California Non-Compete Section 16600 in 2026: One of the Strictest Bans in the US

Are non-competes enforceable in California?

No. Non-competes are not enforceable in California. Cal. Bus. & Prof. Code § 16600 voids almost every employee non-compete, and the 2024 amendments (AB 1076 and SB 699) made California's ban one of the strictest in the country. The covenant is void no matter how narrowly it is drafted, and a California court will treat it as unenforceable even if it was signed in another state before the employee moved to California, and even if the contract picks another state's law. Three narrow exceptions survive, all tied to selling a business or ending a partnership or LLC interest (§§ 16601, 16602, 16602.5). They cover sellers, partners and members, and do not reach an ordinary employee as such.

Reviewed and corrected on 6 October 2026. This is general information, not legal advice; check the cited statute or opinion before relying on it.

For employers, the stakes changed in 2024. § 16600.1 required individualized written notice by February 14, 2024 to current employees, and to former employees employed after January 1, 2022, whose contracts had a void non-compete. § 16600.5 bars an employer from entering into or attempting to enforce a void covenant and gives the worker a private right of action with damages, an injunction and attorney's fees. A violation of § 16600.1 is unfair competition under § 17200, and public prosecutors can seek civil penalties of up to $2,500 per violation.

The rest of this guide covers the statutory text, the controlling cases, the exceptions, the 2026 changes (including the stay-or-pay statute, § 16608) and a drafting checklist for both sides.

Official text, as of 6 October 2026

Each quotation below was read on 6 October 2026 on the California Legislature's site, leginfo.legislature.ca.gov. The links are to the sections themselves: § 16600, § 16600.1, § 16600.5 and § 16608.

• Bus. & Prof. Code § 16600(a). "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." Source line: "Amended by Stats. 2023, Ch. 828, Sec. 1. (AB 1076) Effective January 1, 2024."
• § 16600.1(a). "It 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 this chapter." Source line: "Added by Stats. 2023, Ch. 828, Sec. 2. (AB 1076) Effective January 1, 2024."
• § 16600.5(a) and (c). "Any contract that is void under this chapter is unenforceable regardless of where and when the contract was signed." And: "An employer shall not enter into a contract with an employee or prospective employee that includes a provision that is void under this chapter." Source line: "Added by Stats. 2023, Ch. 157, Sec. 2. (SB 699) Effective January 1, 2024."
• § 16608(b)(1), as amended by AB 1697 (Stats. 2026, ch. 889). "for contracts entered into on or after January 1, 2027, it shall be unlawful to include in any employment contract" a term that requires a worker to pay a debt, or any penalty, fee or cost, if the worker's employment ends. The text is from the chaptered bill, which the Governor approved on September 30, 2026. The code page on the Legislature's site can lag a chaptered bill, so check both.

What changed in 2026. The text of §§ 16600, 16600.1 and 16600.5 did not change; their source lines still end with Stats. 2023. California's stay-or-pay statute, § 16608, was enacted for 2026 and then moved to contracts entered into on or after January 1, 2027 by AB 1697. The FTC's Non-Compete Clause Rule was removed from the federal regulations effective February 12, 2026. Both are covered below.

The February 14, 2024 notice deadline

Section 16600.1(b)(1) required employers to notify, by February 14, 2024, current employees and former employees employed after January 1, 2022 whose contracts included a non-compete clause that does not satisfy an exception. Section 16600.1(b)(2) required "a written individualized communication to the employee or former employee", delivered to the last known address and the email address.

Employers that missed the deadline committed an act of unfair competition by operation of § 16600.1(c), which channels violations into Bus. & Prof. Code §§ 17200 and following. Two different sets of people can sue under that chapter. Under § 17206(a), the civil penalty of up to $2,500 per violation is "assessed and recovered in a civil action brought in the name of the people of the State of California" by the Attorney General, a district attorney, or one of the listed county, city and city-and-county attorneys. Under § 17204, a private plaintiff can sue only if she "has suffered injury in fact and has lost money or property as a result of the unfair competition," and § 17203 lets a court order an injunction and restoration of money or property. The limitation period is four years after the cause of action accrued (§ 17208).

