In most states, noncompetition agreements are enforceable if reasonably necessary to protect trade secrets
and other confidential information. California, however, has a long standing public policy generally prohibiting
noncompetition agreements. This policy is embodied in California Business & Professions Code section 16600
(“Section 16600”). Limited exceptions are set forth in subsequent sections of the California Business &
Professions Code, such as the “sale of business” exception in Section 16601.
In VL Systems v. Unisen, Inc.,[fn1] the California Court of Appeal found that an employee no-hire provision in a
business-to-business computer consulting agreement was overbroad and unenforceable. The holding was based in part on the public policy established by Section 16600. As drafted, the no-hire clause in the consulting agreement purported to prohibited the client from hiring: (1) employees of the consulting company that did not
provide any consulting services to the client; and (2) individuals that were hired by the consulting company
after its engagement by the client ended.
The Court of Appeal, however, was careful to point out that its decision was limited to the facts of the case, and
that a “more narrowly drawn clause limited to soliciting employees who had actually performed work for the
client might pass muster.” [fn2]
Below is a summary of the facts and analysis set forth in the VL Systems case, and other relevant California
cases addressing employee no-hire and non-solicitation clauses.