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California Non-Disclosure Agreement Requirements

Senate Bill 699 added Business and Professions Code Section 16600.5, effective January 1, 2024, which voids an overly broad confidentiality clause that functions as a restraint on trade no matter where the agreement was signed, and lets the restrained person sue for an injunction, damages, and attorney's fees.

Introduction

Senate Bill 699 added Business and Professions Code Section 16600.5, effective January 1, 2024, which voids an overly broad confidentiality clause that functions as a restraint on trade no matter where the agreement was signed, and lets the restrained person sue for an injunction, damages, and attorney's fees. It builds on Section 16600's longstanding rule that a contract restraining a lawful profession, trade, or business is void to that extent. A California NDA is otherwise an ordinary, enforceable confidentiality contract, mutual or one-way, protecting trade secrets and other sensitive information shared between parties. Trade secrets themselves are protected separately under the California Uniform Trade Secrets Act (Civil Code Sections 3426 through 3426.11), and a misappropriation claim generally must be filed within three years of when the misappropriation was discovered or reasonably should have been. The practical effect for drafting is narrow but important: define what counts as confidential information carefully, since an overbroad definition is what turns an ordinary NDA into the kind of restraint Section 16600 targets.

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Key Things to Know

  1. 1

    If a California NDA is used in an employment relationship and asks someone to assign inventions to the employer, it cannot reach an invention developed entirely on the employee's own time without the employer's equipment or trade secrets, unless the invention relates to the employer's business (Labor Code Section 2870).

  2. 2

    California's 2024 non-compete law expansion (Business and Professions Code Section 16600.5) voids a confidentiality restriction that functions as a restraint on someone's ability to work in their field, regardless of where the NDA was signed, and gives the restrained person a right to sue for an injunction, damages, and attorney's fees.

  3. 3

    That risk runs through the scope of the confidentiality definition, not the existence of the NDA itself. An NDA that protects genuine trade secrets and sensitive information, without reaching into what someone can do for a living afterward, is not the kind of contract Section 16600 targets.

  4. 4

    Trade secret protection runs through the California Uniform Trade Secrets Act (Civil Code Sections 3426 through 3426.11), separate from whatever the NDA itself says.

  5. 5

    A trade secret misappropriation claim in California generally must be filed within three years of when the misappropriation was discovered or reasonably should have been discovered (Civil Code Section 3426.6).

  6. 6

    Mutual NDAs, where both sides share confidential information, and one-way NDAs, where only one side does, are both ordinary enforceable contracts in California; which one fits depends on whether the exchange runs both directions, like a partnership or acquisition discussion, or one direction, like pitching an investor.

  7. 7

    A California court can order injunctive relief to stop an ongoing or threatened breach of a valid NDA, in addition to any damages the disclosure caused.

Key decisions before you file

Before you file a Non-Disclosure Agreement in California, a few decisions shape the document: which option to choose and what each one means. The Non-Disclosure Agreement guide walks through them.

Open the Non-Disclosure Agreement guide

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CALIFORNIA NON-DISCLOSURE AGREEMENT

[Party A Name] of [City], California and [Party B Name] of [City], California (each a "Party") enter into this Non-Disclosure Agreement as follows.

  1. Purpose. In connection with [describe business purpose, e.g. a potential business relationship the Parties are exploring], either Party may share Confidential Information with the other.

  2. Definition of Confidential Information. "Confidential Information" is any business, technical, or financial information one Party discloses to the other that is marked confidential, or that the circumstances of disclosure would lead a reasonable person to treat as confidential, including trade secrets under the definition in the California Uniform Trade Secrets Act (Civil Code Section 3426.1). Four categories fall outside that definition: information the public can already access through no fault of the receiving Party, information the receiving Party already held before disclosure, information the receiving Party develops independently, and information a third party rightfully shares without any confidentiality duty attached.

  3. Obligations. The receiving Party may use Confidential Information only for the purpose stated in Section 1, must protect it with reasonable care, and may not hand it to a third party without the disclosing Party's prior written consent. An exception exists for the receiving Party's own employees, agents, or advisors, but only those who genuinely need the information for that purpose and who are themselves bound to keep it confidential on terms at least as strict as this Agreement.

