"No-Hire" Agreement Is Unenforceable in California

Consultant firms often assign consultants to work closely with clients. Sometimes consultant companies include "no hire" agreements, under which the customer is precluded from hiring consultant's employees for a period of time. In VL Systems, Inc. v. Unisen, Inc., the court of appeal held that such a no-hire agreement was unenforceable in California as an illegal non-compete. The court left open the possibility that a more narrow agreement might be enforceable. However, the fact that the consultant company's agreement made it illegal to hire any of the consultant's employees - even ones never assigned to work for the customer - rendered the agreement overly broad and unenforceable.

DGV