Deadline Alert: California Employers Must Notify Employees of Void Non-Compete Agreements by February 14, 2024
Recent California laws aimed at bolstering the state’s prohibitions on non-competition agreements present immediate challenges for employers. California Assembly Bill 1076 (“AB 1076”) and Senate Bill 699 (“SB 699”) took effect on January 1, 2024, reinforcing the unenforceable status of any non-compete agreements and clauses in the employment context, except in the case of a sale or dissolution of a business. Specifically, these laws make such agreements unlawful, not just voidable. The law also requires employers to provide a notice to certain current and former California employees by February 14, 2024. The failure to comply with these new laws can result in a civil penalty and a class action lawsuit.
The notice requirement applies to current employees and former employees who were employed after January 1, 2022 and whose contracts includes an unlawful non-compete clause. The notice must be in the form of a written, individualized communication. Companies must mail it to an employee’s last known address and email it to the employee’s last known email address. This notice requirement applies to companies both in and outside of California.
As referenced above, the failure to provide the notice can result in a civil penalty. Specifically, companies that fail to comply with this requirement may be subject to a penalty of up to $2,500 per violation. What’s more, SB 699 grants employees a private right of action to sue their employer for imposing or trying to enforce a non-compete against them, even if the non-compete was entered in another state where it would have been otherwise enforceable.
It is important that employers review all employment agreements with current and former California employees hired after Jan. 1, 2022, including those who relocated to California, to determine if they contain non-compete provisions. Companies should also review their offer letter and contract template used with California employees to ensure they do not include non-compete provisions. If you require assistance in complying with these laws, please reach out to one of Honigman’s Labor and Employment Attorneys here.