Court Decision Casts Doubt on Non-Solicitation Clauses

California is known for its strong prohibition on almost all forms of “non-compete” clauses. The Business and Professions Code states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void” (§16600). California courts have consistently held this statute makes it illegal for employers to make workers sign contracts limiting their freedom to work for competitors or in certain industries after termination.

However, the legality of “non-solicitation” clauses has been less clear. A new case from the Court of Appeal clarifies that certain types of non-solicitation clauses are illegal, ruling that certain non-solicitation clauses also violate Section 16600.

What AMN Healthcare v. Aya Healthcare Services Means for Employers and Employees

This case involved recruiters who signed a contract preventing them from “soliciting any employee” to leave the company for a year after they left the company. It did not stop employees from working for a competitor. It just prevented former employees from soliciting AMN’s current employees.

The court held this contract was still illegal, primarily because as recruiters, their sole job is to solicit prospective employees. By limiting who the recruiters could seek, the contract violated Section 16600. While this may seem like a limited case, it could have further repercussions.

The Court set the stage for further restrictions and confirmed the “rule of reasonableness” does not apply in non-compete agreements. It is important for employers to review any NDAs or confidentiality agreements they utilize to ensure that they don’t run afoul of the law, and contact our offices if there is any uncertainty. Employers can still prohibit employees from using confidential trade secrets to solicit former co-workers.

California law governing non-competes and all other sorts of employment conditions can be onerous and confusing, for both employees and employers. If you need assistance drafting employment contracts or feel your employer made you sign an illegal contract, contact the Nuddleman Law Firm, P.C. for legal guidance.

Written by J.T. Keane, edited by Robert Nuddleman; Nuddleman Law Firm, P.C.

Feel free to suggest topics for the blog. We are happy to consider topics pertaining to general points of Labor and Employment Law. We cannot answer questions about specific situations or provide legal advice over the Internet. If you desire legal advice, you should contact an attorney.

Using this blog does not create an attorney-client relationship between you and Nuddleman Law Firm, P.C. Using the Internet or this blog to communicate with the firm does not establish an attorney-client relationship. Do not post confidential or time-sensitive information in this blog. The Nuddleman Law Firm, P.C. cannot guarantee the confidentiality of anything posted on this blog.

The Nuddleman Law Firm, P.C. represents employers and employees in a wide range of employment law matters. Much of his practice focuses on wage and hour issues, such as unpaid overtime, meal and rest break violations, designing or enforcing commission plans, and other wage-related claims. He also advises employers on how to avoid harassment and wrongful termination claims, and represents employees who have been victims of unlawful discrimination, retaliation or harassment. The Nuddleman Law Firm, P.C. helps employers develop good employment policies, and helps employers and employees with disability accommodation issues.