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Privacy Policy

The publishing lawyer and law firm values the privacy of its clients and Web/blog site viewers. Any of the following personal information that may be made available to the lawyer or firm when browsing or navigating the site shall be kept confidential:

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What Is “Reverse Vesting”

“Reverse Vesting” is an expression used to describe a situation in which an employee or independent contractor or consultant receives stock subject to repurchase by the company at an at-cost purchase price, which repurchase right lapses over the vesting period.  Thus, it is the reverse of the typical situation, where the service provider receives a right to purchase stock (an option) which right is not exercisable until the service providers vests.

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Privacy Policy

The publishing lawyer and law firm values the privacy of its clients and Web/blog site viewers. Any of the following personal information that may be made available to the lawyer or firm when browsing or navigating the site shall be kept confidential:

  • First and last name
  • Company, home, postal or other physical address
  • Other contact information, for example, telephone number, fax number, email address, and other similar information
  • Title or position in a company or an organization
  • Occupation
  • Industry
  • Personal interests
  • Any other information needed to provide a service you requested

Examples of scenarios where our visitors provide their personal information include, but may not be limited, to:

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The lawyer or law firm provides you the opportunity to agree or decline to give your personal information via the Internet. The lawyer or firm will inform you of the purpose for the collection and does not intend to transfer your personal information to third parties without your consent, except under the limited conditions described under the discussion entitled “Information Sharing and Disclosure” below. If you choose to provide us with your personal information, we may transfer that information, within the law firm or to a third party service provider as necessary.

Domain Information Collection
The lawyer or firm may collect domain information to enable us to analyze how our visitors use this site. This data enables us to become more familiar with which people visit our site, how often they visit, and what parts of the site they visit most often. The lawyer or firm uses this information to improve its Web-based offerings. This information is collected automatically and requires no action on your part.

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Some pages on this site may use “cookies”—small files that the site places on your hard drive for identification purposes. A cookie file can contain information such as a user ID to track the pages visited, but the only personal information a cookie can contain is information you supply yourself. These files are used for site registration and customization the next time you visit us.

Some parts of the site may also use cookies to track user traffic patterns. The lawyer or firm does this in order to determine the usefulness of our Web site information to our users and to see how effective our navigational structure is in helping users reach that information. Please note that cookies cannot read data off of your hard drive. Your Web browser may allow you to be notified when you are receiving a cookie, giving you the choice to accept it or not. If you prefer not to receive cookies while browsing our Web site, you can set your browser to warn you before accepting cookies and refuse the cookie when your browser alerts you to its presence. You can also refuse all cookies by turning them off in your browser, By not accepting cookies, some pages may not fully function and you may not be able to access certain information on this site.

Information Sharing and Disclosure
Your personal information is never shared outside the lawyer or firm without your permission, except under conditions listed below:

  • Consenting to share your information to a third party service provider working on our behalf to serve you.
  • Requiring us to provide you with a product or service.

The lawyer or firm will also disclose your personal information, if required to do so by law, or in urgent circumstances, to protect personal safety, the public or our sites.

Internet Security
The lawyer or firm strives to protect your personal information; however, we urge you to take every precaution to protect your personal data when you are on the Internet. Change your passwords often, use a combination of letters

Protecting the Privacy of Children
Children under 13 years old are not the target audience for our Web site. To protect their privacy, the lawyer or firm prohibits the solicitation of personal information from these children.

Links to Third Party Sites
This site may contain links to other sites. The lawyer or firm does not share your personal information with those Web sites and is not responsible for their privacy practices. We encourage you to learn about the privacy policies of those companies.

Changes to this Privacy Policy
The lawyer or firm reserves the right to change, modify or update this policy at any time without notice. Any substantial changes in the way we use your personal information will be posted on this site.

If you have questions or concerns about our Privacy Policy, please email us at the contact information on the site.

