Non-Compete Agreements in California Are Void | McLellan Law Group
Non-Compete Agreements in California: Why They're Unenforceable and What Employers Are Trying Instead (2026)
Quick Answer: Non-compete agreements are void and unenforceable in California under Business and Professions Code § 16600. As of January 1, 2024, California employers are also prohibited from enforcing out-of-state non-competes against California employees, and from retaliating against employees who refuse to sign them. Some employers are now turning to non-solicitation agreements and trade secret claims — understanding the limits of those is equally important.
California's prohibition on non-compete agreements is one of the strongest employee protections in the United States — and one of the most important reasons the state's technology sector became a global hub of innovation. Engineers, executives, and professionals who move between employers here do not face the same post-employment restrictions that workers in other states often struggle with.
But the law is not always self-enforcing, and employers continue to find creative ways to restrict employee mobility. This guide explains the controlling statute, recent legislative developments, and what employers are doing instead — and where those alternatives cross the line.
The Controlling Statute: Business and Professions Code § 16600
This rule has been the law in California since 1872 — and California courts have consistently interpreted it broadly to void any agreement that restricts an employee's ability to work for a competitor after leaving an employer. There is no "reasonableness" test in California. If the agreement restrains a lawful profession, it is void — period.
The 2024 Enforcement Expansion: SB 699 and AB 1076
Effective January 1, 2024, the California Legislature strengthened § 16600's reach in two ways:
- SB 699 — made it unlawful for employers to enter into or attempt to enforce any non-compete agreement that is void under California law — even if the contract was signed in another state and even if it was signed outside of California. California employees now have the right to work for competitors regardless of what their out-of-state employment contracts say.
- AB 1076 — codified the Edwards v. Arthur Andersen (2008) 44 Cal.4th 937 rule that § 16600 must be read broadly to void any non-compete that does not fall within the narrow statutory exceptions; also required employers to notify current and former California employees whose non-compete agreements were void by February 14, 2024.
Retaliation protection: Under SB 699, it is now unlawful for a California employer to retaliate against an employee for refusing to sign a non-compete agreement or for taking a job with a competitor. A retaliation claim can be brought under Business and Professions Code § 17200 (unfair business practices) and may entitle the employee to injunctive relief, restitution, and attorney's fees.
The Narrow Exceptions: When Non-Competes Are Permitted
California law does permit non-compete restrictions in a narrow set of circumstances expressly listed in the Business and Professions Code:
- Sale of a business(§ 16601) — a seller of all or substantially all of the goodwill of a business may agree not to compete with the buyer within a specified geographic area
- Dissolution of a partnership or LLC(§ 16602, 16602.5) — partners or members may agree not to compete within a geographic area upon dissolution or withdrawal
These exceptions are narrow and strictly construed. They apply to business owners, not employees. An employee who happens to own a small equity stake is not selling the "goodwill of a business" and is not subject to these exceptions.
Non-Solicitation Agreements: The Line Between Permissible and Void
Faced with California's broad bar on non-competes, many employers have turned to non-solicitation agreements — prohibiting former employees from soliciting the employer's clients or employees after departure. These are also legally fraught in California.
- Client non-solicitation — California courts have applied § 16600's "void" rule to client non-solicitation clauses that effectively prevent an employee from practicing their profession. A blanket prohibition on working with former clients is treated as a non-compete and voided.
- Employee non-solicitation — clauses prohibiting employees from recruiting former colleagues are also scrutinized; the 2023 decision in AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. signaled further restriction on these clauses.
Trade Secret Claims: A Legitimate Alternative — With Limits
Employers cannot prevent employees from working for competitors — but they can protect legitimate trade secrets. California's Uniform Trade Secrets Act (Civil Code § 3426 et seq.) gives employers remedies against employees who misappropriate confidential, proprietary information.
The key distinction: your knowledge, skills, and general expertise belong to you — even if developed on the job. Customer contacts you memorized, your coding style, your understanding of industry practice — all yours. Specific confidential formulas, customer lists with pricing and history, proprietary source code, and unreleased product plans that you took (copied, photographed, emailed) — those may belong to the employer.
California law is clear: An employee cannot be prevented from using their general knowledge and skills simply by labeling those skills as "trade secrets." Courts look at whether the information was genuinely secret and whether the employer took reasonable steps to protect it.
What to Do If Your Employer Threatens to Enforce a Non-Compete
- Do not assume the agreement is enforceable — it almost certainly is not if you are a California employee
- Do not let a threatened lawsuit prevent you from taking a new job without first consulting an employment attorney
- Do preserve any written communications from your employer threatening enforcement — retaliation for rejecting a void non-compete is itself a legal violation
- Consider whether your employer is misusing trade secret claims to do what a non-compete cannot — this is a common tactic and courts have tools to address it
Frequently Asked Questions
I was asked to sign a non-compete as a condition of a bonus. Is it enforceable?
No. Consideration — even cash — does not make a void contract enforceable. A non-compete agreement that violates § 16600 is void regardless of what you were paid to sign it.
My employment contract is governed by another state's law. Does California's rule still apply?
Yes, if you are a California employee. Under SB 699, California law applies regardless of a choice-of-law provision selecting another state's law. An out-of-state choice-of-law clause cannot deprive a California employee of § 16600's protections.
Can I be fired for going to work for a competitor?
Generally no — California law protects employees' right to change jobs freely. Terminating an employee for accepting employment with a competitor — absent actual misappropriation of trade secrets — may constitute wrongful termination in violation of public policy.
What is the Cartwright Act and how does it relate to employment?
The Cartwright Act (Bus. & Prof. Code §§ 16700 et seq.) is California's primary antitrust statute. In the employment context, agreements among competing employers not to hire or recruit each other's employees ("no-poach" agreements) can violate the Cartwright Act. The FTC and state attorneys general have taken an increasingly active interest in employer collusion in the labor market.
Questions About Non-Compete Agreements or Workplace Rights?
Our employment attorneys represent employees and advise businesses throughout Silicon Valley. Schedule a confidential consultation today.
Schedule a Free Consultation (408) 963-7533About the Authors
Claire Melehani, Esq.
Employment law attorney at McLellan Law Group with extensive experience representing employees in wrongful termination, discrimination, and retaliation matters throughout Silicon Valley.
Steven McLellan, Esq.
Founding attorney at McLellan Law Group, specializing in employment law and business litigation throughout Silicon Valley and Santa Clara County.
Legal Disclaimer: This article is for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. Employment law is complex and fact-specific; outcomes vary depending on individual circumstances. Consult a licensed California employment attorney for advice specific to your situation. McLellan Law Group, LLP · 20665 4th Street, Ste. 202, Saratoga, CA 95070 · (408) 963-7533
