Non-Competes and Severance Agreements in California

California is unusually protective of workers in what an employer can make you sign. Most non-compete agreements are void here, even narrowly written ones and even ones signed in another state. And a severance agreement, while often worth taking, is a negotiation that can quietly ask you to give up valuable rights. Knowing what is enforceable changes the conversation.

If you are reading this, someone handed you an agreement and asked you to sign. Below, we cover whether your non-compete is enforceable, what a severance can and cannot require, the new limits on stay-or-pay clauses, and what to check before you sign.

This article is general information about California law, not legal advice. Reading it does not create an attorney-client relationship.

Are non-competes enforceable in California?

Generally no. California law makes non-compete agreements in the employment context void, even if they are narrowly drawn. An agreement that stops you from working for a competitor, or in your field, after you leave a job is usually unenforceable here. Narrow exceptions exist mainly for the sale of a business, not for ordinary employees.

The core rule is Business and Professions Code section 16600 (opens in a new tab), which voids contracts that restrain someone from engaging in a lawful profession or trade. Recent amendments went further: a non-compete is void regardless of where or when it was signed, so an out-of-state agreement does not bind you once you work in California. Employers were even required to notify employees that existing non-competes are void. If a former employer is threatening to enforce one against you, that threat itself may be unlawful.

What is a stay-or-pay agreement?

A stay-or-pay agreement tries to bill you for training, relocation, or other costs if you leave before a set time. Starting in 2026, California restricts these clauses, treating many of them as unlawful terms that a contract cannot impose. The idea is that an employer should not be able to trap you in a job with a debt.

These arrangements go by names like training repayment agreements or sign-on clawbacks. New law limits terms that require a worker to pay the employer or a training provider, or that authorize debt collection, when the job ends. There are detailed exceptions, so whether a specific clause is enforceable is fact-specific, but the days of a blanket you-owe-us-if-you-quit clause are ending in California.

Should I sign my severance agreement?

Often a severance is worth taking, but it is a release of claims, so it is worth understanding what you are giving up before you sign. If the offer came as part of a group layoff, read it alongside your rights under the California WARN Act, because notice pay is a separate obligation that severance does not satisfy. In exchange for the payment, you are typically agreeing not to sue over anything that happened during your employment. If you may have a real claim, the severance number and the value of what you are releasing should be weighed together.

A severance offer is a negotiation, not a final decree, even when it is presented as take-it-or-leave-it. The right questions are what claims exist, what the release actually covers, and whether the amount reflects that. Be careful about deadlines to sign and about accepting a first offer before anyone has looked at whether you were owed more.

Weigh the after-tax number too. Severance is wages, so payroll taxes come out before the check reaches you, and the rest of a settlement is taxed by category. Our guide to how employment settlements are taxed in California breaks down what is withheld from what.

What can't a severance agreement make me do in California?

California limits what an employer can put in a severance. It generally cannot require you to stay silent about unlawful harassment or discrimination, and a waiver of unknown claims must meet specific legal requirements to be valid. Some overbroad confidentiality and non-disparagement terms are unenforceable.

Under California's Silenced No More protections, a severance cannot force you to conceal facts about workplace harassment or discrimination you experienced. And a release of unknown claims must expressly waive the protection of Civil Code section 1542 to be effective, which is why you often see that section quoted in the agreement. These rules exist so a payment cannot buy your silence about unlawful conduct.

What about arbitration agreements?

Many employers ask you to sign an arbitration agreement, which sends disputes to private arbitration instead of court. These are often enforceable, but not always, and they do not erase your rights. Even in arbitration, you can still bring most of the same claims, and certain representative claims for Labor Code penalties cannot be waived.

California tried to bar mandatory employment arbitration, but federal law has largely overridden that effort, so a signed arbitration agreement will often be enforced. Whether a particular agreement holds up can still turn on how one-sided it is and how it was presented. The important thing to understand is that arbitration changes where your case is heard, not whether you have a case.

If you were handed a non-compete, a severance, or an arbitration agreement, the useful next step is to have someone read it before you sign. Justin Silverman represents workers across Los Angeles, and a consultation with our office is free. You can reach us at 818-585-1267 or through the contact form on our site. Learn more about our contract and severance review practice, or read our guide on whether you can sue your employer. The firm has recovered over $12 million for clients. Past results do not guarantee a similar outcome, and every case depends on its own facts.

This article is general information about California law and is not legal advice. Reading it does not create an attorney-client relationship. For advice about your specific situation, talk to a lawyer.