That is the California non-compete regime in 2026. The ban descends from Civil Code section 1673 (1872), which the Legislature repealed and re-enacted as section 16600 in 1941 (Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008)). What is new is the enforcement architecture around it. For a multi-state employer with even one California-based worker, the operative question is what the exposure is for any non-compete clause still sitting in a California worker's agreement.

TL;DR

• Cal. Bus. & Prof. Code § 16600 voids virtually every employee non-compete. AB 1076 (eff. Jan. 1, 2024) added § 16600.1, requiring employers to send individualized written notice by February 14, 2024 to current employees and to former employees employed after Jan. 1, 2022 whose contracts contained a void non-compete. A violation is an act of unfair competition under § 17200.
• SB 699 (eff. Jan. 1, 2024) added § 16600.5: an employer may not enter into a void contract or attempt to enforce one, regardless of where the contract was signed or the work took place. Employees, former employees and prospective employees get a private right of action for damages or an injunction, and a prevailing employee recovers attorney's fees.
• The narrow exceptions (§§ 16601, 16602, 16602.5) cover sale-of-business goodwill and ownership interests, partners on dissolution or dissociation, and LLC members on dissolution or termination of an interest.
• Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008), rejected the "narrow restraint" exception. AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., 28 Cal. App. 5th 923 (2018), held a one-year employee non-solicit void as applied to former travel-nurse recruiters.
• Stashik v. Oakley, Inc. (Cal. Super. Ct., complaint filed May 14, 2025) is reported by Jenner & Block as the first putative class action over failure to give the § 16600.1 notice.
• New for 2026: § 16608 bans stay-or-pay terms in contracts entered into on or after January 1, 2027 (AB 1697, approved September 30, 2026), and the FTC's non-compete rule was removed from the CFR effective February 12, 2026.

Part of our state law reference series. To find the current text of any California statute yourself, see how to find and cite California law.

The statute, read literally

The whole regime turns on thirty words. Cal. Bus. & Prof. Code § 16600(a):

"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."

The 2024 amendments to § 16600 added subsections (b) and (c) for the avoidance of doubt.

Subsection (b)(1): § 16600 "shall be read broadly, in accordance with Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, to void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored, that does not satisfy an exception in this chapter." Subsection (b)(2) states that "This subdivision does not constitute a change in, but is declaratory of, existing law." Subsection (c) says the ban "shall not be limited to contracts where the person being restrained from engaging in a lawful profession, trade, or business is a party to the contract." An agreement between two employers that restrains a third party's workers is an example a court may treat as within that language.

The phrase that matters in (b)(1) is "no matter how narrowly tailored." The Legislature wrote past the courts, instructing them to stop looking for the line that would save a particular clause. The only exceptions are the ones in the chapter, and a covenant fits inside one of them or it is void.

The two 2024 amendments, in their actual order

SB 699: enforcement is now its own violation

SB 699 was approved by the Governor on September 1, 2023 (Stats. 2023, ch. 157) and took effect January 1, 2024. It added Cal. Bus. & Prof. Code § 16600.5, which does four things.

First, it addresses extraterritoriality. § 16600.5(a): "Any contract that is void under this chapter is unenforceable regardless of where and when the contract was signed." A California court will treat a non-compete signed in Boston between a Massachusetts company and a Massachusetts resident as unenforceable once that employee works in California. Section 16600.5(a) does not mention choice of law, and a California court will not enforce a void covenant whatever law the contract names. A court in another state may still apply the chosen law, as the First Circuit did in DraftKings (below).

Second, it bars attempted enforcement. § 16600.5(b): "An employer or former employer shall not attempt to enforce a contract that is void under this chapter regardless of whether the contract was signed and the employment was maintained outside of California."

Third, § 16600.5(c) bars entering into the contract in the first place: "An employer shall not enter into a contract with an employee or prospective employee that includes a provision that is void under this chapter." Under § 16600.5(d), an employer that enters into a void contract or attempts to enforce one "commits a civil violation." The statute states no criminal penalty. It does not define "attempt to enforce." A lawsuit or a demand letter aimed at enforcing a void covenant is the conduct the language most plainly reaches.

