California Non-Compete Law 2026: What Employees and Freelancers Need to Know

California has the strongest employee protections against non-compete agreements in the United States. Under California Business and Professions Code Section 16600, non-compete agreements are void and unenforceable in California, with very narrow exceptions. This applies to employees, independent contractors, and freelancers working in California.

If your employment contract or freelance agreement has a non-compete clause and you work in California, that clause is almost certainly unenforceable.

---

What California Law Actually Says

California Business and Professions Code Section 16600 states:

"Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."

This language is broad and intentional. California courts have consistently interpreted it to mean exactly what it says. Non-compete agreements that restrict where you can work or who you can work for after leaving a company are void.

SB 699 (effective January 1, 2024) strengthened this further. Under SB 699:

• California employers cannot include non-compete clauses in employment contracts
• California employers cannot enforce non-competes signed in other states against California employees
• Employers who try to enforce void non-competes can be sued by employees and must pay attorney fees

AB 1076 (also effective January 1, 2024) requires employers to notify current and former employees (going back to January 1, 2022) if their contracts contain non-compete clauses, so those employees know the clauses are void.

---

The Narrow Exceptions

California law voids most non-competes but has three statutory exceptions:

1. Sale of a business. If you sell your business, the buyer can include a non-compete as part of the sale. The logic: you're being compensated for giving up the right to compete.

2. Dissolution of a partnership or LLC. Partners or LLC members can agree not to compete as part of the wind-down.

3. Sale of business interest. Similar to the business sale exception, applies when someone sells their ownership stake.

These exceptions don't apply to regular employees or independent contractors. If you didn't sell a business, the exceptions don't apply to you.

---

What Employers Can Still Restrict in California

Non-competes are void, but employers can still protect legitimate business interests through other means:

Non-disclosure agreements (NDAs). You can be required to keep trade secrets confidential. California law allows NDAs that protect genuine confidential information.

Non-solicitation of customers is more complicated. California courts have struck down many non-solicitation clauses, treating them as de facto non-competes. As of 2023 and 2024, California courts have increasingly voided non-solicitation clauses as well.

Non-solicitation of employees. Similarly, employee non-solicitation clauses (don't recruit your former colleagues) are also facing increased scrutiny in California courts.

Trade secret protection. The California Uniform Trade Secrets Act protects legitimate trade secrets regardless of whether you have a non-compete. Taking confidential pricing data, customer lists, or proprietary technology is still illegal even without a non-compete.

---

What If You Already Signed a Non-Compete?

If you signed a non-compete agreement and you work in California:

The clause is void. You cannot be legally prevented from working for a competitor or starting a competing business based on a non-compete clause. An employer who threatens legal action over a void non-compete is bluffing.

Document the threat. If your former employer sends a cease-and-desist letter or threatens to sue, save everything. Under SB 699, you can sue them and recover attorney fees.

Consult an employment attorney. If you receive a lawsuit threat, even one based on a void clause, talk to a California employment attorney. Many take these cases on contingency because the law is so clear-cut.

Don't assume it's void in your new state. If you move from California to Texas and then try to work for a competitor, your new employer and former employer may try to apply the non-compete under Texas law. California's protections travel with you as a California resident, but this gets legally complicated when you change states.

---

If Your Contract Is Governed by Another State's Law

Many employment contracts include a choice of law clause that specifies a state other than California. Employers sometimes try to use this to import enforceable non-compete law from states like Texas, Florida, or Georgia.

Under SB 699, California courts will not enforce these out-of-state non-competes against California employees. California's public policy against non-competes is so strong that it overrides contrary choice-of-law provisions when the employee is in California.

---

Non-Competes in Other States

If you work outside California, the rules are different:

States that largely void non-competes: California, Minnesota, North Dakota, Oklahoma, and (for most workers) Colorado and Illinois.

States that broadly enforce them: Florida, Texas, and many others enforce non-competes if they're "reasonable" in scope, duration, and geography.

The FTC rule attempted to ban most non-competes nationally in 2024 but was blocked by federal courts. As of 2026, the FTC non-compete rule is not in effect. State law governs.

---

Check Your Contract

If your contract has a non-compete and you're based in California, Clausely will flag it, cite California Business and Professions Code Section 16600, and explain exactly what it means for your situation.

Upload your contract free at clausely.app, no account required, results in under a minute.