Covenants Not to Compete Are Only Enforceable to Protect Trade Secrets

A recent California court decision has narrowed the scope of enforceable “covenants not to compete.” California, unlike many other states, severely limits the ability of an employer to prevent former employees from taking a position in with a competing business. California Business & Professions Code § 16600 prohibits any contract which restrains a person from engaging in a lawful profession, trade, or business.

In Edwards v. Arthur Andersen LLP, Mr. Edwards, a former employee, agreed not to solicit Arthur Andersen’s clients after his departure. In seeking new employment, Mr. Edwards’ new firm (HSBC) required that he obtain a waiver from Arthur Andersen as a condition of employment. Arthur Andersen demanded that Mr. Edwards sign a general release in exchange for waiving the covenant. Edwards declined to sign the general release and sued Arthur Andersen for interference with his potential new job.

The court decided in California covenants not to compete will only be enforced if necessary to protect a company’s trade secrets or if signed as part of the sale of business. The court rejected a line of cases, mostly decided by federal courts interpreting California law, which had allowed covenants not to compete so long as a “substantial portion of the market” was still available to the employee.

For employees, this means that any employee non-disclosure or confidentiality agreement that attempts to restrain the employee from soliciting customers, competing against the former employer, or otherwise seeking new employment are void and unenforceable unless necessary to protect a trade secret. Trade secrets are a very narrow subset of information and much employer information does not meet the definition of trade secrets. Further, if the employer attempts to enforce an invalid non-disclosure or confidentiality agreement, then the employer may be liable for tortious interference with the employment relationship.

Read more

Young fast food workers subject to harassment at work

Bay Area Popeyes Case Puts Focus on Workplace Sexual Harassment

Two Bay Area women filed claims against Popeyes, alleging sexual harassment during their employment at a franchise location in Oakland. The complaints, filed on Aug. 11, accused the company of failing to…

READ ARTICLE
Man with cane requesting reasonable accommodation

Worker Wins $20 Million From San Francisco Marriott Marquis in Disability Discrimination Lawsuit

A San Francisco jury awarded a former Marriott Marquis employee $20 million in damages after finding that the hotel failed to provide reasonable accommodations for his disability. The verdict was announced in…

READ ARTICLE
Fighting wage theft on your own can be stressful and difficult, which is why it is a good idea to consult an experienced employment lawyer

Bay Area Subway Franchisee Faces Closure and $1 Million Penalty for Wage Theft

The U.S. District Court for the Northern District of California ordered a 14-unit Subway franchisee in the San Francisco Bay Area to either close or sell their stores. The employers must pay…

READ ARTICLE
Firefighting apparel

Bay Area Fire District Pays $100,000 Settlement for Withdrawing Job Offer Based on Applicant’s Criminal Record

The Moraga-Orinda Fire Protection District (MOFD) agreed to pay nearly $97,500 to settle a case brought against it by a job applicant. The settlement, announced by the California Civil Rights Department, stems…

READ ARTICLE
SEEN ON
Fox40-bw
KPIX-bw
SFGate-bw
marin-ij
Abc10-bw