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December 26, 2002
California Court Rules on 'Non-Compete' Contracts
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>The California Supreme Court ruled that out-of-state companies "may" be able to enforce employee "non-compete" agreements at rival firms in the Golden State, the San Francisco Chronicle reports.
At the center of the case is a California law that prohibits "every contract by which anyone is restrained from engaging in a lawful profession, trade or business." The law has been interpreted to ban non-compete clauses, which typically prevent employees from going to a rival company within a certain period of time, according to the Chronicle.
The court ruled that a California court did not have an "exceptional circumstance" in order to bar an out-of-state lawsuit against an employee in California, the Chronicle reports. The case stemmed from an employee who signed a non-compete clause in Minnesota and then went to work for a California company.
The clause said the worker, for a period of two years, could not work on a product at a new company that competed with products he worked on at the Minnesota firm. Employers contend they need to have employees sign such agreements in order to protect trade secrets and intellectual property.
Attorneys tell the Chronicle the ruling is narrow and it is unclear what kind of an impact it will have on other cases. However, the California Supreme Court's ruling allows the Minnesota firm to move forward with its case against its former employee.
"This case will only make it more difficult for workers who sign non- compete agreements, which are not legal in California, to come and work for California firms," says the California Deputy Attorney General Joseph Ragazzo.