Non-solicitation Restriction Labelled Improper Restraint
Updated: Jun 3, 2019
A company that provided temporary travel nurses to medical care facilities hired recruiters with an agreement restricting them from soliciting company employees for at least one-year after termination. Upon resigning and joining a competitor, a number of former recruiters encouraged other employees to come work for the competitor. The company sued its former recruiters and the competitor for violation of the non-solicitation clause.
The defendants claimed the non-solicitation clause was an improper restraint on the recruiters’ ability to practice their profession. The trial court agreed and enjoined the company from enforcing the non-solicitation provision.
The appeals court affirmed. It held the clause void because it was effectively a non-compete clause preventing the travel nurse recruiters from practicing their profession, violating California law. Because the recruiters’ job was soliciting travel nurses, barring them from soliciting nurses in the company’s database restrained them from practicing their profession.
The court rejected the company’s argument that the clause was valid because it simply prevented non-solicitation of employees, not prohibiting the recruiters from practicing their jobs. The court doubted the viability of a prior case which used a reasonableness standard to determine the validity of an agreement preventing a former executive from raiding employees. The court said the code was unambiguous in banning any improper restraints of trade, not just unreasonable ones.
It is uncertain how courts will apply this case. It is clear that the case has elevated the risks. Employers with California employees should reassess whether the use and enforcement of employee non-solicitation clauses pose risks.
Outside of California, this decision joins a pattern of increased restriction on non-competition and like agreements. Massachusetts, for instance, passed legislation last year restricting non-compete clauses and requiring that employers compensate restricted employees if the clauses are allowed to operate.