In-House Advisor

Employers Must Give Notice to Current and Certain Former California Employees of Void Noncompete by February 14, 2024, or Risk Penalties

January 24, 2024

   

Many companies have ceased using noncompete clauses for employees working in California. At best the clauses have become unenforceable, at worst, a liability for the company.

If you thought this issue was behind you, think again…

A change to California Business and Professions Code Section 16600, enacted as Section 16600.1 and effective January 1, 2024, requires employers to notify current and certain former employees who are signatories to any noncompete clause or agreement that the restriction is void. Employers must do this by February 14, 2024, or risk liability for an act of unfair competition under Section 17200, which provides remedies such as injunctions and restitution.

Specifically, Section 16600.1(b)(1) requires that employers provide notice to the following individuals:

  1. Current employees whose contracts include a noncompete clause or who were required to enter a noncompete agreement; and
  2. Former employees employed after January 1, 2022, whose contracts include a noncompete clause or who were required to enter a noncompete agreement.

The notice to employees must:

  1. Be in writing;
  2. Be an individualized communication to the employee;
  3. Be mailed or hand delivered to the last known address of the employee;
  4. Be emailed to the employee;
  5. State that the employee’s noncompete clause or noncompete agreement is void; and
  6. Be given by February 14, 2024.

Section 16600.1 also takes Section 16600 a step further, making use of a noncompete clause in an employment contract or context not only void, but also unlawful. These changes are bolstered by a “clarification” to Section 16600, making it clear that noncompete agreements in an employment context or contract are void no matter how narrowly they may be drafted. (Notwithstanding the foregoing, there is no impact to that portion of Section 16600 applicable to noncompete agreements associated with certain sales of ownership in a company.)

So if your company has or might have any noncompete agreements with California employees, act fast.

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