California treats restrictive covenants very differently depending on what they restrict. Covenants that limit where or for whom a person can work are almost entirely void under state law. Covenants attached to real property, by contrast, are generally enforceable, subject to a growing list of specific categories the legislature has taken off the table. Which side of that line a covenant falls on decides almost everything about whether it will hold up.
Employment Non-Competes Are Void
Business and Professions Code Section 16600 declares that any contract restraining someone from engaging in a lawful profession, trade, or business is void to that extent.1California Legislative Information. California Code Business and Professions Code 16600 – Contracts in Restraint of Trade The statute has been on the books for over a century. In 2023, the legislature strengthened it by directing courts to read Section 16600 broadly and void any non-compete clause in an employment context, no matter how narrowly tailored.
California courts apply this breadth in practice. The prohibition reaches beyond classic non-compete agreements to post-employment customer non-solicitation clauses and, in many cases, employee non-solicitation provisions. If a clause’s practical effect is to stop someone from working freely in their field or serving the clients they know, it faces serious scrutiny.
Agreements Signed in Other States
Section 16600.5, which took effect January 1, 2024, makes any non-compete that is void under this chapter unenforceable regardless of where or when it was signed.2California Legislative Information. California Code Business and Professions Code 16600.5 – Contracts in Restraint of Trade An employer cannot enforce a non-compete against a California employee simply because it was signed in Texas or New York before the employee moved. The statute also bars employers from attempting enforcement, closing a loophole some out-of-state employers had tried to exploit by arguing that another state’s law governed the contract.
Remedies for Employees
Section 16600.5 gives employees a private right of action. Any current, former, or prospective employee can sue an employer that enters into or attempts to enforce a void non-compete, and available remedies include injunctive relief and actual damages. A prevailing employee is also entitled to reasonable attorney’s fees and costs.2California Legislative Information. California Code Business and Professions Code 16600.5 – Contracts in Restraint of Trade The fee-shifting provision lets employees pursue claims without carrying the full financial risk of litigation.
Section 16600.1 separately required employers to send written, individualized notice to current and former employees (employed after January 1, 2022) whose contracts contained a non-compete, informing them the provision is void. That notice was due by February 14, 2024, and had to go out both by mail to the employee’s last known address and by email.3California Legislative Information. California Code Business and Professions Code 16600.1 – Contracts in Restraint of Trade Failing to send the required notice is treated as an act of unfair competition under Section 17200, which can trigger penalties of $2,500 per violation.4State of California – Department of Justice – Office of the Attorney General. Attorney General Bonta Issues Consumer Alert Reminding California Workers of Their Rights
The Narrow Exceptions Tied to Ownership
The prohibition has a few carefully drawn exceptions, all tied to ownership changes rather than employment relationships. Courts read them narrowly.
Section 16601 lets a person who sells the goodwill of a business, or who sells their entire ownership interest in a business entity, agree with the buyer not to compete within the geographic area where the business operated.5California Legislative Information. California Code BPC 16601 – Contracts in Restraint of Trade The restriction lasts only as long as the buyer or a successor continues operating a similar business in that area.
Section 16602 creates a parallel rule for partnerships: a partner who dissolves or dissociates may agree not to compete within the area where the partnership did business.6California Legislative Information. California Code Business and Professions Code 16602 – Contracts in Restraint of Trade Section 16602.5 extends the same rule to members leaving or dissolving a limited liability company.7California Legislative Information. California Code Business and Professions Code 16602.5 – Contracts in Restraint of Trade
In each case, the restriction must be limited to the geographic area where the business actually operated. A seller of a Sacramento-based consulting firm cannot be barred from working across the entire state. And these exceptions apply only to owners and partners, never to rank-and-file employees.
What Employers Can Still Protect
The end of non-competes does not leave employers without tools. Confidentiality agreements narrowly tailored to genuine trade secrets remain enforceable. The distinction is between restricting where or for whom someone works, which is prohibited, and restricting what information they can take with them, which is permitted within limits.
Under the California Uniform Trade Secrets Act, employers can pursue misappropriation claims when former employees use or disclose information that derives independent economic value from being secret and that the employer took reasonable steps to protect. The federal Defend Trade Secrets Act adds another avenue. What employers cannot do is dress up a broad non-compete as a trade secret agreement. A confidentiality clause that effectively prevents someone from working for any competitor, because the “trade secrets” are defined so broadly they sweep in ordinary industry knowledge, will be treated as a non-compete and voided.
During employment, the picture is somewhat more permissive because employees owe a duty of loyalty. Once the relationship ends, only information that meets the statutory definition of a trade secret can be restricted.
Real Property Covenants Start From a Presumption of Enforceability
Covenants attached to land follow a different framework. Covenants, Conditions, and Restrictions recorded against property in a common interest development are treated as equitable servitudes that run with the land, binding current and future owners. The Davis-Stirling Common Interest Development Act, in Part 5 of the California Civil Code, sets the governing rules for these communities.
