CVS Lawsuit Claims Non-Compete Clause in Employment Agreement Violates California Labor Law

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CVS Health Corporation and subsidiary CVS Pharmacy, Inc. face a proposed class action lawsuit that alleges the restrictive covenant agreement (RCA) that job applicants are reportedly required to sign as a condition of employment contains several provisions, including a non-compete clause, that are illegal under California law.

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The 29-page lawsuit was filed by a registered nurse in California who claims that her offer of employment was rescinded by CVS in 2024 because she refused to sign the RCA, which the case alleges contains multiple unlawful terms that are in “clear conflict” with the state’s public policy in favor of “open competition and employee mobility.”

Specifically, the suit shares, the RCA contains a clause that prohibits employees from soliciting CVS’s customers—including suppliers, agencies, healthcare facilities, providers and even prospective customers with whom the defendants may do business—to buy a product or service that competes with one offered by CVS for a 12-month period following the end of employment.

The case contends that this provision is “overly broad” and plainly infringes on open competition protected by California law, as former CVS employees would be barred from competing with any of its hundreds of subsidiaries and affiliates nationwide.

Moreover, the RCA includes an employee non-solicitation clause that precludes workers from hiring current CVS employees or contractors for their own enterprises for 12 months after the end of employment, the complaint says. The filing argues this provision is “anti-competitive, anti-employee” and unlawfully restrains trade because CVS and its subsidiaries and affiliates employ hundreds of thousands of workers across the country.

“[The plaintiff] and other similarly situated individuals would be foreclosed from speaking to any of these employees about working for their own ventures, which would undoubtedly dissuade them from engaging in their professions,” the CVS lawsuit asserts.

What’s more, by preventing communication with contractors in particular, CVS restricts workers’ ability to perform essential tasks at their own businesses after their relationship with the defendants has ended, the suit alleges.

“By way of this employee non-solicit clause, [CVS] intend[s] to restrain [the plaintiff] and other similarly situated individuals not just from hiring away Defendants’ employees, but from launching ventures that compete with Defendants’ businesses,” the case claims.

Similarly, a non-compete provision in the RCA effectively and unlawfully prohibits employees from working for CVS’s clients, customers, suppliers, healthcare entities and other business partners for 12 months following termination, the complaint contends. This clause—whose broad terms essentially bar employees from working for thousands of employers in the healthcare industry—significantly interferes with workers’ ability to find and obtain employment after leaving the defendants, the filing asserts.

The lawsuit further alleges that the RCA’s inventions assignment clause directly contravenes California’s Labor Code. According to the suit, the provision is unlawfully broad because it requires employees to assign any inventions—such as original works, designs, discoveries, ideas, trademarks or trade secrets—to the CVS companies, even if these works are created on an employee’s own time and are unrelated to the defendants’ business.

Per the case, the plaintiff owns a company called A1 Quality Healthcare Services, which provides education and resources for nurses, healthcare professionals and consumers. The woman claims that had she signed CVS’s RCA agreement, she would have been prevented from further developing her business and forced to give up her rights to nursing-related articles, templates and works she created for her company’s YouTube channel.

The complaint also alleges that CVS has unlawfully taken adverse employment action against the plaintiff and other applicants, including by refusing to hire them, for exercising their statutorily protected rights.

The lawsuit looks to represent anyone who was presented with the RCA as a condition of employment with CVS in California at any time in the past four years.

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