Employee Non-Solicitation Agreements Are Shot Down Once Again in California

In November 2018, the California Court of Appeal in AMN Healthcare v. Aya Healthcare Services Inc. called into question the validity of employee non-solicitation agreements that prevent employees from soliciting and encouraging their former colleagues to come join them at their new company. The court found the one at issue in that case was an unlawful restraint on trade under California Business and Professions Code Section 16600. While the non-solicitation agreement in that case was distinguishable from many employee non-solicitation agreements in that it dealt with recruiters that were in the business of recruiting temporary nurses (i.e. the former’ employer’s employees), a California district court order issued last month held that the AMN Healthcare rule applied much broader than the factual context in which it arose.

In Barker v. Insight Global LLC, the court reversed its own prior order granting a motion to dismiss a claim for declaratory relief seeking a declaration that an employee non-solicitation agreement was unenforceable. The court had originally relied on the prior California precedent, Loral Corp. v. Moyes, which held that employee non-solicitation agreements were enforceable, so long as they were reasonable. Following the AMN Healthcare ruling, the employee in Barker filed a motion for reconsideration and the district court granted it stating, quite simply, “Having considered the AMN decision and reviewed Loral and Edwards, the Court is convinced by the reasoning in AMN that California law is properly interpreted post-Edwards to invalidate employee nonsolicitation provisions.”

As a result, employers should reconsider whether to include employee non-solicitation provisions in any agreements with California employees because at least one court has now found the AMN Healthcare reasoning convincing and held that employee non-solicitation provisions are unenforceable regardless of the business the employee may be in

This entry was posted in California, Hiring, Restrictive Covenant, Trade Secrets and tagged , , , , .

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