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Edwards v. Arthur Andersen LLP - 44 Cal. 4th 937, 81 Cal. Rptr. 3d 282, 189 P.3d 285 (Cal. 2008)

Rule:

Cal. Bus. & Prof. Code § 16600 evinces a settled legislative policy in favor of open competition and employee mobility. The law protects Californians and ensures that every citizen shall retain the right to pursue any lawful employment and enterprise of his or her choice. It protects the important legal right of persons to engage in businesses and occupations of their choosing.

Facts:

In January 1997, plaintiff Raymond Edwards II was hired as a tax manager by the Los Angeles office of defendant Arthur Andersen LLP ("Andersen"). Andersen's employment offer was made contingent upon Edwards' signing a noncompetition agreement, which prohibited him from working for or soliciting certain Andersen clients for limited periods following his termination. The agreement was required of all managers. In 2002, Edwards was offered a position at another firm ("Firm"), which was purchasing Andersen's tax practice. As a condition of that employment, Edwards was required to sign a "Termination of Non-compete Agreement" ("TONC"), which, inter alia, released Andersen from all claims arising from his employment with Andersen. Edwards refused to sign the TONC; Andersen terminated his employment, and the Firm withdrew its offer of employment. Edwards then filed a lawsuit against Andersen in California state court asserting claims for intentional interference with prospective economic advantage and anticompetitive business practices under the Cartwright Act. Edwards alleged that the noncompetition agreement was invalid. Ultimately, judgment was entered for Andersen. Edwards appealed, and the appellate court held, inter alia, that the noncompetition agreement was invalid and that the TONC violated public policy. The state supreme court granted review.

Issue:

Was Andersen's noncompetition agreement invalid?

Answer:

Yes.

Conclusion:

The state supreme court affirmed in part and reversed in part the appellate court's judgment and remanded the matter to that court for further proceedings. The court affirmed that part of the appellate court's judgment that held that the noncompetition agreement was invalid. The court ruled that the noncompetition agreement impermissibly restrained Edwards' ability to practice his profession as a certified public accountant by prohibiting him, for an 18-month period, from performing professional services of the type he had provided while at Andersen for any client on whose account he had worked during 18 months prior to his termination. The court ruled, however, that the appellate court erred in its finding that the TONC was invalid. The TONC did not purport to release Andersen from any nonwaivable statutory claims and therefore was not unlawful under Cal. Lab. Code, §§ 2802, 2804. The TONC did not expressly reference indemnity rights, nor did it encompass a waiver of Edwards' indemnity rights. 

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