JMBM IP Update: Employee and Customer Non-Solicitation Agreement Invalid

The California courts have recently held that a seller’s agreement not to solicit employees of the buyer is too broad under California Business and Professions Code Sec. 16601, and thus not enforceable. In Strategix, Ltd. v. Infocrossing, _ Cal. Rptr. 3d _ (4th Dist. 2006), the court said any such restrictions on employee solicitation must be limited to the employees and customers of the sold business and not more broadly, such as employees and customers of the buyer that are unrelated to the sold business. Because the non-solicitation provision in the purchase agreement was overly broad, the court refused to enforce it even against solicitation of the sold business’ employees and customers. If you are a party to a non-solicitation agreement, we suggest that you have us review it and advise you as to its validity. Perhaps if the provision is possibly too broad, it may be possible to amend it.

For more information, contact Robert Braun at (310) 201-3517 or RBraun@jmbm.com.