Non-solicitation provisions in employment contracts are usually unenforceable in California. Therefore, California employers generally cannot stop their former employees from hiring current employees. But courts have made some exceptions.
In this article, our California employment attorneys discuss:
- 1. What is a non-solicitation agreement?
- 2. Are non-solicitation agreements legal in California?
- 3. What if there is a lawsuit?
- 4. How are non-compete agreements different?
1. What is a non-solicitation agreement?
A non-solicitation agreement is where an employee agrees – if that employee later leaves the company – not to hire or offer employment to the company’s other employees. In short, non-solicitation agreements prohibit ex-employees from poaching talent from their former employer.
Non-solicitation clauses are typically found in employment contracts that new employees must sign in order to work at the company.
2. Are non-solicitation agreements legal in California?
In general, California law prohibits employee non-solicitation provisions. This is because the state’s public policy is to minimize restrictions for people to be able to work where they want and to hire whom they want.1
However, there have been instances where California state courts upheld narrowly-tailored employee non-solicitation agreements.
2.1. “No negative impact”
In one court ruling involving a breach of contract for employment, the judges said that the non-solicitation provision was enforceable because the plaintiff’s employees were not hindered from getting work with the defendant or reaching out to the defendant. The only restriction was that the defendant could not contact the plaintiff’s employees first.
In sum, since the non-solicitation provision had “no overall negative impact on trade or business,” the provision was enforceable.
So it would appear that the broader and more restrictive an employment agreement’s non-solicitation provision, the more likely it is unenforceable under California state law. But if the non-solicitation agreement has a short reach and poses little restriction on employee mobility, then courts may be more inclined to let such agreements stand.2
2.2. Trade secret exception
California courts do enforce non-solicitation agreements when they are necessary to protect the company’s trade secrets and other confidential information. The purpose of the “trade secret exception” is to protect the company from unfair competition by former employees who wish to exploit the company’s intellectual property for their own benefit.3
3. What if there is a lawsuit?
In lawsuits involving non-solicitation agreements, California employers (plaintiffs) generally sue the former employee (defendant) on some or all of the following grounds:
- breach of contract
- breach of fiduciary duty
- interference with contractual relations
- interference with prospective economic advantage
- unfair competition
- misappropriation of trade secrets
The defendant could then file a motion to dismiss, claiming that the former employer failed to state a claim for relief. Failing that, the defendant can then file a motion for summary judgment (asking the court to decide the case based on the undisputed facts of the case).
If that does not work, then the case would go to trial unless the parties agree to settle out of court. (Note that in some cases, disputes are settled through arbitration instead of the courts.)
Employers typically seek two types of relief:
- Injunctive relief, such as a court order for the defendant not to hire the plaintiff’s employees; and/or
- Compensation for any money the defendant’s actions allegedly cost the plaintiff
Any case decided at the state district court level could be appealed to the appellate court and finally to the California Supreme Court. (Certain state supreme court cases can be appealed to the U.S. Supreme Court, but this is rare.)
Since these cases can drag on for years in the courts, most of the time they resolve out-of-court.
4. How are non-compete agreements different?
Non-competition agreements are clauses in employment contracts that prohibit employees who later leave the company from then working at a competing business for a certain period of months or years.
So whereas non-solicitation agreements restrict a company’s former employees from hiring the company’s current employees, a non-compete agreement restricts a company’s former employees from working at a competing company.
Similar to non-solicitation agreements, non-compete agreements are usually unenforceable in California because they hinder people from practicing their chosen profession.4
For further help…
To discuss your case with a labor law attorney, contact our employment law firm. We have offices in Los Angeles and throughout California.
- California Business and Professions Code section 16600. AMN Healthcare, Inc. v. Aya Healthcare Services (California Court of Appeal, Fourth Appellate District, Division One, 2018) 28 Cal. App. 5th 923 (“[T]he nonsolicitation of employee provision in the CNDA is void under section 16600. Indeed, the broadly worded provision prevents individual defendants, for a period of at least one year after termination of employment with AMN, from either “directly or indirectly” soliciting or recruiting, or causing others to solicit or induce, any employee of AMN. This provision clearly restrained individual defendants from practicing with Aya their chosen profession—recruiting travel nurses on 13-week assignments with AMN.”). Edwards v. Arthur Andersen LLP (California Supreme Court, 2008) 44 Cal. 4th 937 (“‘The second challenged clause prohibited Edwards, for a year after termination, from ‘soliciting,’ defined by the agreement as providing professional services to any client of Andersen’s Los Angeles office.'” The agreement restricted Edwards from performing work for Andersen’s Los Angeles clients and therefore restricted his ability to practice his accounting profession.”). See also Barker v. Insight Global, LLC (United States District Court for the Northern District of California, San Jose Division, 2019) 2019 U.S. Dist. LEXIS 6523 (federal court decision).
- Loral Corp. v. Moyes (California Appellate Court, Sixth Appellate District, 1985) 174 Cal. App. 3d 268 (“The potential impact on trade must be considered before invalidating a noninterference agreement, a contract must be construed to be lawful if possible, and the restriction only slightly affected plaintiff’s employees, who were not hampered from seeking employment with defendant’s new employer nor from contacting defendant. Since the noninterference agreement had no overall negative impact on trade or business, it was not void on its face under § 16600.”)
- Moss, Adams & Co. v. Shilling (Court of Appeal of California, First Appellate District, Division Five, 1986) 179 Cal. App. 3d 124 (“Antisolicitation covenants are void as unlawful business restraints except where their enforcement is necessary to protect trade secrets.”).
- See Edwards v. Arthur Andersen (“We hold that the noncompetition agreement here is invalid under section 16600, and we reject the narrow-restraint exception urged by Andersen. Noncompetition agreements are invalid under section 16600 in California, even if narrowly drawn, unless they fall within the applicable statutory exceptions of section 16601, 16602, or 16602.5“).