Assume your company is hired by Company B that needs technical computer services. It’s a long-term arrangement so you dispatch a crew of employees to work full-time and work at the premises of Company B. You have agreements with your employees that they will not work for any of your customers. After a few months, one of your employees is hired away by Company B. Can you prevent this?
Assume you are a pest control company and have spent years training an employee. All of a sudden the employee decides to jump ship and work with a competitor. Can you prevent this?
Case Law:
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.
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 redetermination.
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.
Conclusion:
There is a strong public policy in California and other states that your company cannot prohibit one from working somewhere else and pursuing their livelihood. Unfortunately, your chances are slim of enforcing such provisions.
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