Contents

IMPORTANT WARNING

The New California Business & Profession Code §16600.1

What are the Major Exemptions Specified in §16600, et seq.?

IMPORTANT WARNING

This blog article provides an IMPORTANT WARNING to all California's Employers.

From 1 Jan 2024:

All California Employers MUST send an individualized communication/letter by Valentines Day (14 February 2024) to all current and former (if employed after 1 Jan 2022) employees' (last known address and email address):

1️⃣ If they signed an employment agreement containing a non-compete clause; or

2️⃣ If they signed a non-compete agreement.

Under the new California Business & Profession Code §16600.1, the communication MUST notify them the non-compete is VOID unless the non-compete clause or agreement falls within one of the statutory exceptions outlined in Business and Professions Code section 16600, et seq. 

A violation of this new section constitutes an act of Unfair Competition.

Please Note: Senate Bill 699 provides that the ban extends to cover non-compete clauses in employment agreement and non-compete agreements regardless of:

⚖️ The State in which it was signed; and/or

⚖️ The State in which the employee worked.

The New California Business & Profession Code §16600.1

16600.1. (a) 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.

(b) (1) For current employees, and for former employees who were employed after January 1, 2022, whose contracts include a noncompete clause, or who were required to enter a noncompete agreement, that does not satisfy an exception to this chapter, the employer shall, by February 14, 2024, notify the employee that the noncompete clause or noncompete agreement is void.                                          

(2) Notice made under this subdivision shall be in the form of a written individualized communication to the employee or former employee. employee, and shall be delivered to the last known address and the email address of the employee or former employee.

(c) A violation of this section constitutes an act of unfair competition within the meaning of Chapter 5 (commencing with Section 17200).

What are the Major Exemptions Specified in §16600, et seq.?

16600. 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.

Sale of a Business

16601. 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.

Partnerships

16602. (a) 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.

(b) Subdivision (a) applies to either of the following circumstances:

(1) A dissolution of the partnership.

(2) Dissociation of the partner from the partnership.

Dissolution or Termination of Member's Interest in an LLC

16602.5 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.

Sale or Consignment of any Magazine, Book, or other Publication

16604 Every person who, as a condition to a sale or consignment of any magazine, book, or other publication, requires that the purchaser or consignee purchase or receive for sale any other magazine, book, or other publication is guilty of a misdemeanor, punishable by imprisonment in the county jail not exceeding six months, or by fine not exceeding one thousand dollars ($1,000), or by both such imprisonment and such fine.

This section is not intended to prohibit an agreement requiring a person to purchase or accept on consignment a minimum number of copies of a single edition or issue of a magazine or of a particular book or other particular publication.

Source: New California Law Makes Non-Compete Agreements Unlawful, Not Just Void National Law Review article dated Saturday, October 14, 2023.

by: Clifford R. Atlas , Adrienne L. Conrad , Julia A. Olivier , Daniel S. Smith of Jackson Lewis P.C.  -  California Workplace Law Blog

‍Social Sharing Image: Courtesy of Neil Mark Thomas on Unsplash

Credits: This blog article was written by James D. Ford Esq., GAICD CIPP/US CC | Attorney-at-Law, Blue Ocean Law Group℠.

Important Notice:

This blog article is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.