UPDATE: As of January 1, 2024 all non-compete agreements and covenants not to compete are unenforceable and essentially illegal in the State of California. Any employer who attempts to require a worker to sign any such agreement, paragraph, clause or phrase will be exposed to extensive civil and in some cases criminal exposures.
California employers must notify in writing all employees, past and present, by February 14, 2024 that any non compete contract, clause or agreement they have entered into or signed in the past (and specifically from 1/1/2022) is void. Employers are required to notify these employees in writing at their last known address in the employee file. It is ok to email them, but employers are required to send physical notice through the mail (certified mail with receipt or attempt to deliver notice is highly recommended).
There is no specific language or clause you must communicate under the law. Simply inform any employee who has signed a non-compete agreement of any sort in the past (except a trade secret agreement) of the name of the contract they signed, or the specific provisions, paragraphs or clauses contained within any employment-related document that they are void, no longer enforceable and that you will take no action to enforce them going forward.
California is a unique state when it comes to non-compete agreements and yet non-compete language means everything for a healthcare company. Agreements that restrict when and where an individual can work after leaving a company — known as non-compete or non-competition agreements — are highly scrutinized by courts. Why, because the right to earn an income is considered very beneficial not only to the individual but to the success of society itself. While our courts generally do not favor agreements of this type, they are allowed when carefully drafted.
One healthcare company realized the results of careful drafting when a court upheld a non-compete agreement that ultimately resulted in a $6.89 million jury verdict in favor of the healthcare company.
The lawsuit was brought after five employees left Horizon Health Corp., a subsidiary of Psychiatric Solutions, which was acquired by Universal Health Services and how the claims relating to those employees fell into court in complaints filed by UHS. The employees later went to work for another healthcare company, Acadia Healthcare — one that UHS considered competition.
When UHS learned of the collective new positions, the company brought claims in federal court. The complaint named the five former employees as well as Acadia Healthcare as defendants and including claims that the defendants not only violated the non-compete agreements that they had voluntarily signed, but that they misappropriated confidential information. The non-compete agreement was upheld in court and the jury believed the claims made by the former employer, resulting in an almost unprecedented $6.89 million award.
While non-compete language means everything for a healthcare company in many instances, unfortunately, non-compete agreements that were not carefully drafted and considered invalid for one reason or another — more often than not for being overly broad — can lead to serious problems for medical business companies that thought they were protecting their interests when drafting the agreements.
