⚖️ Enforcing Nonsolicit & NDA Obligations Without Violating California Law
Navigate California's strict § 16600 anti-noncompete rules while protecting legitimate business interests
California Business & Professions Code § 16600

California's foundational anti-restraint statute states:

"Except as provided in this chapter, 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 strong public policy favoring employee mobility means California employers face strict limitations on restricting former employees' work activities.

⚠️ Critical 2024 Changes: SB 699 (Bus. & Prof. Code § 16600.5) and AB 1076 make it unlawful to enter into or attempt to enforce void noncompete agreements, even if signed out of state. Employers who violate face civil penalties and must notify affected employees that their agreements are void.
Recent Legislative Developments
Law Effective Date Key Requirements
SB 699 January 1, 2024 Makes it unlawful to enter into or attempt to enforce noncompete agreements void under § 16600, even if signed in another state
AB 1076 January 1, 2024 (notification deadline: Feb 14, 2024) Requires employers to notify current/former employees (employed after Jan 1, 2022) that their noncompete clauses are void; covers customer non-solicits that function as noncompetes
AB 2286 January 1, 2024 Extends § 16600 protections to independent contractors and non-CA employees when conduct occurs in CA
Edwards v. Arthur Andersen (2008): The Landmark Case

The California Supreme Court held that § 16600 applies broadly to any restraint on competition, not just traditional noncompetes:

  • Customer non-solicitation agreements that materially restrain an employee's ability to work are void
  • There is no "narrow restraint" exception—partial restraints are still restraints
  • Geographic or temporal limitations don't save an otherwise void restraint
  • Only the three statutory exceptions (§§ 16601, 16602, 16602.5) allow restraints on competition
💡 The Three Narrow Exceptions: § 16601 (sale of business goodwill), § 16602 (partnership dissolution), § 16602.5 (LLC member dissociation). These apply only to owners, not regular employees.
What California Courts Have Voided
Type of Restriction Why It's Void
Noncompete clauses Directly restrains employee from working in the industry/profession
Customer non-solicitation Materially restrains ability to compete for business in the market
Broad employee non-solicitation If it functions as a restraint on trade (e.g., prohibits hiring anyone from former employer)
Overbroad NDAs If they define "confidential" so broadly they prevent use of general skills/knowledge (disguised noncompete)
Non-compete-in-disguise Any clause that effectively prevents competition regardless of label
What You CAN Enforce in California
Enforceable Obligation Scope Key Limitation
Trade secret protection (CUTSA/DTSA) Stop use/disclosure of actual trade secrets (customer lists with confidential info, pricing, processes, source code) Must qualify as trade secret: valuable, secret, subject to reasonable protective measures
NDAs (narrowly tailored) Prevent disclosure of specific confidential information that qualifies as trade secret Cannot define "confidential" so broadly it covers general skills/knowledge
Employee non-solicit (very narrow) Prohibit active solicitation/recruiting of employees (not merely hiring those who apply voluntarily) Cannot be so broad it restrains competition; focus on poaching, not passive hiring
Duty of loyalty (while employed) Employee cannot divert clients or build competing business using employer's resources while still on payroll Ends at termination—cannot restrict post-employment competition
IP assignment clauses Require assignment of inventions/works created during employment (subject to Labor Code § 2870 limits) Cannot claim inventions developed entirely on own time, own resources, unrelated to business
Non-disparagement (narrow) Prohibit false/defamatory statements about the company Cannot prohibit truthful criticism or disclosure of illegal conduct
✅ Focus on WHAT, Not WHERE: You can stop employees from using your trade secrets. You generally cannot stop them from working for a competitor or competing for the same clients using general knowledge.
Employee Non-Solicitation: The Gray Area

Courts have upheld narrow employee non-solicits focused on preventing poaching, not competition:

Likely Enforceable Likely Void
"Employee shall not actively solicit or recruit Company employees to leave employment" "Employee shall not hire, employ, or work with any former Company employee for 2 years"
Limited to active poaching (calls, emails, LinkedIn messages encouraging colleagues to leave) Prohibits passive hiring (employee applies on their own) or working with anyone who happened to work for former employer
Short duration (6-12 months) Long duration (2+ years) or indefinite

Conservative approach: Even narrow employee non-solicits are risky in California. If you enforce one, focus on egregious coordinated poaching (e.g., mass exodus orchestrated while still employed), not isolated hiring.

