AETNA Hit For Noncompete Agreements

The Recorder, December 30, 1999

Source: Kevin Livingston

A San Francisco Superior court jury has ordered Aetna Inc. to pay $1.2 million to an employee who was fired after she refused to sign a noncompete agreement.

The unanimous jury last week awarded former Aetna account representative Anita Walia $180,000 in compensatory damages and $1,080,000 in punitive damages after finding that she was wrongfully terminated from the Connecticut-based health benefits company.

While some states enforce noncompete agreements- contracts which preclude former employees from working for competing companies within a certain time period - California does not.

The jury that found that although Aetna knew such contracts violated California Business and Professions Code § 16600, the company attempted to enforce the agreements anyway.

Plaintiff's attorney Alan Exelrod argued that in 1997 Aetna implemented a nationwide contract for all its employees, prohibiting them from working for a competitor for six months after leaving Aetna.

He said that when Walia refused to sign the contract in June of that year, she was fired.

Exelrod, a partner at the San Francisco plaintiffs firm Rudy, Exelrod, Zieff & True, was assisted in the trial by associate Patrice Goldman and co-counsel Richard Weil, an associate at San Francisco's Bley and Bley.

"We are very pleased that Judge [Stuart] Polack ruled the noncompete agreement illegal and that he found that firing someone for refusing to sign one is a violation of public policy," Exelrod said. "The jury properly recognized that the company was aware of California law but ignored it."

A second phase of the trial, scheduled for February, will determine if Aetna's actions constitute an unfair business practice under Business and Professions Code § 17200.

"Not only is this agreement unlawful, but requiring employees to sign an agreement containing unlawful terms constitutes an unfair business practice, " Exelrod wrote in court papers. "Although Aetna's attorneys were aware that noncompetes were not permitted in certain states, Aetna required that certain of its employees, including sales employees, sign the same noncompete regardless of their state of residence."

Aetna, and its attorneys from Gibson, Dunn & Crutcher, had little comment on the verdict, but a company spokesman said Aetna will continue to defend itself in the second phase of the case.

"We are reviewing the verdict and its impact on our current policies," the spokesman said. Aetna did not say if it plans to appeal the verdict.

In court papers Aetna argued that the noncompete agreement did not violate public policy because it did not completely restrain Walia from pursuing her profession. Aetna also said there was no evidence the company ever tried to enforce the agreement in California.

"A multistate company should not be subjected to tort liability as a result of seeking, to the extent possible, a facially uniform contract throughout the United States," the company argued in court papers.

Exelrod said Aetna has since discontinued the policy, but only after 523 California employees signed the agreements and 26 others - including Walia - lost their jobs.