People have the option to quit. The company is legally bound to obey, but individual employees can chose for themselves whether they want to be a party to it.
Yahoo may still be court ordered to implement it, just hopefully not with their best and brightest developers. I also have a theory that a lot of the recent terrible news coming out of Yahoo is due to staff complying with the letter of the legal order but not the entire thorough spirit of it, intentionally doing a quick, shoddy bug ridden job.
Unfortunately it's not that simple. More often than not, someone high up will find someone low whose continued stay in the country is highly dependent on them keeping this job.
While I've never had to make such a choice, I can tell you that my personal attitude towards what I would and wouldn't do changed the day this restriction was removed.
The other point to be made is that you probably want your best developers implementing back doors (if you are compelled to do so), so at least the back door is as secure as possible (and not trivially bipassed)
It only "works" in the sense of preventing it if resignations are that numerous. It "works" in the sense of "I, the individual employee, can still live with myself", even if only one quits.
Yahoo may still be court ordered to implement it, just hopefully not with their best and brightest developers. I also have a theory that a lot of the recent terrible news coming out of Yahoo is due to staff complying with the letter of the legal order but not the entire thorough spirit of it, intentionally doing a quick, shoddy bug ridden job.