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Non-Compete Agreements in California: Unenforceable Under Business & Professions Code § 16600

If your California employer asked you to sign a non-compete agreement, here’s what you need to know: the contract is almost certainly void and unenforceable. California law takes a clear stance against non-compete clauses that prevent workers from earning a living in their profession or trade.

This guide explains why California bans non-compete agreements, what the law says, the rare exceptions that do exist, and what you should do if your employer tries to enforce one against you.

Why California Bans Non-Compete Agreements

California’s approach to non-competes is uniquely protective of workers and competition. The state has decided that the benefits of allowing people to work freely outweigh any harm that might come from employees taking business knowledge elsewhere.

The Core Law: Business & Professions Code § 16600

California’s main statute on this issue is straightforward. Business & Professions Code § 16600 states:

“Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

This language is intentionally broad. It doesn’t say “unreasonable” non-competes are void. It doesn’t allow for “narrow restraints.” The law simply says that any contract preventing someone from working in their profession is void.

What Non-Competes Actually Do

A non-compete agreement typically tries to prevent you from working for a competitor or starting a competing business for a set period (often 6 months to 2 years) after leaving your employer.

For example, a non-compete might say: “You cannot work for any competitor of Company X within 50 miles for 18 months after you leave.”

These agreements create a problem. They don’t just protect an employer’s legitimate business interests (like trade secrets). They also prevent workers from using their skills and experience to earn a living. This harms the worker and reduces healthy competition in the marketplace.

California decided long ago that this tradeoff isn’t worth it.

The Edwards v. Arthur Andersen Decision

The California Supreme Court clarified this position in a landmark case that settled the debate over so-called “narrow restraints.”

The Case Background

Raymond Edwards worked for Arthur Andersen, the accounting firm, as a tax manager. When he was hired in 1997, Arthur Andersen required him to sign a non-compete agreement. The agreement barred Edwards from performing the same professional services for any of Arthur Andersen’s clients for 18 months after leaving.

This wasn’t a broad, nationwide restriction. It was limited to Arthur Andersen’s clients and lasted only 18 months. It seemed reasonable and narrow on its face.

When Edwards left the firm, Arthur Andersen tried to enforce the agreement. Edwards challenged it in court.

The Supreme Court’s Ruling (2008)

The California Supreme Court ruled unanimously that the agreement was void under § 16600—even though it was narrowly tailored.

The court rejected the idea that California law allows an exception for “narrow restraints” on competition. Federal courts (particularly in the Ninth Circuit) had previously suggested such an exception might exist. California’s highest court said no.

The reasoning was simple: If the Legislature wanted to allow “reasonable” or “narrow” non-competes, it could have said so. The statute makes no such distinction. It says all contracts restraining someone from engaging in their profession are void.

Why This Matters

Edwards v. Arthur Andersen means that no matter how reasonably written or narrowly tailored your non-compete is, California courts will not enforce it. A non-compete limited to:

  • A small geographic area
  • A short time period
  • Specific competitors or clients

…is still void.

This clarity benefits California workers and employers who compete fairly rather than through restrictive covenants.

Recent Strengthening: Senate Bill 699 (2023)

California strengthened its non-compete ban even further in 2023 with Senate Bill 699, which Governor Newsom signed into law on September 1, 2023.

What SB 699 Added

Extraterritorial Reach: The new law makes clear that non-compete agreements are void under California law regardless of where you worked when you signed the agreement or where the agreement says it applies. If you’re a California resident or worked in California, the law protects you even if the non-compete says it’s governed by another state’s law.

Prohibition on Attempts to Enforce: Employers are not only prohibited from enforcing non-competes—they’re also barred from “attempting to enforce” them. This means threatening legal action or sending cease-and-desist letters about a non-compete violates the law.

Private Right of Action: If an employer tries to enforce or threatens to enforce a void non-compete against you, you can sue for:

  • Injunctive relief (a court order stopping the action)
  • Actual damages (money you lost)
  • Attorney’s fees and court costs

The February 2024 Notification Requirement

SB 699 included another provision: employers were required to notify all California employees by February 14, 2024, that any non-compete agreements they signed are void and unenforceable.

