Restrictive covenants like non-compete and non-solicit agreements are largely unlawful in California. California Business and Professions Code section 16600 voids any “contract by which anyone is restrained from engaging in a lawful profession, trade, or business or any kind[,]” and California courts have repeatedly held that except in narrow circumstances, restrictions like non-competes and non-solicits are unenforceable.

With the rise of remote work in the last few years, more and more employees are working in a different state than where their employer is located. Thus, the question arises:  When an out-of-state employer employs an employee working in California, can the employer enforce the laws of another state that allow restrictive covenants? More times than not, the answer is no.

Labor Code section 925, which applies to agreements signed on or after January 1, 2017, prohibits employers from requiring employees who “primarily reside[] and work[] in California” to “adjudicate [claims] outside of California” or “deprive the employee of the substantive protection of California law” for claims that “arise[] in California.”

In other words, if an employer puts a choice of venue or law provision in an employee’s contract indicating a venue or law outside of California, pursuant to Section 925, that provision is “voidable by the employee.” An exception to this general rule is when an employee is represented by legal counsel in negotiating the choice of venue or choice of law terms in their employment contract.

What does it mean to primarily reside and work in California? While the California Supreme Court has not yet decided this issue, lower courts have found that employees who work remotely in California and spend the majority of their time in California—even while working for an out-of-state employer—fall within this definition. California employees should not take these restrictive covenants at face value and should seek advice from an employment lawyer as to their enforceability.