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package/skills/non-compete-contract-explainer/content/arkansas.md

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+---
+jurisdiction: "Arkansas"
+slug: arkansas
+countryCode: US
+snapshotAsOf: "2026-06-08"
+lastReviewed: "2026-06-02"
+canonicalUrl: https://openagreements.org/legal/non-compete/arkansas
+license: CC BY 4.0
+stale: false
+---
+
+> [!IMPORTANT]
+> **Informational only — not legal advice.** This is a snapshot of an OpenAgreements practice note,
+> provided for general information. It is not legal advice, does not create an attorney-client
+> relationship, and is not a substitute for a licensed attorney in the relevant jurisdiction.
+> Laws change; verify against the canonical version before relying on it.
+>
+> **Canonical:** https://openagreements.org/legal/non-compete/arkansas · **Snapshot as of:** 2026-06-08 · License: CC BY 4.0 · © UseJunior
+
+# Non-Competes in Arkansas[^about]
+
+Arkansas non-compete law under Ark. Code Ann. § 4-75-101, enacted by Act 921 of 2015, includes mandatory reformation, continued-employment consideration, a two-year presumption, a physician ban, and judicial tolling risk.
+
+
+## At a glance
+
+| Question | Arkansas |
+| --- | --- |
+| **Are non-competes enforceable?** | Allowed if reasonable |
+| **Bottom line** | Arkansas enforces an employee non-compete that is ancillary, protects a statutory business interest, and is no broader in time and scope than necessary, with overbroad covenants reformed by the court. |
+| **Main law or case** | Ark. Code Ann. § 4-75-101 (Act 921 of 2015; amended by Act 232 of 2025) |
+| **Main exceptions** | Physician practice restrictions void (§ 4-75-101(k), 2025); Title 17 Subtitle 3 licensees excluded; non-solicits/NDAs excluded |
+| **Can a court narrow it?** | Yes — rewrites to reasonable |
+| **Applies to contractors?** | Unclear |
+| **Restriction extended during a breach?** | Open question — prospective injunctions allowed, contractual tolling unsettled |
+| **Maximum length set by law** | 2 years presumptively reasonable |
+
+## Are employee non-compete agreements enforceable in Arkansas? {#employee-noncompetes}
+
+**Short answer.** Yes, if the covenant is ancillary to employment, protects a statutory business interest, and is no broader in time and scope than necessary to defend that interest [^q1-aca-enforceable].
+
+For agreements governed by the current statute, Arkansas is a permissible, enforce-if-reasonable state rather than a ban state. Ark. Code Ann. § 4-75-101 lists protectable interests, supplies a two-year duration presumption, allows no defined geographic restriction in some cases, and requires reformation of overbroad covenants [^q1-aca-enforceable][^q1-aca-protectable][^q1-aca-reformation].
+
+The effective-date line matters. *Box* treated Act 921 as effective July 22, 2015, and said the statute only arguably applied to the agreement executed after that date, while older agreements remained on the pre-Act common-law track [^q1-box-effective-date].
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not cite pre-2015 Arkansas cases as if they still supply the whole remedial rule. They remain useful for the old common-law framework and reasonableness concepts, but current covered employment covenants start with § 4-75-101 [^q1-box-effective-date][^q1-aca-reformation].
+
+## What makes an Arkansas non-compete reasonable or enforceable? {#reasonableness-test}
+
+**Short answer.** The covenant must be tied to a protectable business interest and limited in time and scope no more than necessary to defend that interest [^q2-aca-enforceable].
+
+The statute supplies the protectable-interest categories. They include trade secrets, intellectual property, customer lists, customer goodwill, business practices, methods, margins, costs, confidential business information, employee training and education, and other valuable employer data reasonably safeguarded from competitors [^q2-aca-protectable].
+
+Reasonableness is still contextual. The statute tells courts to consider the nature of the employer's protectable interest, the geographic scope of the business, whether a geographic limit is feasible, whether the restriction is limited to a specific customer or business group, and the nature of the employer's business [^q2-aca-factors].
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Ordinary competition is not enough. Even before Act 921, Arkansas cases required a real protectable interest rather than a covenant designed only to eliminate competition, and the current statute keeps that interest requirement at the center [^q2-mercy-no-ordinary-competition][^q2-aca-enforceable].
+
+## Does an Arkansas non-compete need a geographic limit? {#geographic-limit}
+
+**Short answer.** Not always. The current statute says the lack of a specific or defined geographic restriction does not make a covenant overbroad if the restraint is otherwise reasonable as to time and scope [^q3-aca-no-geography].
+
+"The lack of a specific or defined geographic descriptive restriction in a covenant not to compete agreement does not make the covenant not to compete agreement overly broad under subdivision (a)(2) of this section if the covenant not to compete agreement is limited with respect to time and scope in a manner that is not greater than necessary to defend the protectable business interest of the employer."[^q3-aca-no-geography]
+
+That is a major statutory shift from the old common-law risk. In *Bendinger*, the Arkansas Supreme Court rejected a covenant with no geographic limit because the facts did not justify it; in *NanoMech*, the Eighth Circuit applied pre-Act Arkansas law to invalidate a no-geography, any-capacity covenant [^q3-bendinger-geography][^q3-nanomech-geography].
+
+The current drafting point is practical rather than formalistic. If there is no geography, the covenant needs another limiting mechanism, such as customer scope, activity scope, or business-scope limits tied to the employer's protectable interest [^q3-aca-no-geography][^q3-aca-factors].
+
+## How long can an Arkansas non-compete last? {#duration}
+
+**Short answer.** Two years is presumptively reasonable under the statute, unless the particular facts clearly show that two years is unreasonable compared with the employer's protectable interest [^q4-aca-two-years].
+
+"A post-termination restriction of two (2) years is presumptively reasonable as to length of time under subdivision (a)(2) of this section unless the facts and circumstances of a particular case clearly demonstrate that two (2) years is unreasonable compared to the employer's protectable business interest."[^q4-aca-two-years]
+
+The presumption is not a safe harbor for every two-year clause. The statute ties duration back to the employer's protectable business interest, and *Bud Anderson* noted the older Arkansas damages treatise summary that one- and two-year limits had been upheld while three- and five-year limits had been unreasonable or invalid [^q4-aca-two-years][^q4-bud-duration].
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Avoid treating two years as automatic. The presumption can be overcome by case-specific facts, especially if the protected interest is narrow or the work restriction is broad [^q4-aca-two-years].
+
+## Will an Arkansas court reform an overbroad non-compete? {#court-reformation}
+
+**Short answer.** Yes, for a covered employment non-compete under § 4-75-101. If the restrictions are unreasonable, the court must reform the covenant as needed and enforce it under the reformed terms [^q5-aca-reformation].
+
+"The court shall enforce the covenant not to compete agreement under the reformed terms and conditions."[^q5-aca-reformation-enforce]
+
+That mandatory reformation rule is the watershed change from pre-Act Arkansas law. Under the old regime, the contract had to be valid as written, and the court would not narrow it to a reasonable version [^q5-bendinger-no-rewrite][^q5-nanomech-no-narrow].
+
+The temporal framing is important. *Bendinger* and *NanoMech* remain useful for the old all-or-nothing rule, and *Box* confirms Act 921's effective-date line; they should not be cited as current authority against mandatory statutory reformation for a covered post-Act employment covenant [^q5-box-effective-date][^q5-aca-reformation].
+
+> [!NOTE]
+> **Practice note.**
+>
+> Reformation does not remove the need to draft narrowly. The statute tells courts to reform only to the extent necessary to make the limitations reasonable and no greater than needed to protect the business interest [^q5-aca-reformation].
+
+## Is continued employment enough consideration for an Arkansas non-compete? {#consideration}
+
+**Short answer.** Yes. The statute says continued employment is sufficient consideration for a covenant not to compete [^q6-aca-consideration].
