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, or take away any of [my employer’s] customers or potential customers with whom I have had any dealings as a result of my employment.” Thompson alleged that his termination violated public policy because he was retaliated against for refusing to sign what was in essence an unenforceable covenant not to compete. Impaxx successfully moved for judgment on the pleadings on the ground that a non-solicitation covenant (as distinguished from a covenant not to compete) does not violate Business & Professions Code § 16600. The Court of Appeal reversed the trial court and held that customer non-solicitation covenants, although less restrictive than covenants not to compete, are also “void as unlawful business restraints except where their enforcement is necessary to protect trade secrets” (relying upon Moss, Adams & Co. v. Shilling, 179 Cal. App. 3d 124 (1986)). Since the covenant was unenforceable in that it was not limited to protecting Impaxx’s trade secrets, the Court held that Thompson could proceed with his wrongful termination lawsuit.