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California Supreme Court Affirms Ban on Noncompetition and Nonsolicitation Agreements Under California Law

08.13.08

By Jennifer L. Brockett, Stuart W. Miller, John P. LeCrone and Emilio Gonzalez

California’s Supreme Court, in the recent case of Edwards v. Arthur Andersen LLP, has affirmed California’s long-standing ban on noncompete agreements and explicitly extended it to so-called “nonsolicitation” provisions, as well. The Court ruled that noncompetition and nonsolicitation clauses are void in California, unless they fall within a statutory exception, such as agreements involving the sale of a business or shares of stock in a corporation. The Court also found that an employer that requires employees to sign an agreement containing such a clause may commit an unlawful business practice subject to tort damages.

Edwards involved claims by a former accountant at Arthur Andersen LLP who had signed an agreement at the time of hire that provided, “For twelve months after you leave the firm, you agree not to solicit (to perform professional services of the type you provided) any client of the office(s) to which you were assigned during the eighteen months preceding release or resignation.” When Andersen collapsed in the wake of the government investigation into the demise of Enron Corporation, Edwards’ unit of Andersen was sold to HSBC and his employment was terminated, after he refused to sign an agreement releasing any claims he had relating to his employment. He was nonetheless bound by the prior nonsolicitation clause.

Edwards filed a complaint against Andersen and others, asserting claims for intentional interference with prospective economic advantage and anti-competitive business practices. He alleged, among other claims, that Andersen’s noncompetition agreement (with its nonsolicitation provisions) violated California Business & Professions Code Section 16600, which provides:

…every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.

It has long been the law in California that Section 16600 “invalidates provisions in employment contracts that prohibit an employee from working for a competitor after completion of his employment or imposing a penalty if he does so.” In addition, Section 16600 has in some cases provided the basis for invalidating nonsolicitation provisions, such as those barring employees from soliciting business from customers with which they had contact during their employment.” Muggill v. Reuben H. Donelley Corp ., 62 Cal. 2d 239, 242 (1965).

Yet, some courts have nevertheless allowed nonsolicitation provisions that only narrowly restrained competition. Relying on these cases, the federal 9th Circuit Court of Appeals—which includes California—had found that narrow restrictions did not violate Section 16600. This—known as the “narrow restraint” doctrine—had led many employers to include limited nonsolicitation or noncompetition clauses in their employment agreements. The Supreme Court inEdwards unequivocally rejected even this narrow form of restraint and reiterated California’s strong public policy favoring open competition and employee mobility. Said the Court:

In the years since its original enactment as Civil Code section 1673, our courts have consistently affirmed that section 16600 evinces a settled legislative policy in favor of open competition and employee mobility. The law protects Californians and ensures that every citizen shall retain the right to pursue any lawful employment and enterprise of their choice. It protects the important legal right of persons to engage in business and occupations of their choosing.

There are, as the Edwards Court recognized, two express statutory exceptions to the restriction on noncompete provisions: Business & Professions Code Section 16601, which applies to the sale of shares of a business when goodwill is being sold, and Section 16602, which applies to the dissolution of partnerships or disassociation of a partner. In either circumstance, nonsolicitation or noncompetition provisions may be upheld.

The Court’s decision in Edwards also does not affect restrictions imposed on employees that are necessary to protect trade secrets. California courts have previously found that nonsolicitation clauses may be upheld where the agreement is necessary to protect trade secrets. Under California’s enactment of the Uniform Trade Secret Act, information may qualify for trade secret protection if the information (a) derives independent economic value from being secret, and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. The Edwards Court expressly did not address the “trade secrets exception” to Section 16600. Because the trade secret exception is supported by a separate statute—the Uniform Trade Secret Act—agreements that are necessary to protect a trade secret should survive the Edwards decision.

In light of Edwards, employers should have employment counsel review noncompetition and nonsolicitation agreements applicable to California employees, to ensure that any such agreements comply with Edwards. Additionally, in the wake of EdwardsCalifornia employers cannot rely upon nonsolicitation and noncompetition provisions to prevent former employees from engaging in competitive activities, unless such provisions are necessary to protect their confidential, proprietary and trade secret information. As a result, employers should consider evaluating their security protocols to ensure that confidential materials are adequately protected from unauthorized disclosure.

FOOTNOTES

Muggill v. Reuben H. Donelley Corp., 62 Cal. 2d 239, 242 (1965).

Thompson v. Impaxx, Inc., 113 Cal. App. 4th 1425, 1429 (2003).

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