📋 Non-Competes Are Generally Void in California

✅ California's Clear Rule

Under Business and Professions Code Section 16600, non-compete agreements that restrict an employee from engaging in a lawful profession, trade, or business are VOID and UNENFORCEABLE in California.

California has the strongest employee mobility protections in the United States. Unlike most other states that analyze non-compete agreements for "reasonableness," California takes a categorical approach: non-compete clauses in employment contracts are void as a matter of public policy, with only very narrow statutory exceptions.

What This Means for You

If your former employer is threatening to enforce a non-compete agreement, you likely have strong legal grounds to:

✓ Work for a Competitor

You can accept employment with a competing business, even in the same industry and geographic area

✓ Start Your Own Business

You can start a competing business using your general skills and knowledge

✓ Solicit Former Clients

General client relationships are not protectable - you can contact former clients (with caveats for trade secrets)

✓ Use General Skills

Your training, experience, and general industry knowledge belong to you, not your former employer

Why Employers Still Include Non-Competes

Despite California law, many employers - especially those headquartered outside California - include non-compete clauses in employment agreements. They do this because:

  • Intimidation effect: Many employees don't know their rights and are scared into compliance
  • Form contracts: National employers use the same template across all states
  • Confusion with other restrictions: Employers conflate non-competes with legitimate protections (trade secrets, NDAs)
  • Choice of law clauses: Some employers attempt to apply other states' laws (this usually fails in California)

⚠ Trade Secrets Are Different

While non-compete agreements are void, trade secret protections are very much enforceable in California. Your former employer CAN sue you for:

  • Misappropriating confidential business information
  • Taking customer lists, pricing data, or proprietary processes
  • Using or disclosing trade secrets to benefit a competitor

This guide focuses on non-compete agreements. If trade secret issues are involved, the analysis is different.

💡 Related Employment Issues

Understanding California's employment classification rules is also important when evaluating your rights. See our guide on California's exempt administrative employee definition for more on employment classifications.

🚫 Narrow Exceptions

While non-compete agreements are generally void in California, the Business and Professions Code does provide three narrow statutory exceptions. These apply only in specific business sale and partnership contexts - NOT to ordinary employment relationships.

The Three Statutory Exceptions

💼 Exception 1: Sale of Business (B&P Code 16601)

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A person who sells the goodwill of a business, or the entire business itself, may agree with the buyer not to carry on a similar business within a specified geographic area, as long as the buyer continues to carry on a like business in that area.

Requirements:

  • Must be a bona fide sale of business goodwill or ownership interest
  • Seller must receive valuable consideration (payment for the business)
  • Geographic scope must be related to where the business operates
  • Does NOT apply to ordinary employment - only business sales

Example: You sell your dental practice to another dentist. You can validly agree not to open a competing practice within 10 miles for 5 years.

🤝 Exception 2: Dissolution of Partnership (B&P Code 16602)

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Partners may agree that upon dissolution of or dissociation from the partnership, they will not carry on a similar business within a specified geographic area where the partnership business has been transacted.

Requirements:

  • Must be an actual partner (not an employee with a "partner" title)
  • Applies to general partnerships, limited partnerships, and LLPs
  • Geographic scope limited to where partnership conducted business
  • Must be triggered by dissolution or partner dissociation

Example: You and two partners dissolve your accounting partnership. Each partner can agree not to compete in the same city for a reasonable period.

🏢 Exception 3: Sale of LLC Membership (B&P Code 16602.5)

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Members of a limited liability company may agree upon dissolution, or sale of the LLC or all of substantially all of its assets, not to carry on a similar business within a specified geographic area where the LLC business has been transacted.

Requirements:

  • Must be an LLC member (ownership interest, not just employment)
  • Triggered by dissolution or sale of the LLC/assets
  • Geographic area must relate to LLC's business territory
  • Does not apply to employees of the LLC

Example: You sell your 40% membership interest in an LLC to the other members. You can agree not to compete in the LLC's market area.

❌ These Exceptions Do NOT Apply To:

  • Regular employees - Even high-level executives, "key employees," or those with equity compensation
  • Independent contractors - Contractor agreements cannot include enforceable non-competes
  • Employees with stock options - Equity incentives do not convert an employee into a business owner
  • "Partner" track employees - Unless they have actual ownership, the label doesn't matter
  • Founders who become employees - If you sold your equity and now just work there, you're an employee

What About Non-Solicitation Agreements?

California courts have increasingly treated non-solicitation agreements (restricting contact with former clients or employees) as a form of non-compete that violates Section 16600:

❌ Customer Non-Solicitation

Agreements prohibiting you from soliciting former customers are generally VOID as an unlawful restraint on your profession

❌ Employee Non-Solicitation

Agreements prohibiting you from recruiting former colleagues are increasingly held VOID under the same analysis

⚠ During Employment

Some restrictions on solicitation during employment may be enforceable as a matter of employee loyalty duties

What IS Enforceable?

While non-compete and non-solicitation clauses are generally void, employers can legitimately protect:

🔒 Trade Secrets

Confidential information, customer lists compiled with substantial effort, proprietary processes, formulas, and other trade secrets are protected under California's CUTSA and DTSA

📄 Confidential Information

NDAs protecting truly confidential business information are enforceable, though they cannot be so broad as to prevent you from working in your field

🛠 Inventions & IP

Agreements assigning work-related inventions to the employer are generally enforceable (with some carveouts for employee's personal inventions under Labor Code 2870)

📝 Sample Response Language

If your former employer has threatened to enforce a non-compete agreement, use these sample paragraphs to respond. These are templates - customize them to your specific situation.

