No. Non-compete clauses are not legal in California for employees. The state has banned them since 1872, and two laws that took effect January 1, 2024 — SB 699 and AB 1076 — pushed that ban further. It’s not just that courts won’t enforce a non-compete. Employers who try to enforce one can now be sued, and if they lose, they pay your damages and your attorney’s fees.
If you signed a non-compete with a California employer, or you moved to California after signing one with an out-of-state company, you almost certainly don’t have to honor it. Here’s what the law says and what it means in practice.
Why California Bans Non-Competes
The basis for California’s position is Business and Professions Code Section 16600, on the books since 1872. The rule is short: every contract that restrains someone from practicing a lawful profession, trade, or business is void. California has always treated free competition and employee mobility as things worth protecting, and non-competes as a direct threat to both.
For most of that history, the rule was already working. But as remote work expanded and employees started crossing state lines, out-of-state employers found ways to argue that their home state’s more permissive laws should apply. California’s legislature responded with the 2024 legislation.
What the 2024 Laws Actually Changed
SB 699 added Section 16600.5 to the Business and Professions Code. It declares any non-compete void under California law void regardless of where or when it was signed, bars employers anywhere in the U.S. from trying to enforce such agreements against California workers, and — this part matters — gives employees a private right to sue. Not just to have the agreement declared void. To collect actual damages, injunctive relief, and attorney’s fees.
AB 1076 codified a 2008 California Supreme Court ruling (Edwards v. Arthur Andersen LLP) clarifying that even a narrowly written non-compete is void if it doesn’t fall within one of the law’s explicit exceptions. It also required employers to notify — in writing, by February 14, 2024 — any current or former employee hired after January 2022 whose contract contained a non-compete clause.
The upshot: an employer that even attempts to enforce a non-compete against a California worker is committing a civil violation, not just losing a court case.
The Three Narrow Exceptions
California’s ban is not absolute. Three situations allow non-compete agreements:
| Situation | Code Section | What It Covers |
|---|---|---|
| Sale of a business | § 16601 | A seller of a business (or ownership interest) can agree not to compete in the geographic area where the business operated |
| Dissolution of a partnership | § 16602 | A departing partner can agree not to compete in the area where the partnership did business |
| Dissolution of an LLC | § 16602.5 | A departing LLC member can agree not to compete in the company’s operating area |
All three involve someone selling or walking away from a business they owned — not a regular employee leaving a job. Courts read these exceptions narrowly and have refused to stretch them to cover employment relationships. A nationwide non-compete for a business that only operated in Sacramento would almost certainly fail even under § 16601, because the geographic scope has to match where the business actually ran.
What About Non-Competes Signed in Other States?
This is where SB 699 made the biggest real-world difference.
Before 2024, employers sometimes used choice-of-law clauses — contract language specifying that Texas or Delaware or wherever the employer was based governed the agreement. If you signed a contract in Ohio before relocating to California, there was at least a colorable argument the agreement stayed valid.
SB 699 largely killed that argument. It applies to California-based employees regardless of where the contract was signed or what state’s law the contract claims to follow. So if a Nevada employer tries to stop a California remote worker from taking a job at a California company, that employer is violating California law — even if Nevada would have enforced the agreement just fine.
One genuine gray area: California Labor Code 925 allows a California employee to sign a contract governed by another state’s law if they were represented by independent legal counsel during negotiations. SB 699 doesn’t address 925 directly, and how courts handle that intersection is still being sorted out in ongoing litigation.
What Employers Can Still Use
Banning non-competes doesn’t leave employers without options.
Non-disclosure agreements restrict what information a former employee can share — trade secrets, client lists, proprietary processes — without saying anything about where the employee can work. These are fully enforceable in California and don’t conflict with Section 16600.
Non-solicitation agreements are murkier. Courts have grown increasingly skeptical of clauses that prevent former employees from contacting old clients or recruiting former colleagues, particularly after a 2018 California appellate court ruled that a broad non-solicitation clause could itself violate Section 16600 if it effectively prevented someone from doing their job. Whether a particular non-solicitation clause survives depends on how it’s written.
Restrictions that apply during employment — barring an employee from consulting for competitors on the side while still on payroll — generally do hold up under California law. Section 16600 targets post-employment restraints, not obligations that exist while you’re working.
If an Employer Is Threatening to Enforce a Non-Compete Against You
If you receive a cease-and-desist letter or get threatened with a lawsuit over a non-compete, don’t assume you have to comply. Under current California law:
- The agreement is almost certainly void if you’re working in California
- The employer’s attempt to enforce it may itself be a civil violation under SB 699
- You may be entitled to sue for damages, injunctive relief, and attorney’s fees
Save every communication. Keep a copy of the non-compete itself and any letters or emails from the former employer. Then talk to an employment attorney. Many take these cases on contingency because the law’s fee-shifting provision makes them financially viable.
If a prospective new employer is hesitating because of a non-compete on your record, walking their legal team through California’s 2024 laws usually puts the concern to rest quickly.
If you’re facing a non-compete dispute or any situation that could affect your ability to work, it’s worth getting specific legal advice from a California employment attorney before deciding how to respond.
Frequently Asked Questions
Can my employer fire me for refusing to sign a non-compete in California? California doesn’t prohibit employers from asking. But since any signed agreement is void under state law, being fired specifically for refusing to sign could support a wrongful termination claim depending on the circumstances.
Does California’s ban apply if I work remotely for an out-of-state company? Generally yes, if you’re based in California. SB 699 protects California workers regardless of where the employer is located or where the contract was signed.
Can an employer put a non-compete in an independent contractor agreement? California courts have applied Section 16600 to independent contractor relationships as well as regular employment. A non-compete in a 1099 contract is typically just as void.
What if my contract says it’s governed by another state’s law? In most cases, that clause won’t override California’s ban for California-based workers. SB 699 addresses this directly.
Are non-solicitation clauses treated the same as non-competes in California? Not exactly, but California courts have applied increasing scrutiny to non-solicitation clauses that effectively function as non-competes by locking a former employee out of their industry or clients.
Can I be sued for violating a non-compete signed before I moved to California? Your former employer would be taking a real legal risk trying to enforce it now. Under SB 699, you can countersue for damages and attorney’s fees.
What’s the difference between a non-compete and an NDA? A non-compete restricts where you can work. An NDA restricts what information you can disclose. NDAs are enforceable in California; non-competes almost never are.