By Melanie M. Ghaw, Esq. and Rachel H. Khedouri, Esq.
This Valentine’s Day, employers get a little sour with their sweets. As a follow up to our prior report on AB1076’s amendment to the California Business & Professions Code § 16600 (HERE), employers must provide any current or former employee employed after January 1, 2022 who is subject to a noncompete clause or agreement with written notice by February 14, 2024 that the noncompete is void (other than in limited circumstances where a statutory exception applies). Such notice must be delivered to the last known address and email address of the individual.
Notably, AB1076 amends Section 16600 to codify existing case law established in Edwards v. Arthur Andersen, LLC, 44 Cal.4th 937 (2008), in which the court also addressed a provision prohibiting an employee from soliciting certain customers of the employer following termination and explicitly held that such customer non-solicit provisions are void. Section 16600, as amended, further provides that the law be read broadly, in accordance with Edwards. Although unclear, this indicates that the notice requirement likely will apply to customer non-solicit provisions in addition to traditional noncompete clauses that prevent the former employee from working for competitors. Accordingly, employers should take this into consideration when providing the required AB1076 notice. The validity of clauses that restrict the former employee from soliciting certain other employees of the employer continues to be an open issue in California, and the amendment does not clarify whether such clauses are intended to be enforceable and, thus, subject to the notice requirement.
Employers who fail to provide notice may be subject to a civil penalty of up to $2,500 per violation. Employers also may face civil penalties for continuing to require employees to enter unlawful noncompete agreements. In light of this new law, employers should update employment agreements to remove noncompliant noncompete provisions, and ensure all appropriate personnel are aware of the new restrictions on noncompete provisions under the law.