In September 2023, the Securities and Exchange Commission (SEC) announced three separate enforcement orders reflecting a renewed interest in and scrutiny of provisions in employment agreements and separation agreements. These three settled cases resulted in cease-and-desist orders, fines, and other sanctions against a registered investment adviser, a public company, and a privately held company in
California Labor Code section 925 remains a potent weapon for departing employees who live and work in California who wish to avoid covenants not to compete. Often, employers will place choice of law provisions in their employment agreements and hope to enforce them in other states where such covenants are more likely to be enforced.
The enforceability of restrictive covenants, particularly non-compete agreements, can be very difficult for employers to navigate, especially for companies in their “start-up” phase. Technology companies in particular face challenges in structuring non-competes that balance their need to attract talent with their need to protect confidential and sensitive information, while preventing unfair competition by former employees.
The title should not be read to suggest some tectonic shift in the moods and values of the California Legislature or the Governor; far from it. However, every once in a while something a bit useful does emerge. This time it is some certainty in executive level employment contracts.
AB 1241 adds yet another section