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Oracle Tips by Burleson |
Proceed
Carefully When Requiring Non-Compete Agreements
State laws may prohibit the termination of
employees who refuse to sign a non-compete agreement. The California
Court of Appeals has determined that an employee who refuses to sign a
non-compete agreement may not be fired as a violation of public policy. An
IT employee who is fired under this situation may file a wrongful
discharge lawsuit against the employer.
California law declares that with few exceptions,
every contract that restrains anyone from engaging in a lawful
profession, trade, or business is void.
Employers should refer to their state laws to
ensure that refinements regarding non-compete agreements have not been
added to the Federal statutes. The complex intermingling of laws can
land an employer in court for wrongful termination
.
Thomas v. Impaxx, Inc Case
In Thomas v.
Impaxx, Inc. (Dec 8, 2003), the Court of Appeal made clear that
anti-solicitation agreements that employees refuse to sign are deemed
void as unlawful business restraints except where their enforcement is
necessary to protect legitimate proprietary and trade secret
information. A proprietary trade secret exists where the employer has
made an effort in identifying the information’s unique characteristics
to the employee, and has taken steps to ensure the confidentiality of
this information.
Walia v. Aetna Case
In the case of
Walia v. Aetna, a California Court of Appeals held that a
wrongful termination
suit may be pursued when an
employee is discharged for refusing to sign an employer's non-compete
agreement.
Anita Walia sued Aetna for wrongful termination
in violation of public policy. During a
merger with another company, Aetna requested all of its employees to
sign a non-compete agreement.
Ms. Walia refused to sign the agreement and was
fired for not meeting the requirements of her job. Aetna had a policy
prohibiting its current and former employees from working for any
competitor in the healthcare business for a period of six months in
the state in which the employee worked for the employer.
The jury in the trial determined that Ms. Walia
was terminated for refusing to sign the non-compete agreement, and
awarded her $54,312 in compensatory damages, $125,000 in emotional
distress damages, and $1,080,000 in punitive damages.
Aetna appealed the case on the grounds that its
agreement did not violate California Business & Professions Code
section 16600. They also stated that the termination for refusing to
sign the non-compete agreement did not violate public policy
because any such policy was neither articulated at the time of Ms.
Walia’s termination nor fundamental and substantial.
The appellate court rejected the appeal by citing
the Business & Professions Code section 16600 that asserts "Every
contract by which anyone is restrained from engaging in a lawful
profession, trade, or business of any kind is to that extent void."
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