California Non-Solicit Clauses After Edwards and AMN Healthcare — What Still Holds Up

The California employment agreement most likely to land a company in restrictive-covenant litigation is not the one with a non-compete clause. Most California employers learned the hard way — usually in the Edwards era between 2008 and 2018 — that non-competes against employees are void under California Business and Professions Code §16600. The 2024 AB 1076 / SB 699 overhaul made that lesson stick. The non-compete column on the typical California employment contract is increasingly empty, or at least lawyered.

The non-solicit columns are not. Customer non-solicits, employee non-solicits, and no-hire provisions still appear routinely in California employment agreements — often drafted by out-of-state counsel who treat them as the lighter, safer cousin of the non-compete. That treatment was defensible in 2010. It has not been defensible since 2018, and it is increasingly risky after the 2024 statutory reforms.

This is the post-Edwards v. Arthur Andersen LLP (2008) 44 Cal. 4th 937 and post-AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal. App. 5th 923 framework — and the AB 1076 / SB 699 overlay — for understanding what restrictive covenants actually hold up in California.

Three categories of non-solicit — and why they aren't interchangeable

California courts (and California-licensed counsel) routinely separate non-solicit provisions into three operational categories. The distinction matters because each category has a different §16600 analysis.

1. Customer non-solicits

Restriction on the former employee soliciting the former employer's customers. Usually time-limited (12–24 months post-termination) and sometimes geographically scoped. The most common restrictive covenant in California employment agreements outside the non-compete itself.

2. Employee non-solicits

Restriction on the former employee soliciting the former employer's other employees to leave (a “no-poach of co-workers” provision). Often paired with the customer non-solicit in a single sentence.

3. No-hire / no-rehire provisions

Restriction on the employer (or its affiliates) from rehiring a separated employee, or restriction between two employers from hiring each other's people. Sometimes appears in settlement agreements, sometimes in commercial agreements between business partners.

Each category has a separate California enforceability analysis. Treating them as interchangeable — as most generic templates do — produces clauses that are either over-restrictive (and therefore unenforceable in California) or under-restrictive (and therefore commercially useless).

Customer non-solicits — the pre-2018 default and where Edwards moved it

California courts historically treated customer non-solicits more leniently than non-competes. The pre-Edwards line, anchored in Loral Corp. v. Moyes (1985) 174 Cal. App. 3d 268, held that a narrowly-drafted customer non-solicit — limited in duration, limited to customers with whom the employee had personal contact, and limited to soliciting them for competing business — could be enforced as a permissible protection of the former employer's customer relationships.

Edwards complicated that. The California Supreme Court in 2008 read §16600 strictly: contractual restraints on trade are void as to employees, full stop, except for the narrow §§16601–16607 exceptions (sale of business, dissolution, etc.). Edwards did not directly address customer non-solicits, but it rejected the “narrow restraint” doctrine that had supported Loral's analysis — and that left customer non-solicits in legal limbo.

California Court of Appeal panels have read Edwards differently since 2008:

• Strict application: Some panels have held that customer non-solicits violate §16600 in any form, because they operate as a partial restraint on the former employee's ability to compete. This is the AMN Healthcare reading.
• Carved-narrow application: Other panels and federal district courts have continued to apply a narrow-Loral analysis, enforcing customer non-solicits limited to (a) customers the employee personally serviced, (b) actual solicitation rather than mere acceptance of business, and (c) reasonable durations.

The split is real and unresolved. What is no longer defensible in California is the broad, generic customer non-solicit that prohibits the former employee from doing business with any of the former employer's customers for two years. That clause was suspect under Loral and is essentially dead after Edwards.

Employee non-solicits — what AMN Healthcare actually held

Before 2018, California courts generally enforced employee non-solicits. The reasoning rested on Loral: these provisions did not restrain the former employee's ability to compete, they restrained the former employee's ability to recruit. Different doctrinal box; different §16600 analysis.

AMN Healthcare changed that. The Fourth District Court of Appeal held that an employee non-solicit clause was void under §16600 because it restrained the former employee's ability to engage in their profession — namely, recruiting healthcare professionals. The court read Edwards as foreclosing the Loral framework for any restrictive covenant that operates to restrain trade, including employee non-solicits.

AMN Healthcare was a Court of Appeal decision, not a California Supreme Court holding, which means subsequent panels could in theory disagree. In practice they have not. Federal district courts applying California law have generally followed AMN Healthcare. The Northern and Central Districts have invalidated employee non-solicit clauses in motions to dismiss with regularity since 2019. The current consensus position is that general employee non-solicit clauses — those restraining the former employee from soliciting any employees of the former employer — are unenforceable in California.

