Forgot your password?
typodupeerror
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)."
This discussion has been archived. No new comments can be posted.

Non-Compete Clauses Thrown Out In California

Comments Filter:
  • by Anonymous Coward on Friday August 08, 2008 @11:45AM (#24526323)

    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.

  • by the4thdimension (1151939) on Friday August 08, 2008 @11:53AM (#24526455) Homepage
    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.
  • by tehcyder (746570) on Friday August 08, 2008 @11:57AM (#24526545) Journal

    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.

  • by ISoldat53 (977164) on Friday August 08, 2008 @11:57AM (#24526547)
    It seems that having Arther Anderson on your resume would be the disqualifying point.
  • by 2nd Post! (213333) <gundbear@@@pacbell...net> on Friday August 08, 2008 @11:58AM (#24526549) Homepage

    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.

  • Finally (Score:1, Insightful)

    by Optic7 (688717) on Friday August 08, 2008 @12:01PM (#24526625)
    This always seemed like an awful restriction of individual rights. Now if this ends up going up to the US Supreme Court, I'm afraid that there's a good chance that we'd see another 5-4 decision in favor of the corporations and their non-compete causes and against individuals. Recent history after Alito and Roberts joined has been showing a solid pattern of SCOTUS leaning in that direction when it comes to employer-worker disputes.
  • by Qzukk (229616) on Friday August 08, 2008 @12:02PM (#24526657) Journal

    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:I bet... (Score:5, Insightful)

    by Anonymous Coward on Friday August 08, 2008 @12:07PM (#24526769)

    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.

  • by Registered Coward v2 (447531) on Friday August 08, 2008 @12:09PM (#24526791)

    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.

  • by alcmaeon (684971) on Friday August 08, 2008 @12:11PM (#24526855)

    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.

  • by taustin (171655) on Friday August 08, 2008 @12:14PM (#24526899) Homepage Journal

    if you willingly sign a contract that contained a non-complete clause . . .

    On the other hand, if the company willingly offers a contract they know cannot be enforced because of provisions that are specifically illegal, that's perfectly OK, eh?

    This isn't new or obscure law. Non-compete clauses have been unenforcable in California for a long time. The company knew this when they wrote that boilerplate contract, and chose to break the law.

  • by nakajoe (1123579) on Friday August 08, 2008 @12:16PM (#24526933)
    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.
  • by corporal_clegg (547755) on Friday August 08, 2008 @12:17PM (#24526953) Homepage

    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:I bet... (Score:5, Insightful)

    by no1home (1271260) on Friday August 08, 2008 @12:19PM (#24526991)

    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.

  • by Kjella (173770) on Friday August 08, 2008 @12:21PM (#24527065) Homepage

    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...

  • Wacky? (Score:5, Insightful)

    by DragonWriter (970822) on Friday August 08, 2008 @12:22PM (#24527075)

    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".

  • by ThomsonsPier (988872) on Friday August 08, 2008 @12:23PM (#24527097)
    I imagine it's often designed to intimidate and control rather than to provide a legal argument. If it is the latter, any company which knowingly writes an unenforceable contract is probably relying on being able to pay lawyers more, and for a longer period, than the disgruntled employee. The contract just needs to be worded in such a manner as to draw out the argument.
  • by Electrawn (321224) <[moc.oohay] [ta] [nwartcele]> on Friday August 08, 2008 @12:27PM (#24527197) Homepage

    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.

  • by Surt (22457) on Friday August 08, 2008 @12:30PM (#24527281) Homepage Journal

    Force is what is used when your life is threatened. When you cannot work without such a contract, your life is threatened because you will not be able to feed yourself. It means exactly what he thought it meant, and he was right.

  • Re:Finally (Score:3, Insightful)

    by Colonel Korn (1258968) on Friday August 08, 2008 @12:31PM (#24527299)

    No... conservative justices are more likely to defer to state law since it's not a federal matter. Liberal justices are more likely to claim "interstate commerce" or "general welfare" give them the responsibility to decide what's best. Eg: California medical marijuana.

    You don't understand the changes in American conservativism in the twenty years, then. At least three of the conservative justices will side with the corporations, regardless of principles.

  • by GNUChop (1310629) on Friday August 08, 2008 @12:32PM (#24527303)

    Contracts can't violate laws.

    It's amazing non-compete held up for as long as it did. A contract that tells you what you can or can't do outside of your employment is obviously flawed. With the economy going in the shitter, people are going to be pushing back harder against clauses that keep them from working and both state and federal courts are going to be receptive.

