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California Strengthens Employee Rights: The Impact Of Senate Bill 699 On Restrictive Covenants

California Strengthens Employee Rights: The Impact Of Senate Bill 699 On Restrictive Covenants

On September 1st, 2023, California Governor Gavin Newsom took a step toward bolstering employee rights by signing Senate Bill 699 into law. This legislation reaffirms and strengthens the state’s long-standing commitment to employee freedom in pursuing their chosen professions, trades, or businesses. The bill reiterates California’s Business and Professions Code Section 16600 and introduces new provisions that have far-reaching implications for employers and employees. Continue reading to delve into the details of SB 699 and explore the broader impact of this legislation.

California’s Commitment To Employee Freedom

California has long been a trailblazer in protecting the rights of its workforce. The cornerstone of this commitment is Business and Professions Code Section 16600, which boldly declares, “Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” California courts have consistently upheld this provision, making it clear that contracts prohibiting post-employment noncompetition, nonsolicitation of customers, and nonsolicitation of employees are generally unenforceable, with only a few exceptions.

SB 699: Strengthening Existing Protections

While SB 699 reaffirms the existing law, it also extends the state’s protections. The following are critical aspects of the bill:

  1. Extraterritorial enforcement: SB 699 clarifies that any contract void under Section 16600 is unenforceable, regardless of where or when it was signed. This means that even if you signed a restrictive covenant outside of California or were employed elsewhere, you’re still protected by the state’s employee-friendly laws.
  2. Ban or noncompete clauses: This bill takes a firm stance against noncompete clauses and other restrictive covenants that violate Section 16600. Employers are now prohibited from entering into such contracts with employees or prospective employees.
  3. Enforcement rights for employees: One of the most significant changes brought by SB 699 is the explicit granting of enforcement rights to employees. This means that if an employer attempts to enforce a contract restricting an employee’s ability to pursue their lawful profession, trade, or business, the employee has a legal recourse to challenge it.

Consequences For Employers

Employers must take note of the implications of SB 699. Violations of this legislation could result in civil penalties. This means that businesses operating in California should review their existing contracts and employment practices to ensure compliance with the strengthened employee protection laws.

The Effective Date

SB 699 is scheduled to take effect on January 1st, 2024, with regard to the new enforcement rights it creates. This grace period allows employers and employees to adjust to the new legal landscape and ensure they comply with the law.

How A PEO Can Be Your Small Business’s Strategic Partner

In the midst of these changing legal landscapes, small businesses in California may find navigating the complexities of employment contracts and compliance challenging. If you’re a small business in California, have you considered partnering with a professional employer organization (PEO)? A PEO like Group Management Services (GMS) acts as a guiding light. GMS specializes in human resources, employee management, and compliance. By partnering with GMS, small businesses can access expertise that helps them stay on the right side of the law while focusing on growth and success. In this dynamic environment, where the protection of employee rights takes center stage, GMS acts as a valuable partner, ensuring that your business thrives while maintaining a steadfast commitment to the welfare of your employees. As the tides of employment law continue to shift, a PEO can be your anchor, providing stability and peace of mind for your business in California. Interested in learning more about how GMS can help your business? Get a quote from us today.

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