Narrower employee non-solicits — limited to specific employees the former employee personally supervised, limited to a short duration, and limited to active solicitation rather than passive acceptance — remain arguable but are not safe. Drafting one and litigating it on a motion for preliminary injunction is an expensive way to find out whether a particular Superior Court judge will read AMN Healthcare narrowly.

No-hire provisions — between employers and in settlement agreements

No-hire provisions are restrictive covenants that operate against the employer rather than the employee. They show up in two main contexts: (1) commercial agreements between two employers (often appearing as “no-hire of each other's employees during the term of this Agreement and for X months after”), and (2) separation or settlement agreements between an employer and a departing employee.

California's §16600 analysis is less clean here because the affected employees often are not parties to the agreement. The leading authority, VL Systems, Inc. v. Unisen, Inc. (2007) 152 Cal. App. 4th 708, invalidated a no-hire clause in a commercial agreement on the grounds that it restrained the affected employees' ability to compete in their profession — even though they were third parties to the agreement.

After AMN Healthcare and AB 1076 / SB 699, the no-hire framework is even more hostile. Courts have read the §16600 prohibition to extend to clauses that operate as restraints on the affected employees' ability to compete — regardless of who the parties to the contract are. The 2021 federal antitrust enforcement against no-hire and no-poach agreements (DOJ guidance treating them as per se Sherman Act violations in some contexts) added a separate layer of risk.

The current practical position: no-hire clauses in California commercial agreements should be removed. No-hire clauses in settlement agreements with departing California employees should be removed. The risk-reward calculus on these provisions has flipped — the upside is small, the downside includes §16600.5 private-action exposure and potential federal antitrust scrutiny.

The §16600.5 overlay — what AB 1076 and SB 699 changed

The 2024 statutory reforms changed the analysis at the margins but did not change the core doctrine. Specifically:

• §16600.5(a) applies to “a contract that is void under this chapter,” which courts will read to include the same restrictive-covenant categories §16600 already prohibited — non-competes, customer non-solicits operating as de facto non-competes, employee non-solicits under AMN Healthcare, and no-hires under VL Systems.
• §16600.5(a) retroactivity reaches contracts signed before January 1, 2024. A pre-2024 employment agreement with an AMN Healthcare-style employee non-solicit is squarely within the statute.
• §16600.5(b) attorney fees are awarded to the employee or former employee who prevails in challenging the restrictive covenant. This is what makes the statute commercially meaningful — without fee-shifting, the cost of suit would dwarf the value of the case for most plaintiffs.
• §16600.5(c) choice-of-law override applies notwithstanding contractual choice-of-law clauses selecting other states' law. Employers cannot rely on a Delaware or Texas choice-of-law clause to enforce restrictive covenants against California-based employees.

The §16600.1(b) notice obligation — the February 14, 2024 deadline addressed in the AB 1076 piece — is more ambiguous as to non-solicits. The statute's text references “a noncompete clause” and “a contract containing a noncompete clause.” A court applying that language to a stand-alone customer non-solicit might read it narrowly (the clause is not a non-compete by its terms) or might read it broadly (the clause functions as a non-compete under AMN Healthcare). The conservative employer position is to send notice covering non-solicit clauses too, particularly for the broader employee non-solicit clauses that AMN Healthcare squarely treats as functioning restraints.

What still survives in California employment agreements

Stripping out non-competes, employee non-solicits, and most customer non-solicits leaves California employers with a question: what protective language can the employment agreement actually include?

Several categories remain enforceable and useful:

1. Trade secret protection under CUTSA

The California Uniform Trade Secrets Act (Cal Civ Code §§3426 et seq.) protects against actual or threatened misappropriation of trade secrets — defined as information that derives independent economic value from not being generally known and is subject to reasonable secrecy measures. CUTSA provides for injunctive relief, exemplary damages (up to 2× compensatory in willful cases), and attorney fees.

Employment agreements should explicitly identify categories of information the employer treats as trade secrets (customer lists with non-public pricing information, proprietary algorithms, manufacturing processes, etc.) and include a confidentiality provision that survives termination. This is broader and more durable than a customer non-solicit because it does not restrict the former employee's competition; it restricts the former employee's use of specific protected information.

2. Confidentiality and non-disclosure

Non-disclosure provisions for non-trade-secret confidential information remain enforceable in California, provided they do not operate as a de facto non-compete. The drafting principle: define what is confidential (with specificity), require non-disclosure during and after employment, but do not extend confidentiality to information that is generally known, lawfully acquired from third parties, or independently developed.

