June 14, 2026

The Hedge | Brutal Honesty Over Hype Since 2008

California law requires HOAs and their members to attempt internal dispute resolution and alternative dispute resolution before filing civil lawsuits against each other in most circumstances. This pre-litigation requirement is designed to resolve disputes faster and at lower cost than courtroom litigation — and for homeowners in disputes with their associations, it creates specific procedural leverage that many don’t use.

Internal Dispute Resolution (IDR)

California Civil Code Section 5900 requires associations to offer a fair, reasonable, and expeditious procedure for resolving disputes between members and the association. Either party can invoke IDR — the member or the association. IDR typically involves a meeting between the member, a board member or manager, and sometimes a neutral facilitator, to discuss the dispute and attempt resolution. Associations must respond to an IDR request within a reasonable time. If the association refuses to participate in IDR, the member can use that refusal as evidence of bad faith in any subsequent legal proceeding.

Alternative Dispute Resolution (ADR)

If IDR fails, California Civil Code Section 5925 requires the parties to consider ADR — typically mediation with a neutral mediator — before filing a civil lawsuit. Either party can refuse ADR, but the refusing party must explain their refusal to the court if litigation follows, and courts may consider an unreasonable refusal to participate in ADR when awarding attorney’s fees. The ADR requirement applies to disputes between members and associations over enforcement of the governing documents, assessments, and other association-member matters.

Using IDR and ADR Strategically

Don’t treat IDR as a bureaucratic hurdle to clear before “real” litigation. Use it as a genuine opportunity to resolve the dispute at lower cost. Bring documentation, be specific about your legal position, and make a concrete proposal. Many HOA disputes that would cost both parties tens of thousands in litigation fees resolve in IDR for a fraction of that cost. If IDR fails, the mediation process in ADR similarly provides a less adversarial setting where creative solutions are more achievable than in court. The pre-litigation requirements exist as opportunities, not just obstacles.

The Hedge has been cutting through financial and business noise since 2008. Brutal honesty over hype — always.

The Hedge | Brutal Honesty Over Hype Since 2008

California Business and Professions Code Section 16600 has provided one of the country’s most employee-friendly non-compete regimes for over a century: contractual restrictions on an employee’s right to work after leaving employment are void as a matter of public policy. Recent legislation strengthened this position further. Yet both employers and employees routinely misunderstand what California’s non-compete law actually prohibits and what it permits.

What California Prohibits

SB 699, effective January 1, 2024, made California’s non-compete prohibition explicit and strengthened it in two important ways. First, it applies to non-compete agreements regardless of where the agreement was signed or where the employee worked — a California employer cannot enforce a non-compete against a California employee even if the agreement was signed in a state where non-competes are legal and the employee previously worked there. Second, it created a private right of action for employees to sue to void non-compete agreements and recover attorney’s fees. The prohibition is not merely a defense — it’s now an affirmative claim.

What California Permits

California does permit: non-disclosure agreements protecting genuine trade secrets (but not general knowledge and skills acquired during employment); non-solicitation of customers the employee directly worked with (narrowly construed); non-solicitation of co-workers in some circumstances; and non-compete agreements in connection with the bona fide sale of a business or a substantial ownership interest. The sale of business exception is the most significant carve-out — a seller of a business can agree not to compete with the buyer in the same type of business for a reasonable time and geographic area.

The Practical Implications

For California employers: stop including non-compete clauses in employment agreements — they are void and their inclusion may now create liability. Focus instead on robust confidentiality agreements covering specific trade secrets, and non-solicitation provisions drafted carefully within the narrow scope California permits. For California employees who signed non-competes (especially those who moved to California from other states): those agreements are void and unenforceable against you in California, and under SB 699 you can sue to have them voided and recover attorney’s fees.

The Hedge has been cutting through financial and business noise since 2008. Brutal honesty over hype — always.