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California’s Ban on Non-Compete Affects Non-Solicitation Agreements Too

21 Nov

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Update Applicable to:

All employers operating in California and out-of-state employers who want to enforce an agreement against someone hired by a California employer.

What happened?

With the passage of SB 699 into law on September 1, 2023, non-solicitation agreements are at risk too of not being unenforceable.

What are the details?

As communicated by Vensure here and here, California not only rendered non-compete agreements unenforceable, but made them unlawful.

SB 699: “(b) California’s public policy provides that every contract that restrains anyone from engaging in a lawful profession, trade, or business of any kind is, to that extent, void, except under limited statutory exceptions.”

A non-solicitation agreement prohibits the employee from contacting and requesting (soliciting) the employers’ clients and employee’s information upon resignation. Since this kind of agreement limits or restraints, it can be considered prohibited and void.

In the case of California, a contract (the non-solicitation agreement) could still be enforceable so long as it is tailored reasonably for the situation and does not infringe upon employee rights. However, specific elements can make them unenforceable and subject to the remedies under SB 699.

Best practices

  • Employers should consult their trusted labor attorney to request a non-solicitation clause tailored to their needs and compliant with the limitations imposed under California law.

Employers should review additional resources here:

Law Firm Articles:

Article 1, Article 2

SB 699

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This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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