Biotech Employer Learns California Law Follows the Contract Across State Lines

Why It Matters

The ruling shows that a California choice‑of‑law provision can transform routine restrictive‑covenant enforcement into a federal‑style liability, exposing companies to damages and fee‑shifting even when employees never worked in California.

Key Takeaways

• California choice‑of‑law clause makes nonsolicits void under §16600.
• NC court upheld employee’s claim despite work never performed in California.
• Employers risk damages and attorney fees when enforcing invalid nonsolicits.
• Audit contracts for outdated choice‑of‑law clauses to avoid liability.
• §16600.5’s extraterritorial reach applies regardless of contract signing location.

Pulse Analysis

Restrictive covenants such as non‑competes and nonsolicitation agreements have long been a battleground between states that protect employer interests and those that champion worker mobility. California, through Business & Professions Code §16600, outright voids any clause that restrains a lawful profession, and §16600.5 adds a private right of action for employees harmed by enforcement attempts. The BioSkryb case illustrates how a seemingly neutral choice‑of‑law provision can import California's strict anti‑restraint regime into jurisdictions like North Carolina, where courts already view such covenants skeptically. This cross‑state application underscores the growing importance of contract geography in employment law.

For companies with workforces spread across multiple states, the decision sends a clear signal: the mere inclusion of a California choice‑of‑law clause can expose the firm to statutory damages and attorney‑fee awards, even if the employee never set foot in California. Section 16600.5’s extraterritorial language overrides the traditional presumption against applying state law beyond its borders, meaning that any attempt to enforce a void restraint triggers liability wherever the employee is based. HR leaders must therefore reassess the risk profile of their standard employment and confidentiality agreements, especially legacy documents drafted before recent court trends.

Practical steps include conducting a comprehensive audit of all template agreements to identify and remove outdated choice‑of‑law clauses, replacing them with neutral or jurisdiction‑specific language that aligns with the company's operational footprint. Companies should also consider adding carve‑outs for states that prohibit certain restraints, and provide clear guidance to legal counsel on the enforceability landscape. As more courts follow California’s lead, proactive contract management will become a critical component of risk mitigation for biotech firms and other multistate employers.