+
+"An employee's continued employment is sufficient consideration for a covenant not to compete agreement."[^q6-aca-consideration]
+
+That means Arkansas does not require a separate bonus, promotion, equity grant, or new job offer for consideration when the statutory rule applies. The covenant still must satisfy the other statutory requirements, including protectable interest and reasonable time and scope [^q6-aca-consideration][^q6-aca-enforceable].
+
+## Are physician and professional non-competes enforceable in Arkansas? {#physicians-professionals}
+
+**Short answer.** Physician practice restrictions are void under the current statute, and § 4-75-101 otherwise does not apply to covered Title 17 professional licensees except for that physician rule [^q7-aca-physician-void][^q7-aca-title-17].
+
+"A covenant not to compete agreement that restricts the right of a physician to practice within the physician's scope of practice is void."[^q7-aca-physician-void]
+
+The physician ban was added by the 2025 amendment. The statute defines physician by reference to the Arkansas Medical Practices Act and osteopathy licensing provisions [^q7-aca-physician-definition].
+
+Older physician cases should be framed as pre-2025 public-policy and common-law context, not as the current statutory text. In *Mercy v. Bicak*, the Court of Appeals emphasized public access to physicians and affirmed summary judgment against enforcement of the physician non-compete [^q7-mercy-public-policy][^q7-mercy-affirm].
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not generalize the physician void rule to every licensed professional. The statute voids covered physician practice restrictions, while separately saying § 4-75-101 does not apply to people holding a professional license under Arkansas Code Title 17, Subtitle 3, except as provided in subsection k [^q7-aca-physician-void][^q7-aca-title-17].
+
+## Does an Arkansas non-compete period toll or extend during breach or litigation? {#tolling-extension}
+
+**Short answer.** Sometimes by equitable injunction, but drafted contractual tolling clauses remain an open question. *Bud Anderson* treated a prospective injunction beyond the nominal one-year period as legally possible, while § 4-75-101 does not expressly validate tolling-on-breach clauses [^q8-bud-prospective][^q8-aca-remedies].
+
+The practical lesson is that Arkansas courts may keep a non-compete injunction dispute alive even after the stated period expires. *Bud Anderson* rejected a mootness dismissal where the employer sought an injunction running one year from the order and the record did not show that relief was impossible [^q8-bud-prospective].
+
+That is different from saying every contract clause that automatically extends the restricted period during breach is enforceable. The Arkansas statute speaks to damages, injunctive relief, irreparable harm, reformation, and enforcement under reformed terms, but it does not contain an express contractual tolling rule [^q8-aca-remedies][^q8-aca-reformation].
+
+> [!NOTE]
+> **Practice note.**
+>
+> Draft tolling language as a risk allocation, not as settled Arkansas law. *Bud Anderson* supports judicially fashioned prospective relief in the injunction posture; it does not squarely decide whether a private extension-on-breach clause is independently enforceable under § 4-75-101 [^q8-bud-prospective][^q8-aca-remedies].
+
+## What remedies are available for breach of an Arkansas non-compete? {#injunction-remedies}
+
+**Short answer.** A court may award damages, appropriate injunctive relief, or both, and immediate harm from breach is statutorily treated as irreparable for preliminary-injunction purposes [^q9-aca-remedies][^q9-aca-irreparable].
+
+"The immediate harm associated with the breach of a covenant not to compete agreement shall be considered irreparable to establish the appropriateness of a preliminary injunction."[^q9-aca-irreparable]
+
+*Porter's* applied that current statutory rule. The Court of Appeals reversed because the circuit court used only the common-law definition of irreparable harm and failed to apply § 4-75-101 in a case involving non-compete agreements executed after 2015 [^q9-porters-after-2015][^q9-porters-statutory-harm].
+
+The statutory irreparable-harm rule does not eliminate every injunction defense. Subsection e says the remedies language does not limit defenses to preliminary injunctive relief or the employer's right to monetary damages [^q9-aca-savings].
+
+## How does Arkansas treat non-solicitation, confidentiality, and trade-secret agreements? {#related-covenants}
+
+**Short answer.** Section 4-75-101 does not apply to employee agreements that do not concern competition or competitive work, including employee non-solicits, confidentiality agreements, and nondisclosure agreements; existing common-law standards remain in effect for those agreements [^q10-aca-related-covenants].
+
+The statute also preserves Arkansas Trade Secrets Act protections and rights. That means a trade-secret claim may be analyzed separately from a non-compete claim, and the statute should not be read to impair, limit, or change ATSA protections [^q10-aca-atsa].
+
+Pre-Act cases show the difference in practice. *Bendinger* rejected the non-compete as overbroad but separately affirmed denial of a permanent trade-secret injunction because the evidence did not prove actual, threatened, or inevitable misappropriation [^q10-bendinger-trade-secrets].
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not label every customer, employee, confidentiality, or NDA restriction as a non-compete. Arkansas separates covered competition restraints from other agreements, and the governing standards can differ [^q10-aca-related-covenants].
+
+[^about]: By Steven Obiajulu, J.D. Published by [openagreements.org](https://openagreements.org) · Maintained by [UseJunior](https://usejunior.com). Last reviewed 2026-06-02. License: CC BY 4.0. Steven Obiajulu, J.D. is admitted in New York, not Arkansas. This article synthesizes Arkansas primary law and is not legal advice from a Arkansas-admitted attorney. This article is for informational purposes only and does not create an attorney-client relationship.
+
+[^q1-aca-enforceable]: **Ark. Code Ann. § 4-75-101** — "A covenant not to compete agreement is enforceable if the agreement is ancillary to an employment relationship or part of an otherwise enforceable employment agreement or contract to the extent that: (1) The employer has a protectable business interest; and (2) The covenant not to compete agreement is limited with respect to time and scope in a manner that is not greater than necessary to defend the protectable business interest of the employer." *Ark. Code Ann. § 4-75-101(a).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q1-aca-protectable]: **Ark. Code Ann. § 4-75-101** — "For the purposes of subsection (a) of this section, the protectable business interest of the employer includes the employer's: (1) Trade secrets; (2) Intellectual property; (3) Customer lists; (4) Goodwill with customers; (5) Knowledge of his or her business practices; (6) Methods; (7) Profit margins; (8) Costs; (9) Other confidential business information that is confidential, proprietary, and increases in value from not being known by a competitor; (10) Training and education of the employer's employees; and (11) Other valuable employer data that the employer has provided to an employee that an employer would reasonably seek to protect or safeguard from a competitor in the interest of fairness." *Ark. Code Ann. § 4-75-101(b).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q1-aca-reformation]: **Ark. Code Ann. § 4-75-101** — "The court shall enforce the covenant not to compete agreement under the reformed terms and conditions." *Ark. Code Ann. § 4-75-101(f).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q1-box-effective-date]: **Box v. J.B. Hunt Transport, Inc.** — "Arkansas Code Annotated section 4-75-101 (Supp. 2015), which became effective on July 22, 2015, pursuant to the enactment of Act 921 of 2015." *Box v. J.B. Hunt Transp., Inc., 2017 Ark. App. 605, 533 S.W.3d 603.* <https://www.courtlistener.com/opinion/4441363/box-v-jb-hunt-transport-inc/#:~:text=Arkansas%20Code%20Annotated%20section%204%2D75%2D101,of%20Act%20921%20of%202015.>
+
