{ "type": "practice-guide", "canonical": "https://openagreements.org/practice-guides/non-compete/us/california", "links": [ { "rel": "self", "href": "https://openagreements.org/practice-guides/non-compete/us/california.json", "type": "application/json" }, { "rel": "alternate", "href": "https://openagreements.org/practice-guides/non-compete/us/california", "type": "text/html" }, { "rel": "alternate", "href": "https://openagreements.org/practice-guides/non-compete/us/california/markdown", "type": "text/markdown" }, { "rel": "alternate", "href": "https://openagreements.org/practice-guides/non-compete/us/california/json", "type": "application/json" } ], "data": { "topic": "non-compete", "state": "california", "frontmatter": { "title": "Non-Competes in California", "description": "California voids employee non-compete agreements by statute and treats customer non-solicitation clauses as the same kind of void restraint, and its 2024 laws make entering or enforcing one a civil violation with a private right of action — leaving only narrow sale-of-business exceptions.", "state": "California", "lastReviewed": "2026-06-03", "license": "CC BY 4.0", "authors": [ "steven-obiajulu" ], "summary": { "enforceability": "banned", "bottomLine": "Employee non-competes and customer non-solicits are void by statute, and since 2024 entering or enforcing one is a civil violation with a private right of action.", "keyLaw": "Cal. Bus. & Prof. Code § 16600", "exceptions": "Sale of a business or ownership interest (§§ 16601–16602.5)", "banEffectiveDate": "Longstanding (§ 16600); 2024 enforcement laws SB 699 / AB 1076 effective Jan 1, 2024", "courtNarrowing": "no", "appliesToContractors": "yes", "extendedForBreach": "No (covenant is void)", "maxLength": "Not applicable — void", "noticeRequirement": "None", "incomeThreshold": "None", "saleOfBusiness": "Allowed — §§ 16601–16602.5", "customerNonSolicit": "Void by statute", "employeeNonSolicit": "High-risk; likely void post-AMN" }, "about": [ "California non-compete agreements", "California restrictive covenants", "Business and Professions Code Section 16600 restraint of trade", "California SB 699 and AB 1076 noncompete laws", "California customer and employee non-solicitation", "California sale-of-business non-compete exception Section 16601", "California choice of law and forum selection Labor Code 925", "California private equity physician non-compete SB 351" ], "translations": [ { "language": "中文", "status": "planned" }, { "language": "Español", "status": "planned" }, { "language": "Português", "status": "planned" }, { "language": "Deutsch", "status": "planned" } ], "relatedForm": { "slug": "openagreements-restrictive-covenant-california" } }, "questions": [ { "slug": "employee-non-compete-enforceability", "label": "Are employee non-competes enforceable?", "heading": "Are employee non-compete agreements enforceable in California?", "answerText": "No. California voids employee non-compete agreements by statute. Business and Professions Code section 16600 makes any contract that restrains someone from engaging in a lawful profession, trade, or business void to that extent, and the Legislature has directed courts to read the ban broadly — voiding any noncompete in employment no matter how narrowly tailored — unless it fits a specific statutory exception.", "sources": [ { "id": "stat-16600-void", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Bus. & Prof. Code § 16600", "citation": "Cal. Bus. & Prof. Code § 16600(a).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=16600", "proposition": "Section 16600(a) voids any contract that restrains a person from engaging in a lawful profession, trade, or business, except as provided in the chapter.", "verbatimQuote": "Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-16600-void" }, { "id": "stat-16600-broadly", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Bus. & Prof. Code § 16600", "citation": "Cal. Bus. & Prof. Code § 16600(b)(1).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=16600", "proposition": "Section 16600(b)(1) directs courts to read the restraint ban broadly to void any noncompete in an employment context, no matter how narrowly tailored, unless it satisfies a statutory exception.", "verbatimQuote": "This section shall be read broadly, in accordance with Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, to void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored, that does not satisfy an exception in this chapter.