5). Courts have generally held that damages are not available under section 17200. Section 17206 does provide for a civil penalty of $2,500 per violation, but only in an action brought by a public prosecutor, such as the state attorney general, any district attorney, or certain city attorneys. Assuming a public prosecutor brought a case and was awarded civil penalties, the statute is silent on how the penalty would be assessed other than the penalty is for “each violation.”Employee Non-Solicits and Fixed-Term AgreementsEach amendment is silent on employee non-solicits and fixed-term employment agreements.The new statutory subdivision, as amended by AB 1076, also requires section 16600 to be “read broadly” and states that this “does not constitute a change in, but is declaratory of, existing law.” Whether courts interpret the amendments to apply to these agreements remains to be seen.Labor Code Section 925(e)Before enactment of SB 699, some courts had, as wereportedin 2023,[5]construed California Labor Code section 925(e) as an exception of sorts to section 16600 if the employee is represented by the individual counsel of their choice. While AB 1076 expressly referred toEdwards, neither amendment mentioned Labor Code section 925 or 925(e) at all.What, if any, effect section 16600.5’s prohibition—that “an employer or former employer shall not attempt to enforce a contract that is void under this chapter regardless of whether the contract was signed and the employment was maintained outside of California”—will have on this issue remains an open question.NEW YORKOn December 22, 2023, New York Governor Kathy Hochul vetoed a bill that would have had a wide-ranging impact on employment contracts in the state.The New York state legislature passed State Senate Bill 2023-S3100A in June 2023, broadly limiting post-employment non-compete clauses. The bill defined “covered individuals” as “any other person who, whether or not employed under a contract of employment, performs work or services for another person on

ese provisions also potentially are covered by the statute.Current and Future AgreementsSecond, the scope of contracts covered by the new laws also is broad. Agreements containing impermissible covenants are “unenforceable regardless of where or when the contract was signed” (BPC § 16600.5(a)), and regardless of whether “the employment was maintained outside of California” (BPC § 16600.5(b)). SB 699 (i) prohibits firms from “enter[ing] into a contract with an employee or prospective employee that includes a provision that is void under this chapter” (BPC § 16600.5(c)), (ii) provides that “[a]ny contract that is void under this chapter is unenforceable regardless of where and when the contract was signed” (BPC § 16600.5(a)) and (iii) provides that “[a]n employer that enters into a contract that is void under this chapter or attempts to enforce a contract that is void under this chapter commits a civil violation” (BPC § 16600.5(d)).One open question is how the new statutes interact with California Labor Code Section 925 (“Section 925”), which permits a California-based employee to agree to the application of another state’s laws, and to the resolution of disputes in another state’s forums, in agreements on which the employee was represented by counsel. See Cal. Lab. Code § 925(e). Where applicable, Section 925 seems to authorize agreements to elect another state’s laws regarding restrictive covenants. And AB 1076 and SB 699 do not cross-reference Section 925, so arguably leave its application to restrictive covenants intact. At the same time, the broad language of AB 1076 and SB 699—and, in particular, SB 699’s application to contracts regardless of where and when executed and/or whether employment was maintained in California­—casts some doubt on that conclusion.Required Notice to Current and Former EmployeesThird, and most pressing from a timing perspective, AB 1076 requires firms to provide written notice to employees subject to unlawful provisions, and former employees who were subject to such pr

