Appellant, a client of respondent computer consulting firm, sought review of a judgment from the Superior Court of Orange County (California), which awarded damages to the consulting firm on a claim for breach of contract.
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Overview
The parties’ contract provided that the client would not hire any employee of the consulting firm for 12 months after the contract’s termination, subject to a liquidated damages provision. Within that period, the client hired an employee of the consulting firm who had not performed any work for the client and who had not been employed by the consulting firm at the time the client’s contract was performed. The court held that the no-hire provision was unenforceable as a matter of law. Although the contract was an agreement between employers, rather than a covenant not to compete, the court concluded that enforcing the clause would unfairly limit the mobility of the employee. The court stated that, in general, contracts precluding a former employee from obtaining new employment with a competitor were invalid under Bus. & Prof. Code, § 16600. Reasonably limited restrictions that tended more to promote than restrain trade and business did not violate § 16600, but the challenged provision of the parties’ contract was much broader than necessary to protect the consulting firm’s interests and was outweighed by the policy favoring freedom of mobility for employees.
Outcome
The court reversed the trial court’s judgment.