Employment Law

California's Non-Compete Ban: What Employers Must Do Now

By Ingrid Rainey · January 28, 2026 · 7 min read

Companies that hire in California with agreement templates drafted in another state are carrying a live liability. Business and Professions Code section 16600 has voided employee non-competes for well over a century, but recent amendments changed the exposure: including an unenforceable non-compete, or attempting to enforce one, is itself unlawful, and a prevailing employee recovers attorney's fees.

Key takeaways

The ban applies regardless of where the contract was signed and regardless of a choice-of-law or forum clause pointing to another state.
Audit every template — offer letters, employment agreements, equity documents, commission plans, severance agreements, and PIIAs.
The ban removes one tool; it does not leave a company defenseless.
The flip side is a hiring advantage.

What the statute reaches

The ban applies regardless of where the contract was signed and regardless of a choice-of-law or forum clause pointing to another state. A non-compete that was valid where executed is still void as applied to an employee who now works in California.

It also reaches beyond documents labeled 'non-compete.' Courts look at effect, not caption: overbroad customer non-solicits, forfeiture-for-competition provisions, and clawbacks triggered by joining a competitor can all be treated as restraints on trade.

The employer checklist

Audit every template — offer letters, employment agreements, equity documents, commission plans, severance agreements, and PIIAs.
Remove non-competes and customer non-solicits from anything a California worker signs.
Do not rely on a Delaware or New York choice-of-law clause to preserve a restraint against a California employee.
Notify affected current and former employees in writing where the statute requires individualized notice of voided clauses.
Retrain recruiters and managers — a verbal threat to enforce is an 'attempt to enforce.'
Re-paper acquisitions carefully; the sale-of-business exception is narrow and fact-specific.

Have a question about your situation?

Rainey Law P.C. advises San Diego businesses and employees on matters like this one.

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What still legitimately protects the business

The ban removes one tool; it does not leave a company defenseless. Trade secret protection under the California Uniform Trade Secrets Act and the federal Defend Trade Secrets Act survives, as does a properly drafted confidentiality and invention-assignment agreement.

Practical protections often matter more than contract language: sensible access controls, exit interviews with device and credential recovery, clear marking of confidential materials, and prompt action when data leaves. Employee non-solicitation ('no-raid') clauses remain legally contested in California and should not be assumed enforceable.

Hiring from a competitor

The flip side is a hiring advantage. A California employer can generally hire a competitor's employee notwithstanding a non-compete signed elsewhere — but should still instruct the new hire not to bring, use, or reference the former employer's confidential materials, and should document that instruction.

Most litigation in this area starts not with the non-compete but with a downloaded customer list. The onboarding process, not the offer letter, is where that risk is managed.

Frequently asked questions

Are any non-competes enforceable in California?

Only under narrow statutory exceptions, principally in connection with the sale of a business or the dissolution of a partnership or LLC interest, and even then the restraint must be tied to the goodwill sold and reasonable in scope.

Can we use a Delaware choice-of-law clause to enforce a non-compete against a California employee?

Generally no. California law voids contract provisions that require a California employee to adjudicate outside California or apply another state's law to claims arising in California, absent independent counsel in the negotiation.

Are customer non-solicitation clauses allowed?

California courts have treated broad customer non-solicits as void restraints on trade. Protection typically has to come from trade secret law and confidentiality obligations rather than a blanket prohibition on contact.

What is the penalty for including a void non-compete?

An employee or former employee can bring a claim for injunctive relief and actual damages, and a prevailing employee is entitled to reasonable attorney's fees and costs — which is why template cleanup is cheaper than litigation.

This article is general information, not legal advice, and does not create an attorney-client relationship. Outcomes depend on the facts of each matter.

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