In the 1973 case Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware, the U.S. Supreme Court ruled in favor of a former employee who sought to recover extra compensation under California law that was denied by his employer due to an employment contract clause requiring him to forfeit it upon leaving the company voluntarily before retirement age. The court held that such contractual provisions were unenforceable as they violated Section 14(a) of Securities Exchange Act which prohibits any condition that may restrain or burden interstate commerce and competition among securities exchanges and over-the-counter markets. The ruling emphasized on protecting employees' rights against unfair labor practices and ensuring free movement of personnel among competing businesses without undue restrictions imposed by employers through restrictive covenants.

In the dissenting opinion for Merrill Lynch, Pierce, Fenner & Smith Inc. v. Ware (1973), Justice William Rehnquist argued that California's law should not supersede New York's in this case because it would interfere with interstate commerce and undermine the uniformity of national securities markets. He contended that applying California law to a contract made and performed in New York was an unwarranted extension of state power over interstate commerce. Furthermore, he believed that allowing states to impose their own laws on such transactions could lead to inconsistencies and unpredictability in the national market system which Congress sought to avoid by enacting federal securities legislation.