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Court Of Appeal Upholds Injunction Restraining Enforcement Of Non-Solicitation Agreement

California Business & Professions Code Section 16600 is particularly tough on covenants not to compete declaring, with certain exceptions, "every contract by which anyone is restrained from engaging in a lawful profession trade, or business of any kind is to that extent void".  Nonetheless, the statute does seem to leave some room for agreements not to solicit employees.  After all, such an agreement does not preclude a promisor from engaging in a business nor does it prohibit a promisor from hiring an employee.  

The validity of non-solicitation agreements also seems to have support in California case law.  In Loral Corp. v. Moyes, 174 Cal. App. 3d 268 (1985) a Court of Appeal observed that a non-solicitation agreement "only slightly affects employees.  They are not hampered from seeking employment with nor contacting . . . .  All they lose is the option of being contacted by him first."

This small bit of daylight for non-solicitation got even smaller or may have even disappeared yesterday with the court's decision in AMN Healthcare, Inc. v. AYA Healthcare Services, Inc.,   Amn Healthcare v. Aya Healthcare Servs., 2018 Cal. App. LEXIS 989.  That case involved a dispute between two companies that were engaged in the business of recruiting "travel nurses".  The plaintiff's employment agreement included a clause committee the defendants from soliciting the plaintiff's employees, including travel nurses, for a period of one year.  The trial court enjoined enforcement of this provision and the Court of Appeal upheld the injunction.  In doing so, the Court of Appeal cast doubt upon Moyes to the extent that it relied upon the reasonableness of the restraint.  The Court of Appeal also found Moyes to be factually distinguishable: 

"Unlike the former employees in Moyes, who was an executive officer of the plaintiff employer, in the instant case individual defendants were in the business of recruiting and placing on a temporary basis medical professionals, primarily nurses, in medical facilities throughout the country.  If enforced, section 3.2 thus restrained individual defendants from engaging in their chosen profession, even in a 'narrow' manner or a 'limited' way."

Thus, AMN  could be read narrowly to apply to situations in which the promisor's business is recruiting or broadly to invalidate all non-solicitation agreements even those that are reasonable.

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