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Non-Compete Clauses Thrown Out In California
Posted by
kdawson
on Fri Aug 08, 2008 10:45 AM
from the what-thou-wilt dept.
from the what-thou-wilt dept.
drfuchs writes "If you signed an employment agreement in California, any non-compete clause in it is null & (void*), says the state Supreme Court of California (ruling PDF). Better still, the San Francisco Chronicle opines that the US Federal courts are likely to fall in line with the decision in the way they interpret California law. (Most other states still have non-compete laws on the books and it's not clear this ruling will affect them.) Turns out it wasn't a high-tech case at all, but a CPA who had worked for the accounting firm Arthur Anderson (now disgraced due to their complicity in the Enron case)."
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Apple: Former IBM Exec Ordered To Stop Working For Apple 270 comments
tom_guyette writes "ComputerWorld reports a federal judge has ordered former IBM executive Mark Papermaster, recently hired as Apple's vice president of hardware devices engineering, to stop working for Apple. The judge's ruling is based on a motion for preliminary injunction made by IBM, which states Papermaster's new job violates a non-compete agreement he signed in 2006. In response, Papermaster asserted to the court that 'Nothing about his new job will implicate any trade secrets from IBM.'"
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Disgraced Arthur Anderson (Score:5, Insightful)
Complicity? How soon we forget! Arthur Anderson is disgraced because when informed of a federal investigation into their complicity with Enron, they immediately shredded all the relevant documents. People only avoided going to jail by claiming they thought shredding documents before a federal investigation was legal. For some reason ignorance of the law is an acceptable accuse for white-collar crimes. Arthur Anderson should have had its corporate charter revoked and those involve should be sitting in jail. It was a travesty of justice that they got away with only a disgracing.
Re:Disgraced Arthur Anderson (Score:5, Insightful)
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Re:Disgraced Arthur Anderson (Score:4, Insightful)
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Re:Disgraced Arthur Anderson (Score:5, Insightful)
It seems that having Arther Anderson on your resume would be the disqualifying point.
This makes little sense. Using your logic, working for a failed software firm should disqualify one for further software employment. I would wager that a fair number of the rank and file had no idea what was going on at Enron, even if they were assigned to the case, and do not to deserve to be labeled negatively just because of bad decisions higher in the company.
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Re:Disgraced Arthur Anderson (Score:5, Funny)
Using your logic, working for a failed software firm should disqualify one for further software employment.
If you worked on Daikatana, then I would say this should apply, yes.
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Re:Disgraced Arthur Anderson (Score:5, Funny)
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Re:Disgraced Arthur Anderson (Score:5, Insightful)
Where have you been? Anderson imploded after Enron. The investigators of the Anderson-Enron probe decided to charge Anderson as a COMPANY instead of the 15 or so individuals involved. This triggered a cascade of Major clients leaving Anderson accounting, causing the Big Accounting Five to become the Big Accounting Four.
Thousands of people laid off in Chicago. Besides the direct Anderson workers, the hundreds of supporting companies down to the janitorial level had to layoff thousands.
http://news.bbc.co.uk/1/hi/business/1917598.stm [bbc.co.uk]
It's really easy to say Off-with-their-heads without realizing the post-anarchy of such an action.
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Re:Disgraced Arthur Anderson (Score:5, Insightful)
It's really easy to say Off-with-their-heads without realizing the post-anarchy of such an action.
Are you saying that companies should be able to get away with this crap because punishing them would hurt a bunch of people? That's screwed up.
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Re:Disgraced Arthur Anderson (Score:5, Insightful)
You're absolutely right. Clearly no large companies should ever be punished for malfeasance when so many jobs will be lost as a result. It is obviously entirely inappropriate to hold companies responsible for ensuring that the activities pursued by said companies are carried out in a legal and ethical manner. That would be absurd. I mean, let's not even get in to even more ridiculous things like letting major companies sporting failed business models actually fail when we can just go in there and prop those models up with tax monies!
P.S. Won't somebody please think of the janitors?
P.P.S. It's easy to conveniently "overlook" blatantly unethical practices without realizing the post-anarchy of such an action. (i.e. You're tracing the blame to the wrong end here)
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Re:Disgraced Arthur Anderson (Score:5, Informative)
Well, as I recall Arthur Anderson had their CPA licence revoked (federal and state), they lost all their clients, layed off 85,000 employees and are now just a series of zombie companies which are effectively dead (no clients). W/o a CPA licence and no clients, it's merely a technicality that their corporate charter isn't revoked (the government taskforce noted that it didn't want to waste it's money going the final step given the company was effectively defunct already).