oyed after January 1, 2022) who entered into agreements with non-compete clauses that are void under California law. The notice must tell the employee his/her/their non-compete is void and be mailed and emailed to each employee.Putting teeth into the law, SB 699 establishes a private cause of action, allowing a prevailing employee, former employee, or prospective employee to seek injunctive relief, actual damages, and reasonable attorneys’ fees and costs. AB 1076 deems the violation of section 16600 an act of unfair competition, exposing employers to liability.Despite the imminent effective date and the significant consequences for violators, uncertainties remain. For instance, the new laws do not define what a non-competition clause is and so it is unclear whether they extend to non-solicitation agreements. Based on California’s legal history, it is likely a California court would find that the laws encompass customer non-solicitation provisions. The legislation also does not address California Labor Code section 925, which previously supported the enforcement of non-competition agreements for California employees under certain circumstances. Additionally, it is uncertain whether SB 699restricts California-based employers from entering into non-competition agreements with employees located outside of California. Future litigation is expected to provide clarity, and we will closely monitor legal developments.Next StepsEmployers, whether they are based in California or have (or have had) employees in California, must prepare for the February 14th deadline. To do this employers should:Promptly review all employee agreements with restrictive covenants (even if not labeled as a “non-competition” clause or restrictive covenant);Compile a list of current and former employees requiring notice under AB 1076, including last known address and email; andPrepare new employee agreements for employees to sign that include robust confidentiality and trade secrets clauses, ensuring that valid consideration is prov

es and former employees (if they were employed after January 1, 2022) who entered into an agreement with a non-compete clause that is void under California law.In addition to these prohibitions and requirements, SB 699 creates a private cause of action permitting a prevailing employee, former employee, or prospective employee to be awarded injunctive relief, actual damages, and reasonable attorneys’ fees and costs, and AB 1076 makes violation of 16600 an act of unfair competition, further exposing an employer to liability.Despite the rapidly nearing effective date for these new laws, and the high stakes for employers found to be in violation, there are still outstanding questions. For example, it is unclear whether the laws’ new prohibitions and requirements extend to non-solicitation agreements, though given California’s past jurisprudence, we believe it likely that they will be interpreted as at least applying to customer non-solicitation provisions. The new laws also do not address California Labor Code § 925, which had on occasion (albeit in a limited number of cases outside of California) been found to support enforcement of a non-competition agreement entered into by a California employee if the agreement was governed by another state’s laws and the employee was represented by counsel during contract negotiation. Likewise, it is not clear whether the broad language of SB 699 would in fact restrict California-based employers from entering into non-competition agreements with employees located outside of California. We expect future litigation to bring some clarity in these areas and we will be monitoring the legal landscape closely.Next Steps for EmployersIn the meantime, employers located in California, as well as employers located outside of California that currently have, or previously had, employees in California, should prepare for the February 14th deadline by immediately reviewing their employee agreements with non-compete provisions to (1) determine their permissibility under Cal

enforce those agreements against former employees who subsequently start working for a competitor in California. Thus, the law highlights the state’s interest in protecting the “freedom of movement of persons whom California-based employers wish to employ to provide services in California, regardless of the person’s state of residence,” which the state deems “paramount to competitive business interests.”Under this expansion, employers outside California would violate Section 16600.5 not only if they required a worker performing services in California to sign a noncompete, but also if a non-California employee who signed a noncompete moves to the state and begins working in California for the same employer or for a different employer – even if the noncompete was fully valid under the law of the state where the employee originally resided and worked.The law spurs many questions that will need to be tested through the court system. For example, it is unclear how SB 699 will interact with California Labor Code Section 925, which prohibits employers from requiring employees who primarily reside and work in California to agree to adjudicate claims outside of the state or deprive the employee of the substantive protection of California law, unless the employee was represented by legal counsel. It is also unclear what effect a judgment secured outside of California enforcing a noncompete would have within the state. SB 699 raises constitutional issues as well, including whether the law poses an undue burden on interstate commerce or impairs the obligation of contracts entered outside the state.2. Assembly Bill 1076Not to be outdone by SB 699, AB 1076 is the second significant noncompete bill to come out of this California legislative session and was signed by Newsom on October 13, 2023. This bill amends Section 16600 of the state’s Business and Professions Code to codify the California Supreme Court’s holding in Edwards v. Arthur Andersen LLP, 44 Cal. 4th 939 (2008), and “void the application of any noncom

