Non-compete agreements are governed almost entirely by state law right now, and in California they remain void in nearly every employment context. The federal government's attempt at a nationwide ban was struck down in court and formally removed from federal regulations in February 2026, so employers can no longer look to a single federal standard. Instead, we advise clients to look closely at California's own statutes, which have grown stricter in recent years and now carry real financial consequences for non-compliance.
Below, we break down what changed, what stayed the same, and what Strategy Law, LLP recommends employers do next.
Why This Topic Matters Right Now
For a few years, employers around the country were preparing for a federal rule that would have banned most non-compete agreements nationwide. That rule never took effect. The FTC's 2024 Non-Compete Rule was set aside before it took effect and later removed from the Code of Federal Regulations in February 2026.
So instead of a single federal standard, the legal landscape for non-competes has settled back into a patchwork of state laws, and state law now controls how these agreements are treated, with dozens of states continuing to pass and enforce statutes that restrict or prohibit them</cite>.
For California employers, this shift matters less than it might elsewhere, because California already had some of the strictest non-compete restrictions in the country. But the broader national conversation, combined with California's own recent statutory changes, means this is a good moment for companies to revisit their employment agreements, confidentiality provisions, and hiring practices.
What Happened With the Federal Non-Compete Rule?
In 2024, the Federal Trade Commission issued a rule that would have banned most post-employment non-compete agreements across the country. It was challenged almost immediately. A federal court in Texas blocked the rule before it ever took effect, and the Northern District of Texas granted summary judgment against the rule, prohibiting the FTC from enforcing it nationwide.
Following a change in leadership at the agency, the FTC abandoned its appeals in the relevant circuit courts, which effectively vacated the rule altogether. The Commission later took the formal step of removing the rule from the federal regulatory code in February 2026, closing that chapter for good.
That doesn't mean the FTC has stepped away from the topic entirely. The agency retains authority under Section 5 of the FTC Act to challenge specific non-compete agreements on a case-by-case basis, particularly ones involving lower-level employees or unusually broad terms.
We've already seen this play out: in September 2025, the FTC brought an enforcement action against a pet cremation company after finding that it had imposed non-competes on nearly its entire workforce regardless of role, and treated that practice as an unfair method of competition. So while there's no blanket federal ban, employers who use non-competes broadly or without a clear business justification should assume federal scrutiny remains possible.
Where California Law Stands
California's approach to non-competes didn't change because of what happened at the federal level. It changed because of legislation the state passed on its own. California has banned employee non-compete agreements since a statute enacted in 1872, and by early 2024, new amendments to that law clarified exactly what is and is not enforceable</cite>.
Two bills drove that clarification. Senate Bill 699 voids non-compete agreements not only when they're signed in California, but also when they're signed in other states, and expressly forbids employers from using choice-of-law provisions to try to enforce a non-compete elsewhere. Assembly Bill 1076 went further by codifying that any non-compete clause in an employment context is void no matter how narrowly it may be written.
Both laws came with teeth. Failing to provide the required statutory notice about void non-competes can trigger penalties of up to $2,500 per violation under California's unfair competition laws. And employees can now sue their employer directly for imposing or attempting to enforce a non-compete, even one signed in another state, and can recover attorneys' fees and costs if they win.
It's also worth noting that these laws don't only apply to agreements labeled "non-compete." California courts have applied the same restriction to other restrictive covenants, including non-solicitation agreements and confidentiality agreements that are written broadly enough to prevent an employee from working elsewhere. Employers sometimes assume a differently titled clause avoids the statute. In our experience, that assumption is exactly where problems tend to start.
What This Means for Employers With Workers in Multiple States
Companies based in California but employing workers elsewhere, or companies based elsewhere with California employees, are in a particularly tricky position. Even if a non-compete is enforceable in the state where it was signed, California's law is written to prohibit its enforcement against California employees regardless of where or when the agreement was signed. Meanwhile, states outside California continue to pass their own restrictions, and the number of states enacting stricter non-compete statutes has continued to grow.
That combination means a single national employment agreement template rarely works cleanly across jurisdictions anymore. What holds up in one state may expose a company to liability in another, particularly when California employees or remote workers are involved.
What We Recommend Employers Do Now
Given where the law stands, we generally recommend that California employers:
- Review existing employment agreements for non-compete language, non-solicitation clauses, and confidentiality provisions that might function as a restraint on future employment.
- Confirm notice obligations were met. If your company has ever used a non-compete with a California employee, the notice requirements under AB 1076 may still apply to your situation.
- Reconsider what you're actually trying to protect. In many cases, trade secrets, client relationships, and proprietary information can be protected through carefully drafted confidentiality and non-solicitation provisions that don't attempt to restrict where someone can work next.
- Build in state-specific review for any company with employees or contractors outside California, since a document that works in one jurisdiction may not hold up in another.
- Watch for FTC enforcement patterns, even without a blanket rule, particularly if your company uses non-competes across a broad swath of roles rather than for a defined, limited business purpose.
None of this is a substitute for a document-by-document review of your specific agreements. Every company's workforce, industry, and risk profile is different, and the right approach depends on the details of your situation.
How Strategy Law, LLP Can Help
Strategy Law, LLP is a business-focused law firm serving entrepreneurs, companies, and investors throughout Silicon Valley, the Greater Bay Area, and the state of California. Since 2014, we have provided strategic, practical legal counsel to help clients address complex business matters with clarity and confidence.
Our work spans the full lifecycle of a business, including entity formation, mergers and acquisitions, financial structuring, real estate transactions, employment matters, and litigation. We offer virtual consultations and provide bilingual support in English and Spanish, and we take a relationship-driven approach that keeps us genuinely invested in our clients' long-term success. See what other clients have said about working with our team on our reviews page. You can also view the full list of communities we serve on our areas we serve page.
Talk to Our Team About Your Employment Agreements
If your company uses non-compete, non-solicitation, or confidentiality agreements and you haven't reviewed them since California's 2024 amendments took effect, now is a good time to do so. Strategy Law, LLP works with employers throughout Silicon Valley, the Greater Bay Area, and across California to review employment agreements and address the risks these recent changes have created.
Employment agreements that were sound a few years ago may not hold up under California's current standards. Reach out to Strategy Law, LLP to schedule a virtual consultation, and we'll work with you to understand where your agreements stand.