Total Articles: 17
Class-Action Antitrust Complaint Alleging an Unlawful Employer "No-Poaching" Conspiracy Appears to Have Survived a Motion to Dismiss
Executive Summary: At a hearing yesterday in San Jose, California, a federal district court judge indicated from the bench that antitrust claims alleging an "over-arching conspiracy" to fix and suppress employee compensation through interconnected employer "no-poaching" agreements would survive a motion to dismiss for failure to state a claim.
California Federal Court Finds Broad Noncompete Could Be Enforceable Based on Possibility of Revision
While the Bratz case continues to dazzle onlookers, an interesting thing happened in a more low profile case. In Richmond Technologies, Inc. v. Aumtech Business Solutions, et al. [pdf], the Northern District of California issued an order granting in part the plaintiff’s motion for temporary restraining order. The court recognized that “the non-solicitation and non-interference provisions in the Non-Disclosure Agreement are likely to be found unenforceable under California law [Business and Professions Code section 16600],” because they are more broadly drafted than necessary to protect trade secrets.
California Non-Competes: Are They Legal After All?
In an eye opening decision, the United States District Court for the Northern District of California recently granted a temporary restraining order partially enforcing a non-compete agreement. In Richmond Technologies v. Aumtech Business Solutions (copy available below), the Plaintiff provides software for financial services firms. The Plaintiff entered into a “Teaming Agreement” with the Defendant, pursuant to which the Defendant developed software for the Plaintiff. In the agreement, the Defendant promised not to (1) use or disclose the Plaintiff’s confidential information; (2) initiate contact with or solicit the Plaintiff’s clients; and (3) compete with the Plaintiff by using its technology. Requesting a temporary restraining order, the Plaintiff alleged a breach of each of these three provisions.
Noncompete News: Is The Duty Of Loyalty Dead In California?
Much to the chagrin of many business owners, California courts have consistently favored open competition and employee mobility, and will not enforce noncompete and nonsolicitation agreements that govern an employee's post-employment activities.[1] Despite this, employers have taken comfort in the fact that California law recognizes that an employee owes a "duty of loyalty" to his or her employer during the term of employment.[2] Although only a handful of cases have discussed the subject, courts have found a breach of the duty of loyalty to support an affirmative defense to a wrongful termination claim[3] and have suggested that an employee may be liable for any resulting damages under a tort theory of liability.
Cyber Privacy Wars: The Employer Strikes Back
Distinguishing Stengart v. Loving Care Agency, a California Appellate Court Holds That An Employee's E-mails With Her Personal Attorney Sent Through The Employer’s Workplace Computer Are Not Protected By The Attorney-Client Privilege.
Noncompete News: California Court Finds Employers May Be Liable for Wrongful Termination When Honoring Competitors' Non-compete Agreements.
A recent decision by the California Court of Appeals, finding an employer's decision to honor a competitor's non-compete agreement tantamount to a violation of California Business and Professions Code section 16600, thus violating public policy, underscores the Catch-22 faced by employers when hiring employees subject to covenants not to compete. Given the uncertainty surrounding the enforceability of non-compete agreements in California presumed void under California law unless found to qualify as a statutory exception employers who endeavor to avoid litigation from former employers nonetheless may be vulnerable to wrongful termination suits by the employees subject to these agreements.
California Courts Weigh In On Non-Compete Agreements.
In many states, restraints on the practice of a profession, business or trade (such as non-competition agreements) are considered valid, as long as they contain reasonable geographic and time restrictions. But that has not been true in California since 1872. In that year California settled public policy in favor of open competition, and rejected non-competition agreements. In the years since then, the law has evolved substantially, and two recent appeals court cases further refined the situation there.
ALTERNATIVES TO EMPLOYEE NON-COMPETITION AGREEMENTS IN CALIFORNIA.
Several recent court decisions have effectively eliminated the lawful use of non-compete and non-solicitation agreements in California except in certain limited circumstances. Those decisions recognize that California law favors open competition and freedom for employees to move from employer to employer. However, this does not mean employers must accept the risk of employees taking their valuable information and resources to the competition.
California Courts Continue to Strike Down Non-Competition Agreements.
While reasonable non-competition agreements are enforceable in most states, California remains hostile territory for companies wishing to bind their employees to such agreements.
The latest case involved Biosense Webster, Inc.
WALKING THE LINE: USING NON-SOLICITATION AGREEMENTS.
In Employment Law 101, we learn California's public policy favors free and open competition for employees' talent. Business and Professions Code Section 16600, concisely provides: "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."
NEW RULES REGARDING NON-SOLICITATION AGREEMENTS IN CALIFORNIA.
When employees with access to key company information and knowledge about company practices leave to work for competitors, employers are naturally concerned about protecting themselves. One way employers try to do this is through various types of agreements with employees designed to limit their ability to use confidential information and trade secrets.
Common Non-Competition Agreement Provision Now Invalid.
When an employee leaves your company, chances are that he or she will go to work for a competitor. It is certainly unsettling to know that someone with inside knowledge of your company has fallen into the hands of a rival. Worse yet, that employee may seek to call on your clients or recruit your key employees.
EDWARDS V. ARTHUR ANDERSEN: NON-COMPETE AGREEMENTS AND GENERAL RELEASES.
California law is tough on agreements that restrain an individual from engaging in his or her profession, trade or business. The only statutory exceptions to this strict rule are non-competition agreements associated with certain business sales transactions and dissolution of partnerships. There are common law restrictions as well. For example, employees usually cannot directly compete with a current employer where doing so would constitute a conflict of interest. Additionally, employees may be restricted from certain post-termination activities to protect the former employers trade secrets. Employers also may use financial disincentives to dissuade employees from leaving, such as requiring repayment of training costs, and bonuses that require employment on a certain date.
California - California Supreme Court Invalidates Non-Compete Agreement.
In a unanimous decision, the states highest court recently ruled that a noncompetition agreement entered into between an employer and one of its former employees is unenforceable under California law. In so doing, the California Supreme Court upheld a longstanding state law restricting employers from using such agreements to restrain employees practice of their professions.
California Supreme Court Rules On Non-compete Agreements And On General Releases.
The California Supreme Court recently handed down a long-awaited and significant decision addressing the nature and scope of non-competition agreements in California. The ruling also addressed the enforceability of contract provisions requiring employees to release "any and all" claims. The case has important consequences for California employers.
Court Refuses To Enforce Overbroad Contractual Provision Penalizing Company For Hiring Consultants Employees (scroll down).
In VL Systems, Inc. v. Unisen, Inc., the California Court of Appeal refused to enforce a contractual provision that precluded a company from hiring employees away from a consulting firm it had hired.
California Court Confirms Arbitration Award Enforcing Non-Compete Agreement (pdf).
A California Court of Appeal recently handed employers a major victory in the areas of noncompetition, choice of law, and arbitration in its decision in Jones v. Humanscale Corporation. The decision issued on Friday, June 17, involved an employers attempt to specify in its employment contracts with its employees that the law of its home state, New Jersey, would control instead of that of California. The employment contract also provided for arbitration through the American Arbitration Association and specified that any dispute would be heard in New Jersey.
