California Supreme Court Says "no" to "Limited" Non-Compete Agreements, but "yes" to Broad Releases

The California Supreme Court issued its opinion in Edwards v. Arthur Andersen - read here -

The Court flatly rejected the "limited" or "narrow" non-competition agreement as unlawful under Bus. and Prof. Code section 16600. The court said that California's unfair competition law bans all non-compete agreements, even when they only restrict the employee's right to work for a limited number of employers. So, bid a sad goodbye to Ninth Circuit cases recognizing the "limited" non-compete such as International Business Machines Corp. v. Bajorek (9th Cir. 1999) 191 F.3d 1033 and General Commercial Packaging v. TPS Package (9th Cir. 1997) 126 F.3d 1131.

Below the fold, but perhaps more importantly, the court upheld a release that covered "any and all" claims. The lower court held that the release was invalid because it included unwaivable claims such as for reimbursement of expenses under Lab. Code section 2802. The court said that general release language such as at issue in Edwards impliedly did not include the release of claims that are not capable of being released:

We apply this rule in holding that a contract provision releasing “any and all” claims, such as that used in the TONC in the present case, does not encompass nonwaivable statutory protections, such as the employee indemnity protection of section Labor Code 2802. In so holding, we interpret the TONC such that it does not violate Labor Code section 2804. As a consequence, the TONC is neither unlawful nor null and void.

So, that's really good news for those of us employment lawyers who don't carve out all unwaivable claims from our releases.

DGV