Expanding public policy wronful termination (California)

In Edwards v Arthur Andersen, LLP, (August 7, 2008), Case No. S147190, the California Supreme Court adopted an expansive interpretation of Business & Professions Code § 16600 ("§ 16600") and its prohibition against non-competition agreements. The Court held that § 16600 prohibits employee non-competition agreements unless the agreement falls within a statutory exception. The Court specifically rejected the "narrow restraint" exception adopted by the Ninth Circuit Court of Appeals.

Under the Andersen decision, an employer will likely only be able to restrain a former employee from soliciting its customers under two circumstances: (1) if the employee is using trade secrets or other protectable confidential information to solicit customers, or; (2) if the solicitation restraint arises as the result of the sale or dissolution of a corporation, partnership or Limited Liability Company. If these exceptions do not apply, a covenant prohibiting the post-employment solicitation of customers will be unenforceable and a public policy violation. As such, if an employer refuses to hire or terminates an employee because the employee refuses to sign the non-competition agreement, the employee will likely have a claim for wrongful termination in violation of public policy which could ultimately subject the employer to tort damages.

SSRN paper posted by Lemley & Pooley availble for download here:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1295606
JoeC (McGruff)