Trade Secrets

AMN Healthcare v. Aya Healthcare: California's Ban Reaches the Employee Non-Solicit

A California appellate panel voided an employee non-solicitation covenant under section 16600 and openly questioned the survival of Loral v. Moyes after Edwards.

July 21, 2025
Travel nurses walking through a hospital corridor
A fight between travel-nurse staffing rivals turned a routine non-solicitation clause into a void restraint on trade. Shutterstock
Educational content, not legal advice. This article explains general legal concepts. It does not create an attorney–client relationship. For your specific situation, consult a licensed attorney.

AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., No. D071924 (Cal. Ct. App. Nov. 1, 2018), reported at 28 Cal.App.5th 923, is the decision that pulled employee non-solicitation covenants into the gravitational field of California’s non-compete ban. For three decades employers had relied on Loral Corp. v. Moyes (1985) for the proposition that a clause forbidding a departing employee from recruiting former colleagues was a permissible, “reasonable” restraint. The Fourth Appellate District, Division One, affirming a judgment for the defendants, held that such a provision violated Business and Professions Code section 16600 — and went further, questioning whether Loral’s reasonableness analysis can stand at all after the California Supreme Court’s text-first ruling in Edwards v. Arthur Andersen. The case is doubly instructive for trade-secret practitioners because it also rejected the plaintiff’s attempt to dress the same restraint in trade-secret clothing.

At a glance

  • Case: AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., No. D071924 (Cal. Ct. App.); reported at 28 Cal.App.5th 923
  • Decision: November 1, 2018, Fourth Appellate District, Division One
  • Court below: San Diego County Superior Court; summary judgment for defendants
  • Statute and authority: Cal. Bus. & Prof. Code § 16600; Edwards v. Arthur Andersen LLP, 44 Cal.4th 937 (2008); Loral Corp. v. Moyes, 174 Cal.App.3d 268 (1985)
  • Core holdings: (1) The employee non-solicitation provision was an unlawful restraint of trade void under section 16600; (2) the panel doubted the continued validity of Loral’s reasonableness standard after Edwards; (3) AMN could be enjoined under the unfair competition law from enforcing the void provision; (4) the recruiters’ knowledge of nurse identities was not a protectable trade secret on this record

A rivalry among recruiters

AMN and Aya compete to supply healthcare facilities with temporary clinicians, especially “travel nurses.” The individual defendants were travel-nurse recruiters who left AMN for Aya, where they did the same work. While at AMN they had signed Confidentiality and Non-Disclosure Agreements (CNDAs) containing a provision barring them, for at least a year after leaving, from soliciting any AMN employee to terminate their relationship with AMN. After the recruiters departed and began recruiting at Aya, AMN sued them and Aya for breach of the CNDA, misappropriation of trade secrets, and related claims; the defendants cross-claimed and moved for summary judgment.

The trial court granted summary judgment to the defendants, declared the non-solicitation provision void under section 16600, enjoined AMN from enforcing it against any former employee, and awarded the defendants roughly $169,000 in attorney fees. The Court of Appeal affirmed across the board. What elevates the opinion above a routine staffing dispute is the reasoning the panel used to get there.

The restraint reframed as what it was

AMN’s provision did not, on its face, forbid the recruiters from competing. It forbade them from soliciting AMN’s employees. But the panel looked at what the clause actually did to these defendants. Their profession was recruiting travel nurses. A clause barring them from soliciting AMN’s travel nurses for a year necessarily restrained them “from engaging in their chosen profession” — because soliciting and recruiting nurses was the profession. The label “non-solicitation” did not insulate the clause; the court asked the Edwards question, whether the provision restrained the individuals from practicing a trade, and answered yes.

That move is the heart of the decision. It converts a clause that looks like a modest loyalty obligation into a void restraint whenever the restrained conduct overlaps with the employee’s livelihood. For recruiters, salespeople, and others whose work is relationship-building, an employee non-solicit can function as a partial non-compete — and Edwards leaves no room for partial non-competes.

The shadow over Loral v. Moyes

The more consequential passage is the panel’s treatment of Loral Corp. v. Moyes. Loral had upheld an employee non-solicitation covenant in 1985 by applying a reasonableness test, reasoning that such a clause only slightly affects the restrained employee and serves the employer’s interest in a stable workforce. AMN’s entire defense rested on Loral.

