employer to withdraw its offer of employ- ment in order to avoid the hassles and legal costs associated with a lawsuit. If that occurs, the employee may have recourse against the former employer. This issue was addressed by the California Supreme Court in Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937 [81 Cal.Rptr.3d 282].
In Edwards, the employee had been
employed by Arthur Andersen and had signed a non-compete agreement. Edwards’ practice group was sold and he was offered employment by the new enti- ty. However, before his employment could take effect, the new entity required that Edwards obtain a release from Arthur Andersen of its non-compete agreement. Arthur Andersen would not agree to ter- minate the non-compete agreement unless Edwards signed a release of all his claims against Arthur Andersen. Edwards did not sign Arthur Andersen’s broad release. Arthur Andersen therefore refused to terminate the non-compete agreement and the new entity withdrew its offer of employment to Edwards. Edwards sued Arthur Andersen for inten- tional interference with prospective eco- nomic advantage.
In order to state a claim for inten-
tional interference with prospective eco- nomic advantage, a plaintiff is required to prove the following elements: an eco- nomic relationship between the plaintiff and a third party, with the probability of future economic benefit to the plaintiff; the defendant’s knowledge of the rela- tionship; an intentional act by the defen- dant, designed to disrupt the relationship; actual disruption of the relationship; and economic harm to the plaintiff proxi- mately caused by the defendant’s wrong- ful act, including an intentional act by the defendant that is designed to disrupt the relationship between the plaintiff and a third party. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153-1154 [131 Cal.Rptr.2d 29, 44-45].) For the third element, a plaintiff must establish that the defendant’s conduct was not only an intentional act designed to disrupt the relationship, but also that it was wrongful. (Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 392-393 [45 Cal.Rptr.2d 436, 447].) At issue in the Edwards opinion was whether Arthur Andersen’s refusal to release the non-compete agreement without consid- eration was a wrongful act sufficient to
support a cause of action for intentional interference with prospective economic advantage. The Court held that it was. (Edwards, supra, 44 Cal.4th at 955.) Thus, where an employer’s conduct
causes an employee to lose employment based on the employer’s threat to enforce a non-compete agreement, the employee may have legal recourse against the employer in the form of an action for intentional interference with prospective economic advantage.
Conclusion Although the employer may try to
take the offensive in litigation by itself suing the employee or threatening suit, in many cases such tactics can backfire on the employer and give the employee even more ammunition in its fight for justice. Iris Weinmann is a partner in
Greenberg & Weinmann, located in Santa Monica. Ms. Weinmann has concentrated her practice on the representation of employees in civil rights and other employment related litiga- tion since 1994. Ms. Weinmann is a frequent contributor to the Advocate’s annual Employment Law issue.
APRIL 2011 The Advocate Magazine — 53
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