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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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  • 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 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 Electrawn (321224) <electrawn@yahoo . c om> 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.

      • Re: (Score:3, Insightful)

        by Z00L00K (682162)

        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 raehl (609729) <raehl311@@@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 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.

      • by immcintosh (1089551) <slashdot&ianmcintosh,org> on Friday August 08, 2008 @02:37PM (#24529587) Homepage

        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)

    • They weren't a corporation, and they were acquitted as what they did was legal, the media made it look much worse than it was.

      The fact that you thought they were a corporation shows that you have done very little to educate yourself about the subject.
      • link to Post article
        http://www.washingtonpost.com/wp-dyn/content/article/2005/05/31/AR2005053100491.html [washingtonpost.com]
        I had a friend that worked for AA, she was happy to see them finally absolved. Sadly it was too little too late.

    • by slew (2918) on Friday August 08, 2008 @12:53PM (#24527671)

      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.

      Well, as I recall Arthur Anderson had their CPA licence revoked (federal and state), they lost all their clients, layed off 85,000 employees and are now just a series of zombie companies which are effectively dead (no clients). W/o a CPA licence and no clients, it's merely a technicality that their corporate charter isn't revoked (the government taskforce noted that it didn't want to waste it's money going the final step given the company was effectively defunct already).

      Perhaps you are one of those that probably are miffed that David Duncan (the lead auditor for Enron) isn't sitting in jail. For a while, it seemed like he would be, but the Supreme Court overturned the obstruction of justice conviction of the company. I think this was overturned by the Supreme Court citing among other things it didn't think it was actually illegal to shred documents unless there was a court order preventing it and he had a legal opinion in hand to that effect that backed him up.

      Yeah that's probably not justice, but the government didn't think it could win that case either given the laws in effect at that time. Now we have Sarbox, unless you are lobbying for ex-post facto laws, unfortunatly, we'll have to realize that's the problem with a linear time continuum... live and learn.

  • Pointer (Score:5, Funny)

    by Ethanol-fueled (1125189) * on Friday August 08, 2008 @11:48AM (#24526375) Homepage Journal

    ...any non-compete clause in it is null &(void*),...

    So what does the address of a void pointer have to do with all this?

  • Federal Courts (Score:5, Informative)

    by DragonWriter (970822) on Friday August 08, 2008 @11:52AM (#24526435)

    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.

    Federal courts are obligated, when applying state law, to follow the highest court of the State (though, of course, they can rule that that law is unenforceable because it conflicts with superceding provisions of federal law.)

  • Null = Void (Score:5, Funny)

    by debrain (29228) on Friday August 08, 2008 @11:53AM (#24526449) Journal

    Random trivia: I've been told by a professor of law and classicist that "null" and "void" mean the same thing (in a legal sense), but are simply different languages. Putting them together is repetitive and unnecessary, although strangely customary.

    I thought that interesting enough to share.

    • Re: (Score:3, Funny)

      by greedyturtle (968401)
      Look man, That's the only bad ass thing that lawyers get to say. Everything else is boring as hell. (Unless you're Al Pacino) Don't take that away from them.
    • by Pope (17780)

      Rather like "aid and abet" and other legal double-barrelled terms.

    • Re: (Score:2, Funny)

      by Huge_UID (1089143)

      You mean it is redundant and repeats itself?

    • Re:Null = Void (Score:5, Informative)

      by DigitalReverend (901909) on Friday August 08, 2008 @12:28PM (#24527213)

      I beg to differ. If something is voided, it means whatever it is exists, but is no longer in effect. If something is nullified, it means that whatever is was no longer exists. So declaring it null and void means, that it no longer exists and is no longer in effect.

      • Re: (Score:3, Funny)

        by Solandri (704621)

        If something is voided, it means whatever it is exists, but is no longer in effect. If something is nullified, it means that whatever is was no longer exists.

        So voiding is like dereferencing a pointer, and nullifying is like releasing memory?

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

      by JBMcB (73720) on Friday August 08, 2008 @12:34PM (#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 debrain (29228)

        Thanks for the info. That's interesting.

        Incidentally, assault and battery are traditionally (and even moreso nowadays) different creatures. I vaguely recall that the old common law versions of the crimes are as follows:

        Assault: The reasonable apprehension of harm.

