Non-Compete Agreements in California: Are They Legal?

A recruiter offers you a better job, and then you remember the paperwork you signed on your first day: a clause saying you can't work for a competitor for two years. Before you turn the offer down, understand this — in California, that clause is almost certainly worthless.

California Voids Nearly Every Non-Compete

California has rejected employee non-competes for more than a century. Business and Professions Code section 16600 states that every contract restraining someone from engaging in a lawful profession, trade, or business is void. Courts read that broadly: it doesn't matter whether the restriction is "reasonable," limited to six months, or confined to one county. If it restrains you from working in your field, a California court will generally refuse to enforce it.

This is the opposite of the rule in most states, where judges weigh whether a non-compete agreement is reasonable in time and geography. California made a policy choice instead — employee mobility wins. The California Supreme Court confirmed this in Edwards v. Arthur Andersen LLP (2008), rejecting the idea that a "narrow restraint" on competition survives section 16600.

The narrow exceptions

Non-competes are enforceable in California only in a few business-sale situations, not ordinary employment:

• Sale of a business — an owner selling the goodwill or substantially all the ownership interest of a business (§ 16601)
• Dissolution of a partnership — partners agreeing not to compete as part of a dissolution or a partner's departure (§ 16602)
• Dissolution or dissociation of an LLC member (§ 16602.5)

If you signed a non-compete simply because you were hired or promoted, none of these apply to you.

What Changed in 2024: SB 699 and AB 1076

Two laws took effect on January 1, 2024, and they moved California from "we won't enforce these" to "you may not even ask."

SB 699 added section 16600.5. A void non-compete is unenforceable regardless of where or when it was signed — so an agreement you signed in Texas for a Texas employer generally can't be used against you once you're working in California. It also makes it unlawful for an employer to attempt to enforce a void clause, and it gives employees, former employees, and even job applicants a private right of action for injunctive relief, actual damages, or both. A worker who wins is entitled to reasonable attorney's fees and costs.

AB 1076 added section 16600.1, which makes it unlawful to include a non-compete clause in an employment contract or to require an employee to sign one. It also required employers to send individualized written notice by February 14, 2024 to current and certain former employees whose contracts contained void non-compete clauses. Violations count as unfair competition under Business and Professions Code section 17200.

A separate federal ban proposed by the Federal Trade Commission never took effect after being set aside in court — but that changes nothing here. California's protections are stronger, and they are what apply to California workers.

What Your Employer Can Still Legally Protect

A void non-compete does not mean anything goes. These obligations generally survive:

1. Trade secrets. Under the California Uniform Trade Secrets Act (Civil Code § 3426 and following), you cannot take or use confidential customer lists, formulas, source code, pricing models, or other protected information. Downloading files on your way out the door is the single most common way a departing employee turns a winnable situation into a lawsuit.
2. Reasonable confidentiality agreements. NDAs remain lawful — but a confidentiality clause written so broadly that it effectively stops you from working in your industry can itself be attacked as a disguised non-compete.
3. Duty of loyalty while employed. You generally may prepare to compete, but you may not compete or divert business while still on the payroll.

The practical rule: your skills, relationships, and general knowledge go with you. Your employer's documents do not.

Non-Solicitation Clauses Are Usually Void Too

Employers often replace a non-compete with a promise not to solicit customers or coworkers. In California, those clauses face the same problem.

• Customer non-solicitation clauses that restrain you from doing business with former clients are generally void, though genuine trade-secret misuse (for example, using a confidential customer database) is still actionable.
• Employee non-solicitation — "anti-raiding" — clauses were held void as an unlawful restraint in AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018).

Label matters far less than effect. If the clause restrains your ability to practice your trade, section 16600 is in play.

What to Do If You're Asked to Sign or Threatened

If a non-compete clause in California shows up in your onboarding packet, a promotion agreement, or a severance offer, take these steps:

1. Keep the document. Save the signed agreement, the offer letter, and every email about it, on a personal device — not a work account you may lose access to.
2. Don't quietly agree to walk away from a job. Turning down an offer because of an unenforceable clause is exactly the harm the 2024 laws were written to prevent.
3. Watch for retaliation. If you are fired, demoted, or have an offer pulled for refusing to sign or for taking a competing job, that may support a separate claim — including wrongful termination in violation of public policy. Read more on wrongful termination in California.
4. Get the agreement reviewed before you sign a severance. Non-competes are frequently buried in exit paperwork; see our guide to severance agreements in California.
5. Act promptly. Different claims carry different deadlines — a wrongful termination claim in violation of public policy generally has a two-year limit, while contract and unfair-competition theories run on their own clocks. Have your specific situation evaluated rather than assuming you have time.

Frequently Asked Questions

Are non-competes enforceable in California?

Almost never for employees. Section 16600 voids restraints on practicing your trade, and the only real exceptions involve selling a business or dissolving a partnership or LLC.

I signed a non-compete in another state. Does it follow me to California?

Generally no. Section 16600.5 says a contract that is void under California law is unenforceable regardless of where and when it was signed. Out-of-state employers sometimes still send demand letters — that attempt itself may be unlawful.

Can I be fired for refusing to sign a non-compete?

Requiring you to sign one is unlawful under section 16600.1. Being terminated or having a job offer rescinded over it may give rise to a claim, and it should be reviewed quickly.

What can I recover if an employer tries to enforce a void non-compete?

Section 16600.5 allows a suit for injunctive relief, actual damages, or both, and a prevailing worker is entitled to reasonable attorney's fees and costs. Actual recovery depends entirely on your facts — no honest lawyer can promise a number.

Does this mean I can take my client list with me?

No. Trade secret law is separate and still applies. Contacting former clients from memory is very different from copying a confidential database, and that distinction often decides the case.

Talk to a California Employment Lawyer

If an employer is using a non-compete or non-solicitation clause to keep you from moving on, you don't have to guess whether it holds up. MMG Law Firm offers a free, no-obligation consultation to review your agreement and explain your options under California law. We represent employees across California — from onboarding paperwork to severance negotiations to litigation. Learn more about our employment law practice, or contact us to speak with an attorney.

You can read the statute yourself at Business and Professions Code § 16600 and § 16600.5, and find general wage and workplace resources at the California Labor Commissioner's Office. This article is general information, not legal advice for your situation.