RECENT AMENDMENTS TO CALIFORNIA BUSINESS AND PROFESSIONS CODE SECTION 16600: SHARPER TEETH FOR A POTENT STATUTE AND A SERIOUS TRAP FOR UNWARY EMPLOYERS

By: Erwin J. Shustak, Managing Partner

On January 1st, California ushered in a new era of employee freedom by enacting two new bills amending California’s Business and Professions Code §16600 – SB 699 and AB 1076. Both laws, which took effect January 1, 2024, significantly reformed California’s public policy and long standing, anti-noncompete law, considered to be one of the broadest, right to compete statutes in the country. At the heart of this transformation lies the novel California Business and Professions Code Section 16600 (“BPC §16600”), originally adopted in 1872 as Civil Code Section 1673.

The changes fortify and add serious teeth to California’s well-established public policy fostering the right to compete by employees and independent contractors. The legislature imposed an affirmative notice requirement on all companies to notify current, and many former employees/independent contractors that those agreements they signed, which contain prohibited, anti-compete provisions, are void and unenforceable. The new amendments impose financial burdens, including legal fees, civil penalties, and other consequences, on companies that do not follow the new directives, which must be followed, and notices given to current and many former employees/independent contractors by February 14, 2024.