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-16600-broadly" }, { "id": "edwards-reject-narrow", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Edwards v. Arthur Andersen LLP", "citation": "Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008).", "url": "https://www.courtlistener.com/opinion/5608069/edwards-v-arthur-andersen-llp/", "deepLink": "https://www.courtlistener.com/opinion/5608069/edwards-v-arthur-andersen-llp/#:~:text=We%20reject%20Andersen's%20contention%20that,prohibition%2Dagainst%2Drestraint%20rule%20under%20section%2016600.", "proposition": "Edwards holds that section 16600 prohibits employee non-competition agreements absent a statutory exception, and rejects the Ninth Circuit's narrow-restraint exception.", "verbatimQuote": "We reject Andersen's contention that we should adopt a narrow-restraint exception to section 16600 and leave it to the Legislature, if it chooses, either to relax the statutory restrictions or adopt additional exceptions to the prohibition-against-restraint rule under section 16600.", "date": "2008-08-07", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-edwards-reject-narrow" } ] }, { "slug": "customer-nonsolicitation", "label": "Can you restrict customer solicitation?", "heading": "Are customer non-solicitation clauses enforceable in California?", "answerText": "No, not in the employment context. California treats a clause barring a former employee from soliciting or servicing the employer's customers as a restraint on trade that is void under section 16600 — the same rule that voids a non-compete. Edwards itself struck a customer non-solicitation covenant.", "sources": [ { "id": "q2-edwards-reject-narrow", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Edwards v. Arthur Andersen LLP", "citation": "Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008).", "url": "https://www.courtlistener.com/opinion/5608069/edwards-v-arthur-andersen-llp/", "deepLink": "https://www.courtlistener.com/opinion/5608069/edwards-v-arthur-andersen-llp/#:~:text=We%20reject%20Andersen's%20contention%20that,prohibition%2Dagainst%2Drestraint%20rule%20under%20section%2016600.", "proposition": "Edwards struck a customer non-solicitation covenant and rejected the narrow-restraint exception, so customer non-solicits are analyzed as restraints void under section 16600 in the employment context.", "verbatimQuote": "We reject Andersen's contention that we should adopt a narrow-restraint exception to section 16600 and leave it to the Legislature, if it chooses, either to relax the statutory restrictions or adopt additional exceptions to the prohibition-against-restraint rule under section 16600.", "date": "2008-08-07", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-q2-edwards-reject-narrow" }, { "id": "fillpoint-void", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Fillpoint, LLC v. Maas", "citation": "Fillpoint, LLC v. Maas, 208 Cal. App. 4th 1170 (2012).", "url": "https://www.courtlistener.com/opinion/5811287/fillpoint-llc-v-maas/", "deepLink": "https://www.courtlistener.com/opinion/5811287/fillpoint-llc-v-maas/#:~:text=In%20this%20case%2C%20when%20we,and%20unenforceable%20under%20California%20law.", "proposition": "Fillpoint holds that a noncompetition and nonsolicitation covenant placed in an employment agreement, rather than the purchase agreement, is void and unenforceable and does not fit the sale-of-business exception.", "verbatimQuote": "In this case, when we read the two noncompetition covenants together, we hold that the noncompetition and nonsolicitation covenant contained in the employment agreement is void and unenforceable under California law.", "date": "2012-08-24", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-fillpoint-void" } ] }, { "slug": "employee-nonsolicitation", "label": "Can you restrict soliciting employees?", "heading": "Can a California employer restrict soliciting its employees?", "answerText": "It is high-risk and probably void. An older decision, Loral Corp. v. Moyes, upheld an employee anti-raiding covenant as only a slight restraint, but the more recent appellate decision in AMN Healthcare v. Aya Healthcare held an employee non-solicitation clause void under section 16600 because it restrained the recruiters' chosen profession, and questioned whether Loral survives Edwards. The California Supreme Court has not resolved the split.", "sources": [ { "id": "amn-void", "authorityType": "case-law", "tier": "primary-source-backed", "title": "AMN Healthcare, Inc. v. Aya Healthcare Services, Inc.", "citation": "AMN Healthcare, Inc. v. Aya Healthcare Servs., Inc., 28 Cal. App. 5th 923 (2018).", "url": "https://www.courtlistener.com/opinion/4549721/amn-healthcare-inc-v-aya-healthcare-services-inc/", "deepLink": "https://www.courtlistener.com/opinion/4549721/amn-healthcare-inc-v-aya-healthcare-services-inc/#:~:text=Turning%20to%20the%20instant%20case%2C,is%20void%20under%20section%2016600.", "proposition": "AMN Healthcare independently concluded that the employee non-solicitation provision was void under section 16600 and questioned whether Loral's reasonableness approach survives Edwards.", "verbatimQuote": "Turning to the instant case, we independently conclude that the nonsolicitation of employee provision in the CNDA is void under section 16600.", "date": "2018-11-01", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-amn-void" }, { "id": "loral-slight", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Loral Corp. v. Moyes", "citation": "Loral Corp. v. Moyes, 174 Cal. App. 3d 268 (1985).", "url": "https://www.courtlistener.com/opinion/2140771/loral-corp-v-moyes/", "deepLink": "https://www.courtlistener.com/opinion/2140771/loral-corp-v-moyes/#:~:text=This%20does%20not%20appear%20to,on%20disclosure%20of%20confidential%20information.", "proposition": "Loral upheld an employee anti-raiding covenant, treating it as no more significant a restraint than a restriction on soliciting customers or disclosing confidential information — the older view AMN Healthcare later questioned.", "verbatimQuote": "This does not appear to be any more of a significant restraint on his engaging in his profession, trade or business than a restraint on solicitation of customers or on disclosure of confidential information.", "date": "1985-11-08", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-loral-slight" } ] }, { "slug": "employer-exposure", "label": "What is an employer's exposure for a void clause?", "heading": "What is an employer's exposure for including or enforcing a void non-compete?", "answerText": "Substantial. Since January 1, 2024, two laws turned California's ban from a defense into an offensive weapon. Senate Bill 699 (section 16600.5) makes entering into or attempting to enforce a void non-compete a civil violation with a private right of action and mandatory attorney's fees, reaching contracts signed anywhere. Assembly Bill 1076 (section 16600.1) made including such a clause unlawful, required employers to notify affected workers by February 14, 2024, and made a violation an act of unfair competition.", "sources": [ { "id": "stat-16600-5-violation", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Bus. & Prof. Code § 16600.5", "citation": "Cal. Bus. & Prof. Code § 16600.5(d).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=16600.5", "proposition": "Section 16600.5(a), (d) make a void non-compete unenforceable regardless of where or when signed and make entering into or attempting to enforce one a civil violation.", "verbatimQuote": "An 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.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-16600-5-violation" }, { "id": "stat-16600-5-fees", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Bus. & Prof. Code § 16600.5", "citation": "Cal. Bus. & Prof. Code § 16600.5(e)(2).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=16600.5", "proposition": "Section 16600.5(e) gives employees, former employees, and prospective employees a private action for injunctive relief or actual damages and entitles a prevailing worker to reasonable attorney's fees and costs.", "verbatimQuote": "In addition to the remedies described in paragraph (1), a prevailing employee, former employee, or prospective employee in an action based on a violation of this chapter shall be entitled to recover reasonable attorney's fees and costs.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-16600-5-fees" }, { "id": "stat-16600-1-unlawful", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Bus. & Prof. Code § 16600.1", "citation": "Cal. Bus. & Prof. Code § 16600.1(a).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=16600.1", "proposition": "Section 16600.1(a) makes it unlawful to include a noncompete clause in an employment contract or to require an employee to enter one that does not satisfy a statutory exception.", "verbatimQuote": "It shall be unlawful to include a noncompete clause in an employment contract, or to require an employee to enter a noncompete agreement, that does not satisfy an exception in this chapter.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-16600-1-unlawful" }, { "id": "stat-16600-1-ucl", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Bus. & Prof. Code § 16600.1", "citation": "Cal. Bus. & Prof. Code § 16600.1(c).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=16600.1", "proposition": "Section 16600.1(c) makes a violation of the section — including the failure to send the required February 14, 2024 notice — an act of unfair competition under Chapter 5 (Section 17200).", "verbatimQuote": "A violation of this section constitutes an act of unfair competition within the meaning of Chapter 5 (commencing with Section 17200).", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-16600-1-ucl" }, { "id": "stat-432-5", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Lab. Code § 432.5", "citation": "Cal. Lab. Code § 432.5.", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB§ionNum=432.5", "proposition": "Labor Code section 432.5 prohibits requiring an employee or applicant to agree in writing to any term the employer knows to be prohibited by law — the predicate for representative penalty claims over void non-compete terms.", "verbatimQuote": "No employer, or agent, manager, superintendent, or officer thereof, shall require any employee or applicant for employment to agree, in writing, to any term or condition which is known by such employer, or agent, manager, superintendent, or officer thereof to be prohibited by law.