Non-Competes in California: Why They're (Almost) Never Enforceable

If you're working in California, there's a very good chance that the non-compete clause in your employment agreement is legally void. California has one of the strongest non-compete bans in the country, rooted in a state statute that has been in place for over a century. Here's what it says, how courts have applied it, and what it means for you in practice.

What Section 16600 Actually Says

California Business and Professions Code Section 16600 is short and direct: "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."

Courts have read this language broadly. California courts have generally held that Section 16600 reflects a fundamental public policy in favor of employees' freedom of movement — the right to freely practice their chosen profession without contractual restriction from a former employer. The California Supreme Court in Edwards v. Arthur Andersen LLP (2008) rejected narrower federal interpretations that would have allowed "reasonable" non-competes under California law. Under California law, if a provision restrains trade, it's void. There's no reasonableness sliding scale.

The Sale-of-Business Exception

Section 16600 does have a narrow exception: a person who sells the goodwill of a business, or their ownership interest in a business entity, may agree not to carry on a similar business within a specified geographic area. This exception exists because the buyer of a business is paying for the goodwill and legitimate competitive value of the operation — non-competes in this context protect what was actually purchased.

This exception applies to genuine business sale transactions. It doesn't apply to employment relationships generally, even if the employment agreement is structured to look like something else. If you're an employee entering into a standard employment relationship, the sale-of-business exception almost certainly does not apply to you.

Choice-of-Law Clauses Won't Save It

Many employment agreements — particularly those drafted by companies headquartered outside California — include choice-of-law provisions stating that the agreement is governed by the law of another state (Delaware and Washington are common choices). The intent is to import the enforcing state's more permissive non-compete rules.

California courts have consistently refused to allow choice-of-law provisions to override Section 16600 for California employees. Under California choice-of-law principles, a court may decline to apply another state's law when doing so would violate a fundamental public policy of California — and courts have held that Section 16600 embodies exactly that kind of fundamental public policy.

The practical implication: if you live and work in California, your non-compete is likely void even if your agreement says "governed by Delaware law."

SB 699: New Teeth in the Law

In 2023, California enacted SB 699, which significantly strengthened Section 16600. Previously, an employer might include a void non-compete in an employment agreement knowing it was unenforceable, betting that many employees wouldn't know their rights and would comply anyway. SB 699 made this practice unlawful.

Under SB 699, it is now an unlawful business practice for an employer to: (1) enter into a contract with an employee that includes an unenforceable non-compete; (2) attempt to enforce a void non-compete; or (3) threaten to enforce one. Employees can seek an injunction and recover attorney fees if an employer attempts to enforce a non-compete that violates Section 16600. This gives California employees both a defense and an affirmative cause of action.

What Still Applies After You Leave

Here's the critical point many people miss: the California non-compete ban does not eliminate all post-employment obligations. Specifically:

• Trade secret protections: Both the California Uniform Trade Secrets Act and the federal Defend Trade Secrets Act apply in California. You cannot take or use your former employer's trade secrets.
• Confidentiality obligations: Your NDA or confidentiality clause remains enforceable. You can go work for a competitor; you cannot bring confidential information with you or disclose it to your new employer.
• Non-solicitation: Non-solicitation of clients has also faced California scrutiny (see the AMN Healthcare line of cases on employee non-solicitation), but the analysis here is more nuanced than the flat ban on non-competes.

Practically speaking: the confidentiality and trade secret obligations can have a meaningful constraining effect on what you can do at a new employer even without a non-compete. The ban on non-competes does not mean you're free to take your former employer's customer lists or source code.

Practical Takeaways

If you're a California employee:

• A traditional post-employment non-compete clause in your agreement is almost certainly void.
• A choice-of-law provision pointing to another state will not change this for California courts.
• If your employer threatens to enforce a non-compete against you after SB 699, they may be exposing themselves to an attorney-fee claim.
• Your confidentiality and trade secret obligations survive and are fully enforceable — behave accordingly.
• Non-solicitation provisions (not to recruit your former colleagues) remain a contested area.

The Bottom Line

California's non-compete ban is one of the most employee-protective in the country, but knowing your rights and actually having them protected are different things. If your former employer has threatened enforcement, or if you want to understand which provisions in your agreement are void versus enforceable, paste your employment agreement into dott.legal for a free AI risk analysis. For situations where an employer is actively threatening enforcement, attorney-validated review is $349 with 24-hour turnaround.