        Battery: Non-consensual touching.

        Hence, in the old criminal sense, you can assault someone without touching them (i.e. swinging a bat at them), and you can batter them without them being afraid of harm (i.e. a doctor touching an unconscious patient

  • Not a Surprise (Score:5, Interesting)

    by Dragoness Eclectic (244826) on Friday August 08, 2008 @11:53AM (#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.

    • by tb()ne (625102)

      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.

      IANAL but I don't think that's generally true. Virginia is a right-to-work state and I've worked for several employers there that had non-compete clauses in their employment contracts. My guess is that the right-to-work affects how restrictive the non-competes be, depending on your line of work.

      • Re:Not a Surprise (Score:5, Informative)

        by CodeBuster (516420) on Friday August 08, 2008 @12:15PM (#24526921)
        They can put whatever they want in their employment contract and their lawyers can try to scare you into believing that they can sue you and enforce it in court but it is really nothing more than a bluff on the part of the employer to prevent spineless and ignorant former employees from "violating the agreement". They are hoping that they can scare people into giving up their rights.
        • Re:Not a Surprise (Score:4, Interesting)

          by DrVomact (726065) on Friday August 08, 2008 @01:48PM (#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 Muad'Dave (255648)

        Virginia is most certainly NOT a right-to-work state. It is an at-will employment [lawyers.com] state.

        From the linked article:

        The courts of Virginia follow an "employment-at-will" doctrine. At-will employees may be terminated for any reason, so long as it is not illegal. Generally, employees who work under an employment contract can only be terminated for reasons specified in the contract. However, in Virginia, the mere fact that an employment contract is in writing is not sufficient to overcome the presumption that the

    • And anyone who has ever worked in California is surprised by this because...?

      Its a potential surprise to some people because, in the absence of ultra-clear guidance from the California Supreme Court, some courts interpreting California law in employment cases, notably the federal courts in CA and the Ninth Circuit, have applied the prohibition on contracts which restrain the practice of a profession more narrowly (for the most part, the state courts seem to have ruled consistently with the broad interpretat

  • Proceed with caution (Score:3, Interesting)

    by Barbarian Queen (1329161) on Friday August 08, 2008 @11:54AM (#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.

  • by John Hasler (414242) on Friday August 08, 2008 @11:57AM (#24526529) Homepage

    > ...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.

    Of course they will. The California Supreme Court is the ultimate authority on California law.

    > Most other states still have non-compete laws on the books...

    No. They do not have anti-non-compete laws on the books.

    > ...and it's not clear this ruling will affect them.

    It is perfectly clear how this ruling will affect them: not at all. They are not California.

    • That was exactly my line of thought when reading the summary. 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. But you already know that; it's the submitter who doesn't seem too clear on these things.
      • Re: (Score:3, Interesting)

        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

    • by NNKK (218503)

      > It is perfectly clear how this ruling will affect them: not at all. They are not California.

      Not completely true. It is not uncommon for courts to take judicial notice of rulings from other jurisdictions that they are not technically bound by. Good examples are courts attempting to interpret potentially-ambiguous clauses of law common to multiple states (think Uniform Commercial Code), particularly if those clauses have not been commonly-reviewed in the state they're in.

      This of course is a more speciali

  • by krlynch (158571) on Friday August 08, 2008 @12:10PM (#24526809) Homepage

    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.

    This sentence reflects a fundamental misunderstanding of the way the US Federal system operates. In matters of interpreting State laws and constitutions, the State court system has the final say. Federal courts have no authority to independently interpret State laws and constitutions once the State Supreme Court has spoken; they have to take State rulings as uninterpretable "fact". The exceptions are quite limited, and involve preemption by Federal law and disputes under the US Constitution.

    In this case, if there are no implicated Federal Statutes, the Federal Courts have to abide by the holdings of the State Supreme Court decision, whether they like it or not.

  • by houghi (78078) on Friday August 08, 2008 @12:44PM (#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 johannesg (664142) on Friday August 08, 2008 @01:48PM (#24528697)

    Those smug Java-bastards will no doubt be scratching their collective heads now - hahaha, you wish you had a void* now huh?

    The only job left for you in the future will be collecting garbage!

    (I think I can see the humorless trolls circling already ;-) )

  • 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.

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