Latham & Watkins December 6, 2023 | Number 3192 | Page 2
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An employer or former employer is prohibited from attempting to enforce a contract that is void under
Section 16600 “regardless of whether the contract was signed and the employment was maintained
outside of California” (emphasis added).
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An employer shall not enter into a contract with an employee or prospective employee that includes a
provision that is void under Section 16600.
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An employer who violates these provisions commits a civil violation, and current, former, and
prospective employees can bring a private action to enforce the Section for injunctive relief, to recover
actual damages, or both. If the current, former, or prospective employee prevails, the amendment
provides that the individual will be entitled to recover reasonable attorney’s fees and costs.
AB 1076
AB 1076 also amends Section 16600 in two ways. First, it purports to codify the California Supreme
Court’s decision in Edwards v. Arthur Andersen LLP,
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which interpreted Section 16600 “to void
noncompete agreements in an employment context and noncompete clauses within employment
contracts, even if that agreement is narrowly tailored, unless a [statutory] exception applies.” The
amendment instructs that the law “shall be read broadly” in accordance with the Edwards decision, but
“does not constitute a change in, but is declaratory of, existing law.”
Second, the amendment imposes on employers certain notification requirements with respect to
agreements that are void under Section 16600. Specifically:
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The amendment again confirms that “[i]t shall be unlawful to include a noncompete clause in an
employment contract, or to require an employee to enter a noncompete agreement, that does not
satisfy an exception in [Section 16600].”
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Employers must notify both (1) current employees and (2) former employees who were employed
after January 1, 2022, who were parties to unlawful non-compete clauses or agreements that the
noncompete clause or agreement is void. The notice must be provided no later than February 14,
2024.
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The form of notice must be a written individualized communication, delivered to the last known
address and the email address of the current or former employee.
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Violation of the notification requirement constitutes “an act of unfair competition” under Section 17206
of the California Business and Professions Code, which could result in a penalty of $2,500 per
violation (though it is unclear how the penalty would be calculated, e.g., per employee, per void
clause or agreement, or per overall failure to notify an employee population).
Key Takeaways and Considerations
The new laws raise a number of unanswered questions. We will closely monitor any developments,
including litigation, which we expect to see in 2024. In the meantime, our observations include the
following:
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The limited exceptions under Section 16600 remain unchanged, i.e., restrictive covenants in the sale
or dissolution of corporations, partnerships, and limited liability companies are enforceable.
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