  • by Anonymous Coward on Friday August 08, 2008 @12:33PM (#24527325)

    Well in that respect nobody forces you to breathe either. Unless you're an undocumented worker there aren't many ways to gain employment that don't involve agreement with a contract of some sort. So saying you're forced to agree to a contract in order to gain employment is still an accurate use of the word "forced".

  • Re:I bet... (Score:5, Insightful)

    by hedwards (940851) on Friday August 08, 2008 @12:34PM (#24527343)

    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.

  • by Kjella (173770) on Friday August 08, 2008 @12:35PM (#24527373) Homepage

    You would think that companies would not put in language that is unenforceable; but that clearly isn't the case.

    Why not? It's called "Let's see what we can get away with", how many employees are really aware of their rights and willing to fight for them in a potential lawsuit? Most would rather avoid the issue, thus fulfilling the purpose for the company.

  • by antirelic (1030688) on Friday August 08, 2008 @12:36PM (#24527405) Journal

    Its not irrational, its well programmed. Mega conglomerates have spent A LOT of money making villains out of unions and organized labor. So much focus has been placed on the few down sides of unions that very few people from the under 30 and under generations can fathom the positive effects of unions.

    As for those employment contracts with "non-compete" clauses in them it is pretty silly. Everyone in my industry uses them (I'm stuck in one right now). Unless you have some very specific and very highly valued niche skill, 90% of people in the industry cannot find a job without giving into these stupid agreements. Its either sign it, or go to another industry. I doubt that this type of crap would be welcomed in most other industries.

  • by hedwards (940851) on Friday August 08, 2008 @12:40PM (#24527463)

    I'm not sure about CA, but here in the state of WA, it's almost certainly not a breach of contract to violate it in this sort of instance.

    One of the requirements for a breach is that it not be a result of the normal course of business or a reasonably predictable outcome of the business. (I'm paraphrasing there) I don't believe that anybody in their right mind would consider the AA meltdown to be foreseeable by anybody not actually involved in the cover up, and certainly not by people who didn't do it several years earlier.

    One is also not liable for a breach if they were prevented from holding up their end of the bargain by the actions of the other party.

    Obviously it would have to be brought to trial to say for sure, and juries can be unpredictable at time, but it's pretty clear that this wouldn't result in any damages being awarded to AA under WA law. Of course it's not relevant, but if move the scenario here, it's probably fairly accurate.

  • by Anonymous Coward on Friday August 08, 2008 @12:48PM (#24527595)

    Unions can be great. I worked at a place once that was mismanaged. I talked to all of the developers and got them all to walk in together and make demands, threatening to quit if our demands were not met. We got our demands.

    But once you create a bureaucracy out of the union, the bureaucracy becomes self serving.

  • by Narpak (961733) on Friday August 08, 2008 @12:52PM (#24527657)
    Indeed if a contract in anyway disables you from working in the future it should not be accepted as legal. Keeping qualified personnel away from jobs where they can make a meaningful contribution is a counter-productive to society at large and a great source of frustration for the individual in question. Laws or contract clauses should never disable someone from applying for a job with another company.
  • by Anonymous Coward on Friday August 08, 2008 @01:00PM (#24527791)

    A union can't have a secondary boycott - meaning they can't refuse to say handle packages delivered to businesses still doing business with a targeted business.

    Unionized employees are entirely free to do that, but nothing will prevent them from being fired because of it.

    If unions were treated like companies, they'd be squashed by anti-trust legislation in a minute.

  • by Z00L00K (682162) on Friday August 08, 2008 @01:02PM (#24527833) Homepage

    In a way it was the correct action.

    The aftermath was a lot of turbulence, but it sure is also a wakeup call to the remaining accounting companies that no one is safe from legal action regardless of size.

    Bad business is contagious, just look at the bank problems right now. I'm sure that a lot of accounting companies cleared up their acts very silently after the Enron turbulence.

