Under California law, post-employment noncompetition agreements are generally void as unlawful restraints on trade and business under California Business and Professions Code Section 16600, but California courts have enforced various employee nonsolicitation provisions. However, the enforceability of employee nonsolicitation provisions under California law was called into question on November 1, 2018, by the California Fourth District Court of Appeal in AMN Healthcare, Inc. v. Aya Healthcare Servs., Inc., 239 Cal. Rptr. 3d 577, 581, which found that a post-employment employee nonsolicitation provision was void under Section 16600. In that case, the plaintiff, AMN Healthcare, Inc. and the defendant, AMN competitor Aya Healthcare Services, Inc., were both in the business of providing temporary travel nurses to medical care facilities. As a condition of employment with AMN, AMN employees, including “travel nurse recruiters,” were required to enter into confidentiality and nondisclosure agreements that, among other things, prohibited the solicitation of any AMN employee for one year after termination of employment.
The AMN court held that the employee nonsolicitation provision “restrained individual defendants from practicing with Aya their chosen profession of recruiting travel nurses.” The court clarified that unless a contractual restraint falls into one of Section 16600’s statutory exceptions (i.e., sale of business, dissolution of partnership or dissolution or sale of a limited liability company), the restraint is void. The court distinguished this case from Loral Corp. v. Moyes, 219 Cal. Rptr. 836 (Cal. App. 6th Dist. 1985), which found that a noninterference agreement that restrained a former employee “from disrupting, damaging, impairing or interfering with his former employer by raiding ... employees” did not appear to be a restraint on trade under Section 16600. The AMN court reasoned that unlike in Loral, where the court found that the noninterference agreement only prohibited former employees from soliciting other employees and did not prevent former employees from seeking other employment, in AMN, enforcement of the employee nonsolicitation provision would prevent AMN’s former employees from engaging in their profession, given the nature of their jobs as recruiters. In the wake of AMN, the enforceability of at least certain employee nonsolicitation provisions under California law remains questionable.