Out-of-state non-competes are not enforceable in California. California law voids virtually every non-compete clause tied to employment, and that voiding applies no matter where or when you signed the contract. If you signed a non-compete in Texas, New York, or anywhere else that enforces them, and you now work in California, your former employer cannot use it to stop you from taking a new job or starting a competing business. Since January 1, 2024, you can also sue an employer who even attempts to enforce one.
The California Rule That Voids the Agreement
California Business and Professions Code Section 16600 says that any contract restraining someone from engaging in a lawful profession, trade, or business is void to that extent.1California Legislative Information. California Code Business and Professions Code 16600 – Contracts in Restraint of Trade Courts read that language the way it sounds. The clause is void regardless of how narrowly it was drafted, how short the restricted period is, or how small the geographic area. If the practical effect is to keep you from working for a competitor, it does not survive.
Business and Professions Code Section 16600.5, effective January 1, 2024, closed the out-of-state loophole in explicit terms. Any contract void under California’s non-compete chapter is unenforceable “regardless of where and when the contract was signed,” and employers cannot try to enforce one “regardless of whether the contract was signed and the employment was maintained outside of California.”2California Legislative Information. California Code Business and Professions Code 16600.5 The statute’s own findings state that California’s policy against restraints of trade overrides other states’ laws when a worker seeks employment in California, even if the contract was signed while living out of state and working for a non-California employer.
Why Employer Workarounds Fail
Most out-of-state non-competes include contract language designed to lock in another state’s rules. Two provisions come up again and again, and neither works in California.
Choice-of-Law Clauses
Many non-competes specify that the agreement is governed by the law of the state where it was signed. Courts normally honor these clauses. California treats non-competes as the exception. The state’s interest in worker mobility and open competition is considered fundamental public policy, and courts will not apply another state’s law to validate an agreement that Section 16600 makes void. Employers cannot contract around the ban by picking a friendlier forum’s rules.
Forum Selection Clauses
The other common tactic is to require that any dispute be litigated outside California, in a court likely to enforce the non-compete. California Labor Code Section 925 blocks this. It prohibits employers from requiring workers who primarily live and work in California to agree, as a condition of employment, either to adjudicate California-arising claims outside the state or to waive California law protections.3California Legislative Information. California Code Labor Code 925 A provision that violates the rule is voidable at the employee’s request. If voided, the dispute is resolved in California under California law. The rule covers both litigation and arbitration.
Section 925 has one narrow exception: it does not apply if the employee was individually represented by their own attorney when negotiating the forum or choice-of-law provision. Most people sign non-competes as a condition of a job offer without separate counsel, so this exception rarely matters in practice.
What You Can Do If an Employer Tries to Enforce One
Before 2024, California’s non-compete ban was already strong, but the remedies for employees were less defined. Two bills changed that.
SB 699: You Can Sue, and Recover Fees
Senate Bill 699, codified as Section 16600.5, does more than declare the agreement void. An employer that enters into or attempts to enforce a void non-compete commits a civil violation.4California Legislative Information. California Senate Bill 699 – Contracts in Restraint of Trade Employees, former employees, and prospective employees can sue for injunctive relief, actual damages, or both. A worker who prevails recovers reasonable attorney’s fees and costs.2California Legislative Information. California Code Business and Professions Code 16600.5
Fee-shifting matters. It means a cease-and-desist letter or a lawsuit from a former employer trying to enforce an unenforceable non-compete now carries real financial exposure for the employer, and it makes it realistic for employees to find a lawyer willing to take the case.
AB 1076: Your Employer Was Supposed to Tell You
Assembly Bill 1076 codified existing California Supreme Court authority voiding non-competes in the employment context and added a concrete notice requirement. Employers had to send written notice by February 14, 2024, to all current employees and to former employees hired after January 1, 2022, informing them that any non-compete clause in their contract is void.5California Legislative Information. AB-1076 Contracts in Restraint of Trade – Noncompete Agreements
Failing to send the notice is unfair competition under California’s Unfair Competition Law, which carries civil penalties of up to $2,500 per violation under Business and Professions Code Section 17206.6California Legislative Information. California Code Business and Professions Code 17206 If you never received the notice and you should have, that is itself a potential claim.
Remote and Multi-State Workers
Remote work complicates which state’s law applies, but Section 16600.5 is written broadly. It bars enforcement of void non-competes “regardless of whether the contract was signed and the employment was maintained outside of California.”2California Legislative Information. California Code Business and Professions Code 16600.5 If you live in California and work remotely for a company headquartered elsewhere, the state’s protections almost certainly apply to you. Labor Code Section 925 reinforces that result by keeping disputes involving workers who primarily reside and work in California inside California courts under California law.3California Legislative Information. California Code Labor Code 925
The harder cases involve workers who split time between California and another state, or who live outside California but perform some work there. Courts have not fully mapped those boundaries, and multi-state employers are still testing jurisdictional challenges to the 2024 legislation.
What the Ban Does Not Cover
A few related situations fall outside the employment non-compete rule, and it is worth knowing where the line sits.
Sale of a Business and Owner Departures
California’s prohibition protects employees, not sellers of businesses. The law carves out three narrow exceptions tied to ownership, not employment:
- Selling the goodwill of a business, all of your ownership interest, or substantially all of its operating assets and goodwill. You can agree not to compete with the buyer within a defined geographic area for as long as the buyer continues operating a similar business there.7California Legislative Information. California Code Business and Professions Code 16601
- Leaving a partnership or dissolving one. The departing or former partner can agree not to compete within the geographic area where the partnership did business, so long as the remaining partners or successors continue operating there.8California Legislative Information. California Code Business and Professions Code 16602
- Dissolving an LLC or leaving as a member. The same principle extends to LLC members under similar terms.9California Legislative Information. California Code Business and Professions Code 16602.5
If you are a regular employee with no ownership stake, none of these exceptions reach you.
NDAs and Non-Solicitation Clauses
A non-disclosure agreement that protects genuinely confidential information or trade secrets stays enforceable in California. An NDA restricts what you can share, not where you can work.
Non-solicitation clauses are more contested. A clause tied directly to protecting a trade secret, such as a confidential customer list, may survive. Broader non-solicitation provisions have fared poorly. In AMN Healthcare v. Aya Healthcare Services, a California appellate court held that a clause barring a former employee from soliciting the company’s workers was void under Section 16600.10Justia. AMN Healthcare Inc. v. Aya Healthcare Services Inc. If a non-solicitation clause is broad enough to effectively stop you from doing your job, California courts tend to treat it like a non-compete and void it.
No Federal Non-Compete Ban
The Federal Trade Commission issued a rule in 2024 that would have banned most non-competes nationwide, but a federal district court blocked it. In 2025 the FTC moved to dismiss its appeals and accede to vacatur of the rule.11Federal Trade Commission. Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule There is no federal ban on non-competes. Enforceability turns entirely on state law, and California’s law is as protective of workers as any in the country.