AMN Healthcare, Inc. v. Aya Healthcare Servs., Inc. - 28 Cal. App. 5th 923, 239 Cal. Rptr. 3d 577 (2018)

Rule:

Bus. & Prof. Code, § 16600, bars a court from specifically enforcing a contractual clause purporting to ban a former employee from soliciting former customers to transfer their business away from the former employer to the employee's new business, but a court may enjoin tortious conduct (as violative of either the Uniform Trade Secrets Act (UTSA), Civ. Code, § 3426 et seq.) and/or the unfair competition law) by banning the former employee from using trade secret information to identify existing customers, to facilitate the solicitation of such customers, or to otherwise unfairly compete with the former employer. When viewed in this light, conduct is enjoinable not because it falls within a judicially created exception to § 16600's ban on contractual nonsolicitation clauses, but is instead enjoinable because it is wrongful independent of any contractual undertaking.

Facts:

Plaintiff, a business that provided traveling nurses, sued defendants, a competitor and recruiters who had worked for plaintiff before working for the competitor, under a confidentiality and nondisclosure agreement that prohibited recruiters from soliciting any employee of plaintiff to leave plaintiff's service for at least a one-year period. The trial court granted summary judgment for defendants, agreeing with the defendants’ contention that the non-solicitation of employee provision in the confidentiality and nondisclosure agreement was an improper restraint on individual defendants’ ability to engage in their profession, in violation of Business and Professions Code. Plaintiff appealed. 

Issue:

Was the non-solicitation of employee provision in the confidentiality and nondisclosure agreement an improper restrain on individual defendants’ ability to engage in their profession, thereby justifying the grant of summary judgment in favor of defendants? 

Answer:

Yes.

Conclusion:

The court affirmed the judgment of the trial court, holding that the plaintiff did not have claims against the defendant based on the confidentiality and nondisclosure agreement. According to the court, the broadly worded provision was void under Bus. & Prof. Code, § 16600, because it restrained recruiters from practicing their chosen profession. The court further held that the business's "customer list" was not a protected trade secret, even if the nurses were customers, because the undisputed evidence showed that the identity and contact information of the nurses was already known to the competitor before any of recruiters left the business and went to work for the competitor.