The California Supreme Court set the enforceability standard in Nahrstedt v. Lakeside Village Condominium Assn., holding that recorded CC&Rs carry a presumption of reasonableness. A covenant will be enforced uniformly against all residents unless it is arbitrary, imposes burdens on the affected property that substantially outweigh the benefits to the development’s residents, or violates a fundamental public policy. Courts look at the restriction’s impact on the community as a whole, not at how it affects one homeowner’s particular situation.
That presumption is why most familiar HOA rules on architectural style, landscaping, noise, pet policies, and rental limitations generally hold up, even when individual homeowners find them inconvenient. If your HOA enforces something, it is probably enforceable, unless it falls into one of the categories California has specifically prohibited.
Real Property Covenants California Prohibits
The legislature has taken a growing list of covenant types out of the enforceability presumption. In each area below, a covenant is void or unenforceable regardless of what the CC&Rs say.
Discriminatory Covenants
Section 4225 of the Civil Code prohibits any declaration or governing document from including a restrictive covenant that violates Government Code Section 12955, which bars housing discrimination based on race, religion, sex, national origin, disability, and other protected characteristics.8California Legislative Information. California Code Civil Code 4225 An HOA must amend the declaration to remove such a covenant without needing membership approval. If the association fails to act within 30 days of written notice, the Civil Rights Department, a local government, or any individual can sue for injunctive relief, and the court may award attorney’s fees to the prevailing party.
Solar Energy Systems
Civil Code Section 714 voids any covenant that effectively prohibits or unreasonably restricts the installation or use of a solar energy system.9California Legislative Information. California Code CIV 714 – Solar Energy Systems An HOA can impose reasonable aesthetic requirements, but a restriction crosses the line if it increases the system’s cost by more than $1,000 or decreases its efficiency by more than 10%. In practice, an HOA cannot require panels only on a north-facing roof where output would be halved, or demand expensive screening that adds thousands to the installation.
Electric Vehicle Charging Stations
Section 4745 voids any covenant that effectively prohibits or unreasonably restricts the installation or use of an electric vehicle charging station within an owner’s unit or designated parking space.10California Legislative Information. California Code CIV 4745 – Electric Vehicle Charging Stations Reasonable restrictions are allowed, but they cannot significantly increase cost or decrease performance. If a homeowner submits an installation application and the association does not respond in writing within 60 days, the application is deemed approved. Common-area installations carry additional requirements, including the homeowner’s responsibility for electricity costs and maintenance.
Clotheslines and Drying Racks
Section 4750.10 voids any governing document provision that effectively prohibits or unreasonably restricts an owner’s ability to use a clothesline or drying rack in a backyard designated for the owner’s exclusive use.11California Legislative Information. California Code Civil Code 4750.10 – Clotheslines and Drying Racks Reasonable rules that do not significantly increase cost are allowed; a blanket ban is not.
The U.S. Flag and Religious Items
Section 4705 protects a homeowner’s right to display the United States flag on or in a separate interest or exclusive-use common area. The protection covers flags made of fabric, cloth, or paper displayed from a staff, pole, or in a window. It does not extend to flag depictions made of lights, paint, landscaping, or building materials. A prevailing party in a flag-display dispute is entitled to attorney’s fees.12California Legislative Information. California Code Civil Code 4705 – Display of US Flag
Section 4706 separately prohibits governing documents from restricting the display of religious items on an owner’s entry door or door frame.13California Legislative Information. California Code Civil Code 4706 A related provision in Section 1940.45 permits restrictions only when a religious item, alone or combined with others on the same door, exceeds 36 by 12 square inches in total size.14California Legislative Information. California Code CIV 1940.45 – Religious Items on Entry Doors
Antennas and Satellite Dishes
Federal law adds another layer here. The FCC’s Over-the-Air Reception Devices rule prohibits any HOA restriction that unreasonably delays or prevents the installation, maintenance, or use of antennas and satellite dishes one meter or less in diameter, as long as the device sits within the homeowner’s exclusive-use area.15eCFR. 47 CFR 1.4000 – Restrictions Impairing Reception of Television Broadcast Signals, Direct Broadcast Satellite Services, or Multichannel Multipoint Distribution Services An HOA can suggest preferred placement for aesthetic reasons, but any rule that blocks signal reception, makes installation impractical, or unreasonably raises the homeowner’s cost violates the rule. Homeowners can file complaints directly with the FCC.
Trying to Enforce or Challenge a Covenant
Before either side can sue over a CC&R, the Davis-Stirling Act generally requires an attempt at alternative dispute resolution first. Civil Code Section 5930 bars either party from filing an enforcement action in superior court unless they have first tried mediation, arbitration, or another nonjudicial process. This applies to actions seeking injunctive or declaratory relief and to damages claims within small claims limits. It does not apply to assessment disputes or small claims court filings.
If ADR fails or is refused, the dispute moves to court. A homeowner challenging a recorded CC&R has to show the restriction is arbitrary, substantially disproportionate in its impact, or in violation of public policy. For restrictions that fall into one of the prohibited categories above, the analysis is simpler: the covenant is void by statute, and the homeowner can seek a court order or compel the HOA to amend its documents. Where attorney’s fees are available by statute, as with flag display and discriminatory covenants, that shift can make enforcement or challenge realistic for individual homeowners.