Non-solicitation Clauses or “Anti-raiding Covenants”

A contractual provision preventing a departing employee from “raiding” his former employer’s employees is “not void on its face under Business and Professions Code section 16600.” Loral Corp. v. Moyes, 174 Cal.App.3d 268, 280 (1985). The Rutter Group explained that these types of agreements were enforceable. “Solicitation as Breach of Contract (“Anti-Raiding Provisions”): A contract may prohibit employees, upon termination of their employment, from soliciting other employees to join a new business (so-called “anti-raiding covenants”). Id. Such provisions may be valid and enforceable even in the absence of trade secret misappropriation or unfair competition. (Loral Corp. v. Moyes (1985) 174 CA3d 268, 280, 219 CR 836, 844). See also, Cal. Prac. Guide Employment Litigation, section 14:416.

California courts have carved out an exception to the general prohibition on noncompetition contractual provisions where former employees engage in unfair competition by the unauthorized use of trade secrets and/or confidential, protected information. (See Metro Traffic Control, Inc. v. Shadow Traffic Network (1994) 22 Cal. App. 4th 853; Scott v. Snelling and Snelling, Inc. (1990) 732 F. Supp. 1034.)

The subsequent case, Edwards v. Arthur Andersen LLP (2008) 44 Cal. 4th 937, 942, does not overrule Loral. The Supreme Court held “that Business and Professions Code section 16600 prohibits employee noncompetition agreements unless the agreement falls within a statutory exception.” The ruling in Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937 made clear the “settled legislative policy in favor of open competition and employee mobility” (Id.)

Non Solicitation Clauses After the AMN Healthcare, Inc. Ruling

AMN Healthcare, Inc. v. AYA Healthcare Servs., Inc. (2018) 28 Cal.App.5th 923 further clarified California law regarding restrictive covenants in employment contexts. In keeping with “California's strong public policy of protecting the right of its citizens to pursue any lawful employment and enterprise of their choice” (Advanced Bionics Corp. v. Medtronic, Inc. (2002) 29 Cal.4th 697, 706) the court in AMN Healthcare found “undisputed evidence in the record... that, if a former AMN recruiter (i.e., individual defendants) was barred for at least one year from "soliciting or recruiting any travel nurse listed in AMN's database, that would [likewise] restrict the number of nurses with whom a recruiter could work with while employed by his or her new staffing agency"; that if a former AMN recruiter was barred from "soliciting or inducing to leave AMN's employment any AMN current travel nurse with whom he or she had worked with as an AMN recruiter, that would [likewise] restrict the number of nurses with whom a recruiter could work with while employed by his or her new staffing agency"; and that "[n]ot being permitted to contact travel nurses who currently work for AMN could limit the amount of compensation a recruiter would receive with his or her new agency after leaving AMN. (AMN Healthcare, Inc. v. AYA Healthcare Servs., Inc.(2018) 28 Cal.App.5th 923, 936-37.)

“In addition, the undisputed evidence show[ed] travel nurses typically were assigned by AMN for 13-week periods.” (Id.) “Although such assignments were sometimes extended, the point is the assignments were temporary.” (Id.) “As such, a one-year, posttermination restriction preventing a former AMN recruiter from contacting and recruiting a travel nurse on a 13-week assignment with AMN at a minimum equates to a period of four such assignments for a given nurse.” (Id.) “The undisputed evidence thus shows section 3.2 of the CNDA restricted individual defendants' ability to engage in their "profession, trade, or business.” (AMN Healthcare, Inc. v. AYA Healthcare Servs., Inc.(2018) 28 Cal.App.5th 923, 936-37.)