A recent Eleventh Circuit Court of Appeals decision highlights the importance (and potential limits) of robust choice-of-law provisions in noncompete agreements, as courts and employers far-flung from California grapple with the purported extraterritorial scope of the Golden State’s noncompete ban.
Reminder, California Bans Almost All Noncompetes, Purportedly Anywhere
As we have reported time and again, California bans noncompete agreements, except in very limited circumstances involving the sale or dissolution of companies. Effective January 2024, California expanded the reach of its noncompete ban with California Business & Professions Code § 16000.5 (the “non-compete ban”). That statute:
- renders noncompete agreements that might well be enforceable in other states “unenforceable regardless of where and when” they were signed;
- prohibits attempting to enforce void noncompetes, regardless of whether they were signed outside of California or whether the employee worked outside of California; and
- authorizes employees to sue employers who attempt to enforce such noncompetes.
The broad brush of California’s noncompete ban promptly raised questions about its impact on noncompete agreements signed outside California. The Eleventh Circuit’s August 25, 2025, decision in NetRoadshow, Inc. v. Carrandi (“NetRoadshow”) provides a cautionary answer.
Eleventh Circuit Finds Georgia Choice-of-Law Provision Does Not Require Application of Georgia Law to Claim Based on California’s Noncompete Ban
A former employee of NetRoadshow, Lisa Carrandi, signed a noncompete agreement with the company in Georgia. The agreement contained a Georgia choice-of-law provision — which proved critical to the Eleventh Circuit’s analysis — stating: “this Agreement and the rights of Company and Employee hereunder shall be governed by and construed in accordance with the laws of the State of Georgia.”
Carrandi worked for NetRoadshow for about 18 years, at some point moving to California and continuing to work for the company there before quitting and becoming employed by a competitor. NetRoadshow sued in Georgia state court to stop Carrandi from working for the competitor, per her noncompete agreement. Carrandi removed to federal court (Northern District of Georgia) and counterclaimed, alleging the company violated California’s noncompete ban by attempting to enforce her noncompete agreement. It is the Eleventh Circuit’s ruling on that counterclaim generating buzz for finding that the agreement’s Georgia choice-of-law provision did not carry the day for the company.
Namely, while the Georgia District Court dismissed Carrandi’s counterclaim upon holding that the Georgia choice-of-law provision precluded her from asserting a claim under California’s noncompete ban, the Eleventh Circuit reversed that dismissal based on a two-step analysis.
- First, the Eleventh Circuit found that the choice-of-law provision did not apply to tort claims, as it was “limited to claims based on the specific rights and duties established by the agreement, that is, contract claims.” By contrast, the Eleventh Circuit noted, the choice-of-law provision did not “state that any and all claims arising out of” the parties’ relationship are governed by Georgia law or otherwise suggest Georgia law applies to tort claims arising out of the contractual relationship.
- Second, the Eleventh Circuit found that Carrandi’s counterclaim sounded in tort, not contract, because it was based on the California noncompete ban — a “source external to the agreement.”
Taken together, the Eleventh Circuit held the choice-of-law provision did not “require that Georgia law govern Carrandi’s counterclaim.” But the Eleventh Circuit stopped short of ruling that California law governed instead. Rather, the Eleventh Circuit sent the case back to the District Court to determine, under Georgia’s general choice-of-law precedent, what state’s substantive law controls the counterclaim. We’ll report back on the District Court’s answer to this question, so stay tuned.
Lessons Learned
In the meantime, a few lessons emerge:
- Ensure robust choice-of-law provisions in noncompete agreements.
- More all-encompassing choice-of-law language may not guarantee application of the chosen state law but would at least give employers the fighting chance that NetRoadshow lacked, in the Eleventh Circuit’s view. Indeed, other courts have enforced choice-of-law provisions to bar claims based on California’s noncompete ban, including the First Circuit applying Massachusetts over California law and a California District Court applying Maryland over California law.
- Regularly review employees’ noncompete agreements to ensure compliance with current law.
- The District Court in NetRoadshow denied the Company’s requested injunction upon finding the noncompete agreement — which dated to 2005 — was overly broad.
- Do not attempt to enter noncompete agreements in California with California employees.
- Such agreements are clearly subject to California’s noncompete ban, regardless of the arguments to be made against extraterritorial application of the ban.
- Consult with counsel regarding the intersection of California’s noncompete ban and other state laws.
- Such counsel could be particularly important as it relates to employees moving from the state where they executed a noncompete to California — the fact pattern common to some degree to the Eleventh and First Circuit’s decisions
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