Non-Compete Agreements and Wrongful Termination in Violation of Public Policy in California

The recent Silguero v. Creteguard, Inc., appellate decision from the Second Appellate district (Los Angeles County) is instructive on a less common issue arising out of the attempt by an employer to follow a non-compete agreement that the subject claimant signed with his former employer. In that case, shortly after claimant was terminated by his first employer, with whom he signed the non-compete agreement, she found employment with the defendant company. The first employer contacted the defendant and requested “cooperation” in enforcing the non-compete. As a result, claimant’s employment was terminated by the defendant.

While the new employer had the best intentions of acting honestly and ethically toward the other company (previous employer) and trying to do the right thing, even though they suspected that the non-compete agreement might be unenforceable in California, the court still found that the future employer was liable for wrongful termination. The court’s analysis largely relied on a very significant, and long standing public policy in California that protects the important legal right of persons to engage in businesses and occupations of their choosing and discourages circumvention of freedom to seek employment anywhere in the state.

The Court of Appeal further reminded the defendant-employer that a competitor may solicit another competitor’s employees if they do use unlawful means or engage in acts of unfair competition. Thus, no actionable wrong is committed by a competitor who hires away his competitor’s employees who are not under contract, as long as the inducement to leave the first employer is not accompanied by unlawful conduct.