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Employers Beware: Non-Solicitation Provisions in Employment Agreements

It has been long-standing law in California that employment-related agreements cannot contain provisions that would prevent former employees from engaging in new employment of their choice, even if that new employment involves competition with their former employer. Employers can prohibit former employees from using confidential information but cannot otherwise prohibit former employees from competing. This means that in most cases former employees can contact customers or businesses served by their former employer during their new employment so long as they are not using confidential information to do so.

As a result, it is common for businesses to have confidentiality agreements that prohibit employees and former employees from using confidential information to compete with the business. It is also common for those type of agreements to include provisions prohibiting former employees from soliciting other employees to leave employment with that business.

During the last two months, two courts (one California court and one federal court) concluded that provisions prohibiting former employees from soliciting employees to leave employment is a violation of the California law that protects employee rights to engage in employment of their choice.

What does that mean? That means that any provision in an employment-related agreement which prohibits a former employee from soliciting current employees from leaving employment with the business is not enforceable. In addition, it is possible that such a provision could be considered a violation of California law (even if not enforced) and could be the basis of a class action claim.

What should employers do? Employers are encouraged to consult their employment counsel to review all employment-related agreements and, if necessary, revise those agreements to remove any non-solicitation of employees provisions.

This information is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations. For more information on these issues, please visit our Counseling Employers practice area HERE and contact an attorney at Sagaser, Watkins & Wieland PC at (559) 421-7000.

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