76 and SB 699 both take effect on January 1, 2024.AB 1076 takes a step further by imposing a potentially burdensome notification requirement on employers. AB 1076 will require employers, by February 14, 2024, to provide individualized written notices to all current employees and all former employees (employed after January 2022) stating that any post-employment noncompete clauses contained in employment agreements or any other post-employment noncompete agreements with the employer are void.AB 1076 further provides that a violation of Section 16600.1 will constitute an act of unfair competition within the meaning of Business and Professions Code Section 17200. Notably, SB 699 separately will create a private right of action for violations of the chapter.Unanswered QuestionsNot only could employers face challenges complying with AB 1076’s broad notice requirements, but the bill also leaves unanswered key questions about how it interfaces with related provisions of the law. For example, California Labor Code Section 925, which generally prohibits out-of-state choice of law and venue provisions, allows employees to negotiate such clauses when represented by counsel. Potentially relying on this exception, some parties may have negotiated post-employment noncompetes that would otherwise be void under California law. AB 1076 calls into question whether those agreements would be subject to the AB 1076 notice requirement.Additionally, AB 1076 does not define what constitutes an unlawful “noncompete agreement,” leaving open the question of whether employee nonsolicitation agreements will be barred by Section 16600 and thus subject to the AB 1076 notice requirement. While traditional post-employment noncompete agreements and customer nonsolicitation agreements have long been void under Section 16600, in 2008 in Edwards v. Arthur Anderson LLP, the Supreme Court of California left open the question of whether employee nonsolicitation agreements are void under Section 16600.For years employee nonsolicitation ag

jurisdictional and constitutional challenges.For example, if an employee based in a jurisdiction where non-competes are facially enforceable enters into a compliant agreement with an employer in that jurisdiction and then relocates to California to work for a competitor, it would seem that the prior employer could not successfully enforce the non-compete in a California court. Or consider a California business that employs an out-of-state fully remote worker in a jurisdiction in which non-competes are enforceable and requires that employee to enter into a non-compete governed by that state’s law. In that case, SB 699 would seemingly require a California court to deem the agreement unenforceable; the employer would be better served seeking judicial relief in the state where the employee is located in order to receive more favorable judicial treatment. In 2017, California attempted to limit employers’ ability to move non-compete and other employment-related disputes out of state through California Labor Code Section 925, which prohibits employers from requiring a California employee to agree to out-of-state choice-of-law and venue provisions except when specifically negotiated by the employee’s legal counsel. But that law applies only to employees who “primarily reside and work in California” and has not beeninterpreted to reach across state lines.AB 1076 Another bill on noncompete agreements has worked its way through the state legislature and is pending signature or veto by the Governor. AB 1076 would add a provision to Section 16600 that purports to codify the 2008 California Supreme Court decision in Edwards v. Arthur Andersen LLP and void noncompete agreements in employment “no matter how narrowly tailored.” In the Edwards case, the California high court ruled that even a narrowly drawn noncompete agreement that does not completely prohibit a former employee from engaging in the former employee’s profession, trade, or business, still violates Section 16600 unless the agreement specifically falls

ding provision was void. The inclusion of a private right of action with statutory attorneys’ fees raises the risk of litigation that employers may face in this arena. An issue that could be explored under the new law is the continued viability of employee nonsolicitation agreements, which for years had been treated as permissible under California’s 1985 Sixth District Court of Appeal’s decision in Loral Corp. v. Moyes. In 2019, however, California’s Fourth Appellate District issued a decision that(along with subsequent federal court decisions) called into question the continued viability of employee nonsolicitation agreements in California. Employers that continue to use such clauses may face heightened risks from those seeking to challenge them under SB 699.What also remains unclear is how other states faced with actions to enforce agreements alleged to be void under this law will respond. In 2017, California attempted to limit the ability to move these disputes out of state through California Labor Code Section 925, which prohibits the use of such clauses except when specifically negotiated by the employee’s legal counsel. But that law applies only to employees who “primarily reside[] and work[] in California.” It remains to be seen how courts will harmonize Section 925 with the requirements under SB 699, which by its terms applies much more broadly.SB 699 will be codified as Section 16600.5 of the California Business and Professions Code. The law is set to go into effect on January 1, 2024.AB 1076Another bill on noncompete agreements is working its way through the state Senate after being passed unanimously by the California State Assembly in May 2023. AB 1076 would add a provision to Section 16600 that purports to codify the 2008 California Supreme Court in Edwards v. Arthur Andersen LLP and void noncompete agreements in employment “no matter how narrowly tailored.”Notably, the legislature stated in AB 1076’s legislative counsel’s digest that the bill is not meant to be a change in the law but

