In the recent case of AMN Healthcare, Inc. v. AYA Healthcare Services, Inc, Case No. D071924, Plaintiff, a medical staffing firm, required employees to sign a contract stating that they would “not directly or indirectly solicit or induce, or cause others to solicit or induce” other employees to leave. Plaintiff sued several former employees and a competitor for soliciting medical staff it had placed on temporary assignments because it considered placed medical staff to qualify as employees under the non-solicitation provision. Defendants cross-claimed that the provision was an improper restraint under Bus. & Prof. § 16600. The court agreed with Defendants, finding the provision barred them from practicing their chosen profession—recruiting and placing medical staff on a temporary basis. Although the court recognized that this situation was “factually distinguishable” from the classic scenario where a former executive “raids” a former employer to get key employees, it questioned the continuing viability of a “reasonableness standard” in analyzing non-solicitation clauses.

The court justified the injunction on the grounds that Plaintiff had repeatedly sought to enforce the provision against other former employees and competitors. The court also awarded Defendants attorneys’ fees under CCP § 1021.5, finding that they were successful parties and that the action conferred a significant benefit on a large class of persons involving an important issue affecting the public interest (e.g., competitors who wanted to hire former employees but were concerned about the non-solicitation provision).

Following AMN Healthcare, businesses (especially staffing firms) will want to review their employment agreements for potentially vulnerable non-solicitation provisions. Click here to see the opinion. Please contact Jerry Hawxhurst or Kyle Foltyn-Smith if you would like to discuss this opinion.