+[^q2-aca-enforceable]: **Ark. Code Ann. § 4-75-101** — "The covenant not to compete agreement is limited with respect to time and scope in a manner that is not greater than necessary to defend the protectable business interest of the employer." *Ark. Code Ann. § 4-75-101(a).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q2-aca-protectable]: **Ark. Code Ann. § 4-75-101** — "For the purposes of subsection (a) of this section, the protectable business interest of the employer includes the employer's: (1) Trade secrets; (2) Intellectual property; (3) Customer lists; (4) Goodwill with customers; (5) Knowledge of his or her business practices; (6) Methods; (7) Profit margins; (8) Costs; (9) Other confidential business information that is confidential, proprietary, and increases in value from not being known by a competitor; (10) Training and education of the employer's employees; and (11) Other valuable employer data that the employer has provided to an employee that an employer would reasonably seek to protect or safeguard from a competitor in the interest of fairness." *Ark. Code Ann. § 4-75-101(b).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q2-aca-factors]: **Ark. Code Ann. § 4-75-101** — "The reasonableness of a covenant not to compete agreement shall be determined after considering: (A) The nature of the employer's protectable business interest; (B) The geographic scope of the employer's business and whether or not a geographic limitation is feasible under the circumstances; (C) Whether or not the restriction placed on the employee is limited to a specific group of customers or other individuals or entities associated with the employer's business; and (D) The nature of the employer's business." *Ark. Code Ann. § 4-75-101(c).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q2-mercy-no-ordinary-competition]: **Mercy Health Sys. of Nw. Ark., Inc. v. Bicak** — "Unless the covenantee has a legitimate interest to be protected by the agreement, the law will not enforce such a contract, as this would merely prohibit ordinary competition." *Mercy Health Sys. of Nw. Ark., Inc. v. Bicak, 2011 Ark. App. 341, 383 S.W.3d 869.* <https://www.courtlistener.com/opinion/5283436/mercy-health-system-of-northwest-arkansas-inc-v-bicak/#:~:text=Unless%20the%20covenantee%20has%20a,would%20merely%20prohibit%20ordinary%20competition.>
+
+[^q3-aca-no-geography]: **Ark. Code Ann. § 4-75-101** — "The lack of a specific or defined geographic descriptive restriction in a covenant not to compete agreement does not make the covenant not to compete agreement overly broad under subdivision (a)(2) of this section if the covenant not to compete agreement is limited with respect to time and scope in a manner that is not greater than necessary to defend the protectable business interest of the employer." *Ark. Code Ann. § 4-75-101(c).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q3-bendinger-geography]: **Bendinger v. Marshalltown Trowel Co.** — "We hold that the failure of the covenant to contain a geographic restriction in this case renders it overbroad." *Bendinger v. Marshalltown Trowel Co., 338 Ark. 410, 994 S.W.2d 468 (1999).* <https://www.courtlistener.com/opinion/2454655/bendinger-v-marshalltown-trowell-co/#:~:text=We%20hold%20that%20the%20failure,this%20case%20renders%20it%20overbroad.>
+
+[^q3-nanomech-geography]: **NanoMech, Inc. v. Suresh** — "Under Arkansas law, a noncompete agreement must be valid as written; a court may not narrow it." *NanoMech, Inc. v. Suresh, 777 F.3d 1020 (8th Cir. 2015).* <https://www.courtlistener.com/opinion/2777573/nanomech-inc-v-arunya-suresh/#:~:text=Under%20Arkansas%20law%2C%20a%20noncompete,court%20may%20not%20narrow%20it.>
+
+[^q3-aca-factors]: **Ark. Code Ann. § 4-75-101** — "The reasonableness of a covenant not to compete agreement shall be determined after considering: (A) The nature of the employer's protectable business interest; (B) The geographic scope of the employer's business and whether or not a geographic limitation is feasible under the circumstances; (C) Whether or not the restriction placed on the employee is limited to a specific group of customers or other individuals or entities associated with the employer's business; and (D) The nature of the employer's business." *Ark. Code Ann. § 4-75-101(c).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q4-aca-two-years]: **Ark. Code Ann. § 4-75-101** — "A post-termination restriction of two (2) years is presumptively reasonable as to length of time under subdivision (a)(2) of this section unless the facts and circumstances of a particular case clearly demonstrate that two (2) years is unreasonable compared to the employer's protectable business interest." *Ark. Code Ann. § 4-75-101(d).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q4-bud-duration]: **Bud Anderson Heating & Cooling, Inc. v. Neil** — "[W]hile the courts have upheld time limits of one year and two years, restrictions of three years and five years were unreasonable and invalid." *Bud Anderson Heating & Cooling, Inc. v. Neil, 2018 Ark. App. 183, 545 S.W.3d 819.* <https://www.courtlistener.com/opinion/6241502/bud-anderson-heating-cooling-inc-v-mike-neil-absolute-hvac-llc/#:~:text=%5BW%5Dhile%20the%20courts%20have%20upheld,years%20were%20unreasonable%20and%20invalid.>
+
+[^q5-aca-reformation]: **Ark. Code Ann. § 4-75-101** — "If restrictions in a covenant not to compete agreement are found to be unreasonable and impose a greater restraint than is necessary to protect the protectable business interest of the employer under subdivision (a)(1) of this section, the court shall reform the covenant not to compete agreement to the extent necessary to: (A) Cause the limitations contained in the covenant not to compete agreement to be reasonable; and (B) Impose a restraint that is not greater than necessary to protect the protectable business interest." *Ark. Code Ann. § 4-75-101(f).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q5-aca-reformation-enforce]: **Ark. Code Ann. § 4-75-101** — "The court shall enforce the covenant not to compete agreement under the reformed terms and conditions." *Ark. Code Ann. § 4-75-101(f).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q5-bendinger-no-rewrite]: **Bendinger v. Marshalltown Trowel Co.** — "The court has held that the contract must be valid as written, and the court will not apportion or enforce a contract to the extent that it might be considered reasonable." *Bendinger v. Marshalltown Trowel Co., 338 Ark. 410, 994 S.W.2d 468 (1999).* <https://www.courtlistener.com/opinion/2454655/bendinger-v-marshalltown-trowell-co/#:~:text=The%20court%20has%20held%20that,it%20might%20be%20considered%20reasonable.>
+
+[^q5-nanomech-no-narrow]: **NanoMech, Inc. v. Suresh** — "Under Arkansas law, a noncompete agreement must be valid as written; a court may not narrow it." *NanoMech, Inc. v. Suresh, 777 F.3d 1020 (8th Cir. 2015).* <https://www.courtlistener.com/opinion/2777573/nanomech-inc-v-arunya-suresh/#:~:text=Under%20Arkansas%20law%2C%20a%20noncompete,court%20may%20not%20narrow%20it.>
+
+[^q5-box-effective-date]: **Box v. J.B. Hunt Transport, Inc.** — "However, in the present case the statutory law arguably applies only to the parties’ third restricted stock agreement executed in October 2015 after Act 921 became effective." *Box v. J.B. Hunt Transp., Inc., 2017 Ark. App. 605, 533 S.W.3d 603.* <https://www.courtlistener.com/opinion/4441363/box-v-jb-hunt-transport-inc/#:~:text=However%2C%20in%20the%20present%20case,after%20Act%20921%20became%20effective.>
+
