If there have been shades of gray within the state of enforceability of worker non-solicitation provisions (to forestall makes an attempt to and/or the rent of former colleagues), that outlook simply acquired darker. California regulation has declared void “each contract by which anybody is restrained from partaking in a lawful occupation, commerce, or enterprise of any form.” (Enterprise & Professions Code part 16600.) Over the previous 5 years, California courts have more and more relied on Part 16600 to invalidate non-solicitation provisions.
Within the 1985 case, Loral Company v. Moyes, the California Courtroom of Appeals upheld an settlement restraining a former govt from raiding his former employer’s workers as a result of it was an inexpensive restraint on commerce. That was the regulation for 3 a long time. Nevertheless, in 2018, the California Courtroom of Appeals invalidated a non-solicitation of workers clause in AMN Healthcare, Inc. v. Aya Healthcare Providers, Inc., counting on the precise undeniable fact that plaintiffs have been recruiters such that upholding the availability would, in impact, restrain them from partaking of their chosen occupation. Then, in 2019, a U.S. District Courtroom in Barker v. Perception International, boldly struck down a non-solicitation provision as unenforceable below California Enterprise & Professions Code Part 16600, regardless of Loral and AMN, rejecting that fact-specific software.
With the passage of SB 699, continued use of non-solicitation provisions in California is riskier than ever. As my colleagues Jeffrey Horton Thomas and Michelle Harrington wrote, earlier than the adoption of part 16600.5, people suing in California to invalidate restrictive covenants had no foundation to recuperate injury awards or legal professional’s charges. Whereas people might search restitution, that greenback determine is completely different than a damages award and sometimes lower than a damages award. However, efficient January 1, 2024, part 16600.5 authorizes workers, former workers, and candidates to recuperate injury awards, injunctive reduction, and legal professional’s charges and prices in opposition to their employers once they prevail in invalidating restrictive covenants, and not using a corresponding provision for employers who prevail in litigation.
The inducement to litigate worker non-solicitation clauses (together with anti-raiding provisions) has elevated exponentially and is more likely to chill any additional use of those provisions in opposition to California-based workers.