Governor Newsom Signs Non-Compete Bill Drafted by USD Law Professor

This month, Governor Newsom signed into law Senate Bill 699, which strengthens laws against non-compete clauses in California. Orly Lobel, Warren Distinguished Professor of Law and Director of the Center for Employment and Labor Policy at the University of San Diego, led the drafting of the bill based on her decade of research on the harms of non-competes.

Non-compete clauses in employment contracts are extremely common in the United States. The Federal Trade Commission estimates about one in five American workers — approximately 30 million people — are bound by a non-compete clause, restricting them from pursuing better employment opportunities. Professor Lobel’s research has shown that non-competes are not only harmful to workers, suppressing wages and job opportunities, but also harmful to entrepreneurship, innovation, and economic growth.

“California has long held unenforceable post-employment agreements that limit a person’s ability to work in their trade or industry. This new section 16600.5 reinforces that policy by providing reimbursement of legal fees for employees who successfully defend their rights. It allows California employers to hire trained individuals in a competitive labor market without fear of reprisal. And it protects employees who want to take jobs in California or with California companies. It clarifies what the California courts have long recognized: that California’s public policy that voids non-competes extends to all California-based employees and employers, even if an employee had previously signed a non-compete outside of California,” said Professor Lobel. 

“In my research since my first book, Talent Wants to be Free, I have argued it is not only the law on the books but the enforcement structure that shapes talent mobility. The bill provides an enforcement mechanism and strengthens California’s longstanding policy which has been an important contributor to the state’s prospering tech, entertainment, biomedicine, pharma, and other thriving industries.”

Lobel has an extensive background in labor and employment law and is recognized as one of the leading legal experts in the country in this field. In 2016, Lobel served as a member of a White House working group to put together the call to action announced by the Obama Administration to push back against the over-expansion of non-competes. This was to help spur competition in the labor market and accelerate wage growth. In 2020, she was the keynote speaker at an FTC workshop on this topic, and she is currently involved in the FTC’s proposed rule to ban non-compete clauses nationally.

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