+[^q6-aca-consideration]: **Ark. Code Ann. § 4-75-101** — "An employee's continued employment is sufficient consideration for a covenant not to compete agreement." *Ark. Code Ann. § 4-75-101(g).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q6-aca-enforceable]: **Ark. Code Ann. § 4-75-101** — "The employer has a protectable business interest; and (2) The covenant not to compete agreement is limited with respect to time and scope in a manner that is not greater than necessary to defend the protectable business interest of the employer." *Ark. Code Ann. § 4-75-101(a).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q7-aca-physician-void]: **Ark. Code Ann. § 4-75-101** — "A covenant not to compete agreement that restricts the right of a physician to practice within the physician's scope of practice is void." *Ark. Code Ann. § 4-75-101(k).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q7-aca-title-17]: **Ark. Code Ann. § 4-75-101** — "Except as provided under subsection (k) of this section, this section shall not: (1) Be read to impair, limit, or change a party's protections and rights under the Arkansas Trade Secrets Act, § 4-75-601 et seq.; or (2) Apply to a person holding a professional license under Arkansas Code Title 17, Subtitle 3." *Ark. Code Ann. § 4-75-101(j).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q7-aca-physician-definition]: **Ark. Code Ann. § 4-75-101** — "As used in subdivision (k)(1) of this section, ‘physician’ means a person authorized or licensed to practice medicine under the Arkansas Medical Practices Act, § 17-95-201 et seq., § 17-95-301 et seq., and § 17-95-401 et seq., and a person authorized to practice osteopathy under § 17-91-101 et seq." *Ark. Code Ann. § 4-75-101(k).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q7-mercy-public-policy]: **Mercy Health Sys. of Nw. Ark., Inc. v. Bicak** — "Covenants not to compete are not looked upon with favor by the law; in fact, it is contrary to public policy to unduly restrict the [spublic’s right of access to the physicians of their choice." *Mercy Health Sys. of Nw. Ark., Inc. v. Bicak, 2011 Ark. App. 341, 383 S.W.3d 869.* <https://www.courtlistener.com/opinion/5283436/mercy-health-system-of-northwest-arkansas-inc-v-bicak/#:~:text=Covenants%20not%20to%20compete%20are,the%20physicians%20of%20their%20choice.>
+
+[^q7-mercy-affirm]: **Mercy Health Sys. of Nw. Ark., Inc. v. Bicak** — "The circuit court did not err in granting partial summary judgment to Dr. Bicak on the eovenant-not-to-compete claim because Mercy did not counter the evidence demonstrating that it had no interest sufficient to warrant its enforcement; that it was designed only to eliminate competition; and that it would unreasonably interfere with the public’s right of access to the physicians of their choice and Dr. Bicak’s ability to earn a living." *Mercy Health Sys. of Nw. Ark., Inc. v. Bicak, 2011 Ark. App. 341, 383 S.W.3d 869.* <https://www.courtlistener.com/opinion/5283436/mercy-health-system-of-northwest-arkansas-inc-v-bicak/#:~:text=The%20circuit%20court%20did%20not,ability%20to%20earn%20a%20living.>
+
+[^q8-bud-prospective]: **Bud Anderson Heating & Cooling, Inc. v. Neil** — "Therefore, it is not clear and obvious on the record before us that BAHC could not obtain the relief it seeks on appeal, a one-year prospective injunction." *Bud Anderson Heating & Cooling, Inc. v. Neil, 2018 Ark. App. 183, 545 S.W.3d 819.* <https://www.courtlistener.com/opinion/6241502/bud-anderson-heating-cooling-inc-v-mike-neil-absolute-hvac-llc/#:~:text=Therefore%2C%20it%20is%20not%20clear,appeal%2C%20a%20one%2Dyear%20prospective%20injunction.>
+
+[^q8-aca-remedies]: **Ark. Code Ann. § 4-75-101** — "In a private court action, a court may award the employer damages for a breach of a covenant not to compete agreement, appropriate injunctive relief, or both, if appropriate." *Ark. Code Ann. § 4-75-101(e).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q8-aca-reformation]: **Ark. Code Ann. § 4-75-101** — "The court shall enforce the covenant not to compete agreement under the reformed terms and conditions." *Ark. Code Ann. § 4-75-101(f).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q9-aca-remedies]: **Ark. Code Ann. § 4-75-101** — "In a private court action, a court may award the employer damages for a breach of a covenant not to compete agreement, appropriate injunctive relief, or both, if appropriate." *Ark. Code Ann. § 4-75-101(e).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q9-aca-irreparable]: **Ark. Code Ann. § 4-75-101** — "The immediate harm associated with the breach of a covenant not to compete agreement shall be considered irreparable to establish the appropriateness of a preliminary injunction." *Ark. Code Ann. § 4-75-101(e).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q9-porters-after-2015]: **Porter's Commercial Refrigeration, Inc. v. Brewer** — "The grounds for establishing the right to an injunction are straightforward, but the analysis becomes layered in the context of allegations regarding breaches of noncompete agreements executed after 2015." *Porter's Com. Refrigeration, Inc. v. Brewer, 2024 Ark. App. 232, 688 S.W.3d 145.* <https://www.courtlistener.com/opinion/9490284/porters-commercial-refrigeration-inc-v-danny-a-brewer-jason-spears/#:~:text=The%20grounds%20for%20establishing%20the,noncompete%20agreements%20executed%20after%202015.>
+
+[^q9-porters-statutory-harm]: **Porter's Commercial Refrigeration, Inc. v. Brewer** — "This means that a party seeking a preliminary injunction concerning a noncompete agreement executed after 2015 can establish irreparable harm by establishing immediate harm associated with a breach of the noncompete." *Porter's Com. Refrigeration, Inc. v. Brewer, 2024 Ark. App. 232, 688 S.W.3d 145.* <https://www.courtlistener.com/opinion/9490284/porters-commercial-refrigeration-inc-v-danny-a-brewer-jason-spears/#:~:text=This%20means%20that%20a%20party,a%20breach%20of%20the%20noncompete.>
+
+[^q9-aca-savings]: **Ark. Code Ann. § 4-75-101** — "This subsection does not limit: (A) Any other defense available to a party against a claim for preliminary injunctive relief; or (B) An employer's right to monetary damages for breach of a covenant not to compete agreement." *Ark. Code Ann. § 4-75-101(e).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q10-aca-related-covenants]: **Ark. Code Ann. § 4-75-101** — "This section shall not apply to other types of agreements between employers and employees that do not concern competition or competitive work, including: (A) Agreements not to solicit, recruit, or hire employees; (B) Confidentiality agreements; (C) Nondisclosure agreements; and (D) The terms and conditions of an employment or employment agreement." *Ark. Code Ann. § 4-75-101(i).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q10-aca-atsa]: **Ark. Code Ann. § 4-75-101** — "Except as provided under subsection (k) of this section, this section shall not: (1) Be read to impair, limit, or change a party's protections and rights under the Arkansas Trade Secrets Act, § 4-75-601 et seq.; or (2) Apply to a person holding a professional license under Arkansas Code Title 17, Subtitle 3." *Ark. Code Ann. § 4-75-101(j).* <https://advance.lexis.com/document/?pdmfid=1000516&pddocfullpath=/shared/document/statutes-legislation/urn:contentItem:6F8J-XPN0-R03K-P3X3-00008-00>
+
+[^q10-bendinger-trade-secrets]: **Bendinger v. Marshalltown Trowel Co.** — "We next turn to Marshalltown’s cross-appeal where it challenges the chancellor’s denial of injunctive relief under the Arkansas Trade Secrets Act, since this issue may have merit independent from our decision not to enforce the restrictive covenant." *Bendinger v. Marshalltown Trowel Co., 338 Ark. 410, 994 S.W.2d 468 (1999).* <https://www.courtlistener.com/opinion/2454655/bendinger-v-marshalltown-trowell-co/#:~:text=We%20next%20turn%20to%20Marshalltown%E2%80%99s,to%20enforce%20the%20restrictive%20covenant.>

package/skills/non-compete-contract-explainer/content/california.md

@@ -0,0 +1,270 @@
+---
+jurisdiction: "California"
+slug: california
+countryCode: US
+snapshotAsOf: "2026-06-08"
+lastReviewed: "2026-06-03"
+canonicalUrl: https://openagreements.org/legal/non-compete/california
+license: CC BY 4.0
+stale: false
+---
+
+> [!IMPORTANT]
+> **Informational only — not legal advice.** This is a snapshot of an OpenAgreements practice note,
+> provided for general information. It is not legal advice, does not create an attorney-client
+> relationship, and is not a substitute for a licensed attorney in the relevant jurisdiction.
+> Laws change; verify against the canonical version before relying on it.
+>
+> **Canonical:** https://openagreements.org/legal/non-compete/california · **Snapshot as of:** 2026-06-08 · License: CC BY 4.0 · © UseJunior
+
+# Non-Competes in California[^about]
+
+California voids employee non-compete agreements by statute and treats customer non-solicitation clauses as the same kind of void restraint, and its 2024 laws make entering or enforcing one a civil violation with a private right of action — leaving only narrow sale-of-business exceptions.
