Los Gatos, CA asked in Contracts, Employment Law and Business Law for California

Q: Non-solicitation agreement between me and LLC; also between LLC and client.

I am employed, in CA, "at will" with a Limited Liability Company, Stepping Stones Group, that provides services to educational institutions. I am hourly. I started 3 months ago. Included in my offer letter, was an employment agreement. A section of the agreement, under "No Solicitation," says I wont accept employment, with the client (educational institution) to whom I have been assigned, during and 2 years after termination. I signed this. After 3 months of employment, I innocently and mistakenly applied with the county office of education (the client to whom I had been assigned to). The county also has a contract with the LLC- not to hire its employees during and 2 years after term. of contract. County gave me interview and called my employer- the LLC- for reference. Not sure what they were told, but my job then called me and explained contract I signed and said I couldn't take the job.

Is either contract enforceable given: company is an LLC, but broad agreement and in CA.

2 Lawyer Answers
Jonathon Maddox
Jonathon Maddox
Answered
  • Redding, CA
  • Licensed in California

A: Provided there’s no other relevant facts here, the Non-solicitation/non-compete clause would be enforceable.

D. Steven Yahnian
PREMIUM
D. Steven Yahnian
Answered
  • Visalia, CA
  • Licensed in California

A: First, you should immediately seek legal counsel from a California employment law attorney. The following is a general discussion of the law and should not be relied on as the complete and total answer to your question. Generally, with some exceptions, an Employer cannot prevent an employee from seeking employment with a customer of the Employer, under California law. The Employer can prevent sharing of trade secrets or solicitation by a former employee of its other employees to go to work for a competitor. But, as a rule, California has been one of the leading states to look unfavorably on contractual restraints on competition, especially in the context of employment agreements seeking to restrict an employee's ability to compete post-employment. This position is rooted in public policy and codified in Bus & P C §16600, and courts have broadly held (with certain limited statutory exceptions) that §16600 applies to every contract that imposes "a restraint of a substantial character," regardless of whether the contract includes an express noncompete clause. Golden v California Emergency Physicians Med. Group (9th Cir 2015) 782 F3d 1083, 1091; SPS Technols., LLC v Briles Aerospace, Inc. (CD Cal, Oct. 30, 2019, No. CV 18-9536-MWF (ASx)) 2019 US Dist Lexis 219610, *39.

The types of contractual restraints on competition can vary, but in the employment context they fall into five basic categories including "No-hire" provisions between a business, its competitors, and/or its customers, which are designed to prohibit or deter the customer from hiring the employee away.

An employer's attempts to restrain employee mobility or the ability to compete, whether by contract or otherwise, are viewed with circumspection by California courts, and as a violation of the state's strong public policy. A person has a substantial interest in the unrestrained pursuit of their livelihood and must, within limits, be allowed to change employers and compete for available business and customers.

The public policy underlying Bus & P C §16600 is also designed to protect California-based employers (such as the county in your case), by allowing them to compete for the most talented, skilled employees in their own industries, wherever they may reside. It bears remembering that employers enjoy almost complete freedom to downsize, restructure, or otherwise lay off employees. The rules should not be, and are not, so one-sided as to allow one party to the relationship to terminate it at will and deny the other party an opportunity to pursue a career in their area of expertise.

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