You may have received one or more well-meaning email blasts trumpeting what sound like massive changes to California’s law on noncompetes. Some of the emails imply that now, as a result of these changes, noncompetes are unenforceable in California. In my opinion, these emails have overstated the extent of the changes. Especially in the context of mergers and acquisitions (M&A).
The basic law regarding noncompetes in California has not changed: no company can prevent a non-employee from competing, other than in connection with the sale of a business. But the seller of a business can still agree not to compete with the buyer. That hasn’t changed.
The new law basically does three things:
- It clarifies that noncompetes in the employment context are unforceable regardless of where the agreement was signed or which state’s law supposedly governs the contract.
- If an employer tries to make an employee sign an unenforceable noncompete, that’s a civil violation and the employer can be fined.
- Employers who have made employees sign unenforceable noncompetes in the past must notify the employees that the noncompete is unenforceable.
Although the February 14 deadline for notifying employees has passed, it’s probably still a good idea to notify employees, to show a good faith effort at compliance. A late notice is better than no notice, and may prevent the company from being fined or at least reduce the amount of the fine. If you believe that your company may have made employees sign unenforceable noncompetes, you should reach out to your company’s employment law attorney about sending the required notices.
I hope this clarifies this new law regarding noncompetes. Thanks,
Rick
This post is not intended and should not be relied upon as legal or tax advice pertaining to any specific matter. You are encouraged to seek competent legal and tax counsel before proceeding with any transaction involving any of the matters discussed above.