Perhaps you are one of those that probably are miffed that David Duncan (the lead auditor for Enron) isn't sitting in jail. For a while, it seemed like he would be, but the Supreme Court overturned the obstruction of justice conviction of the company. I think this was overturned by the Supreme Court citing among other things it didn't think it was actually illegal to shred documents unless there was a court order preventing it and he had a legal opinion in hand to that effect that backed him up.
Yeah that's probably not justice, but the government didn't think it could win that case either given the laws in effect at that time. Now we have Sarbox, unless you are lobbying for ex-post facto laws, unfortunatly, we'll have to realize that's the problem with a linear time continuum... live and learn.
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Re:I bet... (Score:5, Insightful)
The obvious difference being, of course, that the Arthur Andersen was shredding to keep themselves out of jail while the ISP is shredding to keep you out of jail.
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Re:I bet... (Score:4, Interesting)
Wow, an AC comment that is sane, right, and properly contradicts an AC troll. Mod parent up!
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Re:I bet... (Score:5, Insightful)
The difference is that AA (and any accounting/auditing firm) is supposed to be keeping accurate records for reporting to the public (including 'The Man') whereas we hope the ISPs are protecting our privacy. We denizens of the 'Net are private citizens who have no requirement to report our activities to investors or government (aside from income for tax purposes), but AA must make those reports.
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Re:I bet... (Score:5, Insightful)
It's a completely apples to oranges comparison. Destroying logs periodically isn't illegal. Destroying them only becomes illegal if one has been issued a subpoena for them and possibly if one has been informed of a relevant investigation or one expects the other things to be coming. If you're doing any of those things, you're definitely toying with things best not toyed with.
In the case of AA they shredded the documents specifically in response to the investigation. Which would be illegal whether or not they were specifically likely to be charged.
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Pointer (Score:5, Funny)
...any non-compete clause in it is null &(void*),...
So what does the address of a void pointer have to do with all this?
Re:Pointer (Score:5, Funny)
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Re:Pointer (Score:5, Funny)
well if it survives the compiler, it's just a glorified memset to 0.
null = 00000000
null &(void*) can be anything
& = bitwise and
so always equals 00000000.
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Federal Courts (Score:5, Informative)
Federal courts are obligated, when applying state law, to follow the highest court of the State (though, of course, they can rule that that law is unenforceable because it conflicts with superceding provisions of federal law.)
Null = Void (Score:5, Funny)
Random trivia: I've been told by a professor of law and classicist that "null" and "void" mean the same thing (in a legal sense), but are simply different languages. Putting them together is repetitive and unnecessary, although strangely customary.
I thought that interesting enough to share.
Re:Null = Void (Score:5, Informative)
I beg to differ. If something is voided, it means whatever it is exists, but is no longer in effect. If something is nullified, it means that whatever is was no longer exists. So declaring it null and void means, that it no longer exists and is no longer in effect.
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It's the French! (Score:5, Interesting)
This practice dates back to the Norman invasion, when French was the language spoken by the ruling class in otherwise English speaking, er, England :)
During court proceedings, they'd use both languages, the tradition caught on and stayed with us through common law terminology. So now you have null and void, aiding and abetting, assault and battery, etc...
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Not a Surprise (Score:5, Interesting)
And anyone who has ever worked in California is surprised by this because...?
It's pretty well-known that California law does not allow non-compete clauses in employment contracts. Here, the California State Supreme Court ruled that the law says what is says.
I'd be more interested in finding out if it is true that states with "Right-to-Work" laws also forbid non-compete clauses as part of their "right to work" laws. I heard that once, but do not know if it is correct. I've heard it said that a company has a hard time enforcing a non-compete clause in a Right-to-Work state.
Re:Not a Surprise (Score:5, Informative)
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Re:Not a Surprise (Score:4, Interesting)
That's part of it, of course. But there's another side of the issue: they can scare potential employers into not hiring someone who has signed such an agreement. If former employer A finds out that Joe Shmo is applying for a job at Company B, all it takes is a friendly phone call from A to B mentioning that that Joe is a former employee who has signed a non-compete agreement, and that A views B as a competitor. I saw this happen back in the day when corporations actually considered software people to have strategic significance. B would have to balance their desire to hire Joe against the potential costs of a lawsuit by A...and they'd have to want Joe an awful lot to take that risk. This would have nothing to do with the validity of the agreement—it's just a matter of having to spend money for lawyers to defend against the lawsuit.