Fourth, it built a private right of action. § 16600.5(e)(1): "An employee, former employee, or prospective employee may bring a private action to enforce this chapter for injunctive relief or the recovery of actual damages, or both." Section 16600.5(e)(2) gives a prevailing employee, former employee or prospective employee reasonable attorney's fees and costs. It gives employers no fee right of its own.

The interaction with out-of-state litigation is the lawyer-y part. Section 16600.5(e)(1) lets the employee sue in California. The statute does not say whether that private action can be used against an employer's pending suit in another state.

The First Circuit's decision in DraftKings Inc. v. Hermalyn, 118 F.4th 416 (1st Cir. 2024) (No. 24-1443, decided Sept. 26, 2024), shows the other side of the question. It affirmed a preliminary injunction under a Massachusetts choice-of-law clause against a former employee who had worked for the Massachusetts-based employer from New Jersey and New York, and who then took a similar job with a competitor's California-based subsidiary. The court found no showing that California's interest was materially greater than Massachusetts's. It said it was ignoring a parallel California state-court suit because that suit did not affect its analysis, and the opinion did not address a suit under § 16600.5. For why these clauses fail more often than drafters expect, see our state-by-state breakdown of choice-of-law clauses.

AB 1076: the notice mandate and § 17200 exposure

AB 1076 was approved by the Governor on October 13, 2023 (Stats. 2023, ch. 828) and took effect January 1, 2024. It amended § 16600 (the "no matter how narrowly tailored" language above) and added § 16600.1.

§ 16600.1(a): "It 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 this chapter."

§ 16600.1(b)(1): for current employees, and for former employees who were employed after January 1, 2022, whose contracts include a non-compete clause "that does not satisfy an exception to this chapter," the employer "shall, by February 14, 2024, notify the employee that the noncompete clause or noncompete agreement is void." Subdivision (b)(2): the notice "shall be in the form of a written individualized communication to the employee or former employee, and shall be delivered to the last known address and the email address of the employee or former employee."

§ 16600.1(c): "A violation of this section constitutes an act of unfair competition within the meaning of Chapter 5 (commencing with Section 17200)." That ties the notice mandate to the Unfair Competition Law.

Who can recover what. Public prosecutors can recover civil penalties of up to $2,500 per violation under § 17206(a). A private plaintiff who has lost money or property can seek an injunction and restoration of money or property under §§ 17203 and 17204, and the worker's route to damages and fees is the private action in § 16600.5(e).

Attorney General activity. The Attorney General issued an alert on non-competes on March 15, 2022 and a consumer alert on October 15, 2024. On August 26, 2024 the office announced a stipulated judgment with CK Franchising, Inc. and SDX Home Care Operations, LLC (Comfort Keepers): $500,000 in civil penalties and removal of no-hire, non-solicitation and liquidated damages terms from its client care agreements. The office concluded the agreement violated section 16600, and that its liquidated damages term violated Civil Code section 1671. That case concerned client agreements, not employee non-competes, and the judgment was subject to court approval. Not verified in our October 2026 review: whether the Attorney General has brought an action over missed § 16600.1 notices or under § 16600.5(b). Check the press releases at oag.ca.gov.

The first class action. Jenner & Block's June 12, 2025 client alert reports Stashik v. Oakley, Inc. (Cal. Super. Ct., complaint filed May 14, 2025) as the first case filed over failure to give the § 16600.1 notice. According to the alert, the plaintiff worked as a machine operator at Irvine locations for employers headquartered in Washington and Maryland, and seeks to certify a class of California employees who were not given individualized notice by the deadline. We did not read the complaint, and we have not checked the case's status. See the Jenner & Block alert.

The exceptions

§ 16601: sale of business goodwill or ownership interest

The cleanest exception. A person who sells "the goodwill of a business," an owner of a business entity "selling or otherwise disposing of all of his or her ownership interest in the business entity," or an owner of an entity that sells all or substantially all of its operating assets with goodwill, may agree with the buyer "to refrain from carrying on a similar business within a specified geographic area in which the business so sold ... has been carried on, so long as the buyer ... carries on a like business therein." The covenant binds the seller or the owner disposing of an interest. An employee who owns no interest in the business and sells nothing is outside the text.

