In this guide9 sections
- The rule: Business and Professions Code 16600
- Signed it in another state? Section 16600.5
- The notice requirement: Section 16600.1
- The narrow exceptions
- Non-solicitation, confidentiality and trade secrets
- Stay-or-pay and training repayment agreements
- What you can recover
- What to do if your employer threatens you
- Frequently asked questions
Yes, non-compete agreements are void in California for nearly all employees: your former employer cannot stop you from working for a competitor or starting your own business, even if you signed a non-compete. California has refused to enforce employee non-competes for well over a century, and recent laws made the rule stronger, adding notice requirements, reaching contracts signed in other states, and giving workers the right to sue.
That matters because employers still use them. Many workers turn down better jobs, or get a frightening letter from a former employer’s lawyer, because of a clause that has no legal force here. An employer that tries to enforce a void non-compete can end up paying the worker’s damages and attorney’s fees.
This guide explains the rule in Business and Professions Code 16600, how it applies to contracts signed outside California, the 2024 notice requirement, the narrow exceptions, where non-solicitation and trade secret rules fit in, and what to do if your employer comes after you.
- Almost every employee non-compete is void in California under Business and Professions Code 16600, no matter how “reasonable” it looks.
- Under Section 16600.5, a non-compete is unenforceable in California regardless of where or when you signed it, and employers cannot try to enforce one.
- Employers had to send written notice by February 14, 2024 telling current and many former employees that their non-competes are void (Section 16600.1).
- Customer non-solicitation clauses are generally void too, but you still cannot take or use trade secrets.
- If an employer tries to enforce a void non-compete, you can sue for damages, an injunction and your attorney’s fees.
The rule: Business and Professions Code 16600
Section 16600 says that, except as specifically allowed by statute, every contract that restrains anyone from engaging in a lawful profession, trade or business is void. In Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, the California Supreme Court held that the statute means what it says. There is no “reasonableness” exception, and even a narrow restraint, like a promise not to work with former clients for 18 months, is void unless a statutory exception applies.
In 2024 the Legislature added language confirming that Section 16600 must be read broadly, as Edwards did, and that it covers non-compete clauses in employment however narrowly drawn (Bus. & Prof. Code 16600(b)).
In practice, this means a clause that bars you from working for a competitor, opening a competing business, or working in your industry within a certain distance or time period after you leave is generally unenforceable against you in California.
Signed it in another state? Section 16600.5
Since January 1, 2024, Section 16600.5 has made a void non-compete unenforceable in California regardless of where and when the contract was signed, and regardless of whether you worked outside California when you signed it. The statute also makes it unlawful for an employer to:
- Attempt to enforce a void non-compete against you;
- Enter into a contract with an employee or prospective employee that includes a void non-compete.
A related law, Labor Code 925, generally prevents an employer from requiring a California-based employee to agree, as a condition of employment, to litigate claims outside California or give up California law protections, unless the employee was individually represented by a lawyer in negotiating the contract.
Out-of-state employers sometimes still sue in their home states. How those cases play out can depend on the other state’s courts, so if you are threatened with a lawsuit outside California, talk to a lawyer right away.
The notice requirement: Section 16600.1
Section 16600.1 made it unlawful to include a non-compete clause in an employment contract, or to require an employee to sign one, unless an exception applies. It also required employers to send a written, individualized notice by February 14, 2024 to current employees, and to former employees who were employed after January 1, 2022, whose contracts included a non-compete clause, telling them the clause is void.
The notice had to go to the worker’s last known mailing address and email address. Failing to send it is a violation of the Unfair Competition Law.
If you never got the notice and your agreement contains a non-compete, that is not a reason to worry that the clause still applies. The clause is void either way. But the missing notice may be one more violation to raise if your employer tries to restrict you.
A cease-and-desist letter over a non-compete is often more bluff than law in California. We can review your agreement and the letter and tell you where you stand. Free consultation.
The narrow exceptions
The statutory exceptions are about selling or leaving a business, not ordinary employment:
| Situation | Can a non-compete be enforced? | Law |
|---|---|---|
| Ordinary employee, any industry or pay level | No | Bus. & Prof. 16600, 16600.5 |
| Owner sells the goodwill of a business or all of their ownership interest | Yes, within the area where the business operated | Bus. & Prof. 16601 |
| Partner leaving or dissolving a partnership | Yes, within limits | Bus. & Prof. 16602 |
| Member leaving or dissolving an LLC | Yes, within limits | Bus. & Prof. 16602.5 |
| Competing while still employed | Restrictions generally allowed | Duty of loyalty |
The last row matters: while you still work for an employer, you generally owe it a duty of loyalty and cannot secretly compete or solicit its customers for a rival. You can, however, generally prepare to compete, such as interviewing or planning a business, before you leave.
Non-solicitation, confidentiality and trade secrets
Customer non-solicitation clauses are generally void under Edwards. You can usually announce your new job and do business with former customers who choose to follow you.