+
+
+## At a glance
+
+| Question | California |
+| --- | --- |
+| **Are non-competes enforceable?** | Banned |
+| **Bottom line** | Employee non-competes and customer non-solicits are void by statute, and since 2024 entering or enforcing one is a civil violation with a private right of action. |
+| **Main law or case** | Cal. Bus. & Prof. Code § 16600 |
+| **Main exceptions** | Sale of a business or ownership interest (§§ 16601–16602.5) |
+| **When the ban took effect** | Longstanding (§ 16600); 2024 enforcement laws SB 699 / AB 1076 effective Jan 1, 2024 |
+| **Can a court narrow it?** | No |
+| **Applies to contractors?** | Yes |
+| **Restriction extended during a breach?** | No (covenant is void) |
+| **Maximum length set by law** | Not applicable — void |
+
+## Are employee non-compete agreements enforceable in California? {#employee-noncompetes}
+
+**Short answer.** No. California voids employee non-compete agreements by statute. Business and Professions Code section 16600 makes any contract that restrains someone from engaging in a lawful profession, trade, or business void to that extent, and the Legislature has directed courts to read the ban *broadly* — voiding any noncompete in employment *no matter how narrowly tailored* — unless it fits a specific statutory exception [^stat-16600-void][^stat-16600-broadly].
+
+This makes California the most employee-protective non-compete jurisdiction in the country. Unlike a reasonableness state, California does not weigh a covenant's duration or geography — a clause that restrains a former employee from competing is simply outside the statute and therefore void. The California Supreme Court settled this in *Edwards v. Arthur Andersen LLP*, where it struck a customer non-solicitation covenant and refused to adopt the Ninth Circuit's *narrow-restraint* exception [^edwards-reject-narrow].
+
+"We reject Andersen's contention that we should adopt a narrow-restraint exception to section 16600 and leave it to the Legislature, if it chooses, either to relax the statutory restrictions or adopt additional exceptions to the prohibition-against-restraint rule under section 16600."[^edwards-reject-narrow]
+
+The 2024 amendment to section 16600 wrote that holding into the statute, removing any argument that a short or geographically modest non-compete might survive [^stat-16600-broadly].
+
+"This section shall be read broadly, in accordance with Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, to void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored, that does not satisfy an exception in this chapter."[^stat-16600-broadly]
+
+What a California employer can protect instead is a narrow set of interests — the goodwill it buys when it acquires a business, and its trade secrets and confidential information. Each is addressed in its own question below.
+
+> [!NOTE]
+> **Practice note.**
+>
+> Do not paper a California employee with an out-of-state non-compete form and assume a court will narrow it to something enforceable. California treats a conventional employee non-compete as void rather than reforming it. As the questions below explain, merely *including* or *attempting to enforce* one now carries its own statutory exposure [^stat-16600-void][^edwards-reject-narrow].
+
+## Are customer non-solicitation clauses enforceable in California? {#customer-nonsolicitation}
+
+**Short answer.** No, not in the employment context. California treats a clause barring a former employee from soliciting or servicing the employer's customers as a restraint on trade that is void under section 16600 — the same rule that voids a non-compete. *Edwards* itself struck a customer non-solicitation covenant [^q2-edwards-reject-narrow][^fillpoint-void].
+
+Because *Edwards* rejected any reasonableness or narrow-restraint analysis in employment, a customer non-solicitation clause does not become enforceable just because it is limited to a handful of accounts or a short period. If it forecloses any part of the former employee's ability to compete for business, it is void [^q2-edwards-reject-narrow].
+
+The one place a customer non-solicitation covenant can survive is where it is genuinely part of the sale of a business rather than an employment relationship — and even then courts read the exception narrowly. In *Fillpoint, LLC v. Maas*, the Court of Appeal refused to let a buyer enforce a noncompetition-and-nonsolicitation covenant that sat in the *employment* agreement rather than the purchase agreement [^fillpoint-void].
+
+"In this case, when we read the two noncompetition covenants together, we hold that the noncompetition and nonsolicitation covenant contained in the employment agreement is void and unenforceable under California law."[^fillpoint-void]
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not rely on a customer non-solicitation or *non-dealing* clause as a softer substitute for a non-compete in a California employment agreement. Courts analyze it as the same kind of restraint and void it; the durable protection for customer relationships is a properly scoped trade-secret and confidentiality program, addressed below [^q2-edwards-reject-narrow][^fillpoint-void].
+
+## Can a California employer restrict soliciting its employees? {#employee-nonsolicitation}
+
+**Short answer.** It is high-risk and probably void. An older decision, *Loral Corp. v. Moyes*, upheld an employee anti-raiding covenant as only a *slight* restraint, but the more recent appellate decision in *AMN Healthcare v. Aya Healthcare* held an employee non-solicitation clause void under section 16600 because it restrained the recruiters' chosen profession, and questioned whether *Loral* survives *Edwards*. The California Supreme Court has not resolved the split [^amn-void][^loral-slight].
+
+For decades employers relied on *Loral*, where the court treated a clause barring a departing executive from *raiding* his former employer's staff as a minor restriction that did not foreclose anyone's livelihood [^loral-slight].
+
+"This does not appear to be any more of a significant restraint on his engaging in his profession, trade or business than a restraint on solicitation of customers or on disclosure of confidential information."[^loral-slight]
+
+In 2018 the Court of Appeal in *AMN Healthcare* invalidated an employee non-solicitation clause imposed on nurse recruiters and openly questioned whether *Loral* survives *Edwards* [^amn-void].
+
+"Turning to the instant case, we independently conclude that the nonsolicitation of employee provision in the CNDA is void under section 16600."[^amn-void]
+
+Federal district courts applying California law have largely followed *AMN* and extended it beyond the recruiting industry. Until the California Supreme Court speaks, treat a standard employee non-solicitation or *no-hire* clause as carrying a high risk of invalidation — and, as the next question explains, including a void clause now carries its own statutory exposure.
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not assume *Loral* still protects a no-hire or anti-raiding clause. After *AMN Healthcare*, an employee non-solicitation provision is more likely void than enforceable, and a clause that bars *hiring* a former colleague who applies on their own initiative is weaker still. Protect the workforce through trade-secret and confidentiality measures rather than a raiding ban [^amn-void][^loral-slight].
+
+## What is an employer's exposure for including or enforcing a void non-compete? {#employer-exposure}
+
+**Short answer.** Substantial. Since January 1, 2024, two laws turned California's ban from a defense into an offensive weapon. Senate Bill 699 (section 16600.5) makes *entering into* or *attempting to enforce* a void non-compete a civil violation with a private right of action and mandatory attorney's fees, reaching contracts signed anywhere. Assembly Bill 1076 (section 16600.1) made *including* such a clause unlawful, required employers to notify affected workers by February 14, 2024, and made a violation an act of unfair competition [^stat-16600-5-violation][^stat-16600-1-unlawful].
+
+The private right of action is what ended the old practice of leaving an unenforceable *scarecrow* covenant in a contract to deter departures. Entering or enforcing a void clause is now itself the violation [^stat-16600-5-violation].
+
+"An employer that enters into a contract that is void under this chapter or attempts to enforce a contract that is void under this chapter commits a civil violation."[^stat-16600-5-violation]
+
+A prevailing worker recovers fees on top of any damages or injunction, which makes even a low-value case worth bringing [^stat-16600-5-fees].
+
+"In addition to the remedies described in paragraph (1), a prevailing employee, former employee, or prospective employee in an action based on a violation of this chapter shall be entitled to recover reasonable attorney's fees and costs."[^stat-16600-5-fees]
+
+AB 1076 layered on a compliance duty: it is unlawful to include the clause at all, and a violation is folded into the Unfair Competition Law [^stat-16600-1-unlawful][^stat-16600-1-ucl].
+
+"It shall be unlawful to include a noncompete clause in an employment contract, or to require an employee to enter a noncompete agreement, that does not satisfy an exception in this chapter."[^stat-16600-1-unlawful]
+
+There is a further trap for employers who present void terms. Labor Code section 432.5 forbids requiring an employee to agree in writing to any term the employer knows to be prohibited by law — which a void non-compete now plainly is — exposing the employer to representative penalty claims [^stat-432-5]. California's Attorney General has publicly reinforced that noncompetes are generally illegal and that workers can act on these rights [^ag-alert].
