Tuesday, November 13, 2018

At Will Employees in California Need Not Comply With Non-Solicitation Covenants

Ordinarily, an employment case does not contain aspects of IP law. But in a very broad sense, some employers view their employees as a form of IP. That is, the employer expends resources to train the employee and the employee acquires valuable business knowledge through on-the-job experience. The employee develops connections with customers and gains insight into business operations. 

In some sense, the employer views the employee as containing intellectual value for the business. And in this light, it is not unusual that some employers prefer that former employees not solicit current employees to engage in a competing business enterprise. Indeed, some employers may require employees to agree to non-solicitation clauses in employment agreements, thereby prohibiting former employees from soliciting current employees for a period of time.

Such non-solicitation clauses are no longer permitted in California. That state's Court of Appeals recently determined that non-solicitation agreements in the employment context are invalid. Specifically, non-solicitation clauses in at-will employment agreements are not enforceable in California. 

In AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (11/1/18 CA4/1), the court held that a contract provision prohibiting the solicitation of an at-will employee is barred by the California Business and Professional Code sections 16600 through 16602. "Section 16600 expresses California's strong public policy of protecting the right of its citizens to pursue any lawful employment and enterprise of their choice."

Accordingly, any company doing business in California should be aware that contract clauses prohibiting solicitation of its at-will employees can no longer be relied upon to maintain ownership and control of its employees' knowledge, experience and customer connections.

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