May It Please The Court

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May It Please The Court
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Noncompetition Agreements Struck Down By California Supreme Court

The California Supreme Court yesterday settled a dispute between federal courts in California and our state courts on noncompetition agreements.  In Edwards v. Arthur Anderson.  The Supremes ruled first the noncompetition agreements are against public policy and therefore illegal.  Second they decided releases in employment agreements can release "any and all" claims without improperly including claims that can't be released due to public policy prohibitions.

Federal courts previously upheld agreements that prevented an employee from going to work for a competitor, I think largely because most other states likewise uphold them.  State courts, however, have been following the rule since 1872 when the California legislature wrote the law banning them.

The second portion of the ruling is of more interest to lawyers, perhaps.  We're the ones who write the releases or advise clients to sign them.  The issue revolves around whether the words "any and all" mean that the release includes claims that are illegal to release, such as noncompetition agreements.  There's a tenet of the law that prefers to uphold agreements rather than void them.

So, to uphold the validity of the agreement, the court determined that the better course would be to rule the "any and all" didn't include claims that were illegal, so the court determined that the illegal claims weren't included in the release. 

See why only lawyers would be interested in the second issue?  But, employers are the ones interested in the noncompetition agreement.  Luckily, employers can still rely on trade secret and nondisclosure agreements, which are not illegal. 

Posted by J. Craig Williams on Friday, August 08, 2008 at 22:01 Comments (0)


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