ill survive the legal challenges it will encounter, all remain to be seen and likely will not be resolved for many months, if in 2023 at all.In the meantime, employers still need to contend with the ever-evolving world of non-compete law in the United States. The year 2022 saw an ongoing trend of legislatures passing laws intended to narrow the scope of non-competition agreements but courts—including in California, which may be a surprise for some to hear—continuing to enforce them. Meanwhile, other courts continued grappling with important issues—such as sale of business criteria and under what circumstances may a sale-of-business non-compete be unenforceable—that are already important now and will become even more so if the FTC’s proposed ban goes into effect. Other decisions dealt with evergreen issues such as contract interpretation and blue penciling. And still others considered the ever-increasing importance of California’s choice-of-law and choice-of-forum exception codified in California Labor Code Section 925(e). Below is a summary of some key non-compete highlights from 2022.Lawmakers Narrow Non-Competes.Colorado, the District of Columbia (D.C.), and Illinois are among the jurisdictions where new laws narrowing the reach of non‑competition agreements for employees went into effect in 2022. Among other limitations, Colorado law was amended to bar non-competes for employees earning less than $101,250 and to require a non-compete agreement be given to an employee before starting employment or at least 14 days before going into effect for current employees. The D.C. law bars non-competes for employees earning less than $150,000 annually and requires employees be given at least 14 days’ notice to review a non-compete before it goes into effect. The Illinois statute bars non-competes for employees earning less than $75,000 per year, imposes a 14-day notice requirement, and requires adequate consideration of at least two years of employment or financial benefits (which are not defined but presumabl

Late last year, the Supreme Court denied certiorari in Howmedica Osteonics Corp. v. DePuy Synthes Sales, Inc., which was brought to the Supreme Court for reviewfrom an opinion of the Ninth Circuit Court of Appeals. 28 F.4th 956 (9th Cir. 2022). At the heart of Howmedica (as explained in a previous article, here) was the classic Erie law school hypothetical – does federal or state law control in federal court when deciding if a party’s contractual forum selection clause preempts a state statutory forum selection mandate?To briefly summarize the Howmedica case: A former sales representative for Howmedica had an employment agreement containing a New Jersey forum selection and choice of law provision, as well as noncompete and nonsolicitation clauses. He ultimately resigned and went to work for a competitor. When Howmedica attempted to enforce the restrictive covenants, the former employee asserted that the forum selection and choice of law clauses were void under California Labor Code § 925, because he was a California resident. The former employee filed a declaratory judgment action in the Central District of California, asking the court to declare those provisions void. Howmedica moved to transfer venue to the District of New Jersey under 28 U.S.C. § 1404(a). The district court denied the motion, holding that state, not federal, law governed the validity of a forum selection clause in a contract, and that the forum selection clause was therefore invalid and unenforceable. The Ninth Circuit agreed, and held that § 1404(a) and Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988), “do not broadly preempt all state laws controlling how parties may agree to or void a forum-selection clause.” Howmedica then petitioned the Supreme Court for certiorari review.By applying state law to decide the validity of a forum selection clause, the Ninth Circuit joined the Seventh Circuit in the minority on this issue. See, e.g., Jackson v. Payday Fin., LLC, 764 F.3d 765, 774 (7th