Employers in California have long understood that non-compete clauses (clauses specifically prohibiting an employee from working for a competitor after their termination) in employment agreements are generally unenforceable. This restriction is based on California Business and Professions Code Section 16600, which states that, “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void,” and California’s “strong public policy of protecting the right of its citizens to pursue any lawful employment and enterprise of their choice.” See Dowell v. Biosense Webster, 179 Cal. App. 4th 564, 575 (2009).
While including a non-compete clause in an employment agreement can in itself risk liability for an employer, other restrictions on an employee’s conduct after their termination have been permissible, including non-solicitation clauses that prohibit former employees from “raiding” an employer’s workforce by reaching out to former coworkers to try to hire them at a new company. In November 2018, however, the California Court of Appeal for the Fourth District held that employee non-solicitation clauses are also invalid under Section 16600, and two courts in the Northern District of California have since agreed.
The courts in these cases followed the same logic as those that barred non-compete clauses - non-solicitation clauses limit employees’ job opportunities by creating fear among employees and employers that hiring employees from the same company may risk expensive litigation, even if intentional “raiding” had not occurred. As a result, non-solicitation clauses are now also both unenforceable and grounds for attorney fee awards, and employers should consult legal counsel before including such provisions in an employment agreement.
Employers still have the right to protect their trade secrets and confidential information from use and disclosure by former employees, so employment agreements should be properly drafted to restrict employees’ post-termination actions to protect these assets. However, if employers simply don’t want employees to leave, the employers need to provide incentives to stay, rather than unenforceable restraints on their employees’ job mobility.
