Here is a situation many companies are confronted with over time. You are consulting firm and your customers hire-out your consultants on a temporary basis. But you are finding recently your customers are taking away your consultants. In other words, after they finish one of the jobs, they are hired permanently as an employee and you lose the income for future work. Can you have your customers sign a contract which prevents this? In other words, inserting a No-hire or Non-solicitation of Employees clause?
The courts have not wavered from the strong public policy of the right of every employee to earn a livelihood under Business and Professions Code Section 16600. See Metro Traffic Control, Inc. v. Shadow Traffic Network (1994) 22 Cal.App.4th 853, 859 (“every citizen shall retain the right to pursue any lawful employment and enterprise of their choice”); Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1520 (“the important legal right of persons to engage in businesses and occupations of their choosing”).
The California Supreme Court has gone so far as to state that even “a mere limitation on an employee’s ability to practice his or her vocation … [that was] reasonably based” would fall afoul of section 16600. Edwards v. Arthur Andersen LLP, 44 Cal.4th 937, 81 Cal.Rptr.3d 282 (2008)
Key Points:
- Courts overwhelmingly favor the right of a person to find the employment of their choosing.
- Courts almost have a built-in bias against no-hire and similar provisions.
See VL Systems, Inc. v. Unisen, Inc. (2007) 152 Cal.App.4th 70. Company hired consultant for computer services. One of consultant’s employees was hired away by Company, which caused a lawsuit for violation of the no-hire agreement. That agreement had a liquidated damages provision. The employee of the consultant had never worked on any jobs for the Company and was just a random employee. The employee was hired away after answering an Internet ad. The court invalidated the no-hire provision and allowed the employee to be employed.
Key Points:
- There is a better chance of stopping the employee if that person was actually working for the contracting party.
- There is a better chance of the employee winning if he or she did the solicitation as opposed to the contracting party (because the contracting party would not be directly violating the provision it signed).
- It is easier for the employee to win if he or she did not know about the no-hire provision.
- It is not okay to “raid” the employment pool by taking away numerous employees
Golden v. Cal. Emergency Physicians Med. Grp., 782 F.3d 1083 (9th Cir., 2015). A doctor worked with a medical staffing company that specialized in staffing emergency rooms with physicians. The agreement signed by the doctor prohibited him from working for any of the hospitals that had been under contract. At the appellate level, the Court of Appeal held in favor of the employee and sent the case back to the District Court for re-determination.
Key Points:
- Although there are many cases regarding non-solicit or non-compete, as to no-hire agreements, there is no definitive statement thus far from the California Supreme Court.
- Regardless, the weight of authority and the trend modernly is to invalidate these provisions and allow the employee to work.
- Other states allow the prohibitions if they are reasonable in nature. California cases say that any restraint is unlawful.
As you can see from the above, this is a highly technical issue, it’s best to receive legal advice you are confronted with it. And if you do insert a no hire or non-solicitation employees provision, make sure it is properly worded. Be careful, as this is one of the frequent issues confronted by HR consultants.
National Lien Law can act as your virtual Human Resources Consulting Firm–either replace your existing HR Department or augment it with our ongoing human resources consulting services. And, we are equipped to prepare any documents required (for example, termination notices, warnings, employment agreements/confidentiality/noncompete, employee handbooks, write-ups, responses to claims, wage and hour disputes, legal memos to management, response to attorney demands, legal investigations, help with arbitrations or language used in your emails and communications with employees). Services can be on a retainer basis, hourly or flat fee. Our human resources consultants have law degrees and 20+ years’ experience in human resources consulting. Or, simply give us a call for a free initial consultation. (800) 995-9434. Info.NationalLienLaw@gmail.com.
HR Consulting Network 