  4. Scope Limitation (California-Specific). Business and Professions Code Section 16600 voids any contract that restrains a person from working in a lawful profession, trade, or business, and since January 1, 2024, Section 16600.5 has gone further: such a restraint is unenforceable no matter where this Agreement was signed, and the restrained person can sue for an injunction, damages, and attorney's fees. Because of that, this Agreement reaches only genuine confidential and trade secret information, never a person's general training, knowledge, skill, or experience, and never conduct the law separately protects.

  5. Federal Whistleblower Notice. Federal law (18 U.S.C. Section 1833(b), part of the Defend Trade Secrets Act) shields a person from criminal or civil liability for sharing a trade secret in confidence with a government official or an attorney for the sole purpose of reporting a suspected legal violation, or for disclosing it in a court filing made under seal. This Agreement includes that notice because federal law conditions the disclosing Party's full remedies under the Act on giving it.

  6. Term. The confidentiality duties in this Agreement last [X years] from signing, except that information qualifying as a trade secret under California law stays protected for as long as it remains one.

  7. Return or Destruction. Once the disclosing Party asks, or once the relationship described in Section 1 ends, the receiving Party must return or destroy every copy of the Confidential Information it holds.

  8. Remedies. Because a breach here could cause harm money alone cannot fix, the non-breaching Party may go to court for injunctive relief under Code of Civil Procedure Section 526, on top of damages and whatever else the California Uniform Trade Secrets Act allows.

  9. Governing Law. California law governs this Agreement, under the default rule in Civil Code Section 1646.

  10. Miscellaneous. Electronic signatures bind the Parties here, under both the California Uniform Electronic Transactions Act (Civil Code Section 1633.1 et seq.) and the federal ESIGN Act (15 U.S.C. Section 7001). Should any provision of this Agreement prove unenforceable, every other provision stays in force. The mutual promises in this Agreement count as valid consideration under Civil Code Section 1605.

[Party A Signature] ____________________ Date: __________ [Party B Signature] ____________________ Date: __________

California Requirements for Non-Disclosure Agreement

Definition of Confidential Information (California Civil Code Section 3426.1)

Clearly defines what constitutes confidential information under California law, including trade secrets as defined in the California Uniform Trade Secrets Act.

Trade Secret Protection (California Civil Code Section 3426 through 3426.11, California Uniform Trade Secrets Act)

Addresses the specific requirements for trade secret protection under California law, including reasonable efforts to maintain secrecy.

Federal Trade Secret Protection (18 U.S.C. Section 1836, Defend Trade Secrets Act)

Incorporates protections under the federal Defend Trade Secrets Act, which provides additional remedies for misappropriation of trade secrets.

Non-Compete Limitations (California Business and Professions Code Section 16600 and Section 16600.5)

Acknowledges California's prohibition against non-compete agreements. Section 16600 voids contracts restraining a lawful profession, trade, or business. Effective January 1, 2024, Section 16600.5 makes any such void restraint unenforceable regardless of where the agreement was signed and gives the restrained person a private right of action for injunctive relief, actual damages, and attorney's fees, ensuring the NDA's confidentiality definition does not function as an unenforceable restriction on future employment.

Employee Mobility Protection (California Business and Professions Code Section 16600 through 16602.5)

Recognizes California's protection of employee mobility and right to work, ensuring the NDA doesn't improperly restrict future employment opportunities.

Invention Assignment Exclusions (California Labor Code Section 2870)

Complies with California's limitations on invention assignment provisions, excluding inventions developed entirely on the employee's own time without using the employer's equipment, supplies, facilities, or trade secret information, unless the invention relates to the employer's business.

Economic Espionage Compliance (18 U.S.C. Sections 1831 through 1839, Economic Espionage Act)

Acknowledges federal protections against economic espionage and theft of trade secrets, including criminal penalties.

Whistleblower Protections (18 U.S.C. Section 1833(b), Defend Trade Secrets Act)

Includes the required notice that an individual may not be held liable for disclosing a trade secret in confidence to a government official or attorney to report a suspected violation of law, or in a sealed court filing, as required to preserve the disclosing party's remedies under the Defend Trade Secrets Act.

Remedies and Injunctive Relief (California Code of Civil Procedure Section 526)

Specifies available remedies for breach, including injunctive relief, consistent with California law on enforcement of confidentiality agreements.

