New Golden State Law to Create Gold Rush Litigation Testing Non-Compete Agreements
(Source: CDF Labor Law by Dan M. Forman – September 7, 2023)
For over two decades, California law concluded non-compete agreements are not enforceable in the context of employment, Edwards v. Anderson, 44 Cal.4th 937 (2008). California law even created a public policy claim against employers assisting the enforcement of out-of-state non-compete agreements, Silguero v. Creteguard, Inc., 187 Cal.App.4th 60 (2010). Effective January 1, 2024, California’s new statute expressly allows employees, or former employees, to file civil claims seeking injunctive relief, actual damages, and attorneys’ fees when confronted with what they believe to be void non-compete agreements, Bus. & Prof. Code § 16600.5.
The new law expands current law to render any non-compete void and unenforceable, no matter where or when the contract was signed. Moreover, the code expressly makes it a violation for an employer to even attempt to enforce a void non-complete, even if the agreement was signed in another state and related to employment in another state. Like other civil rights laws, an employer that enters into an illegal non-compete or attempts to enforce an illegal non-compete will commit what is called a civil violation.
Impact
Expect increased litigation in the Golden State over the treatment of non-competes. Employers seeking to hire their competitors’ employees have a new powerful weapon to test any non-competes in California. The new law to enforce California’s public policy includes the threat of an award of attorneys’ fees for successfully defeating such non-competes, or a former employers’ attempts to enforce such agreements. Also, expect challenges to the enforceability of this new law under the United States Constitution from out-of-state employers.
Employers in states where non-competes are enforceable, should consider the potential consequences of an employee moving to California, who then seeks injunctive relief from the agreement, damages, and the employee’s attorneys’ fees under California law.
Employers should immediately review any employment agreements in place with employees to help avoid costly litigation fees. Our human resource team is experienced in reviewing, revising, and creating reliable employment agreements that consider the ever-changing California laws and statutes. Let us help you navigate these often complicated waters. Contact us today.