Is That Non-Compete Too Broad?

Interesting Calif. Case Involving Arthur Andersen(Yes, That's Not a Typo!
Written by Brian Sommer, Contributor

Interesting Calif. Case Involving Arthur Andersen

(Yes, That's Not a Typo!)

You really ought to check out this court filing involving that fascinating business/employee contract: the non-compete. This case is about an Arthur Andersen Tax professional whose group was being sold to another firm as a consequence of the post-Enron breakup of Arthur Andersen in 2002.  In 1997, while at Andersen, this professional had been asked to sign a non-compete agreement. But, before this individual could start work for the new firm, he was being asked to sign away several critical legal rights that the court eventually ruled were unenforceable.

What made this case so interesting is that the court found that non-compete agreements for California workers are essentially unenforceable except in a very limited number of situations. And, this ruling was absolutely clear on these very limited cases.

The prevalence of non-compete agreements in software, high-tech and professional services firms continues to run strong (especially outside of California) but employers should read this court filing and seriously ask yourselves if:

  • your firm really does need these agreements? Are your confidentiality and other protections adequate for most employees?
  • you are using a legal threat to force retention or are you focused on creating the kind of employment environment where people really want to work for you? If it's the former, no amount of contracts will save your firm from your self-destructive policies.

If you'd really like to know how great managers lead and win in the market, they create a work environment that causes people to stay with the firm years longer than average. They make work fun and exciting. They constantly nudge people to continue to develop their craft and increase their personal net worth and that of the firm. They build the kind of company everyone wants to join and no one wants to leave.

What will be your firm's legacy? Will people still be litigating your non-compete agreements six years after your firm is almost extinguished? Or, will people be talking up your business to other great talented folks and encouraging them, strongly, to join your team?

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