While you’re making reservations and buying flowers for Valentine’s Day, don’t forget to check your company’s confidentiality, non-solicitation and noncompete agreements for violations of California law.
Last year, California enhanced its already strict prohibitions against noncompetes by expressly codifying that unlawful noncompetes are void in any employment context. In addition, newly enacted Business & Professions Code Section 16600.1 requires every employer in California to send a notice to employees and former employees who signed an unlawful noncompete with the employer, informing them that the noncompete they signed is void. Employers must send personalized notices to the email and last known mailing address of affected current employees, as well as former employees who worked for the employer after January 1, 2022. The new law requires notice of an unlawful “noncompete” clause or agreement; under existing California law, customer non-solicitation agreements have long been deemed a form of unlawful noncompetition agreement, so the new law almost certainly requires notice to employees and former employees that their customer non-solicitation agreements are void, in addition to more traditional “noncompete” clauses that expressly restrict employment after termination. Failure to comply with the notice requirement by February 14, 2024, may trigger penalties of up to $2500 per violation under the Unfair Competition Law. See Business & Prof. Code § 17206.
In addition to the notice requirement, there is now a new statutory private right of action for employees to sue employers who violate California’s ban on noncompetes, with a right to injunctive relief, damages, attorneys’ fees, and costs. See Business & Prof. Code § 16600.5. You can read Manatt's prior coverage on this topic here. There are still a lot of unknowns under these new statutes, including the extent to which employee non-solicitation provisions are covered by them (a gray area under the law), as well as the degree to which the laws would limit California-based employers from enforcing noncompetes against employees outside of California. As it stands, part of the new statute expressly states that California finds that “[a]ny contract that is void under this chapter is unenforceable regardless of where and when the contract was signed.” Id. (emphasis added). It may be a stretch for a non-California employee to argue that this statute applies to them, and there would be jurisdictional issues at play, but we can expect litigation on that issue given the language of the statute.
In the meantime, employers are reminded to check their agreements and to work with their employment counsel to prepare notices, before they head out for dinner on Valentine’s Day.