Employment Law Alert: 2-14-24 Deadline to Provide Notice of Void Noncompetes

As we reviewed in our recent webinar 2024 California Employment Law Update, California Assembly Bill 1076 requires that, by no later than February 14, 2024, employers must provide written notice to employees who have signed a noncompete agreement, or a contract containing a noncompete clause, that the noncompete agreement or clause is void under California law. A void noncompete agreement or clause would include not only language in an agreement that purports to restrict competition specifically, but also language in an agreement that courts have deemed to be a de facto noncompete (such as a customer non-solicitation clause, or overbroad confidentiality provisions that would effectively prevent competition). The law provides that failure to comply with the requirement "constitutes an act of unfair competition," meaning that non-compliant employers may be sued and face legal liabilities under California's unfair competition laws.

Many employers are unaware that their employee confidentiality/proprietary information agreements contain void noncompetes, and have not recently had their form agreements reviewed by legal counsel. Employers that are unsure of whether their agreements contain void noncompete language should have their agreements reviewed by legal counsel to confirm whether they need to comply with the February 14, 2024 notice deadline.

The new law requires employers to provide the written notice to all current and former employees who were employed by the employer after January 1, 2022. The notice must be in the form of a written, individualized communication to the current or former employee and, delivered to the last known address and e-mail address. In light of the legal risks involved with void noncompetes, we strongly suggest that employers work with their legal counsel to carefully draft the required notices.

Now is also a good time to have legal review of confidentiality/proprietary information agreements in light of the California Court of Appeal's 2023 ruling in Alberto v. Cambrian Homecare, which held that some relatively common provisions in such agreements were "unconscionable" (e.g., waiving the need for the employer to post a bond to obtain an injunction). Our complimentary on-demand webinar Employee Confidential Information & Inventions Assignment Agreement Legal Update reviews the Alberto ruling and other important legal updates regarding such agreements in more detail. When an employer discovers that it has used an agreement with one or more non-compliant provisions, the employer should not only develop a new form of agreement to use for new hires, it should also discuss with legal counsel whether to require current employees to sign a new form of agreement (i.e., because the non-compliant provision(s) of the old agreement could invalidate the entire agreement, including critical provisions related to intellectual property ownership).

Employers seeking further guidance may contact any of the firm’s attorney.