How California treats non-competes and NDAs
Non-competes are void here, with narrow exceptions, and employers must notify employees who signed them. NDAs survive but are limited.
California's treatment of restraints on employment is among the most employee-favourable anywhere, and it is a genuine factor in why talent moves so freely between companies here.
Non-competes
Agreements restraining someone from engaging in a lawful profession or business are void, subject to narrow exceptions — principally in connection with the sale of a business or the dissolution of a partnership, where the restriction protects goodwill actually purchased.
The rule is not merely that such clauses are unenforceable in court. Employers may not require them, and requiring one can itself create liability.
Notice
Employers who required non-compete clauses that are now void have obligations to notify affected current and former employees in writing that the clause is void. This is a positive duty, not a passive one.
What still works
Trade secret protection remains fully available. An employee may move freely and still may not take confidential information.
Non-solicitation of customers is treated with scepticism where it functions as a restraint on practising a profession. Confidentiality agreements are enforceable within limits.
“The line is between protecting information and preventing employment. The first is available; the second is not.”
NDA limits
Statute restricts agreements that prevent disclosure of unlawful acts in the workplace, including harassment and discrimination. Clauses purporting to silence a person about such conduct are unenforceable in defined circumstances.
Practical points
- Review template agreements for inherited non-compete language.
- Protect trade secrets properly, since that is the remaining tool.
- Check NDA wording against the carve-outs required by statute.
