Roundtable: Avoiding the Californication of your noncompetes

We will be hosting a roundtable on November 17, from 1:00 to 3:00 PM ET, about how to plan for California’s new, expanded, anti-restrictive covenant laws. We are scheduled to have almost 50 leading lawyers from law firms around the country to participate in the brainstorming.

Spoiler alert: The new laws are not limited just to companies with employees in California; they have nationwide, retroactive application and take effect on January 1, 2024 — leaving less than two months to prepare.

Join us to brainstorm how companies should prepare.

Background

California has banned noncompetes since 1872. See Cal. Bus. & Prof. Code §§ 16600-1602.5, and predecessor.

It has also (clearly) banned (customer) nonsolicitation agreements since 2009. See Edwards v. Arthur Andersen LLP, 44 Cal.4th 937, 189 P.3d 285, 81 Cal.Rptr.3d 282 (2008).

Since 2018, there has been some question about whether California also bans no-recruit agreements (sometimes also called “nonsolicitation agreements,” “employee nonsolicitation agreements,” “no-raid agreements,” and other names). See Moss Bros. Auto Group v. Shaver, 2022 WL 17546280, at *4 (Cal. App. 5th Dist. Dec. 9, 2022) (refusing to pronounce that all no-recruit agreements violate California’s noncompete ban); compare AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., 28 Cal.App.5th 923, 935-936, 239 Cal.Rptr.3d 577 (2018) (no-recruit agreements are unenforceable) with Hamilton v. Juul Labs, Inc., 2020 WL 5500377 (Sept. 11, 2020) (no-recruit agreements are enforceable).

What’s Changed

Whether you agree with California’s hostility toward restrictive covenants or not, you can no longer ignore it.

California’s new laws make four things abundantly clear:

1. As of January 1, 2024, California is expanding the scope of its anti-restrictive covenant policy, making clear that virtually all, if not all, restrictive covenants in whatever form they may take and wherever signed are prohibited, including even broad confidentiality agreements signed out of state by an out of state employee and an out of state employer and otherwise-lawful agreements that affect a non-party;
2. As of January 1, 2024, California is prioritizing its policy over all other states’ policies, and in so doing, purports to be creating a safe-haven for employees with otherwise-lawful and enforceable contracts to flee to California to avoid their lawful obligations;
3. By February 14, 2024 (Valentine’s Day), employers with employees – or certain former employees – in California must notify all of those employees that their restrictive covenants (if they have one) are void; and
4. Assuming the constitutionality of California’s effort to invalidate contracts that have no relationship to California, companies need to know how to protect their trade secrets, customer relationships, and workforces in light of this new reality.

Of course, it’s not just California that has created a hostile landscape for noncompetes and other restrictive covenants. For example, the Federal Trade Commission is expected to adopt a rule that will (try to) ban a swath of noncompetes and other agreements, the General Counsel of the National Labor Relations Board issued a memorandum declaring that noncompetes are an unfair labor practice, Minnesota passed a new law banning noncompetes, and New York has a bill to ban noncompetes that is sitting with the Governor.

The Roundtable

On November 17, 2023, we will be hosting a roundtable brainstorming session among about 40 of the leading trade secret / restrictive covenant / employee mobility lawyers from around the country.

At a high-level, the working agenda for the roundtable is as follows:

• Update on what has happened.
  • Summary of California’s current law (for background).
    • Bus. & Prof. Code §§ 16600 – 16602.5; and
    • Labor Code § 925
  • Explanation of California’s new laws.
    • Bus. & Prof. Code §§ 16600 (amended)
    • Bus. & Prof. Code §§ 16600.1
    • Bus. & Prof. Code §§ 16600.5
  • Brief summary (for context) of other developments this year and predictions for additional changes.
• Practical implications of California’s changes.
  • What agreements are at risk.
  • Who will actually be affected and how.
• Strategies for protecting trade secrets, customer relationships, and workforce integrity in light of California’s change:
  • What to do about existing noncompetes, nonsolicitation agreements, no-recruit agreements, confidentiality agreements, and others.
  • How to draft restrictive covenants going forward.
  • Alternatives to traditional restrictive covenants.
  • Other strategies for companies to consider.

If you are interested in observing, please contact me and my paralegal, Erika Hahn, to let us know.

Please note that attendance is limited. However, we plan to record the program and make it available afterward. The advantage to attending in-person is that you will be able to submit questions in the chat.