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-432-5" }, { "id": "ag-alert", "authorityType": "agency-guidance", "tier": "official-source-backed", "title": "California Attorney General — Consumer Alert on Noncompete Agreements", "citation": "Cal. Att'y Gen., Consumer Alert: Noncompete Agreements (Oct. 15, 2024).", "url": "https://oag.ca.gov/news/press-releases/attorney-general-bonta-issues-consumer-alert-reminding-california-workers-their", "proposition": "The California Attorney General's October 2024 consumer alert states that SB 699 makes it generally illegal for employers to enter into noncompete agreements with California employees, signaling active enforcement.", "verbatimQuote": "Effective January 1, 2024, Senate Bill (SB) 699 makes it generally illegal for employers to enter into noncompete agreements with California employees.", "date": "2024-10-15", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-ag-alert" } ] }, { "slug": "choice-of-law", "label": "Can another state's law escape the ban?", "heading": "Can a choice-of-law or forum-selection clause escape California's non-compete ban?", "answerText": "Usually not for a California employee. Labor Code section 925 lets an employee who primarily resides and works in California void an out-of-state choice-of-law or forum-selection clause imposed as a condition of employment, and section 16600.5 says a void non-compete is unenforceable regardless of where it was signed. But California's extraterritorial reach has limits: federal courts have applied another state's law to enforce a non-compete where that state's interest was greater.", "sources": [ { "id": "stat-925", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Lab. Code § 925", "citation": "Cal. Lab. Code § 925(a).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB§ionNum=925", "proposition": "Labor Code section 925(a) bars requiring a California-resident-and-working employee, as a condition of employment, to adjudicate California claims elsewhere or to give up the substantive protection of California law; by subdivision (f) it applies to contracts entered into, modified, or extended on or after January 1, 2017, and by subdivision (e) it does not apply where the employee was individually represented by counsel in negotiating the clause.", "verbatimQuote": "An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following: (1) Require the employee to adjudicate outside of California a claim arising in California. (2) Deprive the employee of the substantive protection of California law with respect to a controversy arising in California.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-925" }, { "id": "stat-16600-5-anywhere", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Bus. & Prof. Code § 16600.5", "citation": "Cal. Bus. & Prof. Code § 16600.5(a).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=16600.5", "proposition": "Section 16600.5(a) provides that a contract void under the chapter is unenforceable regardless of where and when it was signed.", "verbatimQuote": "Any contract that is void under this chapter is unenforceable regardless of where and when the contract was signed.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-16600-5-anywhere" }, { "id": "draftkings-stand", "authorityType": "case-law", "tier": "primary-source-backed", "title": "DraftKings Inc. v. Hermalyn", "citation": "DraftKings Inc. v. Hermalyn, 118 F.4th 416 (1st Cir. 2024).", "url": "https://www.courtlistener.com/opinion/10125471/draftkings-inc-v-hermalyn/", "deepLink": "https://www.courtlistener.com/opinion/10125471/draftkings-inc-v-hermalyn/#:~:text=Having%20considered%20the%20matter%20on,let%20the%20challenged%20order%20stand.", "proposition": "In DraftKings v. Hermalyn the First Circuit applied Massachusetts law, upheld a preliminary injunction enforcing a Massachusetts non-compete against an executive who moved to California, and declined to treat California's policy as controlling — illustrating the limits of section 16600.5's extraterritorial reach.", "verbatimQuote": "Having considered the matter on an expedited basis, we let the challenged order stand.", "date": "2024-09-26", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-draftkings-stand" } ] }, { "slug": "sale-of-business", "label": "Are sale-of-business non-competes allowed?", "heading": "Are non-competes tied to the sale of a business or ownership interest enforceable in California?", "answerText": "Yes, within narrow statutory limits. A person who sells the goodwill of a business or disposes of an ownership interest may agree not to compete within the geographic area where the business operated (section 16601), and parallel rules cover partners (section 16602) and LLC members (section 16602.5). Courts read these exceptions strictly and tie them to the goodwill actually transferred.", "sources": [ { "id": "stat-16601", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Bus. & Prof. Code § 16601", "citation": "Cal. Bus. & Prof. Code § 16601.", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=16601", "proposition": "Section 16601 lets a person who sells the goodwill of a business, or an owner disposing of an ownership interest, agree not to carry on a similar business within the specified geographic area where the business was carried on, so long