Search for:

In brief

Last fall California doubled-down on the state’s hostility to noncompete agreements. Assembly Bill 1076 codified the landmark 2008 Edward v. Arthur Andersen decision that invalidated all employment noncompetes, including narrowly tailored ones, unless they satisfy a statutory exception.

AB 1076 also added new Business & Professions Code §16600.1, requiring California employers to notify current (and certain former) employees that any noncompete agreement or clause to which they may be subject is void (unless it falls within one of the limited statutory exceptions).

Individualized written notice must be sent by 14 February 2024 or significant penalties may apply.

Notice must be provided to all current and former employees to whom all of these conditions apply:

  • They were employed by the company after 1 January 2022.
  • They are located in California.
  • They are bound by or entered into an employment-related agreement containing a noncompete provision, customer nonsolicitation provision or other similar provision that is unenforceable under California law.

The notice must inform employees that the provisions are void in California. Notice must be written and delivered to the employee’s last known postal address and email address. Failing to provide such notice constitutes a violation of the state’s Unfair Competition Law, which carries civil penalties.

Special considerations for compensation & benefit professionals

What may fall under the radar is AB 1076’s implicit requirement to carefully review all employment documentation, including equity and incentive award plans and agreements and other contracts (bonus plans, commission plans, severance agreements), for language that may be construed as a noncompete.

This includes traditional noncompetes that empower an employer to seek a court injunction to prevent a former employee from working for a competitor. But it also captures more limited restraints or penalty clauses, e.g., equity award provisions that require employees to forgo post-employment equity vesting (such as under a retirement clause) if they work for a competitor, but which do not otherwise prohibit competitive activity. Any such “limited restraints” theory is no longer viable in California – all clauses that prohibit post-employment competition are void even if they impose only financial penalties for competition rather than an outright ban on working for a competitor.

Equity and benefit plan professionals may not be aware of AB 1076’s impact on their “world,” and similarly, in-house employment counsel are often not aware of the fine print details contained within equity or benefit plan documents. However, to ensure that no prohibited noncompete is overlooked, it is important for compensation and employment professionals to coordinate on their approach to AB 1076, especially given that failure to provide requisite notice may trigger significant penalties. Under the statute, violations will be deemed an act of unfair competition and subject to civil penalties up to USD 2,500 per violation. For large employers, the damage could be enormous and surprising.

Yes, customer nonsolicitation agreements count too

AB 1076 prohibitions and notice provisions also impact customer nonsolicitation agreements which are considered the same as noncompetes under California case law. 

Action items

  • Review all compensation and employment arrangements with current and former California employees, including equity and incentive award plans and agreements, to identify prohibited restrictions.
  • Draw up your compliance plan and create your notice list, bearing in mind:
    • Current employees who were previously bound, but are no longer bound due to a plan or contract amendment, may need to be notified. The statute isn’t clear – the conservative approach is to notify, but the practical approach is that if they were not bound as of the effective date of the new law (1 January 2024), they are not a party to a contract with a noncompete and notice should not be required.
    • Former employees who worked post 1 January 2022 and who are subject to a viable noncompete need to be notified.
    • Employees with expired noncompetes who worked post 1 January 2022 arguably would not need notice because there is no point in notifying them that their already-expired noncompete is no longer effective.
    • Former employees who left before a plan amendment eliminating a noncompete might need notice if they wouldn’t otherwise know the plan was amended.
  • For grey areas or sample notices, please contact your Baker McKenzie attorney.

Victor Flores is a partner in Baker McKenzie’s Employment & Compensation Practice, with a focus on Executive Compensation and Employee Benefits.


Sinead Kelly is a partner in the Firm's Compensation practice. She advises on US executive compensation and global equity and has practiced in the compensation field since 2005. She regularly speaks and publishes on compensation-related topics and is a contributing author to Lexis Practice Advisor and Wolters Kluwer’s “Practical Guide to SEC Proxy and Compensation Rules,” as well as a founder of the Firm's Compensation Connection blog. She is on the Advisory Board of the Certified Equity Professionals Institute (CEPI) of Santa Clara University and is a member of the Firm's Artificial Intelligence and Blockchain working groups. Sinead has been recognized by Chambers USA for Employee Benefits and Executive Compensation, most recently in 2024, where Chambers states that she is “extremely intelligent, responsive and solution-oriented.” She is a Thomson Reuters Stand-out Lawyer for 2024, and is ranked by Legal 500 as a "Leading Lawyer" for Employee Benefits, Executive Compensation and Retirement Plan Design.


Barbara Klementz is the chair of Baker McKenzie’s North American Compensation Practice. She has practiced in the area of global equity and executive compensation for over 20 years. Barbara has authored several articles on global equity issues for the BNA Executive Compensation Journal, Journal of Corporate Taxation and San Francisco and Los Angeles Daily Journal, among others, and she is the author of a blog on global equity related topics called the Global Equity Equation. She is also a frequent speaker on a variety of global equity topics. Barbara is recognized as a ranked practitioner by Chambers USA. Chambers states that she "consistently delivers top-notch assistance and work product, and is a true expert in the field." Barbara is admitted to private practice in California and Düsseldorf, Germany.


Robin Samuel leads Baker McKenzie’s US Labor & Employment team, is co-chair of the Firm’s Workforce Redesign service line, and is a Steering Committee member for the North American Employment and Compensation practice. Robin also serves on the California offices’ leadership team. Robin is a Chambers-ranked attorney for California employment law, a Benchmark Litigation Labor & Employment Star, and a 2023 L.A. Business Journal Top 100 Lawyers award recipient. Robin is a frequent author and speaker for organizations such as SHRM, ACC, and the World Business Council for Sustainable Development.


Caroline Burnett is a Senior Knowledge Lawyer with the North America Employment & Compensation Practice Group. Caroline's primarily responsibility is to make knowledge easily available to lawyers within the North America Employment & Compensation Group, increasing the quality, consistency and cost-effectiveness of the advice that Baker McKenzie gives its clients
In addition to her focus on enhancing technical standards and improving efficiency, Caroline drafts drafting pragmatic and commercially-minded thought leadership for the Firm's clients. She identifies trends and developments impacting US multinationals to enable fee-earners in her practice group to better advise their clients on managing a global workforce. In 2017, Caroline launched the Employer Report blog, which provides legal updates and practical insights to help multinational employers understand, prepare for and respond to the latest domestic and cross-border labor and employment law changes.
Before joining Baker McKenzie, Caroline practiced labor and employment law for nearly a decade at major US law firms.

Write A Comment