California Reinforces Illegality of Contracts in Restraint of Trade

Emphasizing that existing state law generally voids contractual provisions by which a person is restrained from engaging in a lawful profession, trade, or business of any kind (with certain exceptions), California has passed a new bill establishing that any contract that is void as such is unenforceable regardless of where and when the contract was signed. The bill also prohibits an employer or former employer from attempting to enforce a contract that is void regardless of whether the contract was signed and the employment was maintained outside of California.

As for remedies, violating employers commit a civil violation under the new bill, and an employee, former employee, or prospective employee is authorized to bring an action to enforce that law for injunctive relief or the recovery of actual damages, or both, as well as for reasonable attorney’s fees and costs.

The new restrictions are effective on January 1, 2024.