Non-Competition Agreements are Unenforceable in California Law Unless Necessary to Protect Trade Secrets.
The 9th Circuit Court of Appeals examined a non-competition and trade secret dispute involving the alleged unauthorized use of source codes in computer software. The defendant allegedly obtained the source code through former employees who came to work for the defendant. The court rejected all counts, finding that the defendant was given an unconditional license to use the software, and therefore, no trade secret violation occurred. As to the cause of action for violation of the non-compete clause in Plaintiff's employment contract, the Court concluded that because the defendant was legally entitled to access defendant's trade secret, then the nompetition agreements with Plaintiff's employees were invalid. Under California law, non-competition agreements are unenforceable unless necessary to protect an employer's trade secret. Cal. Bus. & Prof.Code § 16600 (voiding any contract that restrains anyone from engaging in a lawful profession, trade, or business. Because the non-competition agreements were no longer necessary to protect Plaintiff's trade secrets, they were no longer enforceable. Asset Marketing Systems, Inc. v. Kevin Gagnon dba Mister Computer, 542 F.3d 748 (9th Cir. 2008).

Computer Software Professional's Exemption Changed as of JANUARY 1, 2009
Gov. Schwarzenegger vetoed 35 percent of the new laws proposed by the California legislature this session. That’s a record. Due to the historic 85-day delay in passing a state budget and the governor's vow not to sign any legislation until the impasse ended, the governor had just 10 days to review bills on his desk. Accordingly, he signed only those bills that he deemed the highest priority for California.

A.B. 10 was signed into law effective January 1, 2009. It amends the Labor Code to add an annual income restriction for exempt computer software professionals who are paid on salary. Under existing law, to qualify as exempt, computer software pros must be paid at rate of at least $36/hour, on an hourly basis. The amendment also permits exemption where the employee is paid an annual salary of at least $75,000, paid at least monthly, and in a monthly amount of not less than $6,250

Ninth Circuit Affirms Dismissal With Prejudice of Corinthian Colleges Securities Fraud Class Action (August 2008)
In Metzler Investment GMBH v. Corinthian Colleges, Inc., 2008 WL 2853402 (9th Cir. July 25, 2008), the United States Court of Appeals for the Ninth Circuit affirmed the dismissal with prejudice of a securities fraud class action, holding that plaintiffs had failed to plead the essential elements of loss causation, scienter and falsity consistent with the requirements of prevailing Supreme Court and Ninth Circuit authority. Corinthian Colleges is the most recent in a long line of Ninth Circuit decisions since 1999 that apply strictly the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). (See more in depth article above in Securities Laws.)


Ninth Circuit Allows SEC To Proceed Against Director For Insider Trading Even Where Director Owed No Fiduciary Duty To Company Whose Stock He Traded (July 2008)
In SEC v. Talbot, 2008 WL 2574513 (9th Cir. June 30, 2008), the United States Court of Appeals for the Ninth Circuit held that a board member could be liable for insider trading under the “misappropriation theory” where the board member owed no fiduciary duty to the company whose stock he traded. This holding reversed summary judgment granted in favor of the board member, and broadened the scope of potential liability for misappropriation of information by board members and officers of companies. (See in depth article above in Securities Laws & Transactions).

Commissions Paid in Advance may be recovered by Employer (December 2006)
An employer hired sales associated to sell internet services on a base salary plus commission basis. The employment agreement provided that commissions would be paid when the order was “booked” but the employer could “recover or charge back” the commission from the sales associates if certain conditions were not met. Former sales associates sued claiming that their employer’s recovery of commissions it had paid in advance to the employees was unlawful. The trial court held that the recovery of the advanced commissions was not unlawful because they were not “wages” and it entered judgment in favor of the employer. The decision hinged on the question of whether or not the commissions were “wages.” If the commissions were wages, then charge backs would be unlawful under California Labor Code § 221. The California Court of Appeal affirmed the judgment in favor of the employer. The Court determined that it was “clearly the law” in California that a commission salesperson must pay back advances made over commissions earned when there is an express agreement on the part of the salesperson to do so. Furthermore, the court went one step further in finding that Labor Code § 224 provides an independent basis to allow charge backs in certain situations. Therefore, even if advance payments were considered “wages,” an employer may withhold or divert them if the deduction is: 1) authorized in writing and 2) does not reduce the employee’s “standard wage.” Koehl v. Verio, Inc., 142 Cal. App. 4th 1313 (Cal. App. 1st Dist. 2006).