as the buyer continues a like business there.", "verbatimQuote": "Any person who sells the goodwill of a business, or any owner of a business entity selling or otherwise disposing of all of his or her ownership interest in the business entity, or any owner of a business entity that sells (a) all or substantially all of its operating assets together with the goodwill of the business entity, (b) all or substantially all of the operating assets of a division or a subsidiary of the business entity together with the goodwill of that division or subsidiary, or (c) all of the ownership interest of any subsidiary, may agree with the buyer to refrain from carrying on a similar business within a specified geographic area in which the business so sold, or that of the business entity, division, or subsidiary has been carried on, so long as the buyer, or any person deriving title to the goodwill or ownership interest from the buyer, carries on a like business therein.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-16601" }, { "id": "stat-16602", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Bus. & Prof. Code § 16602", "citation": "Cal. Bus. & Prof. Code § 16602(a).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=16602", "proposition": "Section 16602 lets a partner, on or in anticipation of dissolution or dissociation, agree not to carry on a similar business within the specified geographic area where the partnership did business, so long as another partner carries on a like business there.", "verbatimQuote": "Any partner may, upon or in anticipation of any of the circumstances described in subdivision (b), agree that he or she will not carry on a similar business within a specified geographic area where the partnership business has been transacted, so long as any other member of the partnership, or any person deriving title to the business or its goodwill from any such other member of the partnership, carries on a like business therein.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-16602" }, { "id": "stat-16602-5", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Bus. & Prof. Code § 16602.5", "citation": "Cal. Bus. & Prof. Code § 16602.5.", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=16602.5", "proposition": "Section 16602.5 lets an LLC member, on or in anticipation of dissolution or the termination of the member's interest, agree not to carry on a similar business within the specified geographic area where the LLC did business, so long as another member carries on a like business there.", "verbatimQuote": "Any member may, upon or in anticipation of a dissolution of, or the termination of his or her interest in, a limited liability company (including a series of a limited liability company formed under the laws of a jurisdiction recognizing such a series), agree that he or she or it will not carry on a similar business within a specified geographic area where the limited liability company business has been transacted, so long as any other member of the limited liability company, or any person deriving title to the business or its goodwill from any such other member of the limited liability company, carries on a like business therein.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-16602-5" }, { "id": "q6-fillpoint-void", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Fillpoint, LLC v. Maas", "citation": "Fillpoint, LLC v. Maas, 208 Cal. App. 4th 1170 (2012).", "url": "https://www.courtlistener.com/opinion/5811287/fillpoint-llc-v-maas/", "deepLink": "https://www.courtlistener.com/opinion/5811287/fillpoint-llc-v-maas/#:~:text=In%20this%20case%2C%20when%20we,and%20unenforceable%20under%20California%20law.", "proposition": "Fillpoint read the purchase and employment agreements together and held the noncompetition and nonsolicitation covenant in the employment agreement void and unenforceable — it did not fit the limited sale-of-business exception.", "verbatimQuote": "In this case, when we read the two noncompetition covenants together, we hold that the noncompetition and nonsolicitation covenant contained in the employment agreement is void and unenforceable under California law.", "date": "2012-08-24", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-q6-fillpoint-void" }, { "id": "blue-mountain-16601", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Blue Mountain Enterprises, LLC v. Owen", "citation": "Blue Mountain Enters., LLC v. Owen, 74 Cal. App. 5th 537 (2022).", "url": "https://www.courtlistener.com/opinion/6246635/blue-mountain-enterprises-llc-v-owen/", "deepLink": "https://www.courtlistener.com/opinion/6246635/blue-mountain-enterprises-llc-v-owen/#:~:text=Here%2C%20the%20trial%20court%20correctly,which%20the%20business%20so%20sold.