Thursday, October 23, 2008, 10:53 AM

California Attorneys Concede Total Defeat on Noncompete Issues

By Todd
Adam Katz had earlier blogged the Edwards v. Arthur Andersen decision - but now California attorneys are agreeing with him on the record that the gig is up in California.

“Employers simply cannot use noncompete agreements with their employees any more,” explained San Jose-based employment attorney Dennis Brown, co-founder of Littler Mendelson PC’s risk management program, noting that certain courts had allowed some latitude in the matter in recent years.

The August decision by the California Supreme Court, Edwards v. Arthur Andersen LLP, was closely watched by labor and employment lawyers because it took up the issue of noncompete agreements, which are allowed in many states as long as they’re limited in terms of geography and duration.

In the case, Raymond Edwards, an accountant at Arthur Andersen, sued the firm on a number of grounds. Among them was an agreement he signed specifying that after leaving the firm, for 18 months Edwards would not contact any of the clients he’d worked with at Andersen.

The firm argued, “You can still be a tax accountant,” Brown said, “you just can’t call on our customers for 18 months.”

This argument had been accepted in recent years as valid by the 9th U.S. Circuit Court of Appeals, a federal appellate court, believing the California courts would uphold a narrow opening into the noncompete area as long as it was reasonable.

In matters of state law, however, the state Supreme Court has the final word. California courts are bound by what its own courts say, not by what federal appellate courts say, according to employment attorney Andrew Wolfe, a partner at Redwood City-based Ropers, Majeski, Kohn & Bentley.

The state Supreme Court unanimously reaffirmed its stance on the noncompete issue, saying California statute, dating back to 1872, was clear — any restraint is invalid unless it fits within specific statutory exceptions.

Those exceptions include contracts eliminating competition in the context of the sale of a business or the dissolution of a partnership.

“The California Supreme Court took the Edwards case simply to deliver this message: ‘Pay no attention to the 9th Circuit, lower courts. California law remains what it always was,’” Wolfe said. “In sum, it reaffirms the status quo.”


Anonymous Anonymous said...

I recently left the law firm at which I worked. When I left, I took a list of clients that I handled during my time there. I wrote to them notifying them that I had left the firm and started my own practice. I told them their case would likely be transferred to another attorney within the firm. I told them I was available in the future if they need legal representation. I did not badmouth the firm in any way.

One of my clients decided to jump ship and retain me. Now, I think my ex-employer is upset, and I think he might come after me. I did not sign any non-compete or employment contract of any kind.

Did I violate ethical rules by contacting my former clients?

April 14, 2009 at 3:49 PM  

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