Legal Briefing: The Doctor Is Back In

Dr. Donald Golden brought a lawsuit against the California Emergency Physicians Medical Group claiming, among other things, racial discrimination. The parties agreed on the record to a settlement of the dispute, which included a clause providing that Golden would never again work for the medical group. The settlement agreement also provided that if it ever acquired a company that employed Golden, the medical group would have the right to terminate Golden’s employment without further consequence. 

Golden subsequently sought to back out of the settlement agreement, claiming that the “no employment” provision violated California Business & Professions Code Section 16600, which provides that “[e]xcept as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade or business of any kind is to that extent void.” Golden claimed that his entire settlement agreement had to be voided because the “no employment” restrained his ability to pursue his lawful profession.

The trial court found the settlement agreement enforceable, but the 9th Circuit reversed the decision, finding that a “no employment” term in a settlement agreement could potentially violate Business & Professions Code Section 16600 if it “substantially limited” a party’s ability to pursue their profession.  (Golden v. Cal. Emergency Physicians Med. Group, 2015 BL 99256, 9th Cir., No. 12-16514 (April 8, 2015)

IMPACT: Employers must be careful in drafting settlement agreements that involve “no employment” or “no re-employment” provisions to be sure they do not substantially restrict the former employee’s ability to work.