Many California employers missed this deadline or provided inadequate notice. If your employer tried to collect signatures saying they’d comply with this requirement or failed to notify you entirely, that’s another violation of the law.

The Rare Exceptions: When Non-Compete-Like Restrictions Do Apply

While non-competes are essentially always void for employees, California law does allow two narrow exceptions related to business transactions.

Exception 1: Sale of a Business

When someone sells their entire business or sells substantially all of the assets of a business, the buyer can require the seller not to compete for a reasonable period in the same geographic area.

Important: This exception applies to people selling a business, not to employees of that business. If you’re sold along with your employer’s business, you generally still can’t be bound by a non-compete.

Exception 2: Dissolution of a Partnership or Limited Liability Company

When a partnership dissolves or a member of an LLC leaves, the partnership or LLC can include non-compete provisions in the departure agreement—but only if the non-compete is limited to the partnership’s or LLC’s geographic area and clients.

This exception makes sense because partners and LLC members have different legal status than employees. They’re partial owners, not workers.

What About Non-Solicitation Agreements?

Non-compete agreements are different from non-solicitation agreements. A non-solicitation agreement says you can’t solicit your former employer’s customers or employees, typically for a limited period.

California courts sometimes enforce narrow non-solicitation agreements focused on legitimate business interests like trade secrets or confidential information. These are treated more favorably than non-competes because they don’t prevent you from working entirely—they just limit who you can work with.

If you have a non-solicitation agreement, you’re in a different legal situation than someone with a non-compete. Learn more in our guide to non-solicitation agreements in California.

What to Do If Your Employer Tries to Enforce a Non-Compete

If your employer has told you that you can’t work elsewhere, sent a cease-and-desist letter, threatened legal action, or attempted to enforce a non-compete in any way, here are your options.

Document Everything

Keep records of:

  • The original non-compete agreement
  • Any communications about enforcing it (emails, letters, phone call notes)
  • Dates and details of what happened
  • Any impact on your job prospects or income

Understand Your Leverage

Your employer is already violating California law by trying to enforce a void agreement. This is a significant legal problem for them. Many employers don’t realize this and back off immediately when confronted with the law.

Send a Clear Response

Consider having an attorney send a letter stating:

  • The non-compete is void under Business & Professions Code § 16600
  • SB 699 makes it illegal to attempt to enforce it
  • You expect the employer to cease all enforcement efforts
  • You reserve the right to pursue legal remedies if they continue

Many employers stop when they receive this letter.

File a Complaint with the State

You can file a complaint with the California Labor Commissioner about your employer’s violation of SB 699. The Labor Commissioner’s office can investigate and take action.

Sue for Damages and Attorney’s Fees

If your employer continues to pursue enforcement despite knowing the law, or if their actions damaged you financially or professionally, you can sue under SB 699. You’re entitled to actual damages and, importantly, attorney’s fees.

The attorney’s fees provision is crucial. It means you might be able to pursue your claim with an attorney on a contingency basis, even if your actual damages aren’t large.

Defend Yourself If Sued

If your employer files a lawsuit to enforce the non-compete, your attorney should immediately move to dismiss the case, citing § 16600 and Edwards v. Arthur Andersen. Courts routinely dismiss non-compete cases at early stages.

Key Takeaways

Non-compete agreements are void in California. This rule applies regardless of:

  • How narrowly written the agreement is
  • How reasonable it might seem
  • Where the agreement was signed or says it applies
  • What other states’ laws it references

SB 699 strengthened the ban by making it illegal to attempt to enforce non-competes and creating a private right of action if an employer tries.

Rare exceptions exist for the sale of an entire business and dissolution of partnerships or LLCs—but these don’t protect employees.

You have rights if your employer tries to enforce a non-compete. You can seek legal remedies, recover damages, and obtain attorney’s fees.

If you’re facing a non-compete enforcement situation, consult with an employment law attorney. The vast majority of these cases are resolved quickly once an employer understands that California law provides no protection for such agreements.

Related Resources

References

Edwards v. Arthur Andersen LLP, 44 Cal.4th 937, 189 P.3d 285 (2008)

California Business and Professions Code §§ 16600, 16600.1, 16600.5

Senate Bill 699, California Legislative Session 2023-2024