Another factor is the related—but legally distinct—issue of non-disclosure. If you've signed a non-disclosure agreement with an employer, then go to work for another employer who is in the same line of business, there's a risk that you and your new employer may get sued because you failed to forget all you learned at your previous job.
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Non-Compete Clauses Thrown Out In California (Score:4, Informative)
> ...the San Francisco Chronicle opines that the US Federal courts are likely to fall in
> line with the decision in the way they interpret California law.
Of course they will. The California Supreme Court is the ultimate authority on California law.
> Most other states still have non-compete laws on the books...
No. They do not have anti-non-compete laws on the books.
> ...and it's not clear this ruling will affect them.
It is perfectly clear how this ruling will affect them: not at all. They are not California.
Misunderstands the Federal System (Score:4, Informative)
Better still, the San Francisco Chronicle opines that the US Federal courts are likely to fall in line with the decision in the way they interpret California law.
This sentence reflects a fundamental misunderstanding of the way the US Federal system operates. In matters of interpreting State laws and constitutions, the State court system has the final say. Federal courts have no authority to independently interpret State laws and constitutions once the State Supreme Court has spoken; they have to take State rulings as uninterpretable "fact". The exceptions are quite limited, and involve preemption by Federal law and disputes under the US Constitution.
In this case, if there are no implicated Federal Statutes, the Federal Courts have to abide by the holdings of the State Supreme Court decision, whether they like it or not.
Slightly different over here (Score:4, Interesting)
In Belgium it is only valid from a certain payment on. This will exclude most people and only iclude the CEO typeof people. What a lot of people also do not know in Belgium if that if it is valid, then this is not so much a bad thing.
e.g. if it states that you can not work for 12 months fr the competition, then it also must say what the punishment it. e.g. 24 months payment. However (and this is what many people forget) this is punishment for BOTH parties. So if you as an emplyee say: I can not start working for company X, you previous company has to pay out te money.
Obviously you are then 'forced' to work for a third company.
And again, it is null and void for most standard employees. Even if it is in the contract and you signed for it, the law will make it null and void and it might even mean that all other extra things in the contract become nul and void or just that one paragraph if that would be in favour of the individual.
Hahaha score one for C (Score:5, Funny)
Those smug Java-bastards will no doubt be scratching their collective heads now - hahaha, you wish you had a void* now huh?
The only job left for you in the future will be collecting garbage!
(I think I can see the humorless trolls circling already ;-) )
Re:Peoples Republic Of California (Score:5, Insightful)
Yeah right, as in "you are perfectly free not to sign this contract, but unfortunately we then won't employ you , oh and by the way all the other firms in this industry have similar contracts, so in fact your choice is sign or never work again".
The reason you have to have laws protecting employees is that employers otherwise have such a position of strength that no fair contracts are feasible.
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Re:Peoples Republic Of California (Score:5, Insightful)
The reason you have to have laws protecting employees is that employers otherwise have such a position of strength that no fair contracts are feasible.
Especially when you consider the irrational American hatred of unions, collective bargaining, and collective action in general.
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Re:Peoples Republic Of California (Score:5, Insightful)
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Re:Peoples Republic Of California (Score:5, Interesting)
I used to work in a union shop. The job was a lot of fun until we went union, but just sucked afterwards (in fairness I have to mention that I knew we were going union when I took the job).
* Before we went union, I was working 4x10s (by choice). After going union, "I'm sorry...that's not an approved work schedule. You'll have to work 5x8s."
* After going union, my pay check actually went down, even though the union promised us no loss in pay (they negotiated a slight salary increase to offset the union dues, but calculated the pay increase pre-tax; after subtracting taxes and union dues, I lost about $100/month).
* Before going union, we were free to adjust our schedules as needed to accomplish after hours work or to take time off for personal errands. After going union, we had six fixed schedules to provide 24 hour coverage.
I could go on, but you get the idea.
What really pissed most of us off is that pretty much every one of these points were things that we told the union not to change when we were negotiating union membership. They promised us it wouldn't change, and well, they lied.
