Non-compete agreements are illegal in California for nearly every employee. Business and Professions Code 16600 voids any contract that keeps someone from working in their chosen profession, and two laws that took effect in 2024 closed the last common workarounds. The only real exceptions involve selling a business or leaving a partnership, not ordinary employment.
What Section 16600 Actually Says
The statute is blunt. Any contract that restrains a person from engaging in a lawful profession, trade, or business is void to that extent. It doesn’t say “unreasonable” restraints are void. It says any restraint. That single word separates California from most of the country, where courts will enforce a non-compete if the employer can show the geography and duration were reasonable.1California Legislative Information. California Business and Professions Code 16600
The California Supreme Court cemented this reading in Edwards v. Arthur Andersen LLP (2008), holding that even a narrowly written non-compete is unenforceable unless it fits a specific statutory exception. The legislature later wrote that holding directly into the statute. Subsection (b) requires courts to read Section 16600 broadly to void non-competes no matter how narrowly tailored. Subsection (c) extends the ban to situations where the restricted person didn’t personally sign the contract, cutting off attempts to embed non-compete language in third-party agreements.
The 2024 Laws That Closed the Loopholes
If you work in California, two changes that took effect on January 1, 2024, matter more than almost anything else about non-compete law.
Contracts Signed in Other States
Business and Professions Code 16600.5 makes it unlawful for any employer to enforce a non-compete against a California worker, even when the contract was signed in another state where non-competes are legal, and even when the employment began outside California. An employer that tries to enforce one, or signs a new one, has committed a civil violation. The worker can sue for injunctive relief, actual damages, and attorney’s fees.2California Legislative Information. California Business and Professions Code 16600.5
Notice to Current and Former Employees
A companion law added Section 16600.1, which required employers to send individualized written notice by February 14, 2024, to any current employee and to former employees employed after January 1, 2022, telling them any non-compete clause in their contract is void. The notice had to go to each person’s last known mailing address and email. Failing to send it is treated as an unfair business practice under California’s Unfair Competition Law.
Choice-of-Law Clauses
Some employers try to sidestep California by writing employment contracts that say another state’s law governs. Labor Code 925 blocks this for employees who primarily live and work in California. An employer cannot require these workers to litigate outside California or to give up California-law protections for disputes that arise here. Any provision that violates the section is voidable at the employee’s request, and a court can award the employee attorney’s fees.3California Legislative Information. California Labor Code 925
Even if a choice-of-law clause somehow survived a Labor Code 925 challenge, the non-compete itself is still void under Section 16600.5. Employers have to beat both layers to enforce anything.
The Exceptions Are About Business Ownership, Not Employment
California recognizes a few narrow exceptions to the ban, and every one of them ties to ownership rather than a job. When someone sells a company or leaves a partnership, the buyer or remaining owners need some protection against the seller opening a competing shop next door. Courts read these exceptions narrowly and will not stretch them to cover restrictions that are really about employment.
Sale of a Business
Business and Professions Code 16601 allows a non-compete when someone sells the goodwill of a business, sells all of their ownership interest, or when an entity sells all or substantially all of its operating assets along with goodwill. The seller can agree not to compete in the geographic area where the business operated, for as long as the buyer keeps running a similar business there.4California Legislative Information. California Business and Professions Code 16601
In Fillpoint, LLC v. Maas (2012), a California appeals court upheld a non-compete tied to a business sale and struck down a separate employment-based restriction in the same agreement. The sale exception protects the value of the deal, not an employer’s desire to limit a worker’s future career.
Partnership and LLC Dissolutions
Business and Professions Code 16602 lets a departing partner agree not to compete in the area where the partnership operated, as long as the remaining partners or a successor keep the business going there. Section 16602.5 applies the same rule to members of a limited liability company.5California Legislative Information. California Business and Professions Code 166026California Legislative Information. California Business and Professions Code 16602.5
What Employers Can Still Enforce
The ban on non-competes doesn’t leave employers without tools. It leaves them without the specific tool that stops you from working somewhere else. Several other restrictions remain enforceable, and if an employer is pressuring you about your next job, one of these is more likely the real basis.
