California Assembly Bill 935 is not a non-compete law. The bill Governor Newsom signed on October 7, 2023 dealt with enforcement of the state’s flavored tobacco sales ban, not employment contracts.1LegiScan. Roll Call: CA AB935 | 2023-2024 | Regular Session The 2024 non-compete reforms that AB 935 is often confused with came through two different bills: Senate Bill 699 and Assembly Bill 1076. Both took effect on January 1, 2024, and together they reshaped how California treats non-compete agreements.
The Laws That Actually Changed Non-Compete Rules
SB 699 added Section 16600.5 to the Business and Professions Code. It declared that any contract void under California’s non-compete ban is unenforceable regardless of where or when it was signed, and it barred employers from attempting to enforce a void non-compete even when the contract was signed and maintained entirely outside California.2California Legislative Information. California Business and Professions Code 16600.5 An out-of-state employer can no longer use a choice-of-law clause pointing to a more permissive state to work around the ban when the worker lives in California.
AB 1076 added Section 16600.1. It made it independently unlawful for an employer to include a non-compete clause in a contract or require an employee to sign one that does not fit a statutory exception.3California Legislative Information. California Business and Professions Code 16600.1 Before this change, the clause was simply void and ignored. Now the act of putting the language in a contract is itself a violation. Employers face real consequences for the drafting, not just for an eventual attempt to enforce.
The Employer Notice Deadline
Section 16600.1 required employers to send individualized written notice to all current employees, and to any former employees who worked for the company after January 1, 2022, if those workers had signed a contract containing a non-compete clause that did not qualify for an exception.3California Legislative Information. California Business and Professions Code 16600.1 The notice had to state that the clause was void.
Delivery had to go to both the last known mailing address and the email address of the affected person. A general company-wide announcement did not count. The deadline was February 14, 2024.
Missing the deadline is treated as an act of unfair competition under Section 17200, which carries civil penalties of up to $2,500 per violation. The deadline has passed, but the liability has not disappeared for employers that never sent the notices.
What Employees Can Do Now
Under Section 16600.5, current, former, and prospective employees can bring a private lawsuit against an employer that enters into or attempts to enforce a void non-compete. A successful plaintiff can recover actual damages plus attorney’s fees and costs. Under the unfair competition framework triggered by Section 16600.1, courts can also issue injunctions and order restitution.
This is a meaningful shift. Before 2024, a worker handed a non-compete could refuse to sign or treat the clause as void if the employer tried to enforce it, but that was the extent of the remedy. Now a worker can go on offense, and the fee-shifting provision makes it economically viable to bring a claim even when individual damages are modest.
The Underlying Ban and Its Three Exceptions
California has prohibited non-compete agreements since 1872. Business and Professions Code Section 16600 states that any contract restraining someone from working in a lawful profession, trade, or business is void, and courts are instructed to read the prohibition broadly.4California Legislative Information. California Business and Professions Code 16600 Only three narrow exceptions exist, and none apply to typical employment relationships:
- Someone selling the goodwill of a business, or all ownership interest in a business entity, can agree not to compete with the buyer within a defined geographic area.5California Legislative Information. California Business and Professions Code 16601
- A departing partner can agree not to compete in the geographic area where the partnership operated.6California Legislative Information. California Business and Professions Code 16602
- A departing LLC member can agree to similar geographic restrictions.7California Legislative Information. California Business and Professions Code 16602.5
If an agreement does not fit squarely within one of those categories, it is void. The 2024 reforms did not change the exceptions. They changed what happens when an employer tries to use a non-compete that falls outside them.
Non-Solicitation Agreements Fall Under the Same Rule
A common mistake is to assume that a non-solicitation clause is safe because a non-compete is not. In California, that assumption is wrong. California appellate courts have read Section 16600 to cover post-employment customer non-solicitation agreements, and since 2018 they have extended the same reasoning to employee non-solicitation clauses. Federal courts applying California law have followed suit.
If a clause prevents a former employee from contacting former clients or recruiting former colleagues after leaving, courts are likely to void it as a restraint on engaging in a lawful profession. In-term restrictions that apply only while the employment relationship is active are a separate matter; a 2020 appellate ruling confirmed Section 16600 does not reach those.
Confidentiality agreements remain enforceable when properly scoped. A non-disclosure agreement that protects specific trade secrets or proprietary information without restricting where the person can work or who they can contact is not a non-compete. The dividing line is whether the agreement restricts the use of particular information or restricts the person’s ability to work.
The Federal FTC Rule Is Not in Effect
California’s reforms arrived around the same time the Federal Trade Commission was pursuing a nationwide ban on non-compete agreements. The FTC published a final rule in May 2024 that would have prohibited most non-competes across all 50 states. A federal district court blocked the rule on August 20, 2024, finding the FTC lacked statutory authority to issue it.8Federal Trade Commission. Noncompete Rule
On September 5, 2025, the FTC voted 3-1 to drop its appeal and accede to vacatur of the rule.9Federal Trade Commission. Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule The rule will not be enforced. For California workers, this changes nothing, because California’s protections were already broader than what the FTC rule would have delivered. The FTC has said it will continue to challenge individual arrangements through enforcement actions, with a stated priority on agreements applied to lower-wage workers.
Where This Leaves California Workers and Employers
Non-compete clauses in California employment contracts are void. Attempting to enforce one, or merely including one, violates California law. The state of signing and the governing-law clause do not matter if the worker is a California resident. Post-employment non-solicitation clauses are treated the same way. The only valid exceptions involve the sale of a business, a partnership departure, or an LLC member’s departure. Employers who missed the February 14, 2024 notice deadline still face per-violation penalties, and employees bound by or threatened with a void non-compete can sue, recover damages, and collect attorney’s fees. The statutes that produced those rules are Sections 16600.1 and 16600.5 of the Business and Professions Code, enacted through AB 1076 and SB 699. AB 935 is a different bill on a different subject.