What Is California Business and Professions Code Section 16600?

California Business and Professions Code Section 16600 is the state law that voids non-compete agreements. It says that every contract restraining anyone from engaging in a lawful profession, trade, or business is void to the extent of the restraint.¹ A handful of narrow exceptions exist for business sales, partnerships, and LLCs. Outside those, a non-compete signed by a California worker is unenforceable, and recent amendments extend that rule to contracts signed in other states and expose employers who try to enforce void clauses to damages and attorney’s fees.

What the Statute Actually Says

Section 16600 is short. Any contract that restrains someone from engaging in a lawful profession, trade, or business is void to the extent of that restraint.¹ The word “anyone” is doing real work. The statute covers employees, independent contractors, business owners, and anyone else a contract might restrict.

Subdivision (c) extends the rule beyond the parties who signed the contract. If two companies strike a deal that effectively keeps a third person from competing, that restriction can be void too.¹

Most states ask whether a non-compete is “reasonable” in duration, geographic scope, and the interests it protects. California does not. The statute is a flat prohibition, subject only to the specific exceptions in Sections 16601, 16602, and 16602.5.

Non-Competes and Non-Solicits in Employment

In the employment context, Section 16600 voids non-compete clauses no matter how narrowly drafted. The California Supreme Court held in Edwards v. Arthur Andersen LLP (2008) that the statute invalidates even narrowly tailored non-competes, rejecting the “narrow restraint” exception some other states recognize.² The legislature later wrote that holding directly into the statute.

So if your employment contract says you cannot work for a competitor after you leave, that clause is almost certainly void, even if it only covers a small territory or lasts a few months.

Non-solicitation clauses have gone the same way. California courts increasingly treat clauses that bar you from contacting former clients or recruiting former coworkers as restraints on your profession, and strike them down under Section 16600.

One area still gives employers some leverage: trade secrets. If a former employer can show your solicitation of customers relies on genuinely proprietary information, such as a confidential list developed through significant investment, a court may step in. The protection has to be tied to actual trade secret misuse, not general competitive activity, and courts see through confidentiality agreements that are really non-competes in disguise. Proving a customer list qualifies as a trade secret is an uphill fight in practice.

The Narrow Exceptions

Three situations allow enforceable non-competes. Courts read each one strictly.

Sale of a Business

Someone who sells the goodwill of a business, or an owner who sells all of their ownership interest in a business entity, can agree not to compete with the buyer in a specified geographic area where the business operated.³ The same goes for a business entity selling all or substantially all of its operating assets along with the goodwill.

The seller has to give up their entire stake. A partial sale or minority interest does not qualify. “Ownership interest” is defined to include a partnership interest, an LLC membership interest, or corporate shares.³ The geographic restriction must track where the business actually operated. A statewide non-compete tied to a business that only ran in San Diego would likely be cut back or voided.

Partnership Dissolution or Dissociation

Partners can agree not to carry on a similar business in a specified area where the partnership operated, either when the partnership dissolves or when an individual partner leaves.⁴ The restriction lasts only as long as the remaining partners, or someone who acquired the business, keeps operating there.

LLC Dissolution or Membership Termination

A parallel rule applies to LLCs. A member can agree not to compete within a specified geographic area when the LLC dissolves or when that member’s interest ends.⁵ The geographic scope is limited to where the LLC actually did business.

Contracts Signed Out of State

Employers used to try to escape Section 16600 by having California workers sign contracts governed by another state’s law. Senate Bill 699, effective January 1, 2024, closed that route by adding Section 16600.5.

Under Section 16600.5, a contract that is void under Section 16600 is unenforceable regardless of where or when it was signed.⁶ If you moved to California from a state where your non-compete was valid, your former employer generally cannot pursue you for competing once you are working here.

California also limits employers’ ability to force California workers into out-of-state courts or foreign law. Labor Code Section 925 bars an employer from requiring a California-based employee to litigate California claims elsewhere or to waive California-law protections for California disputes.⁷ A provision that violates this rule is voidable at the employee’s request. The one exception is when the employee was individually represented by their own lawyer in negotiating those specific terms.

Employer Notice Duties and Penalties

Assembly Bill 1076, also effective January 1, 2024, added Section 16600.1. It makes it unlawful on its own to include a non-compete clause in an employment contract that does not fit a statutory exception.⁸

The law also required a one-time, backward-looking notice. By February 14, 2024, employers had to send written, individualized notices to current and former employees whose contracts contained a non-compete, telling them the clause is void. For former employees, the duty reached back to anyone who worked at the company at any point after January 1, 2022.⁸ A generic company announcement did not count.

A violation of Section 16600.1 is an act of unfair competition under Business and Professions Code Section 17200. That opens the employer up to civil penalties of up to $2,500 per violation, injunctive relief, and restitution.⁸

What You Can Do if an Employer Tries to Enforce One

Section 16600.5 gives employees, former employees, and prospective employees a private right of action. You can sue for an injunction to stop the employer from enforcing the clause, recover actual damages, or both.⁶ Actual damages can include lost wages from a job you turned down because the employer threatened legal action, or income you missed while being wrongly held out of the market.

If you win, the employer pays your reasonable attorney’s fees and costs.⁶ That fee-shifting rule makes it realistic to challenge an employer’s threat without taking on all the financial risk yourself. An employer who enters into or tries to enforce a void non-compete has committed a civil violation under the statute, which means the exposure runs well beyond simply having the clause struck.

If you find a non-compete in your California employment contract, the practical starting point is simple: the clause is almost certainly void, and you are not bound by it. If your employer threatens suit, Section 16600, the fee-shifting in Section 16600.5, and the unfair competition exposure under Section 16600.1 give you real leverage.

1
California Legislative Information. California Code Business and Professions Code 16600
2
Stanford Law – Supreme Court of California. Edwards v. Arthur Andersen LLP
3
California Legislative Information. California Code Business and Professions Code 16601
4
California Legislative Information. California Code Business and Professions Code 16602
5
California Legislative Information. California Code Business and Professions Code 16602.5
6
California Legislative Information. California Code Business and Professions Code 16600.5
7
California Legislative Information. California Labor Code 925
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California Legislative Information. California Business and Professions Code 16600.1