Are Employee No-Hire and Non-Solicitation Provisions Enforceable Under California Law?
SUMMARY: In most states, noncompetition agreements are enforceable if reasonably necessary to protect trade secrets and other confidential information. California, however, has a long standing public policy generally prohibiting noncompetition agreements. This policy is embodied in California Business & Professions Code section 16600 (“Section 16600”). Limited exceptions are set forth in subsequent sections of the California Business & Professions Code, such as the “sale of business” exception in Section 16601. In VL Systems v. Unisen, Inc.,[fn1] the California Court of Appeal found that an employee no-hire provision in a business-to-business computer consulting agreement was overbroad and unenforceable. The holding was based in part on the public policy established by Section 16600. As drafted, the no-hire clause in the consulting agreement purported to prohibited the client from hiring: (1) employees of the consulting company that did not provide any consulting services to the client
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