Opening - Asserting Unenforceability
I am writing in response to your letter dated [DATE] regarding the non-compete provision in my former employment agreement with [COMPANY NAME]. Please be advised that the non-compete clause you are attempting to enforce is VOID and UNENFORCEABLE under California Business and Professions Code Section 16600, which states that "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."
Citing Edwards v. Arthur Andersen
The California Supreme Court has unequivocally held that Section 16600 prohibits any restraint on an employee's ability to practice their profession. In Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, the Court rejected the argument that "narrow" or "reasonable" non-compete restrictions should be enforceable. The Court held that California does not follow the common law "rule of reason" applied in other jurisdictions. Under California law, non-compete clauses are categorically void - not merely voidable if unreasonable.
Rejecting Choice of Law Clause
Your letter references a choice of law provision designating [OTHER STATE] law. This provision is unenforceable with respect to the non-compete clause. California courts have consistently held that California's strong public policy protecting employee mobility overrides contractual choice of law provisions. See Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881. Because I performed my work in California, California law applies to the enforceability of any restrictive covenants, regardless of what the contract states.
Distinguishing Trade Secrets
To be clear, I have not and will not misappropriate any trade secrets or confidential information belonging to [COMPANY NAME]. I did not take any documents, files, customer lists, or proprietary information when I departed. However, my general skills, training, industry knowledge, and professional relationships are my own property and cannot be restricted by a void non-compete agreement. California law recognizes this distinction - trade secrets are protectable, but an employee's human capital is not.
Demanding Confirmation and Withdrawal
I demand that [COMPANY NAME] immediately: (1) confirm in writing that you will not pursue any legal action based on the void non-compete provision; (2) withdraw any threats of litigation or other adverse action; and (3) refrain from contacting my current employer, prospective employers, clients, or business partners regarding the unenforceable non-compete clause. Any such contacts may constitute tortious interference with my business relationships and could expose [COMPANY NAME] to liability.
Warning of Consequences (Strong Version)
Pursuing litigation to enforce a non-compete agreement that is void under California law could expose [COMPANY NAME] to liability for malicious prosecution, abuse of process, and unfair business practices under Business and Professions Code Section 17200. Under SB 699 (effective January 1, 2024), it is now unlawful for employers to attempt to enforce non-compete agreements against California employees, and I may be entitled to recover actual damages, injunctive relief, and attorney fees. I urge you to consult with California counsel before taking any further action.
Closing with Deadline
Please provide written confirmation that [COMPANY NAME] will not pursue enforcement of the void non-compete clause by [DATE - typically 10-14 days]. If I do not receive such confirmation, or if you take any action to interfere with my employment or business activities, I will have no choice but to seek legal remedies available to me under California law, including a declaratory judgment that the non-compete is void, damages for any harm caused by your wrongful conduct, and recovery of my attorney fees and costs.

⚠ When to Hire an Attorney

While many non-compete threats can be resolved with a well-crafted response letter, consider consulting an attorney if:

  • The employer has actually filed a lawsuit or TRO
  • Trade secret allegations are involved
  • You signed an arbitration agreement
  • You received a substantial severance tied to the non-compete
  • Your new employer is being contacted or threatened

🚀 Next Steps

What to do if your employer is threatening to enforce a non-compete agreement.

Immediate Actions

  1. Document Everything

    Keep copies of all communications from your former employer, including demand letters, emails, voicemails, and any contacts with your new employer. This documentation may be important if litigation ensues or if you pursue claims against your former employer.

  2. Review Your Agreements

    Carefully read your employment agreement, offer letter, and any other documents you signed. Identify exactly what the non-compete provision says, whether there's a choice of law clause, and whether there are separate trade secret or NDA provisions.

  3. Confirm You're Not Taking Trade Secrets

    Make absolutely sure you have not taken any confidential information, customer lists, proprietary documents, or trade secrets. If you have company devices or files, return them immediately. Non-compete threats often escalate into trade secret claims - don't give them ammunition.

  4. Send a Response Letter

    Using the sample language above, draft a formal response asserting that the non-compete is void under California law. Send it via certified mail with return receipt requested, and keep a copy for your records.

If They Don't Back Down

Days 1-14

After sending your response, employer typically consults with counsel about California law

Days 14-30

Expect either a withdrawal/confirmation letter OR an escalation of threats

If They Withdraw

Get their withdrawal in writing and keep it with your records permanently

If They Escalate

Consult an employment attorney immediately - you may need to file a declaratory judgment action or defend against litigation

Possible Legal Actions

  • Declaratory Relief

    You can file a lawsuit asking a California court to declare the non-compete void. This provides certainty and stops ongoing threats.

  • Unfair Competition Claim

    Under Business and Professions Code Section 17200, attempting to enforce a void non-compete may constitute an unlawful business practice, entitling you to injunctive relief and restitution.

  • Tortious Interference

    If your former employer contacts your new employer or clients to interfere with your business relationships based on a void non-compete, you may have a claim for tortious interference with prospective economic advantage.

  • SB 699 Claims (Post-2024)

    For violations occurring after January 1, 2024, you may pursue actual damages, attorney fees, and costs under the new statutory framework.

Need Legal Help?

Non-compete disputes can be stressful, especially when trade secret allegations are involved. Get a 30-minute strategy call with an employment attorney to evaluate your situation and discuss next steps.

Book Consultation - $125

California Resources

💡 Related Reading

For more information on California employment law, see our article on California Supreme Court clarifies the exempt administrative employee definition, which discusses important employment classification issues.