The trap is a deal team that papers a § 16601 covenant against rank-and-file engineers as part of an acquihire. On the text of § 16601, employees with no ownership interest are not within it, so that clause is an employee non-compete.

§ 16602: partnership dissolution or dissociation

A partner may agree, upon or in anticipation of a dissolution of the partnership or the partner's dissociation from it, not to carry on a similar business within a specified geographic area where the partnership business has been transacted, so long as another member (or a successor) carries on a like business there.

§ 16602.5: LLC member dissolution or termination of an interest

Members of an LLC may agree, upon or in anticipation of a dissolution of the LLC or the termination of the member's interest in it, not to carry on a similar business within the area where the LLC business has been transacted. The section was last amended by Stats. 2006, ch. 495. It mirrors § 16602.

Other sections in the chapter

The only exceptions to the ban on restraints on competition are §§ 16601, 16602 and 16602.5. Chapter 1 also contains § 16606 (the customer list of a telephone answering service is a trade secret of its owner) and § 16607 (the customer lists of an employment agency are its trade secret, with a one-year rule for a former employee who starts an employment agency). Chapter 1 has no trade-secret exception to § 16600. In Edwards, the Supreme Court wrote: "We do not here address the applicability of the so-called trade secret exception to section 16600." California's Uniform Trade Secrets Act (Civ. Code § 3426 and following) protects trade secrets without a non-compete.

Edwards: why "narrow restraint" was rejected

Before 2008, the Ninth Circuit had discussed a "narrow restraint" exception. As Edwards describes Campbell v. Board of Trustees of Leland Stanford Jr. University, 817 F.2d 499 (9th Cir. 1987), the Ninth Circuit concluded that section 16600 "only makes illegal those restraints which preclude one from engaging in a lawful profession, trade, or business." In Edwards, Andersen asked the California Supreme Court to adopt "the limited or 'narrow-restraint' exception to section 16600 that the Ninth Circuit discussed in Campbell," and the Court refused.

Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008), involved a tax manager (later senior manager) in Andersen's Los Angeles office. His agreement barred him for 18 months after leaving from performing professional services of the type he provided for any client on which he had worked during the prior 18 months. For twelve months it barred him from "soliciting" (defined as performing professional services for) any client of his office, and for 18 months from soliciting Andersen's professional personnel.

After Andersen's collapse, HSBC USA, Inc., through a new subsidiary, Wealth and Tax Advisory Services (WTAS), agreed to buy part of Andersen's tax practice and offered Edwards a job. HSBC required employees to sign a "Termination of Non-compete Agreement" that included a release of "any and all" claims against Andersen. Edwards did not sign. Andersen fired him, and HSBC withdrew its offer. He sued Andersen, HSBC and WTAS for intentional interference with prospective economic advantage and for Cartwright Act violations.

The Court held the noncompetition agreement invalid under § 16600 and rejected the narrow-restraint exception in plain terms: "Section 16600 is unambiguous, and if the Legislature intended the statute to apply only to restraints that were unreasonable or overbroad, it could have included language to that effect. We reject Andersen's contention that we should adopt a narrow-restraint exception to section 16600 and leave it to the Legislature, if it chooses, either to relax the statutory restrictions or adopt additional exceptions to the prohibition-against-restraint rule under section 16600." 44 Cal. 4th at 950.

Edwards is the structural opinion. The Legislature wrote it into § 16600(b)(1) in 2024. The Court's own footnote shows the limits of the holding: it expressly left open the "so-called trade secret exception" because Edwards did not challenge the portion of his agreement protecting trade secrets or the personnel clause.

The newer fight: non-solicits and NDAs as backdoor non-competes

Employee non-solicits

Employers comfortable with the § 16600 ban worked around it by inserting clauses that restrain employee solicitation rather than competition. The case on the other side was Loral Corp. v. Moyes, 174 Cal. App. 3d 268 (1985). As AMN describes it, Moyes involved an agreement restraining a former executive officer from "raiding" his former employer's employees, and the court there applied a reasonableness standard.

In AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., 28 Cal. App. 5th 923 (2018) (Fourth District, Division One, No. D071924, filed Nov. 1, 2018), AMN's former travel-nurse recruiters had signed a confidentiality agreement that barred them, for one year or 18 months after leaving, from soliciting or inducing any AMN employee to leave. The Court of Appeal affirmed a judgment that the provision was void under § 16600 as applied to them, because it restrained the recruiters from "practicing with Aya their chosen profession," recruiting travel nurses on 13-week assignments. The court wrote that it "thus doubt[ed] the continuing viability of Moyes post-Edwards," and added that its decision "does not rest on that analysis alone": it also distinguished Moyes on the facts, because the Moyes defendant was an executive officer, not a recruiter. The court affirmed the injunction against AMN and the attorney's fee award.

AMN is a decision about those recruiters and that clause, and it was decided by one Court of Appeal division. Jenner & Block's June 2025 alert says that "several federal courts in California and California appellate courts have held that Section 16600 also bars employee non-solicits" and that the California Supreme Court "has yet to weigh in on that issue." We did not check whether it has done so since.

Customer non-solicits

In Edwards the second clause was labeled a non-solicit, but it defined "soliciting" as "providing professional services to any client of Andersen's Los Angeles office," and the Court held the agreement invalid. AMN also cites Dowell v. Biosense Webster, Inc., 179 Cal. App. 4th 564, 575 (2009), as finding void a broadly worded clause that barred employees from rendering services to accounts with which they had contact in their last 12 months, and Brown v. TGS (below) voided broad confidentiality terms. We read Dowell only as AMN and Brown describe it.

The narrower question, whether a clause keyed to misappropriation of confidential customer information, rather than to the bare act of solicitation, can survive as a trade-secret protection clause, depends on the clause's wording and the facts. The safer working assumption for 2026: treat a post-employment customer non-solicit that is not tied to a § 16601 transaction as high risk in California. An employer that tries to enforce one also risks a § 16600.5 claim for damages and fees if the covenant is void.

NDAs that effectively restrain competition

An NDA that defines "confidential information" as everything the employee learned at the company and then prohibits post-employment "use" of it can operate as a non-compete with extra words. Brown v. TGS Management Co., LLC, 57 Cal. App. 5th 303 (2020) (No. G058323, filed Oct. 13, 2020, certified for publication Nov. 12, 2020), was an appeal from a judgment confirming an arbitration award. The Court of Appeal reversed. The agreement barred Brown in perpetuity from "disclosing or using" confidential information, defined so broadly, he argued, that it prevented him from working in securities trading at all. The court held that "the confidentiality provisions in the Employment Agreement on their face patently violate section 16600. Collectively, these overly restrictive provisions operate as a de facto noncompete provision," and that they were void.

The holding rests on the combined breadth of the clauses, so a "use" ban paired with a definition of confidential information broad enough to cover general know-how is the risk. A narrow clause that bars disclosure of specifically defined confidential information is a different thing. For how confidentiality clauses hold up elsewhere, our NDA enforceability by state reference maps the same line across jurisdictions.

Stay-or-pay and training repayment: § 16608 from 2027

Chapter 1 of the statute now runs from § 16600 to § 16608. Section 16608 was added by AB 692 (Stats. 2025, ch. 703) and applied, as first enacted, to contracts entered into on or after January 1, 2026. AB 1697 (Stats. 2026, ch. 889), approved September 30, 2026 as an urgency statute that took effect immediately, changed the date:

• Section 16608(b)(1) now applies to contracts entered into on or after January 1, 2027. The version of § 16608 as it existed on January 1, 2026 is inoperative from January 1 through December 31, 2026 ((c)(2)), and the Legislature declared that the amendments "prevent the accrual of liability for acts occurring between January 1, 2026, and the effective date of this act," and that pending claims based on violations alleged in that period "shall be moot" (AB 1697, section 1(b)).
• It is unlawful to include in an employment contract, or to require a worker to sign as a condition of employment, a term that (A) requires the worker to pay an employer, training provider or debt collector for a debt if the work relationship ends, (B) lets them resume or start collecting a debt, or end forbearance on it, on that event, or (C) imposes "any penalty, fee, or cost" on the worker on that event.
• A contract unlawful under (b) is a restraint on a lawful profession, trade or business and is void under § 16600 only if entered into on or after January 1, 2027 ((c)(1)). Labor Code § 926, as amended, lets a worker sue for the greater of actual damages or $5,000 per worker, plus injunctive relief and attorney's fees.
• Exceptions in (b)(2) include government loan-repayment programs; recruitment and retention bonuses under a government-grant-funded program; tuition repayment for a transferable credential offered separately, prorated and not required on termination other than for misconduct; apprenticeship programs; a discretionary or unearned payment that is not tied to specific job performance, if the repayment terms are in a separate agreement, the worker has at least five business days to consult counsel, any repayment is prorated over a retention period of up to two years with no interest, the worker may defer receipt of the payment, and the separation was the employee's election or for misconduct; residential property contracts; certain inducement payments in contracts between securities broker-dealers, insurance producers or investment advisers and their registered or licensed representatives; and a paid-time-off advance repayment of no more than 40 hours without interest.

For the contrast, Colorado still permits declining-balance recovery of training costs under C.R.S. 8-2-113(3)(a); see our Colorado guide. Read the chaptered text of AB 1697 before relying on any one exception.

What multi-state employers should be doing

Employers with California workers tend to fall into three groups.

The good group built a California-specific agreement template that strips the non-compete, narrows the NDA to actually confidential information with no post-employment "use" prohibition that reaches general knowledge, and drops the employee non-solicit. It sent the § 16600.1 notices by the February 2024 deadline to the current and former-since-2022 workforce, and keeps a log.

The middle group sent some notices, mostly to current California-based employees, and missed former employees who left in 2022 and 2023, and workers who moved to California after signing. Its agreement still has a non-compete with a generic severability clause, and it treats severability as a safeguard. A severability clause addresses what happens after a court strikes a provision. Section 16600.1(a), on its text, separately makes it unlawful to include a non-compete clause in an employment contract in the first place. Those are different questions on different timelines.

The risk for the middle group is not only an enforcement attempt. It is that each California agreement still carrying a non-compete clause is a potential unfair-competition claim under § 16600.1, severability clause or not.

The bad group still uses a single nationwide template with a non-compete that runs against everyone, has done no notice, and treats California as an issue for later.

The same issue arises with remote workers who sign a template elsewhere and later relocate to California. Section 16600.5(a) applies "regardless of where and when the contract was signed," so the agreement should be reviewed when the worker moves.

If you are doing this work in 2026, the order of operations is straightforward. Pull every employment agreement signed since January 1, 2022. Identify every employee or former employee who was a California resident at any point during or after the agreement. Send the § 16600.1(b) notice to anyone you have not noticed, and keep proof of mailing and email delivery. Update the template to strip the covenant for California workers.

What the redline looks like, in practice

A national employment-agreement template usually carries language like this in the restrictive-covenants article:

"For a period of twelve (12) months following the termination of Employee's employment for any reason, Employee shall not, directly or indirectly, engage in any business that competes with the Company in any geographic area in which the Company conducts business."

The California-compliant version is not a narrower version of that paragraph. It is no paragraph at all for that clause, plus a defined-term cleanup so the trade-secret protection clause still works on its own.

The replacement language many in-house teams settle on looks closer to:

"Employee acknowledges that the Company's trade secrets, as defined in Cal. Civil Code § 3426.1(d), are valuable Company assets. Employee shall not, during or after employment, disclose any Company trade secret to any third party, except as required by law or with the Company's prior written consent. Nothing in this Agreement shall be construed to prohibit Employee from engaging in any lawful profession, trade, or business of any kind, including with a competitor of the Company, after the termination of employment."

The second sentence is a disclaimer that the agreement is not intended as a restraint under § 16600. Pair it with a clean Labor Code § 2870 invention-assignment clause, which limits what inventions an employer may claim.