%E2%80%9D", "proposition": "Blue Mountain held that section 16601 applied as a matter of law where the owner disposed of all of his ownership interest while agreeing not to carry on a similar business in the area sold, enforcing a customer non-solicitation covenant under the exception.", "verbatimQuote": "Here, the trial court correctly found that section 16601 applies as a matter of law because Owen “dispos[ed] of all of his . . . ownership interest” under the Contribution Agreement while concurrently agreeing under the Employment Agreement to “refrain from carrying on a similar business within a specified geographic area in which the business so sold.”", "date": "2022-01-28", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-blue-mountain-16601" }, { "id": "ixchel-rule-of-reason", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Ixchel Pharma, LLC v. Biogen, Inc.", "citation": "Ixchel Pharma, LLC v. Biogen, Inc., 9 Cal. 5th 1130 (2020).", "url": "https://www.courtlistener.com/opinion/4772471/ixchel-pharma-llc-v-biogen-inc/", "deepLink": "https://www.courtlistener.com/opinion/4772471/ixchel-pharma-llc-v-biogen-inc/#:~:text=In%20context%2C%20section%2016600%20is,to%20a%20rule%20of%20reason.", "proposition": "Ixchel holds that, outside the employment and sale-of-business contexts, section 16600 does not render business-dealing restraints void per se but subjects them to a rule of reason.", "verbatimQuote": "In context, section 16600 is best read not to render void per se all contractual restraints on business dealings, but rather to subject such restraints to a rule of reason.", "date": "2020-08-03", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-ixchel-rule-of-reason" }, { "id": "samuelian-reasonableness", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Samuelian v. Life Generations Healthcare, LLC", "citation": "Samuelian v. Life Generations Healthcare, LLC (Cal. Ct. App. 2024).", "url": "https://www.courtlistener.com/opinion/10118817/samuelian-v-life-generations-healthcare-llc/", "deepLink": "https://www.courtlistener.com/opinion/10118817/samuelian-v-life-generations-healthcare-llc/#:~:text=We%20agree%20the%20reasonableness%20standard%20applies%20to%20partial%20sales.", "proposition": "Samuelian applied Ixchel and held that a noncompetition restraint arising from a partial sale of a business interest is evaluated under the reasonableness standard rather than treated as void per se.", "verbatimQuote": "We agree the reasonableness standard applies to partial sales.", "date": "2024-09-16", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-samuelian-reasonableness" } ] }, { "slug": "healthcare-private-equity", "label": "Can private equity bind physicians?", "heading": "Can private equity or hedge funds impose non-competes on California physicians and dentists?", "answerText": "No — for contracts under the new healthcare law that takes effect January 1, 2026. Senate Bill 351 (Health and Safety Code section 1191) bars a private equity group or hedge fund involved with a physician or dental practice from using a management or asset-sale contract to stop a provider from competing with the practice after leaving, and voids any such clause.", "sources": [ { "id": "stat-hsc-1191-ban", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Health & Safety Code § 1191 (SB 351)", "citation": "Cal. Health & Safety Code § 1191(d)(1).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=HSC§ionNum=1191", "proposition": "Section 1191(d) bars a management or asset-sale contract with a private-equity- or hedge-fund-controlled entity from including any clause barring a provider from competing with the practice after a termination or resignation.", "verbatimQuote": "shall not include any clause barring any provider in that practice from doing either of the following: (A) Competing with that practice in the event of a termination or resignation of that provider from that practice.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-hsc-1191-ban" }, { "id": "stat-hsc-1191-sale-exception", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Health & Safety Code § 1191 (SB 351)", "citation": "Cal. Health & Safety Code § 1191(d)(3)(A).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=HSC§ionNum=1191", "proposition": "Section 1191(d)(3) preserves an otherwise enforceable sale-of-business noncompete but provides that a contract described in the subdivision shall not operate as an employee noncompete agreement.", "verbatimQuote": "An otherwise enforceable sale of business noncompete agreement. However, a contract described in this subdivision shall not operate as an employee noncompete agreement.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-hsc-1191-sale-exception" } ] }, { "slug": "stay-or-pay", "label": "Are stay-or-pay and TRAP clauses enforceable?", "heading": "Are stay-or-pay and training-repayment (TRAP) clauses enforceable in California?", "answerText": "Increasingly not. For contracts entered into on or after January 1, 2026, Assembly Bill 692 (Business and Professions Code section 16608) makes most terms that impose a debt, penalty, or fee on a worker who leaves unlawful, and treats such a contract as void under section 16600. Labor Code section 926 gives the worker a civil action with statutory damages of $5,000 per worker.", "sources": [ { "id": "stat-16608-penalty", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Bus. & Prof. Code § 16608 (AB 692)", "citation": "Cal. Bus. & Prof. Code § 16608(b)(1)(C).