The 2023 legislative session in California, which concluded on September 14, 2023, saw several employment law bills sent to the desk of Governor Newsom for consideration. Governor Newsom has until October 14, 2023, to make decisions on these bills, either by signing them into law, vetoing them, or taking no action, which would result in a pocket veto. In this overview, we will examine some of these bills with the potential to have a significant impact on California employers.
Senate Bill 699 – Prohibition of Non-compete Agreements – Already Enacted
Most companies are aware that, except for specific exceptions, California generally prohibits employers from entering into contracts with employees that restrict them from pursuing lawful professions, trades, or businesses, as outlined in California Business and Professions Code (“Code”) Section 16600. These contracts are commonly referred to as “non-compete agreements.”
Despite existing laws in this regard, on September 1, 2023, Governor Newsom signed Senate Bill 699 (“SB 699”) further prohibiting non-compete agreements. SB 699 explicitly prevents employers from enforcing contracts that are deemed void under California law, irrespective of whether these contracts were executed outside of California. SB 699 asserts that “an employer or former employer shall not attempt to enforce a contract that is void under this chapter regardless of whether the contract was signed, and the employment was maintained outside of California.” Additionally, Section 1 of SB 699 emphasizes that “California has a strong interest in protecting the freedom of movement of persons whom California-based employers wish to employ to provide services in California, regardless of the person’s state of residence. This freedom of employment is paramount to competitive business interests.” The interpretation of SB 699’s impact remains unclear.
The bill also introduces a private right of action, permitting employees to pursue injunctive relief, actual damages, and attorneys’ fees for violations. SB 699 is set to take effect on January 1, 2024.
Senate Bill 616 – Expansion of Paid Sick Leave
Senate Bill 616 (“SB 616”) amends California’s statewide paid sick leave law, substantially increasing the amount of leave that employers are required to provide and allowing employees to carry over unused sick leave from year to year. This bill was sent to the Governor and is anticipated to be signed into law.
Many employers in California’s major cities already offer more than the three days required by current state law. Some cities, such as Santa Monica and several in the San Francisco Bay Area, mandate up to 72 hours of paid sick leave, while California’s largest city, Los Angeles, requires up to 48 hours annually. However, for employers with employees outside of these areas, SB 616 will considerably expand their sick leave obligations.
SB 616 raises the minimum annual accrual of sick leave for eligible employees from 24 hours (three days) to 40 hours (five days). The bill maintains the existing accrual rate, which is one hour of sick leave for every 30 hours worked. Nevertheless, employers may adopt an alternative accrual method, as long as eligible employees accumulate: (a) at least 24 hours (or three days) of paid sick leave by the end of their 120th day of employment; and (b) at least 40 hours (or five days) of paid sick leave by the end of their 200th day of employment.
While current law permits employers to limit annual sick leave usage to 24 hours or three days per year, SB 616 expands the permissible annual usage cap to 40 hours or five days. Additionally, SB 616 raises the total amount of paid sick leave that employers must allow employees to accrue over time and carry over from one year to the next, from 48 hours (or six days) to 80 hours (or 10 days).
Given the expected enactment of SB 616, California employers should plan to review their sick leave policies and practices before the year’s end.
Assembly Bill 1076 – Voids Non-compete Clauses
Another bill related to non-compete agreements is currently progressing through the state Senate after receiving unanimous approval from the California State Assembly in May 2023. AB 1076 seeks to introduce a provision into Section 16600 that aims to codify the 2008 California Supreme Court decision in Edwards v. Arthur Andersen LLP, thereby voiding non-compete agreements in employment, “no matter how narrowly tailored.”
Notably, the legislature clarified in AB 1076’s legislative counsel’s digest that the bill is not intended to change existing law but rather to serve as a “declaratory” statement of existing law. In the Edwards case, the California Supreme Court ruled that even narrowly tailored non-compete agreements that do not entirely prohibit a former employee from engaging in their profession, trade, or business still violate Section 16600 unless they fall within one of the statute’s narrow exceptions. California courts have heavily relied on the Edwards decision since its release.
Additionally, AB 1076 would impose a potentially onerous notification requirement on employers. The bill would necessitate employers to notify current and former employees in writing by February 14, 2024, that any non-compete agreements they entered into are void. This notice would need to be sent to each former employee’s last known address and email address. If enacted, the law is expected to raise several questions regarding its scope and application.
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About Harrison Oldham
Harrison grew up in Mansfield, Texas. He attended Texas A&M University for his bachelor’s degree, where he met his wonderful wife, Kelsey. After graduating magna cum laude from Texas A&M, he attended SMU Dedman School of Law, graduating with honors in 2012. Today, Harrison and his wife live in Dallas, Texas with their son, Teddy.
Since graduating from SMU Law, Harrison has worked exclusively in the field of business law. He has spent time in private practice and in-house, working with clients of every size; from single person startups to Fortune 250 companies. Today his practice focuses on serving the diverse needs of businesses and individuals throughout Texas. You can learn more about Harrison by visiting his website, at: http://
