A California federal court earlier this year allowed a former Insight Global executive to move ahead with claims over an allegedly unfair employee non-solicitation clause, part of a trend of courts in California calling into question the enforceability of such provisions.
Judge Beth Labson Freeman in the Northern District of California reconsidered her own previous ruling dismissing claims in John Barker’s lawsuit against Insight Global based on a non-solicitation clause in his contract. The judge found California law should be interpreted to “invalidate employee non-solicitation provisions.”
Background and Ruling
A former executive at Insight Global, Barker filed a lawsuit against the company alleging, among other things, that an employee non-solicitation provision in his employment agreement violated California’s Unfair Competition Law.
The court dismissed claims related to this provision in July 2018. In doing so, the court relied on Loral Corporation v. Moyes, decades-old precedent that the validity of non-solicitation clauses should be determined under a reasonableness standard.
Judge Freeman agreed to reconsider the ruling in light of the November 2018 decision from the California Court of Appeal in AMN Healthcare v. Aya Healthcare Services. The appeals court held a non-solicitation provision barring former AMN Healthcare employees from soliciting any AMN employee for at least one year was void under California law.
The ruling questioned the continued viability of Loral’s use of a reasonableness standard.
Ruling in the Barker case on Jan. 11, Judge Freeman said she was convinced “by the reasoning in AMN that California law is properly interpreted…to invalidate employee nonsolicitation provisions.”
Following the Barker ruling, another judge in Northern California found WeRide was unlikely to succeed on its claims against a former executive based on a non-solicitation clause, saying the clause “is void under California law.” Given this trend in California courts toward invalidating non-solicitation provisions in employment contracts, companies should think carefully about including such provisions in contracts with California employees.