Updated April 19, 2022
A California non-solicitation agreement is a contract between an employer and employee that prohibits the employee from using the employer’s customers, clients, employees, and contractors for their own benefit after leaving the company. Companies may use non-solicitation agreements to encourage employees to develop business relationships, without worrying that employees could later use those relationships to the company’s detriment.
Legally Enforceable in California?
It is undetermined whether non-solicitation agreements may be legally binding in California. Non-compete agreements, which are broader and prevent a former employee from working in the same field as the former employer, are almost entirely prohibited by statute in California. Cal. Bus. & Prof. Code § 16600.
For years, however, courts in California had distinguished non-solicitation agreements from non-compete agreements and had generally allowed the former. Loral Corp. v. Moyes, 174 Cal. App.3d 268, 279 (Cal. Ct. App. 1985).
However, a more recent Court of Appeal decision struck down a non-solicitation agreement, citing a 2008 California Supreme court case (Edwards v. Arthur Andersen LLP), and doubted that Loral was still valid law. AMN Healthcare, Inc. v. AYA Healthcare Servs., Inc. 28 Cal. App. 5th 923, 939 (Cal. Ct. App. 2018).