Non-Compete Clauses Violate Workers’ Rights, California Supreme Court Rules
Monday, August 11, 2008
California employers cannot prevent their management-level workers from jumping ship to a competing firm or leaving to start their own businesses, the state’s Supreme Court has ruled.
Non-compete clauses, which may be written into employment contracts, violate a former employee’s right to be free to work where and for whom they want and discourage competition in the workforce, the court said in a unanimous ruling issued August 6. The court was interpreting a state law that had been on the state’s books since 1872. The California high court noted that such employment restrictions may be legal in limited circumstances, such as the dissolution of a partnership or corporation, where former employees may be prevented from going to work for a competitor or taking the clients to start their own enterprise.
But in most cases, the court said, employers cannot require workers to promise they will not leave for another competing operation or go into the same business for themselves.
Los Angeles Tax Manager At Center of Controversy
A former tax manager at the Los Angeles accounting firm Arthur Anderson was the man behind the landmark California Supreme Court ruling. When Arthur Anderson shut down its American accounting operations in the wake of its involvement in the Enron Corp. debacle in 2002, Raymond Edwards II wanted to take a job with a subsidiary of the firm. When his bosses objected to the move, citing a noncompetition agreement he had signed, Edwards sued, alleging Anderson was interfering with his ability to earn a living. Edwards argued the noncompetition agreement was illegal.
In a decision that was closely watched by employment lawyers and legal experts, the California Supreme Court sided with Edwards and reversed a lower court’s ruling in favor of allowing the agreements.
Landmark Ruling Could Have Nationwide Impact
Since most states allow noncompetition clauses, the California Supreme Court ruling could have far-reaching effects. Now that the state’s high court has settled a disagreement between state and federal courts on the meaning of the California law, legal experts believe federal courts will adopt the court’s interpretation of the law and find that noncompetition clauses are illegal as a matter of federal law.
Non-Compete Clauses Are Bad For Business
Restricting employees from working where and for whom they want discourages open competition and employee freedom, the California Supreme Court said. Particularly in the technology industry, non-compete clauses restrict the development of new products and the free exchange of ideas that are so instrumental in the advancement of the field, the court said.
As long as they are not stealing trade secrets or misusing some other property of their former employers, workers should be free to move from job to job in order to earn a living.
Employees Are Free From Non-Compete Clauses
If you or a loved one is being restricted by a non-compete clause in an employment contract, you may have legal rights. The dedicated, experienced employee rights attorneys at Mark & Associates, P.C. will fight for you to receive the best possible legal outcome in your case. To contact Mark & Associates, P.C. for a complimentary, no-obligation review of your possible case, please submit the case inquiry form on this page or call 1-866-50-RIGHTS (1-866-507-4448).
Posted under: Corporate Fraud