On September 1, 2023, in a moment of Legislative overkill, California Governor Gavin Newsom signed into law SB 699. The ‘we really mean it’ legislative initiative that reinforces current laws prohibiting restrictive covenants.
Existing law concerning restrictive covenants (e.g., non-competition, non-solicitation agreements) regulates business activities to maintain competition. To that end, existing law voids contractual provisions that would act to restrain California workers from engaging in a lawful profession, trade, or business of any kind, except as otherwise provided for under limited lawful exemptions (e.g., the sale or dissolution of corporations, partnerships, and limited liability corporations).
SB 699 takes existing law one (hopefully final) step further to make clear (again) that a contact void under current law would remain so “regardless of whether the contract was signed – and the employment was maintained – outside of California.” In other words, the statute establishes that any contract void under current law (as described above) “is unenforceable regardless of where and when the contract was signed.”
The newly signed statute reinforces existing prohibitions on entering contracts with employees or prospective employees that include(s) any provision void under new and existing laws govern restrictive covenants. Making it clear such actions would constitute a civil violation, the statue authorizes applicants, employees or former employees to bring suit for in injunctive relief or the recovery of actual damages, or both, and provides that such an individual is also entitled to recover reasonable attorney’s fees and costs.