Trade Secret vs. Customer Non-Solicit Distinction

You can enforce trade secret rights even if the result is similar to a customer non-solicit:

Scenario Enforceable? Legal Basis
Former employee uses confidential customer list (names, contacts, purchasing history, pricing) to solicit clients ✅ Yes Trade secret misappropriation—the information is protected, not the competition
Former employee solicits clients they personally developed relationships with using general knowledge ❌ No (generally) Protected by § 16600—employee mobility and right to use general knowledge
Former employee uses confidential pricing/margin data to undercut your bids ✅ Yes Trade secret misappropriation of pricing information
Former employee competes for same clients without using confidential info ❌ No § 16600 permits competition; customer relationships in employee's memory are not trade secrets
⚠️ The Line Is Thin: The difference between enforceable trade secret protection and void customer non-solicit is whether you're protecting confidential information or just trying to stop competition. Frame your demand letter around the former, never the latter.
Step 1: Audit Your Restrictive Covenants

Review all clauses in your employment agreements, offer letters, and NDAs through a California lens:

  • Noncompete clauses: Void under § 16600 (with three narrow exceptions for owners)
  • Customer non-solicits: Void under Edwards if they materially restrain competition
  • Employee non-solicits: Probably void if broad; possibly enforceable if narrowly limited to active poaching
  • NDAs: Enforceable if reasonably limited to true trade secrets; void if overbroad (covers general knowledge)
  • IP assignment: Enforceable subject to Labor Code § 2870 limits
Step 2: Identify What You Can Actually Enforce

For each restrictive covenant, ask:

Question If Yes → Enforceable If No → Void
Does it protect actual trade secrets (specific confidential info with economic value)? Focus demand on trade secret misappropriation Cannot enforce as written
Is the employee using confidential information you can identify and prove? Demand cessation of use of that specific information Cannot enforce if based on general knowledge/skills
Does the clause fit a statutory exception (§§ 16601/16602/16602.5)? May enforce as written (rare—applies to owners only) Void if employee/contractor, not owner
Is it an employee non-solicit limited to active poaching? Consider enforcement for egregious coordinated recruiting Void if it prohibits passive hiring or working with ex-colleagues
💡 Reframe, Don't Enforce Directly: If your agreement has a void customer non-solicit, don't demand compliance with it. Instead, reframe the demand around trade secret misappropriation: "You are using our confidential customer list in violation of your NDA and CUTSA."
Step 3: Document Trade Secret Misappropriation (Not Just Competition)

To enforce restrictive covenants in California, you need evidence of misappropriation, not just competition:

Type of Evidence What to Document
Confidential information taken System logs showing downloads of customer lists, pricing, source code, proposals before departure
Use of that information Identical proposals, pricing matches your confidential rates, clients report being contacted with your proprietary info
Protective measures you had NDAs, password protection, access controls, confidentiality policies, exit procedures
Economic value of information Time/cost to develop customer relationships, competitive advantage from proprietary data
Red Flags: When NOT to Enforce
  • Employee is competing but not using confidential info: § 16600 protects their right to compete
  • Your "trade secrets" are general industry knowledge: Customer names everyone knows, publicly available pricing, standard processes
  • You didn't take reasonable protective measures: No NDAs, no access controls, no confidentiality markings
  • The restriction is explicitly a noncompete or customer non-solicit: Void on its face under § 16600 and Edwards
  • Employee is in California (even if agreement has out-of-state choice of law): California courts apply § 16600 regardless
California-Compliant Demand Letter Do's
  • ✅ DO demand cessation of use and disclosure of specific trade secrets and confidential information
  • ✅ DO cite CUTSA (Civ. Code § 3426 et seq.) and DTSA (18 U.S.C. § 1836)
  • ✅ DO identify the specific information misappropriated (customer lists with contact/purchasing data, proprietary pricing, source code)
  • ✅ DO demand return/destruction of misappropriated materials and certification of deletion
  • ✅ DO cite the NDA's confidentiality provisions and focus on secrecy obligations, not competition
  • ✅ DO emphasize that you took reasonable protective measures (NDAs, access controls, etc.)
California-Compliant Demand Letter Don'ts
  • ❌ DON'T demand that employee "stop competing" or "not work for competitors"
  • ❌ DON'T cite or attempt to enforce void noncompete or customer non-solicit clauses
  • ❌ DON'T threaten to enforce restrictions on where the employee works or who they work for
  • ❌ DON'T demand they stop soliciting clients unless you can tie it to misuse of confidential client information
  • ❌ DON'T send letters designed to scare new employers away from hiring California workers based on void restraints
  • ❌ DON'T use overbroad NDA definitions that cover general skills/knowledge as basis for enforcement
⚠️ SB 699 Liability Risk: Attempting to enforce a void noncompete can itself violate Bus. & Prof. Code § 16600.5, exposing you to civil penalties and unfair competition claims. Stick to trade secret misappropriation—never demand compliance with void restraints.
Sample California-Compliant Opening