  • by wlovins (880111) on Friday August 08, 2008 @01:10PM (#24527979)
    Although "force" can mean physical intimidation, it isn't always the case. Force also means "a powerful effect for influence". Generally we use it in this secondary context as "forces", such as "My wife forces me to take out the garbage or watch the kids on Sundays.". Does this mean the wife will beat the crap out of you? Generally not... It means she uses emotional influences or powerful effects (such as love) to persuade you to do something. In the case of accepting a job, there are forces at work (societal, need to take care of self and family, financial stability) that do force people to take a job. I'm not even talking about "eating to survive", but emotional forces that pressure you to take the job. There are still ways to eat without working (depending on area) - welfare, soup kitchens/food banks, and unemployment benefits can cover food (when needed and appropriate). I'm not saying they are optimal, but they exist and no force is required. Emotional and psychological pressures are still a force.
  • by DesScorp (410532) <DesScorp.Gmail@com> on Friday August 08, 2008 @01:19PM (#24528153) Homepage Journal

    Especially when you consider the irrational American hatred of unions, collective bargaining, and collective action in general

    Here we go again. If it's a liberal issue Americans support, they're a great, wise, and noble people. If they're against a liberal issue, well, then Americans are just stupid.

  • by Anonymous Coward on Friday August 08, 2008 @01:20PM (#24528157)

    Then why didn't you and the other employees then vote the union out? If the union is that bad, get rid of it.

  • by superdave80 (1226592) on Friday August 08, 2008 @01:44PM (#24528639)

    Everything that unions were formed to do (wages, overtime, safety, etc.) were signed into law decades ago (minimum wage, 40hr work week, OSHA). Unions now seem to exist solely to squeeze as much money out of a company for as little work as possible (thus driving US industries into the ground), all the while making the union bosses richer and more powerful.

    And I tire of the people that think I should support unions today because of what they did decades ago. You might as well argue that we should still support and pay abolitionist because, you know, they helped end slavery. Never mind the fact that slavery has been illegal for over a century now.

  • by Just Some Guy (3352) <kirk+slashdot@strauser.com> on Friday August 08, 2008 @01:48PM (#24528709) Homepage Journal

    Mega conglomerates have spent A LOT of money making villains out of unions and organized labor.

    That's pretty easy when you see the jack-assery they pull. For example, I once had to sit around for 6 hours waiting for a union mover to pick up my PC and carry it up one flight of stairs. Well, I was supposed to wait, anyway; I got tired of sitting around and did it myself.

    What really drives the younger generation's distaste is that we've seen their unreasonableness broadcast in all its glory. GM losing billions of dollars? Perfect time to strike for a pay raise! GM needs to close a factory to stay afloat? Sue them to keep it open! Most of us realize that companies operate on finite budgets and can't afford to pay out more than they take in. I don't know if union leadership is stupid enough not to grasp the subtlety, or if they simple don't care. Either way, they've earned their own reputation.

  • by Todd Knarr (15451) on Friday August 08, 2008 @01:54PM (#24528807) Homepage

    Look at it the other way: where do you think you're going to find experienced employees if they're all bound by non-compete agreements not to work for you?

  • by raehl (609729) <(raehl311) (at) (yahoo.com)> on Friday August 08, 2008 @02:14PM (#24529169) Homepage

    Of course, all the firing at AA was matched by hiring elsewhere. It's not like AA's old clients didn't still need accounting services. They just got them from a new corporate structure which got to compete with the other Big 4 to get the best of AA's now-laid-off workers.

    Jobs were not lost, overall. They were just moved. Change is part of life, and ongoing change is necessary for most everyone's life to get better.

  • by Nom du Keyboard (633989) on Friday August 08, 2008 @02:23PM (#24529325)
    The only proper and moral way to enforce a non-compete agreement is to pay me not to work for someone else during the length of that agreement. Because you claim to own my time and skills through this period it is only fair that you pay me for them. I'm waiting for the day when the court actually says that, after which these things will probably go away.
  • by Fulcrum of Evil (560260) on Friday August 08, 2008 @02:30PM (#24529455)

    It's really easy to say Off-with-their-heads without realizing the post-anarchy of such an action.

    Are you saying that companies should be able to get away with this crap because punishing them would hurt a bunch of people? That's screwed up.

  • You're absolutely right. Clearly no large companies should ever be punished for malfeasance when so many jobs will be lost as a result. It is obviously entirely inappropriate to hold companies responsible for ensuring that the activities pursued by said companies are carried out in a legal and ethical manner. That would be absurd. I mean, let's not even get in to even more ridiculous things like letting major companies sporting failed business models actually fail when we can just go in there and prop those models up with tax monies!

    P.S. Won't somebody please think of the janitors?

    P.P.S. It's easy to conveniently "overlook" blatantly unethical practices without realizing the post-anarchy of such an action. (i.e. You're tracing the blame to the wrong end here)

A rock store eventually closed down; they were taking too much for granite.

Working...