+
+> [!NOTE]
+> **Practice note.**
+>
+> Audit California employment agreements and remove void non-compete, customer-non-solicit, and overbroad confidentiality clauses now — do not leave them in as a deterrent. Under section 16600.5, entering into or attempting to enforce a void clause is a civil violation with fee-shifting; separately, under section 16600.1 the inclusion of the clause is itself unlawful, and the unmet AB 1076 notice obligation (due February 14, 2024) remains an unfair-competition exposure for employers who never sent it [^stat-16600-5-violation][^stat-16600-1-ucl].
+
+## Can a choice-of-law or forum-selection clause escape California's non-compete ban? {#choice-of-law}
+
+**Short answer.** Usually not for a California employee. Labor Code section 925 lets an employee who primarily resides and works in California void an out-of-state choice-of-law or forum-selection clause imposed as a condition of employment, and section 16600.5 says a void non-compete is unenforceable regardless of where it was signed. But California's extraterritorial reach has limits: federal courts have applied another state's law to enforce a non-compete where that state's interest was greater [^stat-925][^stat-16600-5-anywhere][^draftkings-stand].
+
+Section 925 is the core anti-circumvention rule. A California-based employee can void a clause that forces litigation elsewhere or strips California law, unless the employee was individually represented by counsel in negotiating it [^stat-925].
+
+"An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following: (1) Require the employee to adjudicate outside of California a claim arising in California. (2) Deprive the employee of the substantive protection of California law with respect to a controversy arising in California."[^stat-925]
+
+Section 925 reaches contracts entered into, modified, or extended on or after January 1, 2017, so it does not retroactively void an older choice-of-law or forum clause [^stat-925]. Section 16600.5 reinforces the rule for newer disputes by declaring void non-competes unenforceable no matter where they were signed [^stat-16600-5-anywhere].
+
+"Any contract that is void under this chapter is unenforceable regardless of where and when the contract was signed."[^stat-16600-5-anywhere]
+
+The limit appears when the dispute lands outside California. In *DraftKings Inc. v. Hermalyn*, the First Circuit applied Massachusetts law, enforced a Massachusetts non-compete against an executive who had moved to California, and let the injunction stand — declining to treat California's policy as overriding [^draftkings-stand].
+
+"Having considered the matter on an expedited basis, we let the challenged order stand."[^draftkings-stand]
+
+> [!NOTE]
+> **Practice note.**
+>
+> A California employee who primarily works in California should treat section 925 as the strongest tool against an out-of-state forum or governing-law clause — but recognize that section 16600.5 is not a guaranteed shield in another state's courts. An employee who never worked in California cannot reliably invoke the ban by relocating after the fact [^stat-925][^draftkings-stand].
+
+## Are non-competes tied to the sale of a business or ownership interest enforceable in California? {#sale-of-business}
+
+**Short answer.** Yes, within narrow statutory limits. A person who sells the goodwill of a business or disposes of an ownership interest may agree not to compete within the geographic area where the business operated (section 16601), and parallel rules cover partners (section 16602) and LLC members (section 16602.5). Courts read these exceptions strictly and tie them to the goodwill actually transferred [^stat-16601][^stat-16602][^stat-16602-5].
+
+The sale-of-business exception exists so a buyer can protect the goodwill it pays for; without it, a seller could reopen next door and take back the customer base just sold. But the covenant must be tied to a genuine sale and limited to the area where the business was carried on [^stat-16601].
+
+A covenant that is really an employment restraint dressed up as a sale term will not qualify. In *Fillpoint*, the court read the purchase and employment agreements together and voided the employment-agreement covenant as outside the exception [^q6-fillpoint-void]. Where the transaction is a real disposition of an ownership interest, the exception applies — in *Blue Mountain Enterprises, LLC v. Owen*, the court enforced a customer non-solicitation covenant tied to an owner's sale of his entire interest [^blue-mountain-16601].
+
+"Here, the trial court correctly found that section 16601 applies as a matter of law because Owen ‘dispos[ed] of all of his . . . ownership interest’ under the Contribution Agreement while concurrently agreeing under the Employment Agreement to ‘refrain from carrying on a similar business within a specified geographic area in which the business so sold.’"[^blue-mountain-16601]
+
+For a *partial* sale — where the owner sells some interest but stays involved — the California Supreme Court's decision in *Ixchel Pharma, LLC v. Biogen, Inc.* supplies the analytical frame: outside the employment and full-sale contexts, a restraint on business dealings is judged under a rule of reason rather than treated as void per se [^ixchel-rule-of-reason]. The Court of Appeal applied that frame to a partial sale in *Samuelian v. Life Generations Healthcare, LLC* [^samuelian-reasonableness].
+
+"In context, section 16600 is best read not to render void per se all contractual restraints on business dealings, but rather to subject such restraints to a rule of reason."[^ixchel-rule-of-reason]
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Tie a sale-of-business covenant to the goodwill actually sold and to the geographic area where the business operated, and keep it in the purchase agreement — not the employee's employment agreement. A covenant bootstrapped onto employment, or scoped beyond the acquired goodwill, falls outside sections 16601–16602.5 and is void [^stat-16601][^q6-fillpoint-void].
+
+## Can private equity or hedge funds impose non-competes on California physicians and dentists? {#healthcare-private-equity}
+
+**Short answer.** No — for contracts under the new healthcare law that takes effect January 1, 2026. Senate Bill 351 (Health and Safety Code section 1191) bars a private equity group or hedge fund involved with a physician or dental practice from using a management or asset-sale contract to stop a provider from competing with the practice after leaving, and voids any such clause [^stat-hsc-1191-ban].
+
+SB 351 targets the contractual structures private equity uses to manage medical and dental practices. A management or asset-sale agreement with a PE- or hedge-fund-controlled entity cannot include a clause barring a provider from competing with the practice after a termination or resignation [^stat-hsc-1191-ban].
+
+The law preserves a genuine sale-of-business non-compete but draws a sharp line: a management or asset-sale contract cannot operate as an *employee* non-compete against the provider [^stat-hsc-1191-sale-exception].
+
+"However, a contract described in this subdivision shall not operate as an employee noncompete agreement."[^stat-hsc-1191-sale-exception]
+
+> [!NOTE]
+> **Practice note.**
+>
+> This restriction applies to contracts under the SB 351 framework taking effect January 1, 2026. Private equity and hedge-fund sponsors structuring management services organization (MSO) arrangements with California medical or dental practices should remove provider non-compete clauses from those management and asset-sale contracts and confirm that any retained sale-of-business covenant does not function as an employee non-compete [^stat-hsc-1191-ban].
+
+## Are stay-or-pay and training-repayment (TRAP) clauses enforceable in California? {#stay-or-pay}
+
+**Short answer.** Increasingly not. For contracts entered into on or after January 1, 2026, Assembly Bill 692 (Business and Professions Code section 16608) makes most terms that impose a debt, penalty, or fee on a worker who leaves unlawful, and treats such a contract as void under section 16600. Labor Code section 926 gives the worker a civil action with statutory damages of $5,000 per worker [^stat-16608-void][^stat-926-damages].
+
+Section 16608 reaches the *stay-or-pay* structures — replacement-hire fees, training-repayment provisions (TRAPs), quit fees, and similar termination-triggered charges — that impose a penalty, fee, or cost on a worker who leaves and so function as financial deterrents to departure [^stat-16608-penalty].
+
+A contract that runs afoul of the section is itself a restraint of trade and void under section 16600 — but only prospectively, for contracts entered on or after the January 1, 2026 effective date [^stat-16608-void].
+
+"A contract that is unlawful under subdivision (b) is a contract restraining a person from engaging in a lawful profession, trade, or business, and is void under Section 16600 only if the contract was entered into on or after January 1, 2026."[^stat-16608-void]
+
+The remedy is meaningful: a worker or worker representative can recover actual damages or $5,000 per worker, whichever is greater, plus injunctive relief and fees [^stat-926-damages].