Dear [Former Employee]:

I represent [Company] regarding your misappropriation of trade secrets and breach of your Confidentiality Agreement in violation of the California Uniform Trade Secrets Act (Civil Code § 3426 et seq.), the federal Defend Trade Secrets Act (18 U.S.C. § 1836 et seq.), and your contractual obligations.

This letter does NOT seek to restrict your right to compete or work in the industry. California law protects your freedom to pursue your profession. However, you may not use or disclose [Company]'s trade secrets and confidential information in doing so.

Specifically, you have misappropriated the following trade secrets:

  • Customer lists containing confidential information: Contact details, purchasing history, pricing preferences, and account management notes for [X] clients, which you downloaded to a USB drive on [date];
  • Proprietary pricing and margin data: Confidential pricing structures and profit margins that [Company] developed over [X] years; and
  • Confidential business processes: [Describe specific processes, if applicable].

These materials constitute trade secrets under CUTSA because they derive independent economic value from not being generally known and [Company] took reasonable measures to maintain their secrecy (NDAs, password protection, access controls, confidentiality markings).

Demands Section

DEMANDS:

You must immediately:

  1. Cease all use and disclosure of [Company]'s trade secrets and confidential information;
  2. Return all materials containing confidential information and certify destruction of all copies;
  3. Identify all individuals and entities to whom you disclosed [Company]'s confidential information; and
  4. Preserve all evidence (do not delete emails, files, or data pending resolution of this matter).

What we are NOT demanding:

  • We are NOT demanding that you stop working for [New Employer] or any competitor;
  • We are NOT demanding that you refrain from competing for clients using your general knowledge, skills, and experience;
  • We are NOT demanding that you cease using industry knowledge or relationships you developed independently of [Company]'s confidential information.

Our sole demand is that you stop using our specific trade secrets and confidential information in your competitive activities.

✅ Affirmative Statement of Non-Restriction: Explicitly stating what you're not demanding (i.e., cessation of competition) demonstrates California compliance and reduces the risk of SB 699 liability or unfair competition counterclaims.
Risks of Overly Aggressive Enforcement in California
Action Risk Consequence
Attempting to enforce void noncompete Violates Bus. & Prof. Code § 16600.5 (SB 699) Civil penalties, employee can sue for injunction and attorneys' fees
Threatening new employer to not hire CA employee Tortious interference, unfair competition (Bus. & Prof. Code § 17200) New employer or employee can sue for damages and injunctive relief
Demanding employee stop competing for clients (no trade secret basis) Void under § 16600 and Edwards Unenforceable; employee may counterclaim for declaratory relief and fees
Filing lawsuit based on void restraints Malicious prosecution, abuse of process Employee can recover damages, punitive damages, attorneys' fees
Sending scare letters with no trade secret evidence Unfair competition, extortion (in extreme cases) Counterclaims, reputational damage, fee awards
⚠️ Recent Case Law: California courts have increasingly awarded attorneys' fees to employees who successfully defend against enforcement of void noncompetes. Don't send a demand letter unless you have actual evidence of trade secret misappropriation—not just competition.
When Enforcement May Trigger Counterclaims

If you overreach, the employee may counterclaim for:

  • Declaratory relief: Court declaration that the restrictive covenant is void under § 16600
  • Unfair competition (Bus. & Prof. Code § 17200): Your enforcement attempt is an unfair business practice
  • Violation of SB 699/AB 1076: Unlawful attempt to enforce void noncompete
  • Tortious interference: Your threats caused employee to lose job offer or be fired from new position
  • Malicious prosecution / abuse of process: Lawsuit was filed to harass, not to vindicate legitimate rights
  • Attorneys' fees: Under § 1021.5 (private attorney general) or unfair competition statute
Best Practices to Minimize Risk
  1. Consult California employment counsel before sending demand: Have an attorney review for § 16600 compliance
  2. Document trade secret misappropriation: Don't rely on contractual clauses alone—prove actual misuse of confidential info
  3. Focus narrowly on trade secrets: Never demand cessation of competition; only demand cessation of trade secret use
  4. Avoid threatening new employers: Direct demands only to the former employee, not their new company (unless new company is knowingly using your trade secrets)
  5. Include affirmative non-restriction language: State clearly that you're not restricting their right to compete or work
  6. Be prepared to prove it: Only send a demand if you're willing to file a trade secret lawsuit—hollow threats invite counterclaims
💡 Strategic Settlement: Even if your restrictive covenant is void, you may be able to settle for a negotiated standstill (employee agrees not to solicit specific clients for X months in exchange for you releasing past claims). This avoids litigation and works around § 16600 via mutual agreement.
How I Can Help

I help California employers enforce legitimate business interests (trade secrets, NDAs, IP rights) while navigating § 16600, SB 699, and AB 1076. I draft California-compliant demand letters, pursue trade secret litigation, and defend against employee counterclaims for overreaching enforcement.

Services Offered
  • Restrictive covenant audit: Review your agreements to identify what's enforceable vs. void under California law
  • California-compliant demand letters: Draft demands focused on trade secret misappropriation, not void restraints
  • Trade secret litigation: File and prosecute CUTSA/DTSA claims for actual misappropriation
  • Defense against counterclaims: Defend employers sued for attempting to enforce void noncompetes
  • Settlement negotiation: Secure negotiated standstills and resolutions that work around § 16600
  • Policy drafting: Rewrite restrictive covenants to comply with California law while protecting legitimate interests
My Approach
  1. Compliance-first analysis: I review your agreements and factual situation to identify what you can enforce under California law, not what the contract says.
  2. Evidence-driven demands: I only send demands when you have actual proof of trade secret misappropriation—not just competition.
  3. Reframing restrictive covenants: Instead of enforcing void clauses, I reframe demands around trade secret rights and NDA obligations.
  4. Affirmative non-restriction language: I include clear statements that you're not restricting competition, reducing SB 699 liability.
  5. Strategic settlements: I negotiate standstills and mutual agreements that achieve your business goals without violating § 16600.
⚖️ Need to Enforce Restrictive Covenants in California?

Contact me for a consultation. I'll review your agreements, assess what's enforceable, and draft a California-compliant demand letter that protects your interests without violating § 16600.

Email: owner@terms.law
Frequently Asked Questions
No—not unless the employee falls under one of the three narrow statutory exceptions (owner selling business, partner dissolving partnership, LLC member dissociating). Regular employees cannot be bound by noncompetes in California, even if they signed them and even if the agreement specifies another state's law.
California courts will still apply § 16600 if the employee lives/works in California or if California has a material relationship to the dispute. SB 699 explicitly prohibits enforcing out-of-state noncompetes against California workers. Choice-of-law clauses cannot override California's strong public policy.
Only if they're using your trade secret customer information (confidential lists, purchasing data, pricing). You cannot stop them from competing for clients using general knowledge or relationships they developed. Customer non-solicits are generally void under Edwards unless tied to trade secret protection.
Possibly, if very narrow—limited to prohibiting active poaching/recruiting, not passive hiring of former colleagues who apply voluntarily. Even then, enforcement is risky. Focus on egregious coordinated team departures, not isolated hiring of ex-employees.
Under SB 699, attempting to enforce a void noncompete is itself unlawful. You may face: (1) civil penalties, (2) employee counterclaims for declaratory relief and unfair competition, (3) attorneys' fee awards to the employee, and (4) requirement to notify all affected employees that their agreements are void.
You can enforce an NDA to stop use of trade secrets, not competition itself. If your NDA defines "confidential information" so broadly it covers general skills/knowledge, California courts may void it as a disguised noncompete. Keep NDA enforcement narrowly focused on actual confidential information with economic value.