LABOR DAY ‘99: THE CHANGING WORLD OF WORK : Putting a Leash on Employees : Trends: Job mobility has employers insisting on ‘noncompete’ contracts. Some workers are fighting--all the way to court.

Mark King, president of Taylor Made-adidas Golf for the last 2 1/2 weeks, has been bouncing around like one of the high-tech balls that will be introduced soon by his former employer, Callaway Golf Co.

Eighteen months ago, King had left Taylor Made to help develop Callaway’s new line of golf balls; on Aug. 18, he was lured back to his old employer. The latest hop also landed him in San Diego County Superior Court, where King is being sued by Callaway on charges he violated an agreement not to compete with the golf equipment manufacturer or divulge any of its secrets.

This workplace triangle is a dilemma of Information Age economics: too many companies chasing too few employees with too much in their heads who are only too happy to move along.

Work is often like a giant game of musical chairs these days, with workers flitting from job to job, taking their training and knowledge with them. In every industry there are companies like Callaway and Taylor Made, both based in Carlsbad, Calif., that are fierce rivals not only in the world of golf clubs and balls but also in the market for employees and the know-how they bring.

To protect themselves, employers increasingly are requiring workers to sign employment contracts with promises not to compete with a former employer, to reveal that company’s trade secrets or to solicit its customers. Until recent years, such agreements were required only of top executives or key researchers, but today they are making their way far down the corporate ladder.

“Many employers are drooling to get the competition’s key people because they want to take advantage of what these people know,” said Larry Shapiro, publisher and editor in chief of the monthly newsletter California Employment Advisor. “There are a lot of practical problems when it comes to trying to keep employees.”

Each state has different rules about such noncompetition agreements--nicknamed “noncompetes”--and their cousins, nondisclosure and non-solicitation agreements. Eastern states tend to view these contracts more sympathetically, while California law generally forbids any broad noncompetition agreement that restricts an employee’s ability to earn a living.

That hasn’t stopped employers from attempting to craft contracts that safeguard their work force investments, nor has it slowed down other employers eager to find talented employees in a super-tight job market.

“It’s a two-edged sword,” said attorney James Bryan, a partner in the Los Angeles office of Arter & Hadden. “For every employer who wants to enforce a covenant not to compete, you have an employer who wants to get around a covenant not to compete.”

Employment contracts, which usually contain noncompetition and nondisclosure clauses, are becoming more routine, according to a recent survey by Exec-U-Net, a nationwide executive-networking organization. More than 400 executive search firms responded, saying that about 35% of candidates are signing employment contracts, up from 26% the year before, said David Opton, executive director of the Norwalk, Conn.-based group. Five years ago, such contracts were so unusual that the group didn’t even ask about them in its annual survey detailing job negotiations, Opton said.

Job candidates want employment contracts to provide severance packages, and, in return, employers load them with clauses restricting competition for a certain period and in a certain geographic area, forbidding removal of company property and prohibiting an employee from soliciting clients or other employees after the job ends.

“If you’re trying to decide between Company A and Company B, you’re going to say, ‘I want to have an employment contract so that when you drag me out and shoot me, I won’t be destitute,’ ” Opton quipped. “These contracts usually contain strong boilerplate that says you’re not going to compete and they can go over your entire body with a magnet to take everything off those diskettes you’ve got.”

Courts generally require that such contracts provide “consideration” for the employee in exchange for signing, such as a new job, a raise or a promotion.

Noncompetition and nondisclosure agreements have been required by many technology companies for years, but lately they have been spreading to other industries. Even a toupee stylist in Florida was successfully blocked from competing with a former employer a few years ago.

“This is a huge issue in any company with high turnover,” said James Boswell, general counsel for SAS Institute, the world’s largest privately held software company, based in Cary, N.C.

SAS requires every new employee--down to workers in the company day-care center--to sign an agreement not to disclose any company secrets. But the company, which boasts a 4% turnover in an industry with an average of 20%, stops short of noncompetition agreements, Boswell said.