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Re:Peoples Republic Of California (Score:5, Insightful)
Its not irrational, its well programmed. Mega conglomerates have spent A LOT of money making villains out of unions and organized labor. So much focus has been placed on the few down sides of unions that very few people from the under 30 and under generations can fathom the positive effects of unions.
As for those employment contracts with "non-compete" clauses in them it is pretty silly. Everyone in my industry uses them (I'm stuck in one right now). Unless you have some very specific and very highly valued niche skill, 90% of people in the industry cannot find a job without giving into these stupid agreements. Its either sign it, or go to another industry. I doubt that this type of crap would be welcomed in most other industries.
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Re:Peoples Republic Of California (Score:4, Interesting)
My disagreement of unions stems from two very specific instances. One, when I was in high school, I was paid less than I could/should have been because the union capped the wages of teenage employees to secure better wages for adult employees. Further, this was after the promise of an x% raise every six months. They only explained the cap to me after 18 months, when I was supposed to be getting my third raise and didn't. I can understand why, but frankly, it was detrimental to me and I hold a grudge. Two, my grandfather relates a story from when my father was a child of an anonymous caller threatening violence to his children (my aunt and father) because he planned on voting against unionization of his shop.
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Re:Peoples Republic Of California (Score:5, Insightful)
Mega conglomerates have spent A LOT of money making villains out of unions and organized labor.
That's pretty easy when you see the jack-assery they pull. For example, I once had to sit around for 6 hours waiting for a union mover to pick up my PC and carry it up one flight of stairs. Well, I was supposed to wait, anyway; I got tired of sitting around and did it myself.
What really drives the younger generation's distaste is that we've seen their unreasonableness broadcast in all its glory. GM losing billions of dollars? Perfect time to strike for a pay raise! GM needs to close a factory to stay afloat? Sue them to keep it open! Most of us realize that companies operate on finite budgets and can't afford to pay out more than they take in. I don't know if union leadership is stupid enough not to grasp the subtlety, or if they simple don't care. Either way, they've earned their own reputation.
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"Irrational Hatred of Unions" (Score:4, Insightful)
Especially when you consider the irrational American hatred of unions, collective bargaining, and collective action in general
Here we go again. If it's a liberal issue Americans support, they're a great, wise, and noble people. If they're against a liberal issue, well, then Americans are just stupid.
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Re:Peoples Republic Of California (Score:5, Insightful)
Everything that unions were formed to do (wages, overtime, safety, etc.) were signed into law decades ago (minimum wage, 40hr work week, OSHA). Unions now seem to exist solely to squeeze as much money out of a company for as little work as possible (thus driving US industries into the ground), all the while making the union bosses richer and more powerful.
And I tire of the people that think I should support unions today because of what they did decades ago. You might as well argue that we should still support and pay abolitionist because, you know, they helped end slavery. Never mind the fact that slavery has been illegal for over a century now.
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Re:Peoples Republic Of California (Score:5, Interesting)
Yeah right, as in "you are perfectly free not to sign this contract, but unfortunately we then won't employ you , oh and by the way all the other firms in this industry have similar contracts, so in fact your choice is sign or never work again".
Every company I've worked for has had no problems amending employment contracts if there are legitimate concerns about them. Even really big government contractors and the like are, in my experience, quite reasonable about making changes to those contracts if you present them with a reasonable justification for the changes (though sending changes up through the legal department often takes a bit more time).
Too many people just assume when the contract is plopped in front of them that it's not open to negotiation. In reality, most companies aren't overtly out to get you, and are more than willing to listen to reasonable suggestions if you just take the time to make them in a polite, rational manner. Indeed, many times these sorts of stipulations are just part of some boilerplate contract and not something the company has really given much thought to.
I've changed contracts that:
1. Wanted ownership of all code and patents I developed while in their employ. I pointed out that I do open-source development and had the section explicitly changed to note that anything I developed on my own time outside of the office was my property (so long as it didn't disclose company secrets).
2. Wanted my indemnification that none of my code violated any patents and I'd be liable for the penalties if it did. I pointed out that this was unreasonable given my assets as a solo consultant and the monetary value of the job in question, and had it changed to guarantee that none of my code knowingly violated patents and indemnify them against any patents I held personally.
