Non-solicitation clauses in California employment agreements have been deemed illegal in California per two recent court decisions. This includes out-of-state employers with California employees. Orange County employment attorneys are encouraging companies to review their employment agreements and consider removing non-solicitation clauses that may be in conflict with state law.
Non-solicitation agreements are provisions in employment contracts (sometimes standalone contracts) wherein an employee agrees he or she will not try to solicit customers or clients of the employer for his or her personal benefit or for that of a competitor if/when he/she leaves the firm. Non-solicitation agreements can also encompass an employee’s agreement not to solicit other employees to leave once he/she quits.
Restrictive Covenants in California Labor Code
California has some of the strongest worker rights provisions in the country. For instance, California Business and Professions Code section 16600 states that all employment contracts that would keep anybody from engaging in a lawful profession, business or trade is void.
Courts in California have long held that it is against public policy to restrict former employees’ right to work for competitors. Further, state courts have soundly rejected the argument put forth by the inevitable disclosure doctrine, which asserts employees who immediately go work for a competitor is going to inevitably disclose or use trade secrets of the former employer. In the 2008 case of Edwards v. Arthur Andersen LLP, the California Supreme Court ruled previous workers are entitled to solicit the clients of former employers – assuming they don’t do so using their former employer’s trade secrets or confidential information while doing so.
This ruling marked a shift from the 1985 ruling by a California Court of Appeal in Loral Corp. v. Moyes, in which justices declined to void as unenforceable an employee agreement restriction indicating the employee was not allowed now or in the future to damage, interfere, impair or disrupt the business of the former employer by interfering with or “raiding” its employees, business relationships, agents, representatives, customers, vendors, etc. The clause created an express exception for being employed by or engaging with a competing business. The court didn’t expressly allow employment contracts with non-solicitation agreements, but rather ruled the one in question wasn’t an obvious, unenforceable restriction on fair trade. Continue reading