California Business and Professions Code section 16600 invalidates any contract restraining anyone from engaging in a lawful profession, trade, or business. While this language has been understood to prohibit non-compete agreements, it was generally understood that it still permitted employee “non-solicitation agreements,” which are agreements preventing former employees from poaching employees from their former employers. In AMN Healthcare, Inc. v. AYA Healthcare Services, Inc.; et al., the California Court of Appeal called that prior understanding into serious question.
AMN involved an action between plaintiff AMN Healthcare, Inc. (“AMN”) and defendant AYA Healthcare Services, Inc. (“AYA”). AMN and AYA were competitors in the business of providing temporary workers to medical care facilities across the country. AMN brought suit against AYA and certain former AMN employees now working for AYA. These former employees had previously worked for AMN as recruiters of temporary workers and had all executed Confidentially and Non-Disclosure Agreements with AMN which included a provision preventing them from soliciting any AMN employees to leave the service of AMN for a certain designated period of time. AMN’s lawsuit alleged that these defendants had breached the terms of that agreement by recruiting temporary workers for AYA that AMN had previously employed. Continue Reading