Ease strict noncompete pacts or risk wrongful discharge claim — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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Ease strict noncompete pacts or risk wrongful discharge claim

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in Firing,Human Resources

As part of a merger, Aetna U.S. Healthcare required employees to sign an agreement barring them from working for a competitor in the same state for two years or any competitor for six months after they left the company. Those who refused to sign, including account rep Anita Walia, were terminated.

Walia sued, alleging wrongful termination in violation of public policy and claiming that the agreement violated California law. A jury upheld the former employee's $1.2 million award.

The judges said a jury could reasonably conclude that Aetna's real motive for requiring the noncompete was not to protect trade secrets but to prevent "cherry-picking" by competitors. The judges called the pursuit of that goal "despicable." (Walia v. Aetna Inc., Cal. Ct. App., No. A091221, 2001)

This case puts yet another nail in the coffin of strict noncompete pacts.

Many companies require employees to sign narrowly drawn agreements, aiming to strike a balance between a company's confidentiality protections and an employee's freedom to work. But the whole practice continues to draw the ire of the courts.

You're in particular danger if your company operates in many states and uses a "cookie-cutter" agreement. The reason: Different states and courts put different restrictions on noncompetes. As this case shows, California is especially tough on noncompetes.

Advice: Ask yourself whether your noncompete protects a legitimate interest, extends over a reasonable period and covers a reasonable scope or geographic area.

Above all, if and when an employee refuses to sign, don't immediately fire or demote him. Always seek counsel before responding.

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