A legal proceeding called Filipoint, LLC vs. Maas makes it clear that simply signing an employment contract during the sale of a business does not mean that competition bans are enforceable. In this case, an employee of the company sold his shares and also approved a share purchase agreement. By Robert A. Bleicher, Carr McClellan P.C.In many U.S. jurisdictions, agreements that limit a deceased worker`s ability to compete with his or her former employer are enforceable with appropriate restrictions. As a general rule, courts allow a restrictive employment agreement after conducting a balancing test that weighs on geographic areas, time limits or other considerations, in order to prevent the restriction from being overly repressive. Not in California, where these considerations are virtually irrelevant. As the home country of the world`s seventh largest economy, it has the most aggressive public policy against treaties that somehow prevent a person from exercising his or her profession, trade or business. California, like most other states, allows companies established or created in other states to do business within its borders, provided they comply with the rules issued by the Secretary of State.
In some cases, a business owner will draw up a non-competition clause and indicate that the agreement was concluded in another State. This is called a choice of law provision, which may mean that the restrictions or agreements are enforceable. To better understand how and when competition bans apply in California, it is important to examine the facts of Edwards v. Arthur Andersen, a pioneering legal proceeding that took place in 2008. In this case, the California Supreme Court confirmed that the competition bans are not applicable in California and that the directive, which promotes a worker`s ability to move from employment, is valid. This part of the Labor Act went even further and established that the employee, who lives in California and worked primarily in California, could not agree without an attorney`s instructions to bring future litigation before a court outside of California law or to approve such provisions under the laws of a state other than California. . . .