## Facts

- Raymond Edwards II worked for Arthur Andersen LLP as a tax manager and later senior manager; his employment offer required signing a post-employment noncompetition agreement.
- The agreement restricted Edwards, after leaving Andersen, from (1) providing certain professional services to recent Andersen clients for 18 months, (2) soliciting certain office clients for 12 months, and (3) soliciting Andersen personnel for 18 months.
- In 2002, after Andersen announced it was selling parts of its tax practice to HSBC, HSBC offered Edwards employment conditioned on his signing a “Termination of Non-Compete Agreement” (TONC).
- The TONC would release Edwards from the noncompetition agreement in exchange for Edwards releasing Andersen from “any and all” employment-related claims.
- Edwards refused to sign the TONC; Andersen terminated him, and HSBC withdrew its offer.
- Edwards sued Andersen alleging, among other theories, interference with prospective economic advantage and anticompetitive business practices, asserting the noncompetition agreement was void under California Business and Professions Code § 16600.

## Issues

1. To what extent does California Business and Professions Code § 16600 prohibit employee noncompetition agreements?
2. Is a contract provision requiring an employee to release “any and all” claims unlawful because it encompasses nonwaivable statutory protections, including Labor Code § 2802 indemnity?

## Decision

- The court held § 16600 voids employee noncompetition agreements unless a statutory exception applies.
- The court rejected a judge-made “narrow restraint” or “partial restraint” exception that would permit limited post-employment restraints.
- Because Andersen’s restrictions did not fall within a statutory exception, the noncompetition agreement was void under § 16600.
- The court held a general release of “any and all” claims is not unlawful on its face merely because nonwaivable statutory rights exist; such rights are not waived absent clear, specific, legally permissible language.
- The court affirmed in part and reversed in part the Court of Appeal, upholding invalidation of the noncompetition agreement but rejecting the view that the TONC release was facially invalid for breadth alone.

## Legal Principles

- Under California Business and Professions Code § 16600, post-employment restraints on engaging in a lawful profession, trade, or business are void unless they fit within an express statutory exception.
- Courts may not create a general “reasonable restraint” or “narrow restraint” exception to § 16600 for employee noncompetition agreements.
- Client nonsolicitation and related post-employment service restrictions are restraints within § 16600 when they limit a former employee’s ability to compete, even if limited in scope or duration.
- A general release of “any and all” claims is not per se unlawful for potentially touching nonwaivable statutory rights; nonwaivable rights remain enforceable unless an agreement clearly and validly waives them.

## Conclusion

The court confirmed that California broadly bars employee noncompetition restraints under § 16600 absent a statutory exception, and it further held that a general “any and all claims” release is not facially invalid solely because certain statutory employee protections cannot be waived.


Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937, 189 P.3d 285 (Cal. 2008)