CALIFORNIA SUPREME COURT UPHOLDS STATE'S STRICT BAN ON NON-COMPETITION AGREEMENTS FOR EXITING EMPLOYEES

On August 7, 2008, the California Supreme Court struck-down previous appellate court rulings that would allow employers to require departing employees to sign non-competition agreements as long as the non-competition agreements were narrowly-tailored.

On balance, the California Supreme Court focused on the harshness of non-competition agreements and the competing interest of company trade secrets. The case is Edwards vs. Arthur Andersen.

Edwards, as plaintiff, argued that he was illegally prevented from pursuing his profession as an accountant and tax manager, via a non-competition agreement with Arthur Andersen, after the 2002 Enron/Arthur Andersen collapse.

The California Supreme Court agreed with Edwards. The non-competition agreement was an illegal restriction on Edward's right to work. In short, the non-competition agreement was illegal under a long-line of California employment law history.

As CNET reports, the decision follows precedent, for the most part. "The California law has been in existence since 1872, forbidding "non-compete clauses" that restrict management employees' options in their next job or business."

"But the law has been interpreted differently throughout the state, and the 9th U.S. Circuit Court of Appeals in San Francisco has ruled in favor of allowing a company to limit their employees' future job choices, as long as it doesn't prevent them from working in the same field."

Now the California Supreme Court has weighed-in. The Court's ruling demonstrates California's overall adversity to non-competition agreements.

The ruling is particularly good news for those in the computer, internet, and digital-media industries, as these sectors of California business have high-mobility and a fueled employee interest in moving to the next opportunity or idea.

As reported, these sectors of the industry have watched the Edwards case closely.