By Ryan Danz, Founding Attorney, Employer Guidance Group PC
Disclaimer: This article is general information about California law — not legal advice, and not a substitute for having counsel review your specific policies. Reading it does not create an attorney-client relationship. Employment law changes frequently; consult a licensed California employment attorney about your situation before acting.
In June, a North Carolina judge held a North Carolina company liable under a California statute for one act: suing a former executive on his non-solicitation covenants. The executive's job was based in North Carolina. His agreements chose California law. That was enough for liability in BioSkryb Genomics, Inc. v. AClarity Genomics Inc., 2026 NCBC 51, with damages and attorney's fees still to be decided.
If your company is headquartered elsewhere and has even one person working in California, read your template before a plaintiff's lawyer does. There is no single rule that California law follows every employer. Reach is decided statute by statute, as our guide to which California laws apply to out-of-state employers explains, so the useful question is which connection triggers each rule.
Is a non-compete enforceable against a California employee?
Almost never. Business and Professions Code § 16600 voids a contract that restrains someone from a lawful profession, trade, or business, and it directs courts to read that rule broadly, however narrowly the clause is tailored. The California Supreme Court rejected a narrow-restraint exception in Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937. The reasonableness test your home state may apply does not carry over.
The main exception is for sellers. Section 16601 allows a limited covenant from someone selling a business's goodwill or disposing of all of an ownership interest, confined to the area where the business operated.
| Rule | Connection that triggers it | What it does | Exposure |
|---|---|---|---|
| § 16600.5 | A contract void under the chapter, wherever and whenever signed | Bars entering into or attempting to enforce it | Civil violation; employee may recover damages, an injunction, and fees |
| § 16600.1 | A non-compete in an employment contract, or required of an employee | Makes it unlawful; required notice by 2/14/2024 | Unfair competition; up to $2,500 per violation in public-prosecutor actions |
| Lab. Code § 925 | An employee who primarily resides and works in California | Lets the employee void out-of-state forum and choice-of-law clauses | California forum and law; attorney's fees |
What about a contract signed in another state?
Section 16600.5 answers this directly. A void contract is unenforceable regardless of where and when it was signed, and an employer may not attempt to enforce it even if the contract was signed and the employment was maintained outside California. Filing suit counted as that attempt in BioSkryb, and the court rejected the argument that North Carolina's presumption against extraterritorial laws blocked the statute.
The company did have one fact working against it: its own agreements chose California law. A home-state clause can change the result. In DraftKings Inc. v. Hermalyn, No. 24-1443 (1st Cir. Sept. 26, 2024), the First Circuit upheld a preliminary injunction under a Massachusetts-law non-compete against an employee who left for a Los Angeles job.
Do not treat that as your escape route. Hermalyn lived in New Jersey, worked primarily from New Jersey and New York, and there was no evidence he did any DraftKings work from California. The court distinguished an earlier case involving an employee who lived and worked in California before and after the breach. Your California employee looks like that earlier employee, and Labor Code § 925 lets that employee void the home-state clause you would be relying on, unless individually represented by counsel in negotiating it. So the safer assumption, for anyone living and working here, is that the covenant fails and trying to enforce it creates liability.
Do non-solicitation and confidentiality clauses survive?
Template clauses that sit next to the non-compete carry their own risk.
| Clause | How California treats it | What to do |
|---|---|---|
| Customer restriction | Edwards invalidated limits on serving a former employer's clients | Remove for California staff |
| Employee non-solicit | AMN Healthcare v. Aya Healthcare Services (Cal. Ct. App., 4th Dist., No. D071924, 2018) voided one for recruiters and doubted the older rule allowing them | Remove, or have counsel review |
| Confidentiality | Brown v. TGS Management Co. (Cal. Ct. App., 4th Dist., No. G058323, 2020) voided terms so broad they barred work in the field | Narrow to information that is actually confidential |
| Training repayment signed on or after 1/1/2026 | Lab. Code § 926 voids terms that violate Bus. & Prof. Code § 16608; greater of actual damages or $5,000 per worker | Check against § 16608 before use |
Edwards expressly left open whether a trade-secret exception exists, so protect trade secrets through a narrow confidentiality clause and real access controls, not a restraint on working.
Did you miss the February 14, 2024 notice deadline?
A California-only notice rule is easy to miss from another state. Section 16600.1(b) required employers to tell current employees, and former employees employed after January 1, 2022, that a non-compete in their agreement was void. The notice had to be a written, individualized communication sent to the last known address and email address.
A miss is an act of unfair competition. The text contains no late-notice safe harbor, so a late notice will not erase the violation. Send it anyway: it stops the void clause from sitting unaddressed in your files, and it shows you acted. The statute also does not say how the duty applies to someone who moved here after the deadline. Our judgment: give that person the same notice when the move happens.
The steps below are general information, not legal advice. Have counsel tailor them to your workforce and practices before you act.
Your California non-compete checklist
- List everyone who lives or works in California, including remote staff and former employees employed after January 1, 2022.
- Pull every agreement they signed: offer letters, confidentiality agreements, bonus plans, equity awards, and severance.
- Remove non-competes and customer restrictions for California staff, and review employee non-solicits.
- Send individualized written notice to each affected person, by mail and email.
- Issue a California addendum for new hires and for anyone relocating here.
- Check forum and choice-of-law clauses against § 925.
- Narrow confidentiality terms to real confidential information.
- Stop automatic enforcement. Route every demand letter and lawsuit through counsel first, because § 16600.5 reaches an attempt to enforce, and whether a letter alone counts as an attempt is an open question.
- Limit any § 16601 covenant to a genuine sale, and draft it to the statute.
Get this fixed before it becomes a counterclaim
A template fix costs little. A counterclaim with fee-shifting costs far more. Our California employment counsel for out-of-state companies can review your agreements, prepare the notices, and build a California addendum. Start with a compliance audit, or contact us if you are holding a letter or planning to send one.
Disclaimer
This article is general information about California law. It is not legal advice, and reading it does not create an attorney-client relationship. Employer Guidance Group PC is not your attorney unless and until you have signed a written engagement agreement with the firm.
California employment law changes constantly. The information here may be incomplete, out of date, unverified, or incorrect, and it does not account for your specific facts — and outcomes turn on facts. Do not act, or refrain from acting, on the basis of this article. Consult a licensed attorney about your own situation before making any employment decision.
This communication may constitute attorney advertising. Prior results do not guarantee a similar outcome.