While Florida law allows employment noncompete agreements, California has a long-standing ban against them. California's Business and Professions Code Section 16600 voids "every contract by which anyone is restrained from engaging in a lawful possession, trade, or business of any kind." This prohibition is broadly interpreted to essentially void any noncompete agreement or clause in the employment context, regardless of where the agreement was drafted, if the terms are ostensibly reasonable, or if the employment was initially based outside of California.
Notably, California's ban extends beyond just noncompetes to also include non-solicitation clauses that limit an employee’s ability to work elsewhere following the cessation of employment. The ban is all-encompassing, with only limited exceptions, such as the sale of a business or an ownership interest, where noncompete provisions may be allowed under narrowly defined circumstances.
In addition, California’s ban on noncompete agreements was strengthened on January 1, 2024 with the passage of Assembly Bill 1076 (AB 1076). The intent of this bill is to ensure that no California employee is required to sign away their rights as a condition of initial or continued employment. Accordingly, AB 1076 amended California’s noncompete law by making it unlawful for an employer to include a noncompete clause in an employment agreement or to require an employee to enter into a noncompete agreement that does not meet a statutory exception.
AB 1076 also imposes other obligations on employers and provides additional legal rights to California employees. Specifically, all affected employers located in and outside of California must notify all their current and former California employees with written agreements entered after January 1, 2022 that any noncompete and impermissible non-solicitation provisions contained within their agreements are void. The notice must be delivered to the last known physical mailing address and email on file for each affected current and former employee. The deadline to provide such notice was February 14, 2024.
Failure to provide the mandated notice or to otherwise comply with California’s noncompete law constitutes a violation of California's unfair competition law. Such violation may result in legal action brought by California's attorney general and/or a lawsuit filed by any affected former, current, or even prospective employee.
The liability exposure for violating California's noncompete law can include civil penalties of up to $2,500 per individual violation. For private lawsuits, courts can issue an injunction against the violating employer, award the affected employee actual damages, and order the violating employer to pay the employee’s attorney’s fees and costs incurred in the lawsuit.
4 Key Takeaways for Florida Employers on California’s NonCompete Law
Here are four main points that Florida employers must know when it comes to their current and former California employees as well as any future California employees:
1) Not enforceable. You cannot enforce a noncompete clause or agreement against any of your current or former California employees with written agreements entered after January 1, 2022. This same prohibition applies to non-solicitation clauses or agreements that hinder an employee’s ability to work elsewhere.
2) Mandatory Notice. You must deliver a written notice to all current and former California employees with written agreements containing a noncompete clause entered after January 1, 2022, explicitly stating that the noncompete is void in California. The same rule applies to standalone noncompete agreements. To the extent you have a non-solicitation clause or agreement that prevents a current or former employee’s ability to work elsewhere, the notice should also address this by expressly stating that it is void. The notice must be delivered to each affected employee’s last known mailing address and email on file. As the notification deadline of February 14, 2024 has already passed, prompt delivery should be a priority to mitigate your legal exposure arising from such unlawful agreements.
3) Future California Employees. If you extend an employment offer to a prospective California-based employee, ensure that your offer and/or any written agreement does not include a noncompete or non-solicitation clause, or contain any language designed to have the same result, that does not satisfy one of California’s limited statutory exceptions.
4) Legal Exposure for Violation. If you fail to comply with California’s noncompete law, such failure constitutes a violation of California’s unfair competition law. This exposes your company to civil penalties of up to $2,500 per violation in addition to potentially being sued by any affected former, current, or even prospective employee for injunctive relief, actual damages, and payment of their attorney's fees and costs incurred in the lawsuit.
Finally, ignorance of California’s noncompete law is not a viable defense. Companies are expected to know and understand the laws that apply to their business. As such, strict compliance is necessary to avoid potential civil penalties and/or costly litigation.
Sources: California Assembly Bill No. 1076, Contracts in restraint of trade: noncompete agreements; Assembly Floor Analysis AB 1076 (Bauer-Kahan) as amended July 10, 2023; California Bus. & Prof. Code §16600, as amended effective January 1, 2024; UCL Bus. & Prof. Code §§ 17200, et seq.
The information provided here is for general informational purposes only and not intended as legal advice or opinion for any individual matter. Changes in laws or regulations may occur in the future and this content may not be the most up-to-date legal or other information. You should consult your own attorney for any legal advice you may require.
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