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=16608", "proposition": "Section 16608(b)(1) makes it unlawful, for covered contracts entered on or after January 1, 2026, to include a term that imposes any penalty, fee, or cost on a worker if the worker's employment terminates.", "verbatimQuote": "Imposes any penalty, fee, or cost on a worker if the worker's employment or work relationship with a specific employer terminates.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-16608-penalty" }, { "id": "stat-16608-void", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Bus. & Prof. Code § 16608 (AB 692)", "citation": "Cal. Bus. & Prof. Code § 16608(c).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC§ionNum=16608", "proposition": "Section 16608(c) treats an unlawful stay-or-pay contract as a restraint of trade void under section 16600, but only if it was entered into on or after January 1, 2026.", "verbatimQuote": "A contract that is unlawful under subdivision (b) is a contract restraining a person from engaging in a lawful profession, trade, or business, and is void under Section 16600 only if the contract was entered into on or after January 1, 2026.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-16608-void" }, { "id": "stat-926-damages", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Lab. Code § 926 (AB 692)", "citation": "Cal. Lab. Code § 926(c).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB§ionNum=926", "proposition": "Labor Code section 926 gives a worker or worker representative a civil action for a section 16608 violation, with liability of actual damages or $5,000 per worker, whichever is greater, plus injunctive relief and attorney's fees.", "verbatimQuote": "Any person found liable for a violation of this section shall be liable for actual damages sustained by the worker or workers on whose behalf the case is brought, or five thousand dollars ($5,000) per worker, whichever is greater, in addition to injunctive relief, and reasonable attorney's fees and costs.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-926-damages" } ] }, { "slug": "trade-secrets", "label": "What can employers protect instead?", "heading": "What can a California employer protect instead of a non-compete?", "answerText": "Trade secrets and narrowly drawn confidentiality. The California Uniform Trade Secrets Act lets an employer enjoin the actual or threatened misappropriation of a trade secret (Civil Code section 3426.2), and that protection operates whether or not any restrictive covenant exists. But a confidentiality clause written so broadly that it bars the employee from working in their field is treated as a de facto non-compete and is void.", "sources": [ { "id": "stat-cuts-injunction", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Civ. Code § 3426.2", "citation": "Cal. Civ. Code § 3426.2(a).", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV§ionNum=3426.2", "proposition": "Civil Code section 3426.2(a), part of the California Uniform Trade Secrets Act, authorizes an injunction against actual or threatened misappropriation of a trade secret.", "verbatimQuote": "Actual or threatened misappropriation may be enjoined.", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-cuts-injunction" }, { "id": "brown-de-facto", "authorityType": "case-law", "tier": "primary-source-backed", "title": "Brown v. TGS Management Co., LLC", "citation": "Brown v. TGS Mgmt. Co., 57 Cal. App. 5th 303 (2020).", "url": "https://www.courtlistener.com/opinion/4805583/brown-v-tgs-management-co-llc/", "deepLink": "https://www.courtlistener.com/opinion/4805583/brown-v-tgs-management-co-llc/#:~:text=Collectively%2C%20these%20overly%20restrictive%20provisions,chosen%20profession%20of%20statistical%20arbitrage.", "proposition": "Brown held that confidentiality provisions defined so broadly that they barred the employee from working in his field operated as a de facto non-compete and were void under section 16600.", "verbatimQuote": "Collectively, these overly restrictive provisions operate as a de facto noncompete provision; they plainly bar Brown in perpetuity from doing any work in the securities field, much less in his chosen profession of statistical arbitrage.", "date": "2020-11-12", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-brown-de-facto" }, { "id": "stat-2019-210", "authorityType": "primary-law", "tier": "primary-source-backed", "title": "Cal. Civ. Proc. Code § 2019.210", "citation": "Cal. Civ. Proc. Code § 2019.210.", "url": "https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CCP§ionNum=2019.210", "proposition": "Code of Civil Procedure section 2019.210 requires a party alleging trade-secret misappropriation to identify the trade secret with reasonable particularity before commencing discovery relating to it.", "verbatimQuote": "before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity", "anchor": "https://openagreements.org/practice-guides/non-compete/us/california#src-stat-2019-210" } ] } ] } }