Trade Secrets
The California Uniform Trade Secrets Act lets employers sue anyone who steals or misuses genuine trade secrets. Qualifying information has to derive economic value from being kept secret, and the business has to take reasonable steps to keep it that way. Formulas, customer databases, proprietary software, and manufacturing processes can qualify. The general skills and industry knowledge you built on the job do not.7Justia. California Civil Code Title 5 – Uniform Trade Secrets Act
In The Retirement Group v. Galante (2009), a California appeals court drew the line: an employer cannot stop you from working for a competitor, but it can get a court order preventing you from using trade secrets you took with you. Leave with nothing but your own experience, and the employer has no claim.
Nondisclosure Agreements
Confidentiality agreements that protect real trade secrets or proprietary information are enforceable. Trouble starts when employers draft them so broadly that they effectively block a worker from using ordinary industry knowledge in a new role. Courts have struck down NDAs that swept in routine information, treating them as disguised non-competes.
Non-Solicitation Clauses
Non-solicitation provisions that bar a former employee from contacting a company’s clients or recruiting its workers stand on shaky ground in California. In AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018), a California appeals court struck down a clause barring former employees from recruiting their colleagues, ruling it functioned as an illegal restraint on the right to work. The more a clause limits what you can do in your new job, the more likely a California court voids it.
Garden Leave
A garden leave clause keeps a departing employee on the payroll during a notice period while relieving them of active duties. Because the person is still technically employed and still owes a duty of loyalty, garden leave is generally permissible in California. It produces a cooling-off effect similar to a non-compete without restricting anyone’s future employment.
If an Employer Tries to Enforce a Non-Compete Against You
The law is heavily on your side. Your options depend on whether the employer is actively threatening litigation or just applying informal pressure.
The most direct path is filing a lawsuit for declaratory relief, asking a judge to formally declare the agreement void under Section 16600. That gives you a court order you can show a nervous prospective employer. You can combine it with a claim under Section 16600.5 or the Unfair Competition Law, seeking damages for income lost while the employer’s threats kept you out of work. Attorney’s fees are available under Section 16600.5, so the longer the employer presses, the more they stand to pay.2California Legislative Information. California Business and Professions Code 16600.5
If you were fired or forced to resign for refusing to sign a non-compete, you may have a separate wrongful termination claim. In D’Sa v. Playhut, Inc. (2000), a California appeals court held that an employee was wrongfully terminated on exactly those grounds. Labor Code 432.5 also prohibits employers from requiring workers to agree to any term the employer knows is illegal, and violations can support representative actions under California’s Private Attorneys General Act.8California Legislative Information. California Labor Code 432.5
What This Means for the Employer
An employer that includes a non-compete in a California employment contract, or tries to enforce an existing one, faces exposure from several directions at once:
- A civil violation under Section 16600.5, with the worker able to recover injunctive relief, actual damages, and attorney’s fees.2California Legislative Information. California Business and Professions Code 16600.5
- An unlawful business practice claim under Business and Professions Code 17200, opening the door to injunctive relief and restitution.9Justia. California Business and Professions Code Chapter 5 – Enforcement
- Wrongful termination liability if the employer fired or pushed out someone for refusing to sign.
- Labor Code 432.5 exposure for requiring an employee to agree to a term the employer knows is illegal, potentially amplified through a PAGA action.8California Legislative Information. California Labor Code 432.5
One note on the federal picture, because it comes up: the Federal Trade Commission announced a rule in April 2024 that would have banned most non-competes nationwide, but federal courts blocked it, and the FTC formally removed it from the Code of Federal Regulations effective February 12, 2026. Non-compete law is still state-by-state, and California’s ban is one of the strongest in the country.10Federal Register. Revision of the Negative Option Rule, Withdrawal of the CARS Rule, Removal of the Non-Compete Rule To Conform These Rules to Federal Court Decisions