California has no love for employers this Valentine’s Day. The deadline for employers to give their California employees who signed unlawful noncompetes written notice that the agreements or provisions are “void” is February 14, 2024.
Employers who fail to give the required notice on time risk an award against them of up to $2,500 per violation, plus other sanctions.
All employers, regardless of size and where they are headquartered, are subject to the deadline. Employers must give compliant notice to all current employees and former employees in California who were employed after January 1, 2022, and signed noncompete provisions or agreements that violate California law.
Under longstanding California law, noncompetes are unlawful in the state unless they fall into one of only a few narrow exceptions (e.g., one exception allows noncompetes in the circumstance of an employee selling all of their interest and goodwill in the employer entity).
Under the new statute requiring the notices, the employer’s notice must consist of “a written individualized communication . . . delivered to the last known address and the email address of the employee or former employee.” (California Business & Professions Code section 16600.1.) (Emphasis added.) The notice must advise the individual “that the noncompete clause or noncompete agreement is void.” (Emphasis added.)
The state has not issued guidance as to what is required to constitute a compliant “individualized communication.” It is advisable, though, to ensure that notice is addressed to the specific individual recipient by name and address and that the letter and email reference by title and date the specific noncompete agreement and/or provision they signed. It also appears that a compliant notice must advise the recipient that the specific agreement or clause “is void.” Alternatives such as giving notice that the employer will not enforce the offending agreement or clause likely may fall short of the requirement in section 16600.1 that employers give notice that the agreement or provision “is void.”
Giving written notice to all California employees that, if they signed a noncompete with the employer, it is void, likely does not satisfy the requirement of giving “individualized notice.” Such statements (a) do not make clear to the recipient that they, in fact, signed such an agreement and (b) do not identify the specific offending agreement or provision.
It is not clear whether a provision prohibiting employees, after their employment ends, from soliciting their former coworkers to leave the employer is a “noncompete” provision for purposes of the notice requirement. It is more likely that provisions barring employees, after their employment ends, from soliciting the former employer’s customers or clients may constitute unlawful noncompete provisions that trigger the notice requirement.
Section 16600.1 provides that an employer’s failure to give compliant notice on time “constitutes an act of unfair competition” in violation of California law. Consequently, employees and covered former employees whose employer or former employer did not give compliant notice on time have a private right of action for restitution and injunctive relief against the employer or former employer. (Business & Professions Code section 16600.5.) Civil penalties of up to $2,500 per violation may be sought by the California Attorney General or other law enforcement agents, such as county counsel or city attorneys.
Employers may lawfully prohibit their California employees — during their employment — from competing and from soliciting the employer’s customers, clients and employees to leave the employer. Provisions barring employees — whether during or after their employment — from using confidential and proprietary information belonging to the employer to compete, if well drafted, are enforceable in California.
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