The AMN panel declined to follow it. It reasoned that Loral’s reasonableness approach rested on the same kind of judicial balancing that Edwards had repudiated when it rejected the Ninth Circuit’s narrow-restraint exception. After Edwards, the court explained, section 16600 is read according to its text, which voids restraints on a trade or profession without a reasonableness override. The panel concluded it was “doubtful” that Loral remained good law and held that, in any event, the provision before it was void under a straightforward application of the statute. The court did not need to formally overrule Loral — one Court of Appeal panel cannot bind another — but it signaled to employers that the old safe harbor was no longer safe.

The aftershocks were immediate. Federal district courts in California, citing AMN, began finding employee non-solicitation provisions void as a matter of course, and the decision has become the standard reference for the proposition that California’s hostility to restraints reaches well beyond classic non-competes. The question whether Loral retains any vitality — and for which clauses — is now one of the most actively litigated issues in California restrictive-covenant law.

The trade-secret backstop fails too

Because employers often pivot from contract to trade-secret theories when a covenant falls, the panel’s treatment of AMN’s misappropriation claim matters as much as its section 16600 holding. AMN argued that the recruiters carried away protectable trade secrets — essentially the identities and contact information of the travel nurses in AMN’s database. The court rejected the theory on this record, concluding that the asserted information did not qualify as a trade secret. The identities of nurses available for temporary assignments were the kind of information readily ascertainable in a competitive staffing market, not the product of secret, value-conferring effort. A plaintiff cannot resurrect a void non-solicit by relabeling ordinary industry contacts as trade secrets.

For litigants, the lesson is that the trade-secret claim must rest on genuinely secret, particularized information — protected processes, nonpublic compilations, pricing models — not on the bare fact that a departing employee knows whom to call.

Open questions

The decision left meaningful uncertainty. First, AMN did not categorically declare every employee non-solicitation clause void; its holding turned on defendants whose profession was the very activity restrained, leaving room to argue that a non-solicit imposed on workers whose jobs do not involve recruiting may be analyzed differently. Second, the panel doubted but did not overrule Loral, so a formal resolution of Loral’s status awaits the California Supreme Court or the Legislature. Third, AMN addressed employee non-solicitation, not customer non-solicitation, and the extent to which its logic sweeps in customer non-solicits remains contested. Finally, the 2024 statutory amendments (Bus. & Prof. Code §§ 16600.1 and 16600.5) add notice obligations and extraterritorial reach that interact with AMN’s reasoning in ways not yet fully tested.

Implications

  • Labels do not control. A provision called a “non-solicitation” agreement is analyzed for what it does; if it restrains the employee’s trade, it is treated like a non-compete and voided.
  • Loral is no longer a reliable shield. Employers relying on Loral v. Moyes to defend employee non-solicits in California are litigating against a strong current of contrary authority.
  • Recruiting and sales roles are most exposed. Where the restrained conduct is the employee’s actual job, the clause is most vulnerable under AMN’s reasoning.
  • Trade-secret theories need real secrets. Recasting ordinary industry contacts as trade secrets will not salvage an unenforceable covenant.
  • Enforcing a void clause carries risk. AMN was enjoined from enforcing the provision and ordered to pay the defendants’ fees — attempting to enforce a void restraint can itself generate liability.

Frequently asked questions

Did AMN make all employee non-solicitation agreements illegal in California? Not in so many words. The court voided the specific provision before it because it restrained the defendants’ profession, and it cast serious doubt on Loral v. Moyes. Many courts have read AMN broadly, but its express holding is tied to its facts, and the outer boundary remains contested.

Does AMN overrule Loral v. Moyes? No. One Court of Appeal panel cannot overrule another. AMN declined to follow Loral and called its continued validity “doubtful,” but a definitive resolution would have to come from the California Supreme Court or the Legislature.

Could AMN have protected its nurse contacts as trade secrets instead? Not on this record. The court found the asserted nurse identities and contact information were not protectable trade secrets, so the misappropriation theory could not substitute for the void covenant.

Authorities and sources