California employers were required by February 14, 2024, under AB 1076, to notify employees bound by noncompetition agreements that these agreements are void and unenforceable—unless a statutory exception applies. With this update to California law, many employers are rightly asking:

How can employers still protect their business interests, proprietary information, and customer relationships when noncompete clauses are no longer allowed?

Fortunately, California law continues to provide strong protections for employers through various statutory and common law doctrines—even without enforceable noncompetition agreements. Below is a discussion of a few key legal tools employers can rely on.

Key Labor Code Protections Still Available to Employers

1. Employees Must Follow Lawful Instructions

Labor Code § 2856

Employees are required to “substantially comply with all the directions of [their] employer” unless the direction is impossible, unlawful, or imposes unreasonable burdens. This gives employers a foundation to enforce clear internal policies about protecting company property and confidentiality.

2. Employees Must Exercise a Reasonable Level of Skill

Labor Code §§ 2858–2859

Employees are bound to:

• Use reasonable skill in their work unless their lack of skill was disclosed at hiring.
• Apply all the skill they possess as required by their position.

This provision supports employer expectations for quality work and responsible conduct with sensitive information.

3. Employees Owe a Duty of Loyalty While Employed

Labor Code §§ 2860, 2863

California law still imposes a duty of loyalty. Specifically:

• Anything an employee acquires by virtue of their employment—except earned compensation—belongs to the employer.
• Employees with overlapping personal business interests must give preference to the employer’s business.

This means employees may not:

• Compete with their employer while still employed,
• Share confidential company information for personal gain,
• Retain or use company information after separation.

Legal Remedies Beyond the Labor Code

4. Conversion Claims Against Misappropriation

Civil Code § 1712

Employers may bring a conversion claim when an employee wrongfully takes, retains, or fails to return company property (e.g., documents, plans, client lists). Even if consent was initially granted, it can be rescinded—requiring the return of the items.

5. Additional Civil Causes of Action

Employers may also consider the following legal avenues:

• Unfair Business Practices (Business & Professions Code § 17200) – For deceptive or unfair acts affecting competition.
• Intentional Interference with Prospective Economic Advantage – When former employees disrupt relationships with customers or prospects.
• Fraudulent Concealment / Misrepresentation – For knowingly misleading the employer or hiding material facts.
• Trade Secret Misappropriation (California Uniform Trade Secrets Act – Civil Code § 3426 et seq.) – For the misuse of protected business information.

To qualify as a trade secret, the information must:

• Derive value from not being generally known, and
• Be subject to reasonable efforts to maintain secrecy (e.g., NDAs, access controls, internal policies).

Practical Takeaways for Employers

Even though California has outlawed noncompetition agreements, you can—and should—still take action to safeguard your business:

• Audit employment agreements for compliance and confidentiality clauses.
• Implement internal policies clearly restricting use and disclosure of proprietary data.
• Train employees on confidentiality and post-employment obligations.
• Use NDAs and invention assignment agreements where applicable.
• Consult legal counsel before pursuing claims to ensure all facts and legal grounds are documented.

Conclusion

Noncompetition agreements may be dead in California—but protecting your business isn’t. With proactive steps and strategic legal tools, employers can still deter unfair competition and preserve the value of their confidential information and client goodwill.