+
+"Any person found liable for a violation of this section shall be liable for actual damages sustained by the worker or workers on whose behalf the case is brought, or five thousand dollars ($5,000) per worker, whichever is greater, in addition to injunctive relief, and reasonable attorney's fees and costs."[^stat-926-damages]
+
+> [!NOTE]
+> **Practice note.**
+>
+> The stay-or-pay rules apply to contracts entered into on or after January 1, 2026, and the statute carves out specific arrangements — for example, a genuine sign-on bonus with separate terms and a retention period of no more than two years, and tuition for a transferable credential offered apart from the employment contract. Review any training-repayment or retention-bonus program against the section 16608 exceptions before using it in California [^stat-16608-void][^stat-926-damages].
+
+## What can a California employer protect instead of a non-compete? {#trade-secrets}
+
+**Short answer.** Trade secrets and narrowly drawn confidentiality. The California Uniform Trade Secrets Act lets an employer enjoin the actual or threatened misappropriation of a trade secret (Civil Code section 3426.2), and that protection operates whether or not any restrictive covenant exists. But a confidentiality clause written so broadly that it bars the employee from working in their field is treated as a *de facto* non-compete and is void [^stat-cuts-injunction][^brown-de-facto].
+
+Because the Trade Secrets Act protects the *information* rather than the employment relationship, it is the most durable tool a California employer has for guarding competitively sensitive material [^stat-cuts-injunction].
+
+"Actual or threatened misappropriation may be enjoined."[^stat-cuts-injunction]
+
+The discipline a California employer must accept is precision. In *Brown v. TGS Management Co.*, the Court of Appeal held that confidentiality provisions defined so expansively that they effectively barred the employee from his profession operated as a *de facto* non-compete and were void [^brown-de-facto].
+
+"Collectively, these overly restrictive provisions operate as a de facto noncompete provision; they plainly bar Brown in perpetuity from doing any work in the securities field, much less in his chosen profession of statistical arbitrage."[^brown-de-facto]
+
+A trade-secret claim also comes with a procedural gate that shapes litigation: before taking discovery, the party alleging misappropriation must identify the trade secret with reasonable particularity [^stat-2019-210].
+
+> [!CAUTION]
+> **Drafting note.**
+>
+> Do not define *confidential information* so broadly that it sweeps in the employee's general skills, knowledge, and industry experience — a confidentiality clause that effectively prevents the worker from practicing their profession is a *de facto* non-compete and void under *Brown v. TGS*. Tie confidentiality to genuine, identifiable trade secrets, and rely on the Trade Secrets Act for enforcement [^brown-de-facto][^stat-cuts-injunction].
+
+[^about]: By Steven Obiajulu, J.D. Published by [openagreements.org](https://openagreements.org) · Maintained by [UseJunior](https://usejunior.com). Last reviewed 2026-06-03. License: CC BY 4.0. Steven Obiajulu, J.D. is admitted in New York, not California. This article synthesizes California primary law and is not legal advice from a California-admitted attorney. This article is for informational purposes only and does not create an attorney-client relationship.
+
+[^stat-16600-void]: **Cal. Bus. & Prof. Code § 16600** — "Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." *Cal. Bus. & Prof. Code § 16600(a).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16600>
+
+[^stat-16600-broadly]: **Cal. Bus. & Prof. Code § 16600** — "This section shall be read broadly, in accordance with Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, to void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored, that does not satisfy an exception in this chapter." *Cal. Bus. & Prof. Code § 16600(b)(1).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16600>
+
+[^edwards-reject-narrow]: **Edwards v. Arthur Andersen LLP** — "We reject Andersen's contention that we should adopt a narrow-restraint exception to section 16600 and leave it to the Legislature, if it chooses, either to relax the statutory restrictions or adopt additional exceptions to the prohibition-against-restraint rule under section 16600." *Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008).* <https://www.courtlistener.com/opinion/5608069/edwards-v-arthur-andersen-llp/#:~:text=We%20reject%20Andersen's%20contention%20that,prohibition%2Dagainst%2Drestraint%20rule%20under%20section%2016600.>
+
+[^q2-edwards-reject-narrow]: **Edwards v. Arthur Andersen LLP** — "We reject Andersen's contention that we should adopt a narrow-restraint exception to section 16600 and leave it to the Legislature, if it chooses, either to relax the statutory restrictions or adopt additional exceptions to the prohibition-against-restraint rule under section 16600." *Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008).* <https://www.courtlistener.com/opinion/5608069/edwards-v-arthur-andersen-llp/#:~:text=We%20reject%20Andersen's%20contention%20that,prohibition%2Dagainst%2Drestraint%20rule%20under%20section%2016600.>
+
+[^fillpoint-void]: **Fillpoint, LLC v. Maas** — "In this case, when we read the two noncompetition covenants together, we hold that the noncompetition and nonsolicitation covenant contained in the employment agreement is void and unenforceable under California law." *Fillpoint, LLC v. Maas, 208 Cal. App. 4th 1170 (2012).* <https://www.courtlistener.com/opinion/5811287/fillpoint-llc-v-maas/#:~:text=In%20this%20case%2C%20when%20we,and%20unenforceable%20under%20California%20law.>
+
+[^amn-void]: **AMN Healthcare, Inc. v. Aya Healthcare Services, Inc.** — "Turning to the instant case, we independently conclude that the nonsolicitation of employee provision in the CNDA is void under section 16600." *AMN Healthcare, Inc. v. Aya Healthcare Servs., Inc., 28 Cal. App. 5th 923 (2018).* <https://www.courtlistener.com/opinion/4549721/amn-healthcare-inc-v-aya-healthcare-services-inc/#:~:text=Turning%20to%20the%20instant%20case%2C,is%20void%20under%20section%2016600.>
+
+[^loral-slight]: **Loral Corp. v. Moyes** — "This does not appear to be any more of a significant restraint on his engaging in his profession, trade or business than a restraint on solicitation of customers or on disclosure of confidential information." *Loral Corp. v. Moyes, 174 Cal. App. 3d 268 (1985).* <https://www.courtlistener.com/opinion/2140771/loral-corp-v-moyes/#:~:text=This%20does%20not%20appear%20to,on%20disclosure%20of%20confidential%20information.>
+
+[^stat-16600-5-violation]: **Cal. Bus. & Prof. Code § 16600.5** — "An employer that enters into a contract that is void under this chapter or attempts to enforce a contract that is void under this chapter commits a civil violation." *Cal. Bus. & Prof. Code § 16600.5(d).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16600.5>
+
+[^stat-16600-1-unlawful]: **Cal. Bus. & Prof. Code § 16600.1** — "It shall be unlawful to include a noncompete clause in an employment contract, or to require an employee to enter a noncompete agreement, that does not satisfy an exception in this chapter." *Cal. Bus. & Prof. Code § 16600.1(a).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16600.1>
+
+[^stat-16600-5-fees]: **Cal. Bus. & Prof. Code § 16600.5** — "In addition to the remedies described in paragraph (1), a prevailing employee, former employee, or prospective employee in an action based on a violation of this chapter shall be entitled to recover reasonable attorney's fees and costs." *Cal. Bus. & Prof. Code § 16600.5(e)(2).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16600.5>
+
+[^stat-16600-1-ucl]: **Cal. Bus. & Prof. Code § 16600.1** — "A violation of this section constitutes an act of unfair competition within the meaning of Chapter 5 (commencing with Section 17200)." *Cal. Bus. & Prof. Code § 16600.1(c).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16600.1>
+
+[^stat-432-5]: **Cal. Lab. Code § 432.5** — "No employer, or agent, manager, superintendent, or officer thereof, shall require any employee or applicant for employment to agree, in writing, to any term or condition which is known by such employer, or agent, manager, superintendent, or officer thereof to be prohibited by law." *Cal. Lab. Code § 432.5.* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB&sectionNum=432.5>
+