The 2026 drafting checklist, both sides

What should not be in a California employment agreement: any post-employment restriction on competing, however narrow; any post-employment restriction on soliciting former co-workers (see AMN); any post-employment restriction on soliciting former customers, unless tied to a § 16601 sale (treat as high risk, see Edwards); any NDA that prohibits use, not just disclosure, of information beyond protectable trade secrets; any term that would, for an employee who primarily resides and works in California, require adjudication outside California or deprive her of the substantive protection of California law. Under Labor Code § 925, a provision imposed as a condition of employment that does either of those things is voidable by the employee, unless she was individually represented by legal counsel in negotiating it. Section 925 applies to contracts entered, modified or extended on or after January 1, 2017. And from 2027, any stay-or-pay term in a new contract needs to be checked against § 16608.

What can replace the non-compete: a narrow trade-secret clause scoped to information that actually qualifies under Civ. Code § 3426.1(d); a clean invention-assignment clause under Lab. Code § 2870; and a confidentiality clause that prohibits disclosure of specifically defined confidential information.

Most of the work is the trade-secret clause and the document-handling protocols around it. The protectable interest exists in California; a covenant is not the way to protect it.

What changed in 2026 and what to watch

Stay-or-pay. Section 16608 and AB 1697, above. The date moved once already, so re-check the statute before drafting.

The federal rule. The FTC's Non-Compete Clause Rule was set aside in Ryan, LLC v. FTC, 746 F. Supp. 3d 369 (N.D. Tex. 2024). The Commission voted 3 to 1 on September 5, 2025 to dismiss its appeals and accede to the vacatur, and a final rule removed 16 CFR Part 910 from the Code of Federal Regulations, effective February 12, 2026 (91 FR 6507). See non-compete law updates for 2026.

Out-of-state enforcement. DraftKings shows that a court outside California may apply a chosen state's law. The statute is silent on whether § 16600.5(b) and (e) give the California employee a claim against an out-of-state suit, so watch for decisions on that point.

Other states. Minnesota enacted its own ban on non-competes in 2023 (Minn. Stat. § 181.988, Laws 2023, ch. 53, art. 6, s. 1; revisor.mn.gov). Washington keeps an indexed salary floor until June 29, 2027, then bans nearly all non-competes under ESHB 1155 (Chapter 149, Laws of 2026, approved March 23, 2026, effective June 30, 2027); see our Washington guide. New York's governor vetoed a non-compete ban in December 2023; see the New York guide for the bills since. Massachusetts has its own act. For how the rest of the country sorts out, see the non-compete enforceability by state map.

FAQ

Are non-competes enforceable in California?

No. Under Cal. Bus. & Prof. Code § 16600, an employee non-compete is void in California, no matter how narrowly it is written. The only carve-outs for restraints on competition are tied to selling a business or an ownership interest, or to dissolving a partnership or ending an LLC interest (§§ 16601, 16602, 16602.5), and they do not apply to ordinary employees as such. If a California employer asks you to sign a non-compete, it is almost certainly unenforceable.

What is California Business and Professions Code 16600?

Section 16600(a) states that "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." It descends from Civil Code section 1673 (1872), re-enacted in 1941. The 2024 amendment (AB 1076) added subsection (b)(1), which directs courts to read the ban "broadly" and void any non-compete "no matter how narrowly tailored," and subsection (c), which extends the ban to contracts even where the restrained person is not a party.

What is the official text of California Business and Professions Code 16600?

The Legislature publishes it at leginfo.legislature.ca.gov. Subsection (a) is quoted in full above. The source line reads "Amended by Stats. 2023, Ch. 828, Sec. 1. (AB 1076) Effective January 1, 2024."

What does California Business and Professions Code 16600.1 say, and is it still in effect in 2026?

Section 16600.1 makes it unlawful to include a non-compete clause in an employment contract, or to require an employee to enter a non-compete agreement, that does not satisfy an exception in the chapter. It also required employers to give individualized written notice by February 14, 2024. It was added by AB 1076 and its source line ends with Stats. 2023, so it remains in effect. We found no amendment to it in 2026.

