Damon Anastasia and Robert Milligan Published in California Lawyer
“Noncompete Clauses”

Damon Anastasia and Robert Milligan’s article, “Noncompete Clauses,” was published in the February 2009 issue of California Lawyer as the issue's feature MCLE article. In it, the authors discuss noncompetition agreements, which was at issue in Edwards v. Arthur Anderson. The Edwards decision acknowledged California's longstanding policy favoring employee mobility by confirming that employee noncompetition agreements are unenforceable in California. The authors note that once the case reached the California Supreme Court, the court ruled that section 16600 prohibits all employee non competition agreements— with limited statutory exceptions that are not typically found in the usual employment relationship. According to the article, "As a result, employers with noncompetition provisions in their employment agreements run the risk not only of having a future court invalidate those agreements but also of being sued for interfering with their ex-employees' ability to obtain new employment—and, in some cases, for anticompetitive business practices or unfair competition (44th Cal. 4th at 943-45)."

The authors note, "One thing is clear after Edwards: Companies seeking to invoke the trade secrets exception to section 16660 must show that the information they seek to protect is, in fact, a bona fide trade secret.” The authors further note that the alleged trade secret must be specifically identified, and a detailed showing is required in order to obtain injunctive relief. The authors suggest, "In the wake of that ruling, companies should audit their trade-secret protections to ensure that no restrictive clauses run afoul of Business and Professions Code section 16600 and, equally important, that their organization's intellectual capital is adequately protected.” In conclusion, the Edwards decision showed that a carefully crafted and narrowly drawn noncompete clause designed to protect legitimate employer interests may well remain viable, but there are no guarantees.