3. Stated that I could not work as a software developer for another company while in their employ. This is almost certainly unenforceable anyway, but I explained that I was coming to them as a consultant and would have other jobs contemporaneously; they struck the section entirely.
I'm sure there are more. (1) in particular has happened several times, and (2) has happened at least twice.
But the point is, you can negotiate most contracts as long as your requests are reasonable. If you can't, that's probably a warning sign that the company is going to be unreasonable in other areas.
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Re:Peoples Republic Of California (Score:5, Insightful)
Some things are unconscionable; like signing yourself into slavery, signing away your rights, etc.
Your right to work is therefore one of those things you cannot sign away, and thus this ruling.
Just because you are forced to agree to a contract in order to gain employment does not mean the contract is right or enforceable.
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Re:Peoples Republic Of California (Score:4, Insightful)
Force is what is used when your life is threatened. When you cannot work without such a contract, your life is threatened because you will not be able to feed yourself. It means exactly what he thought it meant, and he was right.
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Re:Peoples Republic Of California (Score:5, Insightful)
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Re:Peoples Republic Of California (Score:4, Informative)
I'll agree that he overstated his case...but then so did you. Force is involved. Not life-threatening, at least not immediately (usually), but still, force.
What would you call it if a miner was told he had to work in an unsafe environment without air filters? Wouldn't it be reasonable to say that force of some sort must be used to get him to agree to put his life in danger in a very uncomfortable environment? Yet such is common.
To claim that no force is involved in contract negotiations is ludicrously unreasonable. To ask what amount of force is fair is reasonable.
To my mind, a non-compete agreement is unreasonable unless the company is willing to pay you your prior wage for the entire duration of the non-compete.
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Re:Peoples Republic Of California (Score:5, Insightful)
Another nutty ruling.. if you willingly sign a contract that contained a non-complete clause, that's your issue with the company you should fight for.
But wacky judges just says these are no good.
Actually, the judges are saying you can't enforce contractual language that violates CA Law.
You would think that companies would not put in language that is unenforceable; but that clearly isn't the case.
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Re:Peoples Republic Of California (Score:5, Insightful)
You would think that companies would not put in language that is unenforceable; but that clearly isn't the case.
Why not? It's called "Let's see what we can get away with", how many employees are really aware of their rights and willing to fight for them in a potential lawsuit? Most would rather avoid the issue, thus fulfilling the purpose for the company.
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Wacky? (Score:5, Insightful)
So it is "wacky" for a judge to see a law that's been on the books for 136 years that says "Except 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" (Ca. Bus. & Prof. Code 16600, as cited in the ruling) and conclude that it invalidates contracts which would restrain someone from engaging in a specific lawful profession, trade, or business, and which don't fall into one of the specified exceptions included in the same chapter of the law?
That seems to me a strange idea of what is "wacky".
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You can't sign yourself into slavery. (Score:4, Insightful)
Contracts can't violate laws.
It's amazing non-compete held up for as long as it did. A contract that tells you what you can or can't do outside of your employment is obviously flawed. With the economy going in the shitter, people are going to be pushing back harder against clauses that keep them from working and both state and federal courts are going to be receptive.
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Inevitable disclosure (Score:5, Informative)
There's probably going to be someone who interprets that as including NDAs instead of just "non-compete" clauses.
The doctrine connecting non-disclosure agreements to covenants not to compete is called inevitable disclosure [ivanhoffman.com].
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Re:Thats right, TRAIN me bitches, then I'm gone! (Score:5, Insightful)
Doesn't seem fair to me
What doesn't seem fair to me is the notion that companies can terminate an employment contract and expect provisions of that terminated contract to continue to be in effect, but hey, when was the last time anyone seriously thought the legal system was "fair"?
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Re:Thats right, TRAIN me bitches, then I'm gone! (Score:5, Insightful)
What doesn't seem fair to me is the notion that companies can terminate an employment contract and expect provisions of that terminated contract to continue to be in effect, but hey, when was the last time anyone seriously thought the legal system was "fair"?
You mean all of the provisions, like confidentiality agreements and such? I don't think you've thought through what you're asking for...
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Re:Finally (Score:4, Informative)
No ... state court interpretations of state law are unreviewable by the federal courts in the absence of preempting federal law. The US Supreme Court can't overturn a state court ruling determined on state law grounds ... they don't even have jurisdiction to hear an appeal in those cases. This is at the heart of our federal legal system.
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