Enforceability of Employee Non-Solicits in Doubt Following Several Recent Decisions

By April 17, 2019Litigation Tips

At Lewis & Llewellyn we routinely advise and represent clients regarding all facets of employee mobility.  California businesses commonly include employee non-solicitation provisions in their employment agreements.  But several recent cases have concluded these provisions are per se invalid under California law, resulting in significant potential consequences for companies statewide.  It is well-established that California law favors employment mobility and does not recognize non-compete agreements restraining employees from leaving one job to work for a competitor.  This policy is codified in Business & Professions Code section 16600.  Unlike non-competes, however, courts have long held that employee non-solicit provisions barring individuals or companies from poaching company talent do not violate section 16600 because the restraint on employee mobility is minimal.  Until now:  in AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., 28 Cal. App. 5th 923 (2018), the Court of Appeal cast significant doubt on the enforceability of employee non-solicits.  This analysis soon gained traction—federal courts in Barker v. Insight Glob., LLC, No. 16-CV-07186-BLF, 2019 WL 176260, at *3 (N.D. Cal. Jan. 11, 2019) and Weride Corp. v. Kun Huang, No. 5:18-CV-07233-EJD, 2019 WL 1439394, at *10 (N.D. Cal. Apr. 1, 2019), relied upon AMN Healthcare to conclude employee non-solicits were unenforceable under section 16600.  While it is too early to say whether these rulings will become the majority view, companies now face significant risk that former employees can legally raid the company’s talent pool.  Moreover, as with non-competes, companies can face liability for wrongful termination for firing an employee who refuses to agree to an employee non-solicit provision.  Accordingly, both company and outside counsel should closely monitor these developments to determine whether these cases are the new norm or a string of outliers.