“It kind of runs counter to our culture” at SAS, which hands out free M&Ms; to employees every Wednesday and appears on lists of the best companies to work for, Boswell said. “We only want people here who want to be here.”

Even in states that allow them, noncompetition agreements can be difficult to enforce, labor experts say. In California, employers generally try to tie the noncompetition agreements to the disclosure of trade secrets.

“The California courts tend to interpret these agreements fairly strictly and in favor of the employee,” Bryan said. Courts have ruled that if information is easily obtained, it is not a trade secret.

These agreements are being put before all types of employees.

In 1997, for example, Aetna U.S. Healthcare fired about 100 mid- and lower-level workers who refused to sign the company’s two-page noncompete agreement. About a dozen fired Aetna employees in California sued. Among them was Diane Latona, a Los Angeles woman who had worked for nine years as a provider relations specialist.

Latona said Aetna’s sweeping noncompete agreement would have prohibited her from working for thousands of health-care providers within a 50-mile radius of her job.

“Aetna’s noncompete agreement would force former employees out of the industry or force them to move away from their homes, families and friends,” Latona’s lawyer, Michael A. Brewer, argued in court papers.

Last week, U.S. District Judge Nora Manella agreed with that argument. Manella said Aetna’s noncompete agreement was invalid because it violated California’s long-standing policy against restricting people’s right to work.

It imposes “an unconscionable burden on an employee who asks for no more than to continue his current employment or seek new employment in conformity with California law and with century-old public policy of the state.”

Brewer applauded the ruling.

“If you’re an employer who wants your employees to sign noncompete agreements, you certainly want to proceed with caution,” he said.

However, two other federal judges in Los Angeles have ruled that Aetna did not violate public policy when it required employees to sign the agreement. The conflicting decisions mean the issue will ultimately be decided by the U.S. 9th Circuit Court of Appeals, Brewer said.

In its case against former employee Mark King, now in arbitration, Callaway Golf is employing an unusual argument known as “inevitable disclosure”: that the employee must inevitably use the former employer’s confidential information in the ordinary course of business at the new employer.

King’s disputed contract as vice president of sales for Callaway runs through the end of 2000, and “when we enter into a contract for a certain period of time, we assume the person will be here, unless he’s sick,” said Ely Callaway, founder and chairman of the company.

“Every bit of information Mark King has learned about the golf ball business he learned from us at Callaway,” Ely Callaway argued. “It is inevitable that he will use our knowledge against us. It’s impossible for him not to do that unless he goes into a coma.”

“Most people think of this as a silly lawsuit,” said Taylor Made General Counsel Timothy Epp, noting that a judge a week ago refused Callaway’s request for a temporary injunction against King.

“We are certainly taking all reasonable precautions to protect the trade secrets of others,” Epp said. “A company can’t simply bully an ex-employee into working someplace he doesn’t want to work. Nationally, indentured servitude ended with the passage of the 13th Amendment in 1865.”

Wal-Mart tried that same tack last year in a suit against Amazon.com and Drugstore.com, which hired away 14 of the Bentonville, Ark.-based retailer’s information technology employees. Wal-Mart’s information systems are the envy of the retailing world, constantly feeding store data back to headquarters, and Wal-Mart argued that former employees would inevitably reveal trade secrets they had learned.

The suit was settled in April, with Amazon.com and Drugstore.com agreeing to return documents to Wal-Mart and reassigning the employees to duties different from those they performed for the retailer.

California Employment Advisor’s Shapiro noted that others have discovered similar creative solutions to keep their new employees and avoid litigation. When a Procter & Gamble executive joined rival Clorox in Oakland, P&G;’s subsequent lawsuit was settled by Clorox’s phasing in the executive’s responsibilities for competing products over 27 months.

“These settlements aren’t perfect, but they do give some semblance of protection to the former employer and allow the employee to earn a living,” Shapiro said. “It’s very expensive to litigate these cases, and the result is not clear-cut.”

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Times staff writer Davan Maharaj contributed to this report.