Confidentiality is the workhorse of the post-Edwards California employment agreement. It does most of the protective work that out-of-state employers think they are getting from non-competes and non-solicits.

3. Trade secret-anchored customer protection (narrow)

Where the former employer's customer list is itself a trade secret (i.e., the list contains non-public information about customer needs, pricing, contracts, decision-makers, etc., that is not readily available in the market), a CUTSA-anchored claim against the former employee for using the trade-secret list to solicit customers can substitute for a non-solicit clause. This is not a contractual restriction; it is a statutory limit on the use of misappropriated trade secrets.

The narrow construction is critical. A generic customer list — names and contact information that could be assembled from public sources, LinkedIn, trade directories — is not a trade secret. The protected list must contain non-public information whose secrecy provides competitive advantage.

4. Sale-of-business and partnership-dissolution exceptions

Cal Bus & Prof Code §§16601–16607 carve out specific contexts in which non-compete and non-solicit restrictions are enforceable: sale of substantially all assets of a business (§16601), dissolution of a partnership (§16602), and dissolution or member separation from an LLC (§16602.5). These exceptions are real and routinely applied.

The application to ordinary employment agreements is narrow. The §16601 sale-of-business exception requires that the restriction be incident to the sale — meaning the employee being restricted is also selling an ownership interest in connection with the transaction. Equity-holding employees in an M&A deal can be subject to enforceable non-competes; non-equity-holding employees in the same deal generally cannot.

5. Compensation-based incentives

California employers cannot force former employees not to compete, but they can structure compensation to make competition uneconomic. Retention bonuses with clawback provisions, deferred compensation that vests over time, and post-termination consulting arrangements with paid retention all create commercial incentives for the former employee to remain on positive terms with the former employer.

These are not restrictive covenants. They are compensation structures. Properly drafted, they survive §16600 because they do not restrict the former employee's conduct — they reward specific conduct (continued cooperation, deferred-comp vesting tied to non-disclosure compliance, etc.).

Practical drafting recommendations

For employment agreement templates that have not been updated since 2018, the redrafting work is significant. The principles:

• Remove the non-compete clause. If the template still contains one, replace it with §16600 acknowledgment language: “The Employee acknowledges that California law (Cal Bus & Prof Code §16600) generally voids non-compete restrictions and that nothing in this Agreement is intended to restrict the Employee's right to engage in a lawful profession, trade, or business after the termination of employment.”
• Remove generic employee non-solicit clauses. After AMN Healthcare, these are functionally void.
• Narrow or remove customer non-solicit clauses. If a customer non-solicit remains, draft it narrowly: limited to specific identified customers the employee personally serviced; limited to active solicitation; time-limited to 12 months or less. Accept that even the narrow version may be invalidated.
• Add or strengthen the confidentiality provision. Define confidential information with specificity. State that confidentiality survives termination indefinitely as to trade secrets and for a defined period (usually 3–5 years) as to non-trade-secret confidential information.
• Add explicit CUTSA acknowledgment language identifying categories of information the employer treats as trade secrets.
• Include a §16600.5(c) acknowledgment for out-of-state employers: California law applies to California employees regardless of choice-of-law clauses elsewhere in the agreement.
• Audit existing employees with pre-2024 agreements and send the §16600.1(b) notice (which the firm covered in the AB 1076 piece). Conservative scope: notice covers non-compete, customer non-solicit, employee non-solicit, and no-hire provisions.

The cultural shift

The California reset on restrictive covenants is not a momentary fluctuation. The legislative direction (AB 1076, SB 699, AB 2188, SB 497 — all in 2023) and the judicial direction (AMN Healthcare, Edwards, the trade-secret-focused appellate decisions) point the same way: California protects employee mobility aggressively, and contractual workarounds have a shrinking attic. Employers acclimated to other states' restrictive-covenant regimes — Texas, Florida, Delaware, New York — sometimes assume that creative drafting will preserve their pre-California restrictions. It usually will not.

The harder organizational question is what to do about it. The protective work that restrictive covenants used to do in California can largely be reallocated: to trade-secret protection, to confidentiality, to compensation structures, to careful onboarding of departing employees, and to the underlying business relationships themselves. The contracts that worked in 1995 do not work in 2026, but the protective objectives are achievable with current California-compliant tools.

Employers who have not refreshed their employment-agreement templates since 2018 — and many have not — should treat that work as overdue. The cost of a refresh is small. The cost of litigation over a stale non-solicit, with §16600.5 fee-shifting on the other side, is not.