Employee non-solicitation clauses, which bar you from recruiting former coworkers, have also been held void. In AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, the Court of Appeal refused to enforce one under Section 16600.
Trade secrets are different. California’s Uniform Trade Secrets Act (Civil Code 3426 and following) still protects confidential information that has value because it is secret, such as non-public customer lists with pricing and preferences, formulas or source code. Taking files, downloading customer databases, or using that information to solicit customers can expose you to liability even though your non-compete is void.
Confidentiality agreements are generally valid to the extent they protect real trade secrets, but a confidentiality clause written so broadly that it effectively keeps you out of your field can itself be void.
💡 Example: Priya, a sales manager, leaves for a competitor. Her old employer sends her new employer a letter citing her non-compete, and the new employer delays her start date by 3 months. Priya earns $8,000 a month, so the delay costs her 3 × $8,000 = $24,000 in wages. Because her old employer tried to enforce a void non-compete, she may be able to sue for those damages, an injunction and her attorney’s fees under Section 16600.5.
Stay-or-pay and training repayment agreements
Some employers try to get the effect of a non-compete in another way: requiring you to repay training costs, sign-on bonuses or other amounts if you leave before a set date. Beginning January 1, 2026, California law (AB 692) generally prohibits employers from requiring workers to sign these “stay-or-pay” terms in contracts entered into on or after that date, with limited exceptions, such as certain repayment arrangements for transferable credentials or discretionary sign-on bonuses that meet specific conditions.
If you are being told you owe money for leaving, have the agreement reviewed. Depending on when you signed it and what it covers, the repayment demand may be unenforceable.
What you can recover
Section 16600.5 gives employees, former employees and prospective employees a private right of action. If your employer tries to enforce a void non-compete or makes you sign one, you can ask a court for:
- An injunction stopping the employer from enforcing the clause;
- Your actual damages, such as lost wages from a delayed or lost job;
- Reasonable attorney’s fees and costs.
Firing a worker for refusing to sign an unlawful non-compete can also support a claim for wrongful termination in violation of public policy. Labor Code 432.5 separately prohibits employers from requiring workers to agree to terms the employer knows are prohibited by law. See our wrongful termination page.
What to do if your employer threatens you
- Do not panic, and do not ignore it. A void non-compete cannot stop you from working, but a lawsuit or a letter to your new employer still needs a response.
- Collect your documents: the agreement, your offer letter, any notice under Section 16600.1, and the threatening letter.
- Return company property and do not take files. Delete nothing that may be evidence, but do not keep company data.
- Tell your new employer you are getting legal advice, and do not sign new restrictions to smooth things over.
- Have a lawyer respond. A letter explaining Sections 16600 and 16600.5, and the employer’s exposure to fees, often ends the matter.
If you are also being asked to sign a severance agreement with restrictive covenants, read our guide to severance agreement review first.
Frequently asked questions
Is a non-compete enforceable if I am a high-level executive?
Generally no. Section 16600 has no exception for executives or high earners. The exceptions apply to selling a business or leaving a partnership or LLC, not to job title or salary.
Can my old employer sue my new employer?
It may threaten to, but it cannot enforce a void non-compete in California. It can sue if it believes trade secrets were taken, so keep your hands clean of company data.
Can I contact former customers?
Generally yes, as long as you are not using trade secret information to do it. Publicly available information and your own general knowledge and skill are yours to use.
What does it cost to fight a non-compete threat?
Because the law lets you recover attorney’s fees, these cases can be handled in ways that keep your out-of-pocket costs low. See how much an employment lawyer costs.
Can my employer make me sign a non-compete to keep my job?
No. Section 16600.1 makes it unlawful for an employer to require an employee to enter into a non-compete that does not fit a statutory exception, and Labor Code 432.5 bars employers from requiring workers to agree to terms the employer knows are unlawful. If you were fired or threatened with firing for refusing to sign, that can support a wrongful termination claim. Keep a copy of the document you were asked to sign and any message tying your job to signing it.
Does a non-compete in a severance agreement change anything?
No. A non-compete in a severance or separation agreement is void for the same reasons as one in an offer letter, and Section 16600.5 makes it unlawful for an employer to enter into a contract that includes one. If your severance agreement contains a non-compete or a customer non-solicitation clause, ask for it to be removed before you sign; the rest of the agreement may still be negotiable.
Workers only. Never employers.
At Employees First Labor Law, we represent California workers only, never employers. Our team has recovered more than $200 million for workers, and we prepare every case as if it is going to trial. We have offices in Pasadena, Irvine, Long Beach, Pomona, Riverside, Bakersfield and Fresno, and we serve workers throughout California. Meet our team.
We help California workers who are threatened with void non-competes, sued over customer contacts, or fired for refusing to sign illegal restrictions. We can push back on the employer and pursue damages and attorney’s fees, and we never charge a fee unless we win.
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This article provides general information about California law and is not legal advice for any specific situation. Reading it does not create an attorney-client relationship. Past results do not guarantee a similar outcome.
