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.
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