California has some of the most specific contract laws in the United States. Whether you're drafting an NDA, hiring a freelancer, or creating a lease agreement, the state's legal framework imposes requirements that contracts drafted for other jurisdictions simply won't satisfy.
This guide covers the key California-specific rules you need to know for three of the most common contract types.
Disclaimer: This is general information about California contract requirements, not legal advice. For specific situations, consult a California-licensed attorney.
NDAs in California
California NDAs operate under the California Uniform Trade Secrets Act (CUTSA), Cal. Civ. Code §§ 3426–3426.11. This statute defines what qualifies as a trade secret and governs how confidential information is protected.
What CUTSA Requires
CUTSA preempts most common-law claims related to trade secret misappropriation in California. This means your NDA's confidentiality provisions should align with CUTSA's definitions, not rely on broader common-law theories that California courts may not recognize.
A California-compliant NDA should:
- Define "Trade Secret" using CUTSA's language — information that derives independent economic value from not being generally known and is subject to reasonable efforts to maintain secrecy
- Specify reasonable protective measures — courts evaluate whether the disclosing party actually took steps to keep the information confidential
- Set a reasonable duration — perpetual NDAs are disfavored; 2–5 years is standard for most business information, with trade secrets potentially lasting longer
Mandatory Carveouts
California law requires specific carveouts that many out-of-state NDA templates omit:
Whistleblower protections. NDAs cannot prevent parties from reporting potential legal violations to government agencies, including the SEC, DOJ, EEOC, or OSHA, or their California equivalents.
Silenced No More Act (SB 331). Since January 2022, NDAs and settlement agreements cannot prohibit the disclosure of information about workplace harassment, discrimination, or retaliation. This applies to all settlement agreements and separation agreements — not just those involving sexual harassment.
DTSA federal immunity notice. Under the federal Defend Trade Secrets Act, NDAs should notify the receiving party of their immunity from liability for confidential disclosures made to government officials or attorneys for the purpose of reporting suspected legal violations.
Non-Compete Prohibition
This is the most important distinction for California NDAs: non-compete clauses are void under Business and Professions Code § 16600. A California NDA cannot include any provision that restricts a party from engaging in a lawful profession, trade, or business.
If your NDA includes a non-compete — even a "reasonable" one — it's unenforceable in California, and including it could expose you to liability.
Alternatives that are enforceable in California:
- Non-solicitation clauses (with limitations — California courts scrutinize these closely)
- Properly scoped confidentiality obligations
- Trade secret protections under CUTSA
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Freelance Contracts in California
California's AB 5 (Assembly Bill 5), codified in Labor Code § 2775, fundamentally changed how freelance relationships are structured in the state.
The ABC Test
Under AB 5, a worker is presumed to be an employee unless the hiring entity demonstrates all three of the following:
- (A) Freedom from control — the worker is free from the control and direction of the hiring entity in the performance of the work, both under the contract and in fact
- (B) Outside usual course of business — the worker performs work outside the usual course of the hiring entity's business
- (C) Independently established trade — the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed
All three prongs must be satisfied. Failing on even one means the worker is legally an employee, regardless of what the contract says.
Exemptions
AB 5 includes exemptions for certain professions that revert to the older Borello test (a multi-factor analysis focused on the right to control). Key exemptions include:
- Licensed professionals (lawyers, doctors, architects, accountants)
- Real estate agents
- Direct sales representatives
- Certain creative professionals (writers, photographers, fine artists) with specific conditions
- Business-to-business relationships meeting additional criteria
Even exempt relationships must pass the Borello test, which examines factors like who provides tools, whether the worker can realize profit or loss, and the permanency of the relationship.
What Your Freelance Contract Must Address
A California-compliant freelance contract should explicitly:
- Define the project scope and deliverables — vague, ongoing scope suggests an employment relationship
- Establish that the freelancer controls how the work is done — specifying hours, location, or methods undermines the independent contractor classification
- Confirm the freelancer operates an independent business — including that they serve multiple clients, maintain their own business licenses, and provide their own equipment
- Address intellectual property assignment — California Labor Code § 2870 protects employee inventions made on their own time using their own resources, even if the employer's contract says otherwise. Freelancers (genuine independent contractors) are not covered by this protection, but the contract should still be specific about IP ownership
Late payment protections. While California doesn't have a specific freelancer payment statute like New York's Freelance Isn't Free Act, general contract law and the California Prompt Payment Act (for certain public works) apply. Include clear payment terms with deadlines and late payment consequences.
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Lease Agreements in California
California has some of the most protective tenant laws in the country. A lease agreement that works in Texas or Florida will almost certainly violate California law.
Tenant Protection Act (AB 1482)
The California Tenant Protection Act, effective January 2020, imposes statewide rent control and just-cause eviction protections:
- Rent cap — annual increases limited to 5% plus the local Consumer Price Index (CPI), or 10%, whichever is lower
- Just-cause eviction — landlords must have a legally recognized reason to terminate a tenancy after 12 months of occupancy
- Relocation assistance — required for no-fault evictions (demolition, owner move-in, substantial remodel)
Exemptions exist for single-family homes (with specific notice requirements), new construction (first 15 years), and certain owner-occupied properties.
Security Deposit Rules (Civil Code § 1950.5)
California's security deposit rules are among the strictest:
- Maximum deposit — one month's rent for unfurnished units (effective July 1, 2024, under AB 12, reduced from the previous two-month limit)
- Return deadline — 21 days after tenant moves out
- Itemized statement — landlords must provide a written itemized statement of deductions with receipts for any amounts withheld
- Allowable deductions — unpaid rent, cleaning beyond normal wear and tear, and repair of damages beyond normal wear and tear
- Pre-move-out inspection — landlords must offer a pre-move-out inspection so the tenant can address issues before the final accounting
Required Disclosures
California requires landlords to provide specific disclosures, many of which must be included in or attached to the lease:
- Lead-based paint (pre-1978 properties) — federal requirement
- Mold disclosure — known or suspected mold presence
- Bed bug history — any known infestations
- Flooding and natural hazard zones — required in designated areas
- Pest control company information — if the property is under a pest control contract
- Demolition intent — if the property may be demolished within the next year
- Military ordnance location — properties within one mile of former military training grounds
A lease that omits these disclosures may be unenforceable with respect to the terms they affect.
Rent Control Localities
Beyond the statewide Tenant Protection Act, many California cities have their own, often stricter, rent control ordinances:
- San Francisco — Rent Ordinance applies to buildings built before June 1979
- Los Angeles — Rent Stabilization Ordinance (RSO) covers buildings with two or more units built before October 1978
- Oakland — Just Cause for Eviction Ordinance with additional tenant protections
- Berkeley, Santa Monica, West Hollywood — each have their own rent control boards and rules
Your lease must comply with both state and local requirements. A statewide-compliant lease may still violate local ordinances.
Create a California lease agreement →
Key Takeaways for California Contracts
- Non-competes are void. Don't include them. Use confidentiality and non-solicitation clauses instead.
- NDAs must include whistleblower and SB 331 carveouts. Templates from other states will miss these.
- Freelancer classification is strict. The ABC test is harder to satisfy than most states' tests. Structure the relationship and the contract to reflect genuine independence.
- Tenant protections are extensive. Statewide rent caps, just-cause eviction, reduced security deposit limits, and mandatory disclosures all apply. Check local ordinances too.
- Always specify California governing law. If your contract involves a California party, explicitly select California as the governing jurisdiction to avoid ambiguity.
California's legal requirements are demanding, but a well-drafted contract that accounts for them protects both parties and reduces the risk of disputes.