Jones v. Humanscale Corp

In Jones v. Humanscale Corp. (2005) 130 Cal.App.4th 401, the plaintiff's employment agreement with the defendant contained noncompetition and arbitration clauses. The agreement expressly declared that its provisions were to be construed in accordance with New Jersey law. (Id. at pp. 405-406.) The arbitrator rejected the plaintiff's argument that under New Jersey choice of law analysis, the noncompetition agreement should be interpreted under California law. (Id. at p. 406.) The arbitrator concluded the noncompetition agreement could be enforced against the plaintiff, and awarded the defendant damages for the plaintiff's previous violation of the agreement. (Id. at p. 407.) The plaintiff opposed the defendant's petition to confirm the award. He contended the award was based on an illegal contract that violated California's policy against covenants not to compete. (Ibid.) The trial court reviewed and vacated the arbitration award. It concluded the arbitrator erred in failing to apply California law and the covenant not to compete was illegal on its face under section 16600. (Jones, at p. 407.) The Court of Appeal disagreed. The court acknowledged Moncharsh allows for judicial review of an arbitration award when granting finality to the arbitrator's decision would be inconsistent with the protection of a party's statutory right. But the Jones court concluded the issue before it was different because the parties' agreement authorized the arbitrator to determine the applicable law and the enforceability of the covenant not to compete. (Jones, at p. 410.) The court further concluded the arbitrator's findings were "not palpably erroneous" because some limits on a former employee's right to pursue his or her occupation are permissible under California law. (Id. at p. 411.) Moreover, the alleged illegality of the covenant not to compete did not render the dispute non-arbitrable. Since the alleged illegality affected only a portion of the contract that did not include the arbitration agreement, the arbitrator had the authority to determine whether the covenant not to compete was enforceable. (Id. at p. 413.)