Governing Law and Jurisdiction (California Civil Code Section 1646)

Establishes California law as governing the agreement, consistent with California's default place-of-performance choice-of-law rule.

Electronic Signatures (California Civil Code Section 1633.1 through 1633.17, Uniform Electronic Transactions Act, and 15 U.S.C. Section 7001, Electronic Signatures in Global and National Commerce Act)

Acknowledges the validity of electronic signatures under both California and federal law.

Privacy Law Compliance (California Consumer Privacy Act and California Privacy Rights Act)

Addresses compliance with California's comprehensive privacy laws when confidential information includes personal data.

Severability (California Civil Code Section 1599)

Ensures that if any provision is found unenforceable under California law, the remainder of the agreement remains valid. Section 1599 specifically addresses a contract with several distinct objects, at least one lawful and one unlawful, being void as to the unlawful part and valid as to the rest; a general NDA severability clause is a broader drafting convention than this section alone establishes, but the section supports the underlying principle.

Independent Contractor Relationship (California Labor Code Section 2750.3, AB 5)

Clarifies the relationship between parties, particularly important under California's strict worker classification laws if the NDA involves an independent contractor relationship.

Consideration (California Civil Code Section 1605)

Establishes valid consideration for the agreement, as required for contract enforceability under California law.

Attorney's Fees Provision (California Civil Code Section 1717)

Addresses the allocation of attorney's fees in the event of litigation, consistent with California's reciprocal fee-shifting statute.

Frequently Asked Questions

A Non-Disclosure Agreement in California is an ordinary contract in which one or both parties agree to keep specified information confidential. It can be mutual, where both sides share confidential information, or one-way, where only one side does. Trade secrets shared under the agreement are also separately protected by the California Uniform Trade Secrets Act (Civil Code Sections 3426 through 3426.11) regardless of what the NDA itself says.

Generally no. California voids contracts that restrain someone from engaging in a lawful profession, trade, or business (Business and Professions Code Section 16600), and an NDA whose confidentiality definition is broad enough to functionally stop someone from working in their field can be treated the same way. Since January 1, 2024, Section 16600.5 makes this void regardless of where the agreement was signed and lets the restrained person sue for an injunction, damages, and attorney's fees.

Senate Bill 699, effective January 1, 2024, added Business and Professions Code Section 16600.5. It confirms that a contract void under Section 16600 is unenforceable no matter where or when it was signed, bars an employer from attempting to enforce it, and creates a private right of action for the restrained person to recover an injunction, actual damages, and attorney's fees. It applies to any contract functioning as a restraint on lawful work, which can include an overbroad confidentiality clause in an NDA.

A trade secret misappropriation claim under the California Uniform Trade Secrets Act generally must be brought within three years after the misappropriation is discovered, or after it reasonably should have been discovered with reasonable diligence (Civil Code Section 3426.6). A separate breach-of-contract claim over the NDA itself follows California's ordinary written-contract limitations period.

No, not automatically. Labor Code Section 2870 excludes an invention the employee developed entirely on their own time, without using the employer's equipment, supplies, facilities, or trade secret information, unless the invention relates to the employer's business or actual or demonstrably anticipated research, or resulted from work the employee performed for the employer. A provision in an NDA or employment agreement that tries to reach further than that is against public policy and unenforceable.

It depends on whether confidential information will flow in both directions or only one. A mutual NDA fits a two-way exchange, such as a merger, partnership, or joint-venture discussion where both sides disclose sensitive information. A one-way NDA fits a one-directional exchange, such as pitching a business plan to an investor who is not sharing anything confidential back. Both forms are equally enforceable in California; the choice is about which structure matches the actual relationship.

No. A California NDA is an ordinary contract, not a formal instrument like a will or power of attorney, so it does not require notarization or witnesses to be valid. It only needs the standard elements of a valid contract: an offer, acceptance, and consideration, along with signatures from the parties being bound.

The non-breaching party can seek injunctive relief to stop an ongoing or threatened disclosure, along with damages caused by the breach. If the disclosed information also qualifies as a trade secret, the California Uniform Trade Secrets Act provides an additional, independent basis for relief, including damages for actual loss and unjust enrichment, separate from whatever remedies the NDA itself specifies.