Last October, California Governor Gavin Newsom signed AB 1076 into law and it became effective as of January 1, 2024. AB 1076 was the Legislature’s attempt to codify the California Supreme Court’s 2008 decision, Edwards v. Arthur Anderson LLP, which held that non-compete agreements in the employment context are unenforceable unless they fall within one of the three narrow statutory exceptions dealing primarily with the sale of business interests. AB 1076 makes clear that requiring an employee to enter into a non-compete is unlawful and can subject the employer to penalties of up to $2,500 per violation.
Importantly, AB 1076 imposes a written notification requirement on employers with a deadline for compliance of February 14, 2024. Employers should be reviewing all of their employment agreements (i.e. employment offer letters, employment agreements, severance agreements, etc.) to determine whether any of them contain unlawful non-compete and/or non-solicitation provisions. If so, employers will have to provide written notification to the affected employees (including former employees if they were employed on or after January 1, 2022) that the non-compete/non-solicitation provisions are void and will not be enforced.
The written notice to an affected employee should:
(1) Identify the specific agreement/provisions at issue;
(2) advise the employee of changes in California law regarding non-compete provisions; and
(3) make clear that the employer will not seek to enforce such provision against the employee.
The written notice must be mailed or emailed to the employee’s last known address by February 14, 2024.
Employers should immediately contact their legal counsel if they have questions about compliance with AB 1076’s notification requirement. Again, the deadline for the written notification is less than one month away.