California Employment Law Update

Category Archives: Non-Competition Covenants

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In a Surprise Move, California Enacts Boatload of New Pro-Employer Laws – Nah, Just Kidding, It’s Going to be More Burdensome than Ever!

In what has become an annual tradition, California – that fabled workers’ paradise on earth – has enacted a slew of new laws that, come January, may keep even the most hearty HR professionals up at night. As we reported earlier this year (here), the California Chamber of Commerce initially identified 11 “Job Killer Bills” … Continue Reading

California Expands Prohibition Against Non-Competes

On September 1, 2023, California Governor Gavin Newsom signed Senate Bill 699, which amends California Business & Professions Code Section 16600 to prohibit an employer from entering into or attempting to enforce a non-compete agreement regardless of whether the contract was signed outside of California.  The law goes into effect on January 1, 2024. Previously, … Continue Reading

California Court of Appeal Publishes Opinion Upholding Customer Non-Solicitation Covenant

Despite California’s general hostility towards post-termination restrictive covenants, the California Court of Appeal, in a recently published opinion, Blue Mountain Enters., LLC v. Owen, 74 Cal.App.5th 537 (1st Dist. Jan. 10, 2022), affirmed that a post-termination customer non-solicitation agreement was enforceable under California Business & Professions Code § 16601. Under most circumstances, contractual provisions that … Continue Reading

September 2021 California Employment Law Notes

We invite you to review our newly-posted September 2021 California Employment Law Notes, a comprehensive review of the latest and most significant developments in California employment law. The highlights include: Ninth Circuit Rejects “Paramour Preference” Liability Arising From Supervisor’s Affair With Another Employee $3.5 Million Emotional Distress Award Was “Shockingly Disproportionate” To Evidence Of Harm … Continue Reading

Employee Nonsolicitation Clause Does Not Violate Antitrust Law And Is “Pro-Competitive”

Aya Healthcare Servs. v. AMN Healthcare, Inc., 2021 WL 3671384 (9th Cir. 2021) AMN Healthcare contracted with Aya Healthcare for Aya to staff temporary “spillover assignments” of travel nurses to hospitals at which AMN was the managed service provider.  In AMN’s agreement with Aya, Aya agreed not to solicit AMN’s employees; eventually, Aya became AMN’s biggest … Continue Reading

President Biden Signs Executive Order Targeting Noncompetition Agreements

On July 9, 2021, President Biden signed an Executive Order on Promoting Competition in the American Economy (the “Order”), which, among other things, “encourage[s]” the “Chair of the [Federal Trade Commission (the “FTC”)] . . . to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority . . . … Continue Reading

California Employee Required to Challenge Non-Compete Clause in Indiana

Despite California’s prohibition against non-compete agreements, a federal court in the Eastern District of California recently ruled that a California resident may be subject to the non-compete covenant in his employment agreement due to a provision in the agreement identifying Indiana as the parties’ choice of forum and that state’s law as the parties’ choice … Continue Reading

Post-Employment Non-Compete Covenant Could Not Be Enforced Against Seller/Employee Of Company

Fillpoint, LLC v. Maas, WL 3631266 (Cal. Ct. App. 2012) Michael Maas sold his stock in Crave Entertainment Group, Inc. to Handleman Company and signed a stock purchase agreement that contained a three-year covenant not to compete. Maas signed a separate employment agreement with Crave that contained a one-year covenant not to compete, which would … Continue Reading

Injunction Upheld Prohibiting Former Employee from Competing

NewLife Sciences, Inc. v. Weinstock, 197 Cal. App. 4th 676 (2011) NewLife terminated the employment of Ronald Weinstock, the purported inventor of a Therapeutic Magnetic Resonance Device (“TMRD”), which NewLife had purchased approximately one year before the termination. In connection with its purchase of the TMRD, NewLife had obtained a non-compete covenant, which prohibited Weinstock … Continue Reading

Non-Compete Agreements Were Unenforceable

Asset Marketing Systems, Inc. v. Gagnon, 542 F.3d 748 (9th Cir. 2008) Kevin Gagnon, doing business as “Mister Computer,” alleged that his former customer, Asset Marketing Systems (“AMS”), infringed his copyright in six computer programs that he wrote for AMS by continuing to use and modify them without his consent and that AMS misappropriated trade … Continue Reading

Customer Non-Solicitation Covenants Violate Public Policy Against Non-Competes

Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008) CPA Raymond Edwards II was hired in 1997 as a tax manager for the Los Angeles office of the now defunct accounting firm Arthur Andersen LLP (“Andersen”). As a condition of his employment, Edwards was required to execute a noncompetition agreement that prohibited his (1) … Continue Reading

Non-Compete Covenant Was Not Too Broad To Be Enforced

Alliant Ins. Services, Inc. v. Gaddy, 159 Cal. App. 4th 1292 (2008) Alliant Insurance Services purchased a competing insurance brokerage company from G. Scott Gaddy for $4.1 million and then employed him under a senior management agreement. Both the purchase and employment agreements contained covenants whereby Gaddy agreed not to compete with Alliant or to … Continue Reading

Employer Was Entitled To Terminating Sanctions Against Former Employee

Computer Task Group, Inc. v. Brotby, 364 F.3d 1112 (9th Cir. 2004) Computer Task Group (CTG) sued William Brotby for breach of a non-solicitation/non-disclosure agreement that he signed while he was working as an information technologies consultant. CTG succeeded in obtaining an injunction prohibiting Brotby from working for Alyeska Pipeline Service Company, one of CTG’s … Continue Reading

Employee Terminated For Refusing To Sign Customer Non-Solicitation Covenant States Claim

Thompson v. Impaxx, Inc., 113 Cal. App. 4th 1425 (2003) David Thompson’s employment was terminated after he refused to sign a customer non-solicitation agreement that his employer, Impaxx, required him to sign. The covenant in question stated that “[f]or a period of one year following the termination of employment, I will not call on, solicit, … Continue Reading

California Court May Not Enjoin Employer From Seeking To Enforce Non-Competition Covenant In Minnesota

Advanced Bionics Corp. v. Medtronic, Inc., 29 Cal. 4th 697 (2002) Mark Stultz was employed in Minnesota as a senior product specialist for Medtronic, a manufacturer of implantable neurostimulation devices, before resigning his employment and going to work for Advanced Bionics Corporation, one of Medtronic’s competitors located in Sylmar, California. Upon accepting employment with Medtronic, … Continue Reading

Federal Court May Not Bar Tennessee Court From Enforcing Non-Compete Agreements

Bennett v. Medtronic, Inc., 285 F.3d 801 (9th Cir. 2002) Medtronic, Inc. sued three of its former California employees and their new employer, NuVasive, in Tennessee following the employees’ resignation from Medtronic and acceptance of employment with NuVasive, one of Medtronic’s competitors in the business of designing and manufacturing spinal surgery devices. Among other things, … Continue Reading
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