Developing compliant restrictive-covenant practices in California requires strict alignment with state statutes and current enforcement trends. California’s Business and Professions Code section 16600 establishes a broad prohibition on contracts that restrain lawful work, and recent legislation has further restricted employer use of noncompete clauses while adding notice and enforcement mechanisms. Employers should therefore rely on lawful alternatives that protect confidential assets without impeding employee mobility.
This guide summarizes California’s position on noncompetes and outlines compliant, practical substitutes—confidentiality (NDA) provisions, invention-assignment agreements, trade-secret protocols, and carefully tailored non-disparagement language—followed by template section headings for agreements and onboarding scripts that reflect California’s requirements.
California’s Current Stance on Noncompete Agreements
California has long voided contracts that restrain an individual’s lawful profession, trade, or business. In 2024, the Legislature enacted SB 699 and AB 1076, which reinforce that employee noncompetes are unlawful regardless of where or when the agreement was signed and require employers to provide written notice to certain current and former employees that any noncompete they signed is void. These measures strengthen remedies and expand the reach of section 16600 beyond state borders for California workers.
Employer alerts and law-firm analyses underscore that both SB 699 and AB 1076 took effect on January 1, 2024, amending the statutory framework and clarifying that post-employment restrictions preventing an employee from working for a competitor or in a chosen field are unenforceable, with narrow statutory exceptions (e.g., the sale of a business). Employers that previously used noncompetes should review historical agreements and ensure the required notices were sent.
Confidentiality (NDA) Provisions: Scope and Limits
NDAs remain a primary, lawful tool to protect trade secrets and confidential business information in California. However, NDAs must be narrowly tailored and cannot bar employees from discussing workplace conditions or unlawful conduct. California’s “Silenced No More Act” limits confidentiality as to facts of discrimination, harassment, or other unlawful acts, particularly in settlement or separation contexts. Drafting should focus on definitional precision (what is confidential), permitted disclosures (e.g., whistleblowing, cooperation with agencies, NLRA-protected activity), and reasonable duration.
Trade Secret Protocols Under CUTSA
The California Uniform Trade Secrets Act (CUTSA) provides robust protections against misappropriation of information that derives independent economic value from not being generally known and is subject to reasonable secrecy measures. Employers should implement administrative, technical, and physical safeguards; access controls; labeling; and litigation-ready documentation. Clear protocols support injunctions and damages in the event of theft or misuse.
Invention-Assignment and IP Ownership
California Labor Code section 2870 permits prospective assignment of employee inventions developed with employer resources or related to the employer’s business, but it excludes inventions developed entirely on the employee’s own time without employer equipment or trade secrets (subject to statutory exceptions). Agreements should attach the statutory notice, track the 2870 carve-out, and include prompt disclosure procedures for potentially related inventions. Overly broad assignment demands can be void as unlawful restraints.
Non-Disparagement: Narrow Drafting and NLRA Considerations
Non-disparagement provisions that sweep too broadly—especially in severance agreements—have drawn scrutiny under the National Labor Relations Act. The NLRB’s McLaren Macomb decision held that employers may not offer agreements that broadly restrict employees’ discussions of terms and conditions of employment; later guidance clarified that limited, narrowly tailored clauses may still pass muster. California employers should include explicit carve-outs for NLRA-protected activity, agency cooperation, truthful testimony, and legally protected speech.
Practical, Safer Alternatives to Noncompetes (Operational Playbook)
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Role-based confidentiality matrices: Map access to “need-to-know” tiers and implement least-privilege controls for systems and datasets protected as trade secrets under CUTSA.
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Customer and employee non-solicit limits: Pure non-solicits tied to trade-secret protection (not general competition restraints) must be drafted carefully; focus on prohibiting use of confidential lists rather than restricting lawful competition. (Assess with counsel; enforceability turns on scope and evidence.)
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Garden-variety NDAs with whistleblower and NLRA carve-outs: Permit reporting to agencies and collective discussion of workplace terms; prohibit disclosure of defined trade secrets and specifically identified confidential materials.
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Targeted IP and inventions workflow: Use Labor Code 2870 language, attach the statutory notice, and implement internal disclosure forms and review committees for borderline inventions.
Template Section Headings for Compliant Agreements
Use these headings as an internal checklist when drafting agreements; tailor content to your operations and applicable law.
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Purpose and Scope of Confidentiality Obligations
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Definitions: Confidential Information and Trade Secrets (CUTSA-Aligned)
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Permitted Disclosures and Safe-Harbor Carve-Outs (Agency Reporting, NLRA Rights, Whistleblower)
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Employee Duties: Handling, Access, Return, and Destruction of Materials
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Information Security Controls and Acceptable Use
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Intellectual Property and Invention Assignment (Labor Code § 2870 Notice Attached)
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Third-Party and Patient Information (HIPAA/State Privacy Alignment, if applicable)
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Conflict of Interest and Outside Activities Disclosure
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Non-Solicitation (Limited to Trade-Secret-Based Protections, if used)
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Non-Disparagement (Narrow, Carved-Out, Time-Limited—if used)
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Training, Acknowledgments, and Annual Reaffirmation
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Remedies, Injunctive Relief, and Fee Provisions (as permitted by law)
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Governing Law, Venue, and Severability (California-Compliant)
Template Section Headings for Onboarding Scripts
Deploy as a manager-led checklist or e-learning module outline; avoid abbreviations in the script text.
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Overview of Employee Mobility in California (No Noncompetes)
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Confidential Information: What It Is and How We Protect It
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Trade Secrets: Examples, Access Rules, and Your Responsibilities
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Acceptable Use of Systems, Devices, and Data Handling Standards
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Permitted Disclosures: Reporting Concerns to Government Agencies and Discussing Working Conditions
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Invention Assignment Summary and Labor Code § 2870 Notice Review
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Patient and Third-Party Data (Healthcare Practices: HIPAA and State Privacy)
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Non-Solicitation Boundaries and Using Information Ethically
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Non-Disparagement: Narrow Scope and Protected Rights
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Incident Reporting: Lost Devices, Data Leaks, and Suspected Misappropriation
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Annual Refresher, Acknowledgment Process, and Where to Get Help
Annual Review and Compliance Maintenance
Given the rapid pace of legal developments, employers should review restrictive-covenant templates and scripts at least annually. This includes verifying compliance with SB 699 and AB 1076, confirming that any required noncompete notices were issued, tightening NDA definitions and carve-outs, updating IP notices under Labor Code section 2870, and aligning severance and settlement language with current NLRB guidance on confidentiality and non-disparagement.
How Leiva Law Firm Can Help
Leiva Law Firm advises California employers on designing noncompete-free protection frameworks that comply with section 16600, SB 699, and AB 1076 while safeguarding proprietary assets. Our team drafts and audits NDAs, invention-assignment provisions with Labor Code section 2870 notices, trade-secret protocols under CUTSA, and compliant non-disparagement language informed by current NLRB guidance. We also develop manager-ready onboarding scripts and annual review cadences tailored to your operations.
To schedule a consultation with our business lawyer, contact Leiva Law Firm at (818) 519-4465. We can help your organization protect information lawfully, reduce litigation risk, and maintain a resilient compliance posture in California’s evolving regulatory environment.
