Are noncompete agreements enforceable in California?

California has refused to enforce employee noncompetes for more than a century. What changed recently is that including one is now its own violation, and starting January 1, 2027, so is most “stay-or-pay” language. Employers still using old templates, and employees who signed one elsewhere, both need to know where things stand.

What does California law say?

Every contract that restrains anyone from engaging in a lawful profession, trade or business is void to that extent (Business and Professions Code 16600). The exceptions are narrow: someone who sells the goodwill of a business, or a partner or member when a partnership or LLC dissolves, can agree not to compete in a defined area (Business and Professions Code 16601).

What changed in 2024?

• Noncompetes are void regardless of where or when they were signed, and an employer cannot try to enforce one against a California employee. Employees can sue for injunctive relief, damages and attorney fees (Business and Professions Code 16600.5).
• Including a noncompete clause in an employment contract, or requiring an employee to sign one, is unlawful (Business and Professions Code 16600.1). Employers had to notify current and many former employees by February 14, 2024 that any such clause was void.

What about non-solicitation clauses?

California courts treat most employee and customer non-solicitation clauses as restraints too. The safer ground for an employer is protecting trade secrets and confidential information directly, under the Uniform Trade Secrets Act, rather than trying to restrict who a former employee can call.

What is the stay-or-pay ban?

For contracts entered on or after January 1, 2027, an employer generally cannot require a worker to repay training costs or another debt when employment ends (Business and Professions Code 16608, Labor Code 926). The ban was first set to start January 1, 2026. AB 1697, signed September 30, 2026 as an urgency measure, moved the start to 2027 and treats claims based on 2026 agreements as moot (Mayer Brown). There are exceptions, including government loan forgiveness programs, approved apprenticeships, certain tuition agreements for a transferable credential offered separately from the employment contract, and certain discretionary sign-on payments that meet strict conditions. AB 1697 added more, including qualifying retention bonuses and repayment of advanced paid time off after a voluntary separation. A violation can cost the greater of actual damages or $5,000 per worker. Agreements signed before 2027 are judged under the old rules, so treat 2026 as the year to fix templates, not a reason to wait. Texas differs, see California vs Texas employment law.

What can an employer still protect?

• Confidentiality of trade secrets and genuinely confidential business information.
• Return of company property and files at separation.
• Invention assignment, within the limits of Labor Code 2870.
• A clear exit process: remove access on the last day and remind the employee of confidentiality obligations in writing.

Review offer letters and handbook language now. A compliance check-up includes this, and it matters at any size; see California HR laws by headcount.

What if you are the employee?

If your offer letter or an old agreement contains a noncompete, it is void in California and should not stop you from taking a new job. Confidentiality still binds you: do not take client lists or files. When comparing two job offers, read the repayment terms as closely as the salary, and if one asks you to sign a noncompete, point to the law and ask for it to come out. Leaving on your own terms is covered in terminations and severance.

The seller of a business is the main exception, and I explain how it plays out in HR deadlines when a small California business is sold.

A related rule limits repayment clauses that make leaving expensive, covered in California’s stay-or-pay rules for 2027, and five questions to ask before signing a retention bonus gives workers the questions to ask.

McKinley holds a J.D. but is not a licensed attorney. Articles here are general information, not legal advice. For your specific situation, talk with an employment attorney.

Data current as of September 2026. Sources are linked where each figure appears.