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The Courts

Non-Compete Clauses Thrown Out In California 375

Posted by kdawson
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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Non-Compete Clauses Thrown Out In California

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  • Not a Surprise (Score:5, Interesting)

    by Dragoness Eclectic (244826) on Friday August 08, 2008 @10:53AM (#24526461)

    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.

  • Proceed with caution (Score:3, Interesting)

    by Barbarian Queen (1329161) on Friday August 08, 2008 @10:54AM (#24526467) Journal

    There's probably going to be someone who interprets that as including NDAs instead of just "non-compete" clauses. That could seriously complicate things when a domain expert hops to a new place and the new employer wants inside info.

    Even if the NDA issue is covered, employers better be sure they have NDAs in place NOW.

  • Re:I bet... (Score:4, Interesting)

    by Surt (22457) on Friday August 08, 2008 @11:28AM (#24527203) Homepage Journal

    Wow, an AC comment that is sane, right, and properly contradicts an AC troll. Mod parent up!

  • It's the French! (Score:5, Interesting)

    by JBMcB (73720) on Friday August 08, 2008 @11:34AM (#24527363)

    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...

  • by houghi (78078) on Friday August 08, 2008 @11:44AM (#24527535)

    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.

  • by GospelHead821 (466923) on Friday August 08, 2008 @11:50AM (#24527621)

    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.

  • by element-o.p. (939033) on Friday August 08, 2008 @11:58AM (#24527751) Homepage
    Wish I had mod points, because you are exactly right.

    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.
  • by Z00L00K (682162) on Friday August 08, 2008 @12:13PM (#24528049) Homepage

    And don't forget - they also want to make sure that they get member fees and therefore activates blockades against competition from out of country companies where the workers may have a different union.

    Like when Polish construction companies comes to Sweden and works.

    Even competition between unions within the same country/state can be a cause for blockades.

  • by Anonymous Brave Guy (457657) on Friday August 08, 2008 @12:17PM (#24528105)

    Indeed if a contract in anyway disables you from working in the future it should not be accepted as legal.

    I don't think it's quite as simple as that. For example, allowing contracts to specify that an employee who leaves one company may not then divulge that company's confidential information and trade secrets to the ex-employee's new employer is perfectly reasonable.

    But in that case, it's not a prohibition against working for a former competitor, it's a prohibition on abusing privileged access. If that prohibition prevents an ex-employee from taking certain jobs with ex-competitors, that's just too bad, but there are plenty of other jobs they could do instead (including working with ex-competitors in ways that do not represent a breach of confidence).

  • by theophilosophilus (606876) on Friday August 08, 2008 @12:24PM (#24528221) Homepage Journal

    However, if Federal law were to follow California law (which it may or may not do), then that would supposedly render moot (mootify?) any non-compete clauses anywhere else in the US.

    Its not quite so clear and depends on conflict of laws principles. Under the Erie doctrine [wikipedia.org] a federal court (with diversity jurisdiction [wikipedia.org]) applies the substantive law (not procedural) of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co. extended the Erie doctrine to a state's conflict of laws [wikipedia.org] rules (the case found that conflict of laws rules were substantive and not procedural). Thus, the California decision only has extraterritorial effect if the state where the federal court sits would apply California law in the situation. Generally, application of another state's law in a contract case will require the connecting factors of either the place of execution of the contract or the place where the contract was to be performed. Federal courts would only invalidate a non-compete if (the federal court found that) the state where it was located would itself invalidate the provision under its law or the law of another state under conflict of laws principles.

  • by unassimilatible (225662) on Friday August 08, 2008 @12:43PM (#24528595) Journal
    Unions have destroyed the auto and airline industries in America. It is quite rational to see how unions can price workers out of jobs. Which is why I shop and Wal-Mart and get much of my food for 50% less than the local grocery chain store. And grocery stores, too, are dinosaurs sinking into tar pits. Thank the unions for that, convincing workers with no education beyond high school that they deserve high wages and "free" health care at the customers' expense. Yeah, well keep your resumes updated.

    And if you are so for collective action, I'm sure you are against antitrust law. If workers can collectively bargain, shouldn't businesses be able to as well?
  • Re:Not a Surprise (Score:4, Interesting)

    by DrVomact (726065) on Friday August 08, 2008 @12:48PM (#24528707) Journal

    They are hoping that they can scare people into giving up their rights.

    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.

  • by pthisis (27352) on Friday August 08, 2008 @01:13PM (#24529153) Homepage Journal

    It was because of ignorance of the law. Exactly like I said. That's an escape that doesn't work for regular crimes. Only white collar workers who cost people millions of dollars get off saying, "I didn't know it was wrong."

    Tax evasion and all kinds of other white collar crimes don't require knowledge of the law. Obstruction of justice is a specific crime alleging that you intentionally hindered a criminal investigation, and so requires knowledge of the illegitimacy of your actions. It is not "ignorance of the law" as a defense; the allegation is not that AA didn't know that obstruction of justice was illegal, but did not believe that their actions constituted obstruction and hence lacked the willfullness required for that particular crime.

    It's not a white collar/blue collar thing. There are several blue-collar crimes that require specific intent and/or willfullness, and most white collar crimes do not.

  • by haystor (102186) on Friday August 08, 2008 @01:20PM (#24529261)

    His second point has everything to do with unions as they actually exist even today.

    Unions may be a great theory, but in reality many do threaten violence against defectors. There is also the rot that goes on in a union shop where people are now untouchable. Sure, that's great if you want to sit on your ass, but it's not so good for those that wish to excel.

  • by pthisis (27352) on Friday August 08, 2008 @01:28PM (#24529395) Homepage Journal

    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.

  • by bennomatic (691188) on Friday August 08, 2008 @01:43PM (#24529685) Homepage
    A friend of a friend was complaining about the union he works for (he's a concrete truck driver), and after arguing with him for quite a while, it finally came out that it pissed him off that pay increases came on a schedule, rather than by merit.

    At that point, I reminded him that he's the greatest benefactor of that. Without the unions, his high level of absenteeism and his productivity on the job would guarantee that his wages remained sorely behind those of his colleagues.

    Here's an example: he told me that they have random drug tests, and that while he was clean and knew he'd always pass, he always took the opportunity to get paid for doing nothing. He'd tell them that he didn't have to go, and at that point, they put him in a waiting room with a pot of coffee and magazines to wait. He couldn't leave, because they had to be sure he wasn't getting someone else's pee. He politely refused the coffee and sat there for as much as eight hours--collecting overtime in some cases--and holding his bladder for as long as he possibly could, just to be an ass.
  • by Anonymous Coward on Friday August 08, 2008 @03:58PM (#24531781)
    I always had fun in crappy union shops I worked at (retail jobs, etc.) Unions always have endless bureaucracy you can abuse - I think I filed over 50 requests for information and clarification at one place I worked, and at least two dozen complaints against my steward for racial discrimination (it was all a misunderstanding - I thought "hi, how are you" was a lynching phrase). I mean, there isn't anything the union can do - it's not like they can fire you.

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