Non-Compete Clauses Thrown Out In California

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)."

Disgraced Arthur Anderson

Arthur Anderson (now disgraced due to their complicity in the Enron case).

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

I don't know how one can assume that, when the man shows up, the best idea is to shred every piece of evidence but something tells me its in fact the exact opposite. Sure you may not go to jail for whatever it is they are after you for, but instead go down for tampering or destroying evidence. I can't decide which is better but something tells me you can avoid both by, ya know, taking up good business practices.

Re:Disgraced Arthur Anderson

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.

Re:I bet...

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.

Re:I bet...

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.

Re:I bet...

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.

Re:Disgraced Arthur Anderson

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.

Re:Disgraced Arthur Anderson

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.

Pointer

...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

Something tells me we are on our way to a de-referencing error. Best re-think the program flow here before the compiler pukes.

Federal Courts

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.

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

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

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.

It's the French!

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...

Not a Surprise

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

They can put whatever they want in their employment contract and their lawyers can try to scare you into believing that they can sue you and enforce it in court but it is really nothing more than a bluff on the part of the employer to prevent spineless and ignorant former employees from "violating the agreement". They are hoping that they can scare people into giving up their rights.

Re:Peoples Republic Of California

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.

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.

Re:Peoples Republic Of California

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.

Re:Peoples Republic Of California

Unions are fine in principle; unfortunately these days unions tend to represent union leadership as opposed to the workers, and do about as much to exploit labor as as the companies do.

Re:Peoples Republic Of California

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.

Re:Peoples Republic Of California

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.

Wacky?

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.

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".

Inevitable disclosure

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].

Re:Thats right, TRAIN me bitches, then I'm gone!

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"?

Re:Thats right, TRAIN me bitches, then I'm gone!

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...