On August 7, 2008, the California Supreme Court issued a vital enunciation of State Law in the decision of Edwards v. Arthur Andersen LLP. The court explicitly rejected the existence of any "narrow restraint" exception to California's prohibition against noncompetition agreements under California Business and Professions Code section 16600. The majority also stated that a general release "does not encompass nonwaivable statutory protections, such as the employee indemnity protection of [Labor Code section] 2802,'' even if the express language of the contract is all-encompassing. The Edwards Court's rejection of a "narrow-restraint" exception brings needed certainty to interpretation of Business and Professions Code section 16600. However, the court's construction of the general release in Edwards may prove to dilute the benefit of nonwaivable protections, as employees could find it too time-consuming and costly to litigate what is, and what is not, effectively and actually released.
Bradford P. Anderson,
Edwards v. Arthur Andersen LLP: There is Not a "Narrow-Restraint" Exception to California's Prohibition of Noncompetition Agreements, and a General Release May Not Mean What It Says, 39 Golden Gate U. L. Rev.