In the conclusion of my Anticipated CA Labor Laws for 2024 series, we are going to explore two laws that California Governor Gavin Newsom signed in 2023 that are poised to have a significant impact on employer and employee contracts. The two new laws, Senate Bill (SB) 699 and Assembly Bill (AB) 1076, took effect this year.
Whether you’re an employee or employer, staying current with legislative changes is of the utmost importance. I am here to provide educational insights from my perspective as a mediator who engages with attorneys and their clients on these issues daily. Learn more about the predicted impacts of SB 699 and AB 1076 on the workplace.
If you haven’t read the previous installments in this series, visit SB 616 & SB 848 Increase Paid Sick Leave & Reproductive Loss Leave, AB 1228 & SB 525 Increase Fast Food & Healthcare Pay, and SB 699 & AB 1076 Non-Compete Agreements & Employee Restrictive Covenants, for a better understanding of this new legislation that will shape the future of employment law. So, without further ado, let’s get into it.
SB 699: Non-Compete Agreements
I discussed SB 699 in a recent article, but it is worth revisiting. Governor Newsom ratified this law on September 1, 2023, and it took effect on January 1, 2024. SB 699 reinforces the current state law that voids contracts that restrain an employee from engaging in a lawful profession, trade, or business of any kind.
“Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”
– California Business and Professions Code section 16600
California courts have set a clear precedent in interpreting this law as prohibiting post-employment noncompetition, non-solicitation of customers, and non-solicitation of employee agreements, with some exceptions, like restrictive agreements in the sale or dissolution of corporations, partnerships, and limited liability corporations.
SB 699 further buttresses this existing law by adding that any contract void under section 16600 is unenforceable, regardless of where and when the contract was signed.
Additionally, employers and former employers are prohibited from enforcing contracts that restrict an employee’s ability to engage in a lawful profession, trade, or business, even if the contract was signed and the employment was maintained outside of California.
Under this expansion of the current law, employers are not allowed to enter into a contract with an employee or prospective employee that includes noncompete clauses and other restrictive covenants that are void under 16600 at the risk of incurring civil violations.
SB 699 also adds clear enforcement rights for employees to challenge restrictive contracts, which includes recovery of attorney’s fees. Under this law, employees can file lawsuits against an employer to get non-compete agreements declared void.
AB 1076: Employee Restrictive Covenants
On October 13, 2023, Governor Newsom also signed AB 1076. This bill, which took effect on January 1, 2024, adds a provision to section 16600 that codifies Edwards v. Arthur Andersen LLP, and voids non-compete agreements in employment, “no matter how narrowly tailored.”
Notably, AB 1076 is not intended to serve as a change in the law but to be “declaratory” of existing law. This new law does not just make non-compete provisions void under Section 16600; it makes non-compete provisions unlawful. Violating this law can now result in a civil penalty of up to $2,500 per violation.
In the aforementioned Edwards case, the California Supreme Court ruled that even a narrowly drawn noncompete agreement that does not entirely prohibit a former employee from engaging in their former profession, trade, or business still violates California Business and Professions Code section 16600 unless the agreement is specifically classified under one of this code’s narrow exceptions.
AB 1076 also places a notification requirement on employers to notify current and former employees who were employed after January 1, 2022, in writing by February 14, 2024, that any noncompete agreements they reached are now void. Employers must send this notice to the last known address and email address of each former employee.
Failure to provide notice can subject employers to civil penalties of up to $2,500 per violation. Still, it remains to be seen if courts will interpret the bill to require notice of these types of agreements and clauses.
Mediation & Conflict Resolution
This concludes my highlights of Anticipated CA employment laws for 2024 series! I greatly appreciate you taking time to read these blogs. As we continue into 2024, it is essential to keep current with new developments and the law and trends in the workplace.
Whether you are an employee or employer, and/or legal counsel representing employees or employers, if you need help mediating or resolving conflicts regarding new laws regarding non-compete agreements or related matters, working with a trusted mediator and objective third party like myself can benefit everyone involved. It is my sincere belief that mediation and alternative dispute resolution are almost always the best choices to avoid the draining, expensive, and time-consuming process of litigation and receive the best guarantee of closure.
Experienced Employment & Title IX Mediator & ADR Professional
I am a former employment and labor law attorney turned mediator, ADR, and conflict resolution specialist who believes it is important to educate the general public on recent developments in employment law and the workplace trends that impact them. My more than 20 years experience as a media legal analyst and contributor have led to my own radio show on Tavis Smiley’s KBLA Talk 1580, “Legal Lens with Angela Reddock.” I also am a regular speaker and blogger on employment law and issues related to the workplace.
Also, learn more about my book – The Workplace Transformed: 7 Crucial Lessons from the Global Pandemic – here – https://angelareddock-wright.com/book/.
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For more information regarding mediation and dispute resolution resources for both employees and employers, connect with let’s connect on LinkedIn for new updates or contact me here. You may also follow me on Instagram.
This communication is not legal advice. It is educational only. For legal advice, consult with an experienced employment law attorney in your state or city.