California recently enacted two bills — SB 699 and AB 1076 — amending and adding to Section 16600 of the California Business and Professions Code to broaden the scope of California’s already expansive prohibitions on post-employment non-compete agreements and to add consequences for violations.
The regulation has sweeping implications for businesses with employees located in California.
AB 1076 Notice Requirement
AB 1076 requires employers to notify employees that any noncompete agreements or noncompete provisions in their employment contract are void in California. The notice must be written and delivered to the employee’s last known postal address and email address. Employers must notify applicable employees by February 14, 2024. Failure to provide notice constitutes a violation of the UCL Bus. & Prof. Code §§ 17200, et seq., and civil penalties of up to $2,500 per violation may be imposed on noncompliant employers.
Who Is Bound by AB 1076?
Employers with any connection to California – a California presence or California employees – should be prepared to comply with AB 1076. Employers bound by AB 1076 include, but are not limited to:
- employers with a California presence must notify employees who are California residents
- employers with a California presence must notify employees who are not California residents
- employers with no California presence must notify employees who are California residents
The notice requirement applies even if the noncompete provision was enforceable in another state at the time it was executed, such as in the case where an employee signed an enforceable noncompete agreement outside California but has since relocated to California without signing a new agreement compliant with California law.
Employees who require notification under AB 1076 include current employees and former employees who were employed after January 1, 2022, and signed an employment agreement containing a non-compete provision, customer nonsolicitation provision, or other similar provision.