If you’re an employee in California, you might be surprised to learn just how protected you are when it comes to non-compete agreements. In fact, California has long been the rebel in the room, banning most non-competes outright while the rest of the country largely went along with them.
Now, the Federal Trade Commission (FTC) is proposing a rule that would make non-compete agreements unenforceable nationwide, with very limited exceptions. This is big news. And for employers and employees in California, it’s also a moment of “we told you so.”
But the story is not quite that simple. Let us break it down.
What Is a Non-Compete Agreement, Anyway?
A non-compete agreement is a contract (often buried in your onboarding paperwork) that tries to prevent you from working for a competitor or starting a similar business after you leave your job.
Traditionally, these clauses have been used to:
- Keep employees from jumping ship to rivals.
- Prevent former workers from “stealing clients”.
- Protect trade secrets and confidential business strategies.
Seems reasonable in theory. But in practice, non-competes have been used to restrict everyone from CEOs to sandwich artists, often with no access to proprietary information at all.
California’s Stance: Non-Competes Are Void
California law is crystal clear.
Under Business & Professions Code Section 16600, any contract that restrains someone from engaging in a lawful profession, trade, or business is void, plain and simple.
That means:
- Most non-compete agreements are unenforceable in California.
- Employers cannot require you to sign one as a condition of employment.
- Even if you signed one in another state, it likely will not hold up once you work in California.
There are very limited exceptions (like in the sale of a business), but for everyday employees, California law favors worker mobility and competition.
What the FTC Is Proposing and Why It Matters
In 2023, the FTC proposed a nationwide ban on most non-compete clauses. If finalized, this rule would:
- Prohibit employers across the U.S. from entering into non-competes with workers.
- Require companies to rescind existing non-competes.
- Apply broadly, even to independent contractors and interns.
It appears the goal would be to boost competition, encourage entrepreneurship, and remove unfair barriers to job mobility.
For California workers, this might sound like old news. But the federal rule matters because:
- Multi-state employers would have to align practices across the board.
- California-based employees working remotely for out-of-state companies might still encounter out-of-state contract terms.
- There is potential for stronger nationwide protections, especially if paired with enforcement mechanisms California does not yet have.
How This Impacts California Employers
If you’re a California employer still using non-competes “just in case,” now is the time to stop.
The FTC’s actions will likely draw even more attention to unlawful contract practices. California is already cracking down:
- AB 1076, effective January 1, 2024, requires employers to notify current and former employees (hired after 2022) that their non-compete agreements are void.
- Violating the law could expose employers to civil penalties and lawsuits.
Instead of relying on non-competes, employers should focus on:
- Confidentiality and trade secret agreements (which are still legal).
- Narrowly tailored non-solicitation clauses, where permitted.
- Strong onboarding and offboarding policies to protect legitimate business interests.
What Employees Should Know
If you’re an employee in California and you’ve been asked to sign a non-compete:
- You do not have to agree to it.
- It is likely unenforceable.
- You can file a complaint or seek legal guidance if your employer threatens to enforce it.
Even if you’re working remotely from California for a company based elsewhere, you may still be protected by California’s laws depending on your situation.
The Bottom Line
California has long been ahead of the curve when it comes to protecting workers from restrictive non-compete agreements. Now, with the FTC’s proposed federal ban, the rest of the country may finally be catching up.
Whether you’re a tech developer, a designer, a sales manager, or a barista, your right to move freely between jobs matters.
Know your rights, read your contracts, and do not be afraid to seek legal guidance when necessary.
The blog published by Fairchild Employment Law is available for informational purposes only and is not considered legal advice on any subject matter. By viewing blog posts, the reader understands there is no attorney-client relationship between the reader and the blog publisher. The blog should not be used as a substitute for legal advice from a licensed professional attorney, and readers are urged to consult their own legal counsel on any specific legal questions concerning a specific situation.