The (Less-Than-Golden) State of Confidentiality Provisions in California

It is well known that California takes a dim view towards restrictive covenants in the workplace. Business & Professions Code Section 16600 prohibits employee non-compete agreements, stating that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” This statute has been read broadly and has been applied to both non-compete and non-solicitation provisions in employment contracts. AMN Healthcare, Inc. v. Aya Healthcare Servs., Inc., 28 Cal. App. 5th 923, 929 (2018).

Despite courts’ enthusiasm in applying Section 16600 to non-competes and non-solicits, courts have long held that confidentiality agreements do not violate Section 16600. Fowler v. Varian Assocs., Inc. (1987) 196 Cal. App. 3d 34, 44 (“[A]greements designed to protect an employer’s proprietary information do not violate section 16600.”); Neville v. Chudacoff (2008) 160 Cal. App. 4th 1255, 1270 (citations omitted) (“Section 16600 does not authorize employees to compete with former employers by stealing their confidential customer information.”) In recent years, however, courts have begun to re-evaluate this position and muddy the waters relating to the permissibility of confidentiality provisions. 

In AMN Healthcare, while the court’s analysis focused on the invalidity of a non-solicitation provision, it also suggested that a confidentiality provision in the same agreement would be invalid to the extent the restriction prevented the employee from engaging in their profession. 

Two years later, in Brown v. TGS Mgmt. Co., LLC, 57 Cal. App. 5th 303 (2020), as modified on denial of reh'g (Nov. 12, 2020), the court invalidated a confidentiality provision as being so overbroad that it was effectively a non-compete. The agreement in Brown prohibited the use of confidential information, which it defined as “information used or usable in, or originated, developed or acquired for use in, or about or relating to, the Business,” while the “Business,” in turn, was defined to include “without limitation analyzing, executing, trading and/or hedging in securities and financial instruments and derivatives thereon, securities-related research, and trade processing.” In other words, the agreement said that any information usable in the entire securities industry could not be used by the employee outside the scope of their employment for the employer. The Brown court found that the agreement, as written, would make it impossible for the employee to work in the securities industry and therefore had the effect of a non-compete. Accordingly, the court invalidated the agreement under Section 16600. Significantly, however, the court recognized that a “properly drawn confidentiality agreement which preserves an employee's right to compete” would not run afoul of Section 16600.

While Brown initially was viewed as a somewhat anomalous decision driven by unique and extreme facts, two more courts have recently followed suit and invalidated confidentiality provisions under Section 16600. 

In BBBB Bonding Corp. v. Pilling-Miller, No. H050703, 2024 WL 2102501, at *3 (Cal. Ct. App. May 10, 2024), an unpublished decision, the court found a provision “prohibiting disclosure or use of any information concerning [ ] customers would make it seemingly impossible for [former employees] to compete” and thus violative of Section 16600, even though the agreement did not prohibit competition on its face. Similarly, in 3D Systems, Inc. v. Wynne, 2025 WL 886958 (S.D. Cal. Mar. 20, 2025), the court invalidated a confidentiality provision that broadly prohibited the employee from using any information about materials or supplies used in the industry, as well as about current and potential suppliers and resellers. While both cases were similar to Brown in holding that a very broadly worded confidentiality provision can violate Section 16600, the 3D Systems court went a step further. The 3D Systems court appeared to bar any confidentiality provision that was not limited to trade secrets, finding that the employer “may not preclude its ex-employees from using information that is confidential but not a trade secret.” If upheld, such a holding would stand in stark contrast with the line of cases, including Brown, holding that confidentiality provisions are enforceable even if they are not limited to trade secrets. 

While these cases have alarmed employers, other courts have continued to enforce confidentiality agreements post-Brown. Importantly, courts have recognized that even broad provisions remain generally enforceable so long as they are not so overbroad as to prohibit competition. 

Most recently, in Olson v. World Fin. Grp. Ins. Agency, LLC, 2025 WL 1101520 (N.D. Cal. Apr. 14, 2025), the court upheld a confidentiality provision that prohibited the use, dissemination, or disclosure of confidential or trade secret information. The court noted that this provision was “broad, [but] not so broad [as] to be void under section 16600,” distinguishing the provision from those where the language “explicitly prevented the employee from rendering services based on [ ] confidential information.” Likewise, in Galderma Lab'ys, L.P. v. Tisckos, 2024 WL 2208096 (C.D. Cal. Mar. 29, 2024), an employment agreement’s confidentiality provision was upheld despite the court’s view that it was not “‘narrowly tailored’ to the protection of [] trade secrets,” because it “would merely prevent [defendant] from disclosing to his subsequent employer . . . Confidential Information, like customer, vendor, and supplier lists.” Courts have also looked to see if, in practice, the employee has actually been prohibited from competing through legitimate means in evaluating whether the confidentiality agreement violates Section 16600. Such an inquiry requires the employee to explain what information they are being prohibited from using and how it affects their ability to compete.

While the exact parameters of a permissible confidentiality agreement remain unclear, it is apparent that California courts are increasingly scrutinizing confidentiality agreements and their potential impact on an employee’s post-employment mobility. Employers should carefully craft these agreements to identify confidential information with specificity and avoid generalized descriptions which can be seen as overbroad restraints on employee mobility. Employers should also continue to be on the lookout for other pitfalls in drafting confidentiality provisions, including attempts to invoke the increasingly precarious “trade secret exception” to non-competes and non-solicits.