VL Systems, Inc. v. Unisen, Inc., 2007 WL 1807001 (Cal. Ct. App. 2007)

VL Systems (VLS) entered into a computer consulting agreement with Star Trac Strength (a dba of Unisen) whereby Star Trac agreed not to hire any VLS employee for 12 months after the contract’s termination, the breach of which triggered liquidated damages payable to VLS. Within the 12-month period, Star Trac hired a VLS employee who was not solicited by Star Trac, had not performed any work for Star Trac and had not even been employed by VLS at the time the consulting agreement with Star Trac was in effect. VLS sued for breach of contract and was successful in obtaining a portion of the liquidated damages in the trial court. The Court of Appeal reversed, holding that “enforcing this [no-hire] clause would present many of the same problems as covenants not to compete and [would] unfairly limit the mobility of an employee who actively sought an opportunity with Star Trac.”