

The Foundation: Business and Professions Code Section 16600

California Business and Professions Code Section 16600 has existed since 1872. It states simply: "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 decades, courts interpreted this as a near-total prohibition on post-employment non-competes. The California Supreme Court confirmed this reading in Edwards v. Arthur Andersen LLP (2008), ruling that non-compete agreements are invalid under Section 16600 in California "even if narrowly drawn."^[1]

Before 2024, however, there were no financial penalties for employers who included non-compete clauses in their agreements anyway. Companies routinely inserted void non-compete terms as a scare tactic, knowing that most employees would not know the clause was unenforceable and would simply comply out of fear. That changed on January 1, 2024, when two new laws — Senate Bill 699 and Assembly Bill 1076 — added real consequences to California's non-compete prohibition for the first time.^[2]

What SB 699 and AB 1076 Changed in 2024

SB 699 added Section 16600.5 to the Business and Professions Code, making clear that any contract void under Section 16600 is unenforceable "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."^[3] This is a direct response to a common employer tactic: requiring employees to sign agreements governed by another state's law, then attempting to enforce those agreements against workers who later move to or work in California. SB 699 closes that loophole entirely. A New York company with California remote workers cannot enforce a New York non-compete against those employees, even if the employee signed the agreement before moving to California.

SB 699 also created a private right of action for the first time. Employees, former employees, and prospective employees can now sue for injunctive relief, actual damages, and attorneys fees when an employer attempts to enforce or even enter into a void non-compete agreement.^[4] Critically, the attorneys fees provision is fee-shifting: a prevailing employee recovers their legal costs from the employer. This fundamentally changes the economics of non-compete enforcement by making it viable for workers to bring claims even in cases where the individual damages are modest.

AB 1076 added Section 16600.1, which goes further by making it expressly unlawful to include a non-compete clause in an employment contract at all — not merely void if challenged, but affirmatively prohibited.^[5] A violation of Section 16600.1 is treated as an act of unfair competition under California Business and Professions Code Section 17200, which carries civil penalties of up to $2,500 per affected employee and opens the door to enforcement by the California Attorney General.^[6]

AB 1076 also required employers to notify current employees, and former employees hired after January 1, 2022, by February 14, 2024, that any non-compete clauses in their agreements are void. Employers who missed that deadline may face unfair competition liability for each affected employee they failed to notify.^[7]

What Is and Is Not Covered: The Narrow Exceptions

California's non-compete prohibition is broad, but it is not absolute. Three narrow statutory exceptions survive under Sections 16601, 16602, and 16602.5 of the Business and Professions Code. All three involve the sale of a business interest, not ordinary employment. They cover: the sale of a business and its goodwill; the dissolution of a partnership where a partner agrees not to carry on a similar business in a specific geographic area; and the dissolution of a limited liability company where a member agrees not to carry on a similar business.^[8]

These exceptions are not available to a company that simply wants to prevent a departing employee from working for a competitor. They apply only when a person is selling their ownership stake in a business and agrees, as part of that sale, not to compete with the buyer. Even then, the restriction must be reasonable in geographic scope and duration.

The California Supreme Court's ruling in Edwards v. Arthur Andersen makes clear that there is no "narrowly tailored" exception for employment non-competes. An agreement does not become enforceable simply because it covers a limited time period, a limited geographic area, or a limited list of competitor companies. If it restrained an employee from engaging in their lawful profession or trade, it was void before 2024 — and it is now affirmatively unlawful.^[1]

What to Do If Your Employer Is Threatening to Enforce a Non-Compete

If you signed a non-compete agreement and your former employer is now threatening to sue you, demanding that you quit a new job, or sending cease-and-desist letters, California law gives you powerful tools to push back. Under SB 699, the moment your employer attempts to enforce a void non-compete clause against you, they have committed a civil violation and you have the right to sue them for it.^[9]

Courts have gone further than merely dismissing enforcement attempts. Employers who file lawsuits to enforce agreements that are clearly void under California law have faced sanctions for filing frivolous claims, treating the enforcement action as an abuse of process that itself warrants monetary consequences.^[10] Even sending a cease-and-desist letter to a California employee based on an out-of-state non-compete agreement can now trigger liability under SB 699.

What you should not do: assume the threat is real and quit your new job, change your conduct, or agree to any modification of the void agreement without first consulting a California employment attorney. The non-compete may be completely unenforceable. Your employer may know that and be relying on your lack of information to accomplish what the law no longer allows them to accomplish through litigation.

If the non-compete is embedded in a severance agreement you are being asked to sign right now, do not sign before speaking with an attorney. Severance agreements that condition payment on agreeing to a non-compete clause are no less problematic than freestanding non-compete agreements. The Legislature has made clear that including such a clause in any employment contract — including a severance agreement — is itself an unlawful act.^[5]

The Bottom Line

California's non-compete ban is not a technicality or a loophole. It is a fundamental policy commitment that has been in place since 1872 and has been reinforced, strengthened, and given real enforcement teeth over the past two years. If you signed a non-compete agreement in California — or signed one in another state and now work in California — that agreement is almost certainly void. The clause your employer is threatening you with exists only on paper. It has no legal force. And if your employer tries to enforce it anyway, they have now broken California law and you have the right to hold them accountable.

At Smith Reback Law, we represent California workers who are being threatened with void non-compete agreements, chased by cease-and-desist letters, or pressured to pass up employment opportunities they are legally entitled to pursue. We know how to evaluate whether an agreement is truly void, how to stop employer enforcement attempts through injunctive relief, and how to seek damages and attorneys fees when employers ignore California law. Your consultation is completely confidential and costs nothing.