On the heels of the enactment of Senate Bill 699, which strengthens California’s prohibitions on non-compete agreements and other restrictive covenants and provides additional employee protections, California is once again strengthening- on its restrictions on non-competes with the October 13, 2023 enactment of Assembly Bill (AB) 1076. AB 1076 imposes notice requirements, compliance deadlines, and amendments to the Business and Professions Code in California, and other updates.
WHAT DOES AB 1076 DO?
AB 1076, effective January 1, 2024, expressly “codifies” existing case law on Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937 and amended Section 16600 of the California Business and Professions Code to “read broadly” and “exclude the application of any non-competition agreement in the employment context, or any non- competition in any employment contract, however slightly tailored,” unless a specific exemption applies.
on Edwards, the noncompetition agreement prohibited Edwards from “soliciting” any client at Andersen’s Los Angeles office for one year after termination. The California Supreme Court rejected Andersen’s contention that it should adopt a narrowly restrictive exception to Section 16600 and concluded that Andersen’s noncompetition agreement (nonsolicitation of customer provision) was invalid.
AB 1076 also amends Section 16600 to expressly state that these provisions apply to contracts where the person prevented from engaging in a legal profession, trade, or business is not a party to the contract .
AB 1076 also adds a new Section 16600.1, which does so against the law to include a noncompete clause in an employment contract, or require an employee to enter into one, that does not satisfy an exception to Section 16600.
It also imposes the following notification requirements on employers:
- By February 14, 2024, employers must notify in writing current and former employees who worked after January 1, 2022 that any noncompete clauses or noncompete agreements previously signed by employees are null and void.
- Each written notice must be addressed to the employee or former employee and delivered to the person’s last known address and email address.
“Noncompete agreement” is not defined by law. Some may argue that this is broad enough to include non-solicitation of customers and non-solicitation of employee provisions.
A violation of Sections 16600 and 16600.1—ie, an employer’s failure to provide such notice, the inclusion of non-competition provisions in an employment contract, or a requirement that an employee enter into of a noncompete provision that does not satisfy a statutory exception—is per se an act of unfair competition under California’s Unfair Competition Law (UCL), California Business and Professions Code §§ 17200 et seq.
Violators of the UCL may be subject to an injunction, a restitution award, or enforcement actions by the attorney general.
CONCLUSION
AB 1076 comes on the heels of SB 699 and further strengthens California’s established public policy against non-compete agreements. Both laws take effect on January 1, 2024. While SB 699 expands the ways in which employees can challenge non-compete agreements through a private right of action, AB 1076 imposes notice requirements and a February 14, 2024 deadline for compliance.