+[^ag-alert]: **California Attorney General — Consumer Alert on Noncompete Agreements** — "Effective January 1, 2024, Senate Bill (SB) 699 makes it generally illegal for employers to enter into noncompete agreements with California employees." *Cal. Att'y Gen., Consumer Alert: Noncompete Agreements (Oct. 15, 2024).* <https://oag.ca.gov/news/press-releases/attorney-general-bonta-issues-consumer-alert-reminding-california-workers-their>
+
+[^stat-925]: **Cal. Lab. Code § 925** — "An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following: (1) Require the employee to adjudicate outside of California a claim arising in California. (2) Deprive the employee of the substantive protection of California law with respect to a controversy arising in California." *Cal. Lab. Code § 925(a).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB&sectionNum=925>
+
+[^stat-16600-5-anywhere]: **Cal. Bus. & Prof. Code § 16600.5** — "Any contract that is void under this chapter is unenforceable regardless of where and when the contract was signed." *Cal. Bus. & Prof. Code § 16600.5(a).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16600.5>
+
+[^draftkings-stand]: **DraftKings Inc. v. Hermalyn** — "Having considered the matter on an expedited basis, we let the challenged order stand." *DraftKings Inc. v. Hermalyn, 118 F.4th 416 (1st Cir. 2024).* <https://www.courtlistener.com/opinion/10125471/draftkings-inc-v-hermalyn/#:~:text=Having%20considered%20the%20matter%20on,let%20the%20challenged%20order%20stand.>
+
+[^stat-16601]: **Cal. Bus. & Prof. Code § 16601** — "Any person who sells the goodwill of a business, or any owner of a business entity selling or otherwise disposing of all of his or her ownership interest in the business entity, or any owner of a business entity that sells (a) all or substantially all of its operating assets together with the goodwill of the business entity, (b) all or substantially all of the operating assets of a division or a subsidiary of the business entity together with the goodwill of that division or subsidiary, or (c) all of the ownership interest of any subsidiary, may agree with the buyer to refrain from carrying on a similar business within a specified geographic area in which the business so sold, or that of the business entity, division, or subsidiary has been carried on, so long as the buyer, or any person deriving title to the goodwill or ownership interest from the buyer, carries on a like business therein." *Cal. Bus. & Prof. Code § 16601.* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16601>
+
+[^stat-16602]: **Cal. Bus. & Prof. Code § 16602** — "Any partner may, upon or in anticipation of any of the circumstances described in subdivision (b), agree that he or she will not carry on a similar business within a specified geographic area where the partnership business has been transacted, so long as any other member of the partnership, or any person deriving title to the business or its goodwill from any such other member of the partnership, carries on a like business therein." *Cal. Bus. & Prof. Code § 16602(a).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16602>
+
+[^stat-16602-5]: **Cal. Bus. & Prof. Code § 16602.5** — "Any member may, upon or in anticipation of a dissolution of, or the termination of his or her interest in, a limited liability company (including a series of a limited liability company formed under the laws of a jurisdiction recognizing such a series), agree that he or she or it will not carry on a similar business within a specified geographic area where the limited liability company business has been transacted, so long as any other member of the limited liability company, or any person deriving title to the business or its goodwill from any such other member of the limited liability company, carries on a like business therein." *Cal. Bus. & Prof. Code § 16602.5.* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16602.5>
+
+[^q6-fillpoint-void]: **Fillpoint, LLC v. Maas** — "In this case, when we read the two noncompetition covenants together, we hold that the noncompetition and nonsolicitation covenant contained in the employment agreement is void and unenforceable under California law." *Fillpoint, LLC v. Maas, 208 Cal. App. 4th 1170 (2012).* <https://www.courtlistener.com/opinion/5811287/fillpoint-llc-v-maas/#:~:text=In%20this%20case%2C%20when%20we,and%20unenforceable%20under%20California%20law.>
+
+[^blue-mountain-16601]: **Blue Mountain Enterprises, LLC v. Owen** — "Here, the trial court correctly found that section 16601 applies as a matter of law because Owen ‘dispos[ed] of all of his . . . ownership interest’ under the Contribution Agreement while concurrently agreeing under the Employment Agreement to ‘refrain from carrying on a similar business within a specified geographic area in which the business so sold.’" *Blue Mountain Enters., LLC v. Owen, 74 Cal. App. 5th 537 (2022).* <https://www.courtlistener.com/opinion/6246635/blue-mountain-enterprises-llc-v-owen/#:~:text=Here%2C%20the%20trial%20court%20correctly,which%20the%20business%20so%20sold.%E2%80%9D>
+
+[^ixchel-rule-of-reason]: **Ixchel Pharma, LLC v. Biogen, Inc.** — "In context, section 16600 is best read not to render void per se all contractual restraints on business dealings, but rather to subject such restraints to a rule of reason." *Ixchel Pharma, LLC v. Biogen, Inc., 9 Cal. 5th 1130 (2020).* <https://www.courtlistener.com/opinion/4772471/ixchel-pharma-llc-v-biogen-inc/#:~:text=In%20context%2C%20section%2016600%20is,to%20a%20rule%20of%20reason.>
+
+[^samuelian-reasonableness]: **Samuelian v. Life Generations Healthcare, LLC** — "We agree the reasonableness standard applies to partial sales." *Samuelian v. Life Generations Healthcare, LLC (Cal. Ct. App. 2024).* <https://www.courtlistener.com/opinion/10118817/samuelian-v-life-generations-healthcare-llc/#:~:text=We%20agree%20the%20reasonableness%20standard%20applies%20to%20partial%20sales.>
+
+[^stat-hsc-1191-ban]: **Cal. Health & Safety Code § 1191 (SB 351)** — "shall not include any clause barring any provider in that practice from doing either of the following: (A) Competing with that practice in the event of a termination or resignation of that provider from that practice." *Cal. Health & Safety Code § 1191(d)(1).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=HSC&sectionNum=1191>
+
+[^stat-hsc-1191-sale-exception]: **Cal. Health & Safety Code § 1191 (SB 351)** — "An otherwise enforceable sale of business noncompete agreement. However, a contract described in this subdivision shall not operate as an employee noncompete agreement." *Cal. Health & Safety Code § 1191(d)(3)(A).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=HSC&sectionNum=1191>
+
+[^stat-16608-void]: **Cal. Bus. & Prof. Code § 16608 (AB 692)** — "A contract that is unlawful under subdivision (b) is a contract restraining a person from engaging in a lawful profession, trade, or business, and is void under Section 16600 only if the contract was entered into on or after January 1, 2026." *Cal. Bus. & Prof. Code § 16608(c).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16608>
+
+[^stat-926-damages]: **Cal. Lab. Code § 926 (AB 692)** — "Any person found liable for a violation of this section shall be liable for actual damages sustained by the worker or workers on whose behalf the case is brought, or five thousand dollars ($5,000) per worker, whichever is greater, in addition to injunctive relief, and reasonable attorney's fees and costs." *Cal. Lab. Code § 926(c).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB&sectionNum=926>
+
+[^stat-16608-penalty]: **Cal. Bus. & Prof. Code § 16608 (AB 692)** — "Imposes any penalty, fee, or cost on a worker if the worker's employment or work relationship with a specific employer terminates." *Cal. Bus. & Prof. Code § 16608(b)(1)(C).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=BPC&sectionNum=16608>
+
+[^stat-cuts-injunction]: **Cal. Civ. Code § 3426.2** — "Actual or threatened misappropriation may be enjoined." *Cal. Civ. Code § 3426.2(a).* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV&sectionNum=3426.2>
+
+[^brown-de-facto]: **Brown v. TGS Management Co., LLC** — "Collectively, these overly restrictive provisions operate as a de facto noncompete provision; they plainly bar Brown in perpetuity from doing any work in the securities field, much less in his chosen profession of statistical arbitrage." *Brown v. TGS Mgmt. Co., 57 Cal. App. 5th 303 (2020).* <https://www.courtlistener.com/opinion/4805583/brown-v-tgs-management-co-llc/#:~:text=Collectively%2C%20these%20overly%20restrictive%20provisions,chosen%20profession%20of%20statistical%20arbitrage.>
+
+[^stat-2019-210]: **Cal. Civ. Proc. Code § 2019.210** — "before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity" *Cal. Civ. Proc. Code § 2019.210.* <https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CCP&sectionNum=2019.210>