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No-poach, non-compete, and others anti-competitive agreements that restrict employee mobility are generally unlawful in California
October 15, 2024 - OAKLAND — California Attorney General Rob Bonta today issued a consumer alert with information and resources for workers about unlawful restraints on employee mobility, including no-poach agreements, non-compete agreements, and Training Reimbursement Agreement Provisions (TRAPS). These agreements, along with other provisions in employment contracts that limit workers’ ability to move to competitors, can stifle job mobility and suppress wages and advancement, often in violation of California law.
"Employees deserve the freedom to seek better opportunities and better wages by finding new employment within their industry. Agreements that restrict employee mobility such as non-compete agreements, no-poach agreements, and TRAPs undermine this freedom," said Attorney General Bonta. "I urge all Californians to be aware of the unlawful nature of anticompetitive contracts and their potential impacts on career advancement and wage growth. If you believe you are being affected by this type of agreement, report it to my office at oag.ca.gov/report."
Non-Competes
Understanding Non-Compete Agreements
Non-compete agreements are between an employer and an employee and generally found within an employment contract. These agreements typically prevent employees from working for competitors or starting their own businesses within a certain time frame or geographic area, with limited statutory exceptions. These agreements can significantly impact workers by:
- Limiting Employment Opportunities: By restricting the types of jobs or companies workers can join, non-compete agreements can hinder workers’ ability to find new employment within their field or industry.
- Suppressing Wages and Career Growth: Workers may face stagnated wages and limited career progression due to reduced competition and fewer job offers.
- Deterring Job Mobility: The fear of legal repercussions or financial penalties may prevent workers from seeking better opportunities or moving to a different company.
Non-compete provisions in employment contracts have generally been void in California for decades. As of January 1, 2024, it is also illegal under California law for an employer to enter into or attempt to enforce such void agreements (see below).
Recognizing Non-Compete Agreements
Signs that you may be affected include:
- Explicit Contractual Clauses: Review your employment contract carefully for any clauses that outline restrictions on working for competitors, starting a similar business, or otherwise limiting your future employment options.
- Restrictions on Future Employment: If your employer has specifically mentioned or enforced restrictions on your ability to work for certain types of businesses or within particular geographic areas after leaving or you are asked to sign an agreement that limits your future employment options.
No Poach Agreements
Understanding No-Poach Agreements
No-poach agreements are arrangements made between companies to refrain from hiring each other's employees. Such agreements can violate California law. These agreements can negatively impact workers by:
- Limiting job opportunities and career growth.
- Restricting wage increases and competitive job offers.
- Creating a stagnant labor market where workers are less likely to find better employment conditions.
Such agreements can be illegal under California antitrust laws, which are designed to ensure fair competition and protect workers' rights.
Recognizing No-Poach Agreements
While these agreements might not always be overtly stated, signs that you may be affected include:
- Being discouraged from applying for jobs at competing companies.
- Statements from a prospective employer that they cannot hire from your current employer.
- Policies at your current employer that restrict hiring from certain competitors.
Training Reimbursement Agreement Provisions (TRAPs)
Understanding Employer-Driven Debt Products
TRAPs are agreements between an employer and employee where an employer provides necessary training to a worker, but requires the worker to reimburse the employer for training costs if the worker leaves their job before a certain date, sometimes even if the worker is fired or laid off. Similar employer-driven debt provisions require departing workers to reimburse the cost of employer-supplied equipment or supplies. These types of arrangements are often unlawful. Like non-competes and no-poach agreements, employer-driven debt products like TRAPs can:
- Limit job opportunities and career growth.
- Restrict wage increases and competitive job offers.
- Create a stagnant labor market where workers are less likely to find better employment conditions.
Last year, Attorney General Bonta issued a legal alert to remind all employers of the state-law restrictions on employer-driven debt.
Recognizing TRAPs
Explicit Contractual Clauses: Review your employment contract carefully for any clauses that detail an obligation to pay your employer for required training, equipment, supplies or the like if you leave employment before a particular timeframe or under certain conditions.
New California Laws
California’s Senate Bill 699: Non-Compete Agreements Are Illegal
Effective January 1, 2024, Senate Bill (SB) 699 makes it generally illegal for employers to enter into noncompete agreements with California employees. This applies to agreements signed both within and outside California. Employers who enter into or attempt to enforce void agreements will be committing a civil violation.
The new law extends its protection to workers even where the contract was signed or the employment was maintained outside of California. If a former employer tries to enforce a noncompete agreement in California, SB 699 can be used to challenge such enforcement.
Additionally, employees can now seek damages, injunctive relief, and reasonable attorneys’ fees if their employers try to enforce unlawful non-compete agreements.
California’s Assembly Bill 1076: Existing Non-Compete Agreements Are Void
Assembly Bill (AB) 1076 codifies that any existing noncompete agreements in employment are void, unless they satisfy an explicit statutory exception.
Employers were required to notify current and certain former employees, whose contracts include unenforceable noncompete clauses, that these agreements are void, by February 14, 2024. Failure to have done so constitutes an act of unfair competition.
Resources for Workers
If you believe you are being affected by an unlawful restriction upon your job mobility, you can take the following steps:
- Report to Authorities: File a complaint with the California Department of Justice at oag.ca.gov/report.
- Seek Legal Advice: To find a free or low-cost legal aid office near where you live, visit LawHelpCA.org. If you do not qualify for legal aid, you may also obtain a referral to a certified lawyer referral service by contacting the California State Bar.
Attorney General Bonta is dedicated to upholding workers' rights and combating unfair labor practices. In 2024, Attorney General Bonta took action by defending wages and overtime owed in the West Coast Drywall Lawsuit; he also secured a settlement with Amalfi Stone & Masonry Company, Inc., resolving allegations of unfair competition and payroll tax, and labor violations. In 2023, Attorney General Bonta took action to protect workers by launching a historic investigation into gender discrimination in the National Football League, joining 17 attorneys general in supporting the Federal Trade Commission’s proposed rule limiting non-compete agreements, launching a legal fight for in-home-healthcare workers, and fighting for the rights of transportation workers and immigrant children.
Source: CA. DOJ
