California employers who have non-compete provisions contained within their employment-related agreements may have an affirmative obligation to take action by February 14, 2024.
Assembly Bill 1076 (AB1076), codified as Business & Professions Code section 16600.1, significantly impacts the use of non-compete agreements in the workplace. Below is a practical overview to help employers understand their obligations under AB1076.
Key Provisions of AB1076
Non-compete Agreements are Largely Prohibited: AB1076 makes it clear that non-compete agreements are generally void in California. This has already been the case under California legal precedent, where California emphasizes that any contract preventing an individual from engaging in their profession or trade is invalid, with few exceptions.
Notification Requirements for Existing Non-compete Agreements: If an employer has an existing non-compete agreement with an employee who was hired after January 1, 2022, the employer must notify the employee by February 14, 2024, that the agreement (or non-compete provision within an agreement) is void. This communication should be individualized and sent to the employee’s last known physical and email addresses.
Legal Consequences for Noncompliance: Violating AB1076 is considered an act of unfair competition. This means noncompliance could lead to legal challenges and penalties, making it imperative to align employment agreements with this new standard.
What Employers Need to Do
Review Your Contracts: Examine all existing employment contracts, especially focusing on any non-compete clauses. Ensure they comply with AB1076 and whether the agreement may fit within the limited exceptions it allows.
Update Policies and Procedures: Revise your hiring and contract processes to eliminate the inclusion of non-compete provisions that don’t meet the exceptions in AB1076.
Notify Affected Employees: For those currently under noncompliant non-compete agreements, prepare and send out the required notifications promptly.
We’re here to help. Navigating these changes can be complex, but you don’t have to do it alone. Our team is equipped to guide employers through every step of this process.
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