Can a Confidentiality Agreement Trump a Non-Compete Law? HP Thinks So.

Some very interesting legal news sparked up in the tech world this week, as recently-fired HP CEO, Mark Hurd, on Monday became the newly-hired president of Oracle, a major HP competitor.  HP almost immediately filed a suit in California to prevent that from happening.  The issue raised is whether HP can stop Mr. Hurd from working at a competitor based on his confidentiality agreements with the company. In many states, parties can agree to restrict a former employee from working for certain competitors in a limited geographic area (for example, a baker who can't work for any other bakeries within 20 miles for one year after termination).  Such non-compete agreements are generally enforceable if the duration and geographic limitation are reasonable.  The court aims to strike a balance between protecting legitimate business interests of the company with the ability of the employee to earn a living.

But California is one state that automatically voids the enforcement of non-competes (outside of certain transactions like the sale of a business) in order to promote open competition and support the employee's freedom of contract.  Other states have adopted similar laws, and even Massachusetts is considering changing its laws to be closer to California's.

In its complaint, HP is seeking what is called "injunctive relief" (in non-legal speak, they want the court to block his hiring at Oracle).  HP's complaint centers around the succinctly-named "Agreement Regarding Confidential Information and Proprietary Developments With Protective Covenants Relating to Post-Employment Activity for Incumbent Employee Working in California", and the later and much more appropriately titled "HP Agreement Regarding Confidential Information and Proprietary Developments", which Mr. Hurd signed on three different occasions.  The agreements restrict Mr. Hurd from performing job duties that are the same or similar to the job duties he had at HP only if that results in the unauthorized use or disclosure of HP's confidential information.  HP claims that Mr. Hurd simply can't do that at Oracle.

So the question for the court to decide is whether HP's confidentiality agreement is an appropriate restriction and not just a backdoor subversion of California's non-compete restriction, or whether Mr. Hurd can perform his duties at Oracle or anywhere else without using or divulging HP's confidential information.  The answer set an important example for how companies should handle agreements with their employees, particularly if they live in California.