Non-Competition Covenants

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” that were introduced early in the legislative session, but

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, California law banned non-compete agreements, subject to limited exceptions. 

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 prevent a person from engaging in a profession, trade,

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:

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 associate vendor.  After Aya began to actively

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 . . . to curtail the unfair use of non-compete clauses

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 of law.  The lawsuit, Scales v. Badger Daylighting Corp. (Case

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 become operative when Maas’s employment with Crave ended. Maas

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 from competing for five years after the termination of

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 secrets contained in the programs’ source code. After AMS