California Strengthens Law Against Noncompete Agreements
By: Emmanuel Perea Jimenez
On September 1, 2023, Governor Newsom signed Senate Bill 699 (SB 699), which further strengthens existing laws prohibiting noncompete agreements and other restrictive covenants, like employee non-solicitation clauses. Overall, SB 699 comes amid a nationwide trend against noncompete agreements, and greatly increases the risk associated with including them in contracts and enforcing them in court. Practitioners and employers should carefully review SB 699 to see how these changes may impact their existing employment contracts.
Historically, California law and public policy has frowned upon noncompete clauses and restrictive covenants. Business and Professions Code section 16600 codifies this policy: “Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” (There are narrow exceptions to this general rule that pertain to the sale of certain business entities, like LLCs.) California courts have largely followed this policy and rendered most noncompete agreements and restrictive covenants unenforceable. This trend has already made California’s legal regime regarding such agreements one of the strictest in the country.
Enter SB 699. This statute will be codified as section 16600.5 in the Business and Professions Code and will take effect on January 1, 2024—just a few short months away. Designed to bolster California’s existing law, SB 699 has several key provisions that practitioners and employers should review closely.
First, SB 699 voids noncompete agreements and restrictive covenants “regardless of where and when the contract was signed” and even if “the employment was maintained outside of California.” In other words, California is retroactively voiding all existing noncompete agreements and restrictive covenants. California also appears to be reaching for out-of-state contracts as well—which presents constitutional issues that are beyond the scope of this article. SB 699 also prohibits employers from (1) entering into new noncompete agreements with employees or job applicants and (2) from attempting to enforce those contracts.
But SB 699 does not stop there. The new law declares violations of SB 699 to be a “civil violation,” and creates a new private right of action to enforce the rights under this new law. So, starting in 2024, employees will be able to sue employers for using or attempting to enforce noncompete agreements. Employees will be allowed to obtain damages, injunctive relief, and, perhaps most notably, the provision also awards attorney’s fees—which will undoubtedly generate new litigation.
These tough new provisions are expressly aimed at employers. In enacting SB 699, the California Legislature expressly found that, despite the strong policy in favor of employee mobility and free competition: “California employers continue to have their employees sign noncompete clauses that are clearly void and unenforceable” and California employers still “pursue frivolous noncompete litigation [that] has a chilling effect on employee mobility.” By retroactively invalidating noncompete clauses and giving employees a right (and an incentive) to sue, the Legislature has raised the stakes for employers who include, and attempt to enforce, noncompete and other restrictive clauses in their contracts.
In closing, SB 699 creates a serious risk of liability for employers, while also giving employees increased protections and incentives to file suit. Employers would be well-advised to consult with their labor counsel to evaluate their existing agreements and before seeking to enforce (or oppose) a noncompete clause or restrictive covenant.
Fenton & Keller Named County’s Top Law Firm in Monterey County Herald and Monterey County Weekly Reader Polls
In its March 22, 2018, edition, the Monterey County Weekly announced that its readers have once again voted Fenton & Keller the Best Law Firm in Monterey County. This is the third consecutive year Fenton & Keller has received this honor.
In addition, the Monterey County Herald recently announced that its readers have voted Fenton & Keller as the Best Law Firm in Monterey County for 2017 in its “Readers’ Choice Awards” poll. Fenton and Keller partner Sara Boyns was also voted the second place winner in the “Best Lawyer” category. The Herald announced the “Readers’ Choice Awards” winners in its March 14, 2018, issue.
All of us at Fenton & Keller would like to express our gratitude to the readers of Monterey County Weekly and the Monterey County Herald for honoring and expressing their confidence in our firm in this way. We would also like to thank our clients for trusting in us and allowing us to serve their changing legal needs for over 50 years!
Click on the links to view these announcements in the Weekly and Herald (page 50).
Susannah Ashton Joins Fenton & Keller As Employment Law And Litigation Associate
Fenton & Keller is pleased to announce that Susannah L. Ashton has joined the firm. Susannah’s practice focuses on general civil litigation and employment law litigation and counseling.
With extensive litigation experience in both California and New York, Susannah has represented and advised management in all areas of labor and employment matters including complex class actions and union representation campaigns. Susannah has experience representing clients before the California Labor Commissioner, the California Department of Fair Employment and Housing, the National Labor Relations Board, and the California Agricultural Labor Relations Board. Before joining Fenton & Keller, Susannah gained valuable employment and immigration law experience through her participation in litigation in federal court involving the processing of H-2A visa applications.
Susannah earned her B.A. from the University of California, Santa Cruz and her J.D. from Brooklyn Law School in 2009. During law school, Susannah co-founded the Brooklyn Law Students for Veterans Rights and won second place in a national legal writing competition for employment law.
Andrew Kreeft Becomes Fenton & Keller Shareholder
Fenton & Keller is pleased to announce that Andrew Kreeft has become a shareholder and director of the firm.
Andrew is a 1983 graduate of Georgetown University and a 1986 graduate of Santa Clara University School of Law. Andrew was in private practice in the San Francisco and Monterey Bay areas since 1987 before joining Fenton & Keller in 2016. For almost 30 years, Andrew has specialized in civil litigation with an emphasis on trial practice, general negligence, and tort liability law. His experience includes product liability, premises liability, professional negligence, employment & labor, and business matters. Andrew represents individuals as well as corporate/private entity clients and has tried numerous cases in multiple counties in Northern California and Federal District court. Notably, Andrew was co-lead counsel on a product defect case against an automobile manufacturer which resulted in a $12.5 million dollar jury verdict. He has received the designation of AV Preeminent by Martindale-Hubbell, the highest peer review rating given to attorneys based on legal ability and ethical standards, and is a member of the American Board of Trial Advocates.
Kenneth Kleinkopf Certified As Estate Planning, Trust & Probate Law Specialist
Fenton & Keller is proud to announce that Kenneth S. Kleinkopf has been certified as a specialist in estate planning, trust and probate law by the State Bar of California Board of Legal Specialization. The State Bar program for certifying legal specialists is a California Supreme Court-approved method of certifying attorneys as specialists in eleven specialty areas of law. Attorneys are certified through a process of which includes successful passage of a written examination, completion of specific tasks in the specialty area, attendance at a prescribed number of approved educations programs, and peer review.