Business and Professions Code section 16600

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.
Continue Reading Co-Worker Non-Solicitation Provisions in Jeopardy?

The use of “No Rehire” Provisions in settlement agreements between employers and their former employees allow employers to protect themselves against “boomerang” lawsuits.  For instance, a former employee who claims he/she was terminated because of discrimination would be prevented from later submitting a new job application and then suing the employer again claiming he/she was not hired because of discrimination.  This common provision is basically an agreement by the employee that in exchange for consideration, usually the payment of a sum of money, he/she will dismiss their claims against the employer and will contractually agree not to seek to be rehired.  A recent decision from a panel of judges in the Ninth Circuit, however, has called the “No Rehire” provisions into question as possibly violating section 16600 of the Business and Professions Code.James-Kachmar-08_web

In Golden v. California Emergency Physicians Medical Group, the plaintiff doctor sued after he lost emergency room privileges at one of CEPMG’s facilities.  Prior to trial, the plaintiff doctor agreed to settle his claim for the payment of a large sum of money and initially agreed (at least orally through counsel) not to seek employment with CEPMG again.  The “No Rehire” provision that was subsequently incorporated into a written settlement agreement provided that the plaintiff doctor would not seek re-employment with CEPMG and also provided CEPMG the right to terminate the plaintiff’s employment should he be working at any facility that it subsequently acquired.  (CEPMG is a large consortium that manages or staffs many emergency rooms, in-patient clinics and other facilities in California and other Western states and intends to continue expanding.)

After the plaintiff doctor refused to sign the written settlement agreement containing the “No Rehire” provision, his former counsel filed a motion to enforce the settlement agreement (apparently to obtain his contingency fee from the settlement proceeds).  The District Court concluded that the “No Rehire” provision was not a “non-compete” provision and therefore did not run afoul of section 16600.  The Court ordered plaintiff to execute the written settlement agreement containing the “No Rehire” provision.
Continue Reading Are “No Rehire” Provisions in Settlement Agreements at Risk?

Under California law, non-compete provisions with an employee are generally unenforceable.  Statutory exceptions to this rule include the seller of a business’s goodwill or a membership interest in an LLC.  Courts have also recognized a judicial exception to this rule: where the non-compete is necessary to protect an employer’s trade secret information.  This judicial exception

Section 16601 of the California Business and Professions Code provides a well-known exception to California’s statutory refusal to enforce contractual commitments not to compete.  Under that section, Courts will enforce “reasonable” restrictions on the seller of a business to engage in competition against the buyer of that business.  This is a commonsense approach: a buyer

Everybody who cares probably knows that, in California, covenants not to compete (agreements that restrain an individual from pursuing a lawful trade of profession) are generally unenforceable.  There are only five “exceptions” to this rule.  I put “exceptions” in quotes because two of them really aren’t exceptions at all. They are independent legal doctrines that