Are employee non-solicitation agreements enforceable in California? It`s a question that has been debated for years, and many businesses in California have relied on these agreements to protect their interests. However, recent legal developments have left employers wondering whether these agreements can actually be enforced.
Non-solicitation agreements are a type of restrictive covenant that prohibits an employee from soliciting the employer`s customers or employees for a period of time after leaving the company. These agreements are often used to protect a company`s trade secrets and confidential information, as well as to prevent employees from taking valuable clients or talent to a competitor.
Until recently, non-solicitation agreements were generally considered enforceable in California. However, this changed with the 2018 case AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., where the California Court of Appeals ruled that employee non-solicitation agreements are void under California law.
In the AMN Healthcare case, the court held that non-solicitation agreements constitute a restraint on trade that is prohibited by California Business and Professions Code Section 16600. This law provides that contracts that restrain a person`s ability to engage in a lawful profession, trade, or business are void and unenforceable in California.
Since the AMN Healthcare decision, other California courts have followed suit and declared non-solicitation agreements to be unenforceable. In the case of Barker v. Insight Global, LLC, the court held that a non-solicitation agreement was overbroad and not narrowly tailored to protect the employer`s legitimate business interests.
While the law has shifted in California, it`s important to note that there are still circumstances where non-solicitation agreements may be enforceable. For instance, non-solicitation clauses can still be included in the sale of a business or the dissolution of a partnership, as these situations are exempted from the restrictions of Section 16600.
In addition, certain non-solicitation agreements may be enforceable if they are necessary to protect a company`s trade secrets or confidential information. However, the agreement must be narrowly tailored to protect only the company`s legitimate interests and not unduly burden the employee`s ability to work in his or her chosen field.
In conclusion, employee non-solicitation agreements are generally unenforceable in California under Section 16600, as interpreted by the recent court rulings. It`s important for businesses in California to review their existing agreements and consult with legal counsel to ensure they are in compliance with the law. While non-solicitation agreements may still be used in certain circumstances, employers must be careful to draft them in a way that is narrowly tailored to protect legitimate business interests.
