Sign This Agreement Not to Compete or You’re Fired! Noncompete Agreements and the Public Policy Exception to Employment at Will

A California jury recently awarded an employee who was fired for refusing to sign a noncompete agreement $1.2 million in damages for wrongful discharge. Whether employ-ees have a right to refuse to sign unenforceable noncompete agreements is an emerging employment law issue. This article considers whether a wrongful discharge remedy is avail-able in such cases under the public policy exception to the employment-at-will doctrine. State court decisions addressing the question are conflicting. Some courts have allowed employers to discharge employees who refuse to sign a noncompete agreement even if the agreement is unreasonable. Other courts have recognized a claim for damages under the public policy exception. This article explores the issue from policy and managerial perspectives, critically analyzing the policy justifications advanced by the courts in those decisions, and comments on the liability risks to employers and the proper resolution of the issue. KEY WORDS: wrongful discharge; noncompete agreement; employment at will; public policy exception. Consider the following scenario: Alicia has worked for ABC Insurance for 5 years. She has performed well and advanced in the company to the position of Account Manager fo