What does 16600.5 say about out-of-state non-competes?

Section 16600.5(a) says a contract void under the chapter is "unenforceable regardless of where and when the contract was signed." Subsection (b) says an employer or former employer "shall not attempt to enforce" such a contract "regardless of whether the contract was signed and the employment was maintained outside of California." A court outside California may still apply the law the contract chose, as in DraftKings Inc. v. Hermalyn, 118 F.4th 416 (1st Cir. 2024).

Does the California non-compete ban apply if I signed the contract in another state?

Yes. Section 16600.5(a) makes a void non-compete "unenforceable regardless of where and when the contract was signed." A California court will treat a covenant signed in Massachusetts or Texas as unenforceable once the employee works in California, and a choice-of-law clause picking another state does not change that in a California court. One caveat: in DraftKings the First Circuit enforced a Massachusetts covenant on its facts, against a former employee who had not worked from California, so the out-of-state litigation question is not settled.

What was the February 14, 2024 non-compete notice deadline?

Section 16600.1(b) required employers to send individualized written notice by February 14, 2024 to current employees and to former employees employed after January 1, 2022 whose contracts contained a void non-compete, telling them the clause is void. The notice had to go to both the last known mailing address and the email address. Missing the deadline is an act of unfair competition under § 17200.

What are the penalties for an illegal non-compete in California?

A violation of § 16600.1 is unfair competition under § 17200. Public prosecutors can recover civil penalties of up to $2,500 per violation under § 17206, within a four-year limitation period (§ 17208). Separately, § 16600.5 makes it a civil violation to enter into or attempt to enforce a void contract, and lets the employee, former employee or prospective employee sue for damages and an injunction, with attorney's fees for a prevailing employee under § 16600.5(e)(2).

Who can sue over an illegal non-compete in California?

An employee, former employee or prospective employee can bring a private action under § 16600.5(e). Public prosecutors can bring unfair competition actions and recover the $2,500 penalty under § 17206. A private plaintiff suing under the Unfair Competition Law must have lost money or property (§ 17204).

What are the exceptions to California's non-compete ban?

There are three. Section 16601 lets the seller of a business's goodwill, or an owner disposing of an ownership interest, agree not to compete in the area sold. Section 16602 covers partners on dissolution or dissociation. Section 16602.5 covers LLC members on dissolution or termination of their interest. Chapter 1 also treats the customer lists of telephone answering services and employment agencies as trade secrets (§§ 16606, 16607), and § 16608 has its own exceptions for stay-or-pay terms.

Are non-solicitation agreements enforceable in California?

Mostly not. AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) held a one-year employee non-solicit void as applied to former travel-nurse recruiters, and said it doubted the continuing viability of Moyes after Edwards. Customer non-solicits not tied to a § 16601 sale are high risk. A narrow trade-secret clause that protects specific confidential information is the safer route.

Is the FTC non-compete rule in effect in 2026?

No. The rule was set aside in Ryan, LLC v. FTC, 746 F. Supp. 3d 369 (N.D. Tex. 2024), the FTC dropped its appeals on September 5, 2025, and 16 CFR Part 910 was removed from the CFR effective February 12, 2026 (91 FR 6507).

Did California change its non-compete law in 2026?

Sections 16600, 16600.1 and 16600.5 did not change. The 2026 change is in § 16608, the stay-or-pay statute, which AB 1697 moved to contracts entered into on or after January 1, 2027.

What can replace a non-compete in California?

Protectable interests still exist, just not through a covenant. California employers rely on a trade-secret clause scoped to information that qualifies under Civ. Code § 3426.1(d), a clean invention-assignment clause under Lab. Code § 2870, and a confidentiality clause that bars disclosure of defined confidential information. A "use" prohibition paired with a very broad definition of confidential information can be treated as a de facto non-compete, as in Brown v. TGS Mgmt. Co. (2020).

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Arshita Anand

Co-Founder & CEO · Attorney

Arshita leads product and strategy at Vaquill AI, the US primary law data API. As an attorney, she decides which law we carry, how each section is sourced and cited, and what legal AI and compliance teams need from the data.