Job Change in CA? How to Avoid a Lawsuit

Transitioning from one employer to another, particularly within the same industry, can introduce significant legal and practical challenges. California law supports employee mobility and your right to change jobs, but the process is not as risk free as you may think. Former employers will seek to protect their business interests, and employees must understand their own legal responsibilities to avoid unnecessary conflict and expense.

Reviewing how California courts have addressed some complex job changes can help employees better understand and avoid common disputes that arise during a transition between companies within an industry. By understanding the lessons from these disputes, you can learn how to protect your career, maneuver your transition smoothly, and stay out of court. 

Noncompete Agreements and Your Right to Work

California has a long and consistent history of championing an employee’s right to work wherever they choose. The state’s laws are built on the idea that limiting your ability to find a new job is an unfair burden. Business and Professions Code section 16600 protects this right, rendering almost all noncompete agreements invalid within the state.

The Case That Set the Standard: Edwards v. Arthur Andersen LLP

In Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, the California Supreme Court held that noncompete agreements are unenforceable in California in most circumstances. This case involved a tax manager who had signed an agreement with his firm, Arthur Andersen, which contained a noncompete clause. This agreement said he could not work for or poach certain clients for a set time after leaving the firm. When the firm was sold, Edwards was offered a job with the new acquiring company, but only if he signed off on a similar restrictive document with the new company and in exchange Arthur Andersen would release him from the noncompete clause. He refused, his job offer was withdrawn, and he sued.

The California Supreme Court came down firmly on the side of Edwards. It made it clear that noncompete agreements are not allowed, even if they are written to be narrow or only partially restrict an employee’s work. The court’s decision was a huge win for employee mobility. It confirmed that unless a situation falls into a very small number of legal exceptions, like if the contracting party is selling an interest in a business, an employer cannot stop you from working for a competitor.

The lesson from the Edwards case is simple but powerful. An employee’s right to find new work is broadly protected in California. In most cases, an employee cannot be legally blocked from joining a competitor, regardless of what a noncompete agreement that an employee signed might say.

What’s a Trade Secret vs. Your Own Skill?

While you are free to compete, you are not free to take your old company’s secrets with you. This is where the lines can be unclear and many legal fights begin. A company can protect its confidential information, like its client lists, secret formulas, or internal business plans. The difficulty is understanding the difference between a protected “trade secret” versus general skills and industry knowledge you gained on the job.

Noncompete disguised as Nonsolicitation: AMN Healthcare, Inc. v. Aya Healthcare Services, Inc.

The case of AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923 provides an example of a noncompete that reads like a different, and legal, restriction on employee mobility. The dispute in that case involved travel nurse recruiters who left one company, AMN, for a rival, Aya. AMN sued, claiming the recruiters violated their agreements by trying to convince other AMN employees to come work at Aya.

The court decided that this agreement, which was designed to stop solicitation, was an illegal restraint on trade, much like a noncompete clause. The court noted that the recruiters’ job was all about their personal networks and contacts. Forbidding them from using those contacts would effectively prevent them from doing their job.

This case shows that California courts will examine the real-world effect of an agreement. It doesn’t matter if it is called a confidentiality agreement or a nonsolicitation clause. If its main function is to keep you from working in your field, a court will likely find it unenforceable. The court decided the recruiters’ knowledge of other nurses was a fundamental part of their professional skill, not a trade secret owned by AMN. As this case demonstrates, these situations are often fact dependent, and it is therefore critical to have legal counsel advise you whether you’re considering a new employment opportunity or looking to leave your current employer.  

How to Make a Clean Break and Avoid Trouble

Legal fights are draining, both financially and emotionally, and can put a black mark on your professional record, even if you acted with the best of intentions. By taking a few common-sense steps, you can reduce the chance of a dispute.

1. Review What You’ve Signed
   Before you start interviewing, dig up and read through any paperwork you signed with your employer. Check your employment contract, NDA, and any other documents that spell out your post-employment duties. Knowing your obligations is the first step to meeting them. If the legal language is unclear, consider getting advice from an attorney.
2. Return Every Piece of Company Property
   This is perhaps the most important action you can take to protect yourself. Before you walk out the door for the last time, do a thorough sweep and return everything that belongs to the company. This means the obvious things, like your laptop, work phone, and ID badge.
3. It also, and more importantly, means all digital assets. Make sure you have returned all company files. This includes work product you created for the company. You should also permanently delete any company data from your personal computer or phone. Do not keep any access to the company’s network, cloud storage, or email. The urge to keep a client list or a project template “just in case” is a mistake that could land you in serious legal trouble.
4. Keep Confidential Information Confidential
   When you are interviewing for a new position or once you have started at a new company, do not share any secrets from your last job. This applies to financial data, marketing plans, customer details, or internal operations. Honoring this duty not only keeps you out of legal hot water but also shows your new employer that you are a professional who can be trusted.
5. Act Like a Professional
   Work diligently until your last day, give your employer sufficient notice, and help with the transition of your duties. Leaving on good terms makes it far less likely that your old company will look for reasons to cause trouble down the line. And a respectful exit can help preserve valuable professional relationships.

It’s Your Right to Move Between Companies

California law gives you a lot of freedom to pursue new job opportunities. The courts have repeatedly backed up your right to change employers and use your talents to grow your career. But with that freedom comes the duty to act ethically and respect your legal obligations.

By learning from the legal fights of others and taking simple, proactive steps, you can make your next career move a success. The best approach is to be upfront and thorough. Return all company property, understand the agreements you are bound by, and conduct yourself professionally. This will let you focus on what’s next, without worrying about a legal battle from your past.

And of course, if you have any questions or specific concerns, seek counsel. 

Micah Nash

Micah Nash is an experienced business litigator with over fifteen years of experience representing clients in a broad range of commercial disputes.  Micah understands that sound legal counsel extends beyond issue-spotting and pre-packaged litigation strategies.  He endeavors to identify his clients’ goals, anticipate possible adverse developments, and craft effective solutions as quickly and efficiently as possible.  He offers straightforward legal advice and works to ensure efficient results.  In all of his cases, he is committed to preventing litigation costs from spiraling out of control. Learn more here.