California’s Statutory Ban on Noncompete Agreements: Employer Duties and Enforcement in 2025

Introduction

California law now enforces a broad statutory prohibition on noncompete agreements in employment. Assembly Bill 1076 and Senate Bill 699, effective January 1, 2024, amended and expanded Business and Professions Code section 16600 and added sections 16600.1 and 16600.5. In 2025, nearly all employment-related noncompetes are void, enforcement is banned, and employers are exposed to substantial penalties for noncompliance.

I. Statutory Framework

Business and Professions Code section 16600 states: “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.” Bus. & Prof. Code § 16600(a). The statute is interpreted broadly “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.” Bus. & Prof. Code § 16600(b)(1).

II. Notification and Ongoing Duties

Section 16600.1 makes it unlawful to include a noncompete clause in any employment contract or to require any employee to enter a noncompete agreement that does not fall under a statutory exception. Bus. & Prof. Code § 16600.1(a). Employers are required to provide individualized written notice to all current and applicable former employees subject to affected provisions, informing them that such restrictions are void. Bus. & Prof. Code § 16600.1(b). Failure to comply with statutory requirements or attempts to enforce a void noncompete expose an employer to a civil penalty of up to $2,500 per violation. Bus. & Prof. Code § 16600.1(c).

III. Enforcement and Remedies

Section 16600.5 clarifies that contracts restraining lawful profession, trade, or business which are void under section 16600 are unenforceable, regardless of where or when the contract was signed. Bus. & Prof. Code § 16600.5(a). Employers are prohibited from attempting to enforce any void noncompete, including enforcement efforts in other jurisdictions, against individuals who work or reside in California. Bus. & Prof. Code § 16600.5(b)–(c). Employees, former employees, or prospective employees may pursue private actions for injunctive relief, actual damages, attorney’s fees, and costs. Bus. & Prof. Code § 16600.5(e).

IV. Statutory Exceptions

The ban does not apply to restraints involving the sale of a business, dissolution of a partnership, or termination of a member’s LLC interest, as specifically recognized by statute. Bus. & Prof. Code §§ 16601, 16602.

V. Employer Compliance Checklist

• Review all employment agreements, offer letters, and handbooks for prohibited noncompete language.

• Ensure all affected employees and former employees have received individualized written notice that any noncompete provision is void, if not already given.

• Cease all attempts to enforce noncompete provisions, including against remote or out-of-state agreements if the worker lives or works in California.

• Update onboarding processes and templates to exclude noncompete restrictions in compliance with the law.

• Train HR, legal, and management staff on California’s noncompete ban, current enforceability limits, and compliance requirements.

• Consult counsel on ongoing obligations, statutory updates, and risk mitigation related to noncompete language and enforcement.

VI. Conclusion

Business owners and HR professionals should ensure full compliance with Bus. & Prof. Code §§ 16600, 16600.1, and 16600.5 by eliminating employment-based noncompete agreements, delivering required notices to impacted workers, and updating internal policies and practices to reflect California law in 2025 and beyond.