California has long been famous for its hostility toward non-compete agreements. Under Business and Professions Code Section 16600, post-employment restrictive covenants have been largely unenforceable in the Golden State for decades.
Recent legislative expansions (specifically Assembly Bill 1076 and Senate Bill 699) strengthen this even further. California didn’t just reaffirm its ban; it gave the law aggressive new enforcement mechanisms, civil penalties, and an extraterritorial reach that impacts employers far beyond state borders.
The result? Aggressive trade secret litigation.
No case illustrates this dynamic better than the high-stakes legal feud between Apple and OpenAI. When tech giants cannot stop senior engineers and executives from joining a rival, trade secret claims become the primary tool to safeguard competitive advantage.
Not in California? You still need to pay attention.
The Apple v. OpenAI Catalyst: Mobility Meets Trade Secrets
The intense race to develop generative AI and consumer hardware has turned specialized talent into Silicon Valley’s most valuable resource. In California’s open-market environment, experienced engineers move freely between tech behemoths and emerging startups.
However, as the Apple v. OpenAI lawsuit demonstrates, that free mobility comes with immense legal exposure. Apple’s complaint alleges that OpenAI systematically poached senior hardware executives and engineers who subsequently retained, transferred, and utilized confidential product designs, CAD files, and supplier data to jumpstart OpenAI’s competing consumer hardware division.
The lawsuit highlights a key operational reality in California: Companies cannot block employees from taking a job at a direct competitor. They can, however, fiercely litigate how data was handled during the transition.
As competition for AI researchers and product leaders accelerates, disputes over alleged data retention and trade secret misappropriation are rapidly replacing traditional non-compete enforcement across California state and federal courts.
How does this impact non-California businesses?
Being Out-of-State Won’t Protect Employers
California’s expanded non-compete framework creates major hazards not only for Golden State businesses, but also national and multi-state corporations attempting to restrict talent movement.
Under SB 699, a non-compete clause is void and unenforceable in California. This is regardless of where or when the contract was signed, and regardless of whether the employment was originally maintained outside the state.
In other words, if a multi-state corporation attempts to enforce an out-of-state non-compete against an employee who moves to or works remotely in California, state courts will view that enforcement effort as an independent civil violation. Former employees and hiring companies can file suit in California seeking immediate injunctions, damages, and mandatory attorney’s fees. This turns an employer’s standard restrictive covenant into a costly legal liability.
Can You Protect Proprietary Assets in an Era of Free Mobility?
Traditional non-competes are off the table for any employee connected to California. That means enterprise risk management must pivot from trying to restrain employees to securing data and managing onboarding hygiene:
Robust Trade Secret Frameworks. California strongly protects proprietary assets under the California Uniform Trade Secrets Act (CUTSA) and the federal Defend Trade Secrets Act (DTSA). Employers must deploy precise non-disclosure agreements (NDAs) that clearly define protected trade secrets without acting as disguised, overbroad non-competes.
Strict Onboarding Protocols. When hiring talent from a competitor, companies must establish written acknowledgments explicitly instructing new hires not to bring, retain, or use confidential information from prior employers. Hiring managers must be trained never to ask for or accept former employer materials during interviews or onboarding.
Technical Offboarding and DLP Security. Prevent data exfiltration before an employee resigns. Utilize Data Loss Prevention (DLP) tools to restrict external storage devices, monitor unusual file transfer activity, disable unauthorized cloud services, and conduct forensic audits on devices returned by departing staff.
Bottom line? If you employ anyone in California, you must embrace employee freedom while investing in rigorous trade secret hygiene and proactive data governance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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