Co-Worker Non-Solicitation Provisions in Jeopardy?
February 7 2019
For years, California courts have recognized the right of employers to use non-solicitation provisions in employment agreements to prevent employees from “soliciting” their coworkers to join them at a new employer. For instance, in 1985, a California appellate court in Loral Corp v. Moyes, 174 Cal.App.3d 268 (1985), held that a non-solicitation of fellow employees provision in an employment agreement was lawful because the co-workers were free to seek employment with a competitor, they just couldn’t be contacted first by the departing employee.
The enforcement of non-solicitation of co-worker provisions remained relativity consistent until November 2018 when a court in AMN Healthcare, Inc. v. Aya HealthCare Services, Inc., 28 Cal.App.5th 923, enjoined an employer from enforcing a co-worker non-solicitation provision against former employees. The Court held that the co-worker non-solicitation provision violated section 16600 of the California Business and Professions Code, which provides that agreements that restrain a person’s trade or profession are unenforceable. The AMN Healthcare Court relied heavily on the California Supreme Court’s ruling in Edwards v. Arthur Andersen LLP, 44 Cal.4th 937 (2008), which broadly struck down non-compete agreements preventing employees from competing with their former employer.
It remained an open question following the AMN Healthcare decision whether other courts would follow its holding concerning the unenforceability of an employee non-solicitation provision. For instance, would other courts limit its holding and decline to follow it because:
(1) The former employees who were being sought to be restrained by AMN were recruiters such that any prohibition on solicitation would necessarily restrain them in their profession as recruiters; and
(2) The former co-workers they were targeting for recruitment were temporary nurses who served short assignments so that enforcing the non-solicitation provision could limit those employees’ ability to obtain new work after their temporary assignments ended.
Now, two months later, another court appears to be following the lead of the AMN Healthcare court and is allowing a claim to go forward attacking a co-worker non-solicitation provision. In Barker v. Insight Global, LLC (Jan. 11, 2019 N.D. Cal.), Judge Beth Labson Freeman recently reversed herself and granted the plaintiff-employee’s motion for reconsideration to allow him to state a claim as a class representative against his former employer for the use of co-worker non-solicitation provisions in its employment agreements. Judge Freeman held that the recent AMN Healthcare decision (her initial order dismissing the claim came three months prior to the AMN Healthcare decision) was likely consistent with the current state of California law regarding these non-solicitation provisions, especially in light of the Edwards v. Arthur Andersen decision. She denied the defendant-employer’s motion to dismiss the former employee’s claim and ruled that plaintiff should be allowed to present a claim that the use of an employee non-solicitation provision in his employment agreement violated section 16600 and was therefore an unfair business practice.
The Barker case is still in the early stages but employers should be concerned that a court has decided to follow the holding of the AMN Healthcare decision. In light of these recent developments, employers should carefully review any non-solicitation provisions in their employment agreements with their attorneys to determine whether they are at risk at facing claims similar to those asserted in the AMN Healthcare and Barker cases.