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‘A non-compete is a non-compete’
A California law has been broadened for to protect employees.
By Jerry HicksPublished: September 01, 2008
The California Supreme Court recently widened a state law protecting workers from employers who want them to sign non-compete agreements that deter them from moving to other companies.
But the Supreme Court case Edwards v. Arthur Andersen LLP also includes language friendly to employers, especially when such employees take “inside trading” information with them. Robert Yonowitz, a longtime labor law attorney with Fisher & Phillips in Irvine, discusses the case.
Hicks: What is the background of the Andersen case?
Yonowitz: It involves the Arthur Andersen accounting firm, which no longer exists. (Andersen went broke in 2002 from the Enron scandal.) Raymond Edwards II, a certified public accountant, was employed in Andersen’s L.A. office. Upon hire, he signed a non-competition agreement regarding clients he worked with at Andersen in the 18 months before he departed. (After Andersen folded, Edwards sued over the agreement.)
H: What was the court’s decision?
Y: Full-blown non-compete agreements in California are illegal. What the Andersen case took up was this narrow restraint exception: After you leave us, you may not provide services to these limited customers. But, the California Supreme Court said a non-compete is a non-compete – you can’t restrain employees from their livelihood.
H: Did employers win anything in the Andersen case?
Y: Oh yes. The court said the “trade secrets exception” is viable. Under it, you can still have certain agreements that restrain an employee’s conduct to protect trade secrets.
H: Are these trade secret issues a major contention in Orange County?
Y: Yes. With more businesses competing against each other, we’ll see more of them as companies fight for customers. And some people will cheat.
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But the Supreme Court case Edwards v. Arthur Andersen LLP also includes language friendly to employers, especially when such employees take “inside trading” information with them. Robert Yonowitz, a longtime labor law attorney with Fisher & Phillips in Irvine, discusses the case. Hicks: What is the background of the Andersen case? Yonowitz: It involves the Arthur Andersen accounting firm, which no longer exists. (Andersen went broke in 2002 from the Enron scandal.) Raymond Edwards II, a certified public accountant, was employed in Andersen’s L.A. office. Upon hire, he signed a non-competition agreement regarding clients he worked with at Andersen in the 18 months before he departed. (After Andersen folded, Edwards sued over the agreement.) H: What was the court’s decision? Y: Full-blown non-compete agreements in California are illegal. What the Andersen case took up was this narrow restraint exception: After you leave us, you may not provide services to these limited customers. But, the California Supreme Court said a non-compete is a non-compete – you can’t restrain employees from their livelihood. H: Did employers win anything in the Andersen case? Y: Oh yes. The court said the “trade secrets exception” is viable. Under it, you can still have certain agreements that restrain an employee’s conduct to protect trade secrets. H: Are these trade secret issues a major contention in Orange County? Y: Yes. With more businesses competing against each other, we’ll see more of them as companies fight for customers. And some people will cheat. |
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