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Businesses The Courts

Amazon Sues Former AWS VP Over Non-Compete Deal (geekwire.com) 76

Reader joshtops shares a report: Amazon.com is alleging that one of its former high-ranking executives violated a non-compete agreement when he accepted a job at Bellevue-based Smartsheet, GeekWire has learned. In a lawsuit filed Friday in King County Superior Court, Amazon alleges that Gene Farrell, who served as Vice President of the AWS Enterprise Applications -- EC2 Windows team, violated a non-compete agreement when he took the new job as head of product June 1 at the heavily-funded Bellevue online workplace collaboration platform. "This move is unthinkable," Amazon wrote in a motion for a temporary restraining order that would bar Farrell from working at Smartsheet. "he cannot possibly forget everything he knows about AWS's products and plans while he is working to develop products for its competitor." The suit also notes: "Farrell's role as "Head of Product" at Smartsheet will necessarily involve development of and strategy regarding competing cloud-based productivity products, including but not limited to those for project management, collaboration, and/or automation, and will therefore breach the Noncompetition Agreement and threaten the disclosure of Amazon's highly confidential information," Amazon wrote in its lawsuit.
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Amazon Sues Former AWS VP Over Non-Compete Deal

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  • So is this a case where we should be happy because a guy with the resources to fight the legality of a non-compete agreement is being sued?

    • Sharks eating sharks = that's entertainment!
    • by ranton ( 36917 )

      So is this a case where we should be happy because a guy with the resources to fight the legality of a non-compete agreement is being sued?

      Sarcasm aside I think you sum it up quite well. Non-compete clauses are not universally bad, but they are easily abused. They are not as easily abused when both parties have the means to fight it over in court. I'm not sure how much Gene Farrell is worth, but as long as it's in the multi-million dollar level then I believe the courts are an appropriate way to settle this matter fairly.

      • "I'm not sure how much Gene Farrell is worth, but as long as it's in the multi-million dollar level then I believe the courts are an appropriate way to settle this matter fairly."

        Thermonuclear warheads at 20 paces might be more entertaining and result in more social benefit, but yeah courts might work also.

    • If there is silver lining to this story, it's that most of us do not work, nor will ever work, for Amazon.

  • by Joe_Dragon ( 2206452 ) on Monday June 12, 2017 @11:03AM (#54602711)

    Non-Compete Deal should be full pay with the same COL / pay raises that you should of gotten and full benefits for the term.

    • by Dog-Cow ( 21281 )

      This times a billion. Non-competes effectively prevent an ex-employee from using his skills and knowledge to work in his field. If you want to control the employment of people, you should be prepared to pay for it.

      • As part of the sale of my company, I agreed to not work in the industry again. I am given to understand that this is something I could argue in front of a judge or jury, who would likely go with a 'reasonable time period.' More specifically, I can't work for a different company - I was asked to go back and do some contract work, twice.

        At the time of the sale, I was 49. That's a lot of productive years that I sold. Don't get me wrong, I am pretty happy with the renumeration. I have no financial complaints, a

    • by houghi ( 78078 ) on Monday June 12, 2017 @11:20AM (#54602859)

      In Belgium these things are great to have.
      I had one. The moment I was let go, they signed of that it was not valid anymore. Why? Because if they would not have, they would have had to pay me the amount agreed upon.

      All I had to do was file a suit saying that I was unable to go after a job at the competition and they would have to pay me out, regardless if I actually wanted a job or that I was going for a job at none of the competitors.
      It would not even matter if I got fired or if I left.

      As always: ask a real lawyer that is specialized in this stuff in your jurisdiction, because it can make you a LOT of money or not.

      The best moment to do this if you retire. Then there is no risk with future employers who won't hire you. Also look if it is legal, because below a certain pay grade in Belgium it isn't. So you can still go work for the competition and they can't do anything and if you go work elsewhere, they still have to pay you.

      Again: talk to a specialized lawyer that is not related to your company. So not the people that do your salary. They work for the company, not for you. Also not your bookkeeper. Only talk to your Union if you are unable to find a lawyer, because it is very likely you talk to somebody who does not know the details and will give you the wrong info, resulting in you not getting the money you should or paying a LOT.

    • Ha, not a chance.

      What they want is to control what you learned without paying a single dime.

      If they could actually wipe out the years you spent with them from your brain, they would.
    • by ranton ( 36917 )

      Non-Compete Deal should be full pay with the same COL / pay raises that you should of gotten and full benefits for the term.

      I would rather non-compete clauses require arbitration to settle if the terms are enforceable. They should look at the pay of the employee and severance in determining if the clause can be enforced. In short arbitration should ensure the employee is being given a fair shake.

      Companies should have a way to ensure key employees cannot take their knowledge to competitors. But they should have to pay for the privilege. For instance my specialized knowledge probably makes me around $50k-$75k (in salary) more valu

      • I think that it shouldnt matter how much money you make. The idea that your past employer can dictate your future is abhorrent. Luckily i live in a state where they are un-enforcable. There is no place for non-competes in modern society, period. You dont get to own people or their minds. Hire people, get the work you need out of them and move on.
        • by ranton ( 36917 )

          The idea that your past employer can dictate your future is abhorrent.

          Your past employer is not dictating your future. You are when you sign the non-compete agreement. You are accepting a job under a set of conditions. Would you consider it abhorrent if an employer dictates when you come to work, where you work, or what projects you work on? If it is some form of slavery or coercion then it certainly is abhorrent, but as long as both parties agree I see no problem with any of these scenarios.

          Hire people, get the work you need out of them and move on.

          Some people are hired to manage long term strategy and curate long term competitive a

          • by sinij ( 911942 )

            The idea that your past employer can dictate your future is abhorrent.

            You are when you sign the non-compete agreement. You are accepting a job under a set of conditions.

            You are accepting a job in exchange for wages, when wages stop so should conditions.

            How would you feel if you were downsized, but still forced to show up at the office at 9am or risk wage claw-backs or lawsuits?

            • by ranton ( 36917 )

              How would you feel if you were downsized, but still forced to show up at the office at 9am or risk wage claw-backs or lawsuits?

              A similar situation exists for contractors where they need to do work they are not billing for. I will grant you the common employee relationship doesn't work this way, but not everything fits into the standard. Some cases are fundamentally different than others, and for those the employee contracts will also be different.

    • "Non-Compete Deal should be full pay with the same COL / pay raises that you should of gotten and full benefits for the term."

      Typically in the case of both retention contracts and non-compete clauses, the remuneration provided in the position is much higher than you would get in circumstances nob-cimpete clauses are not required.

      If you sign a non-compete clause without considering these aspects, you will need to find some other type of work if you leave while it in effect. If you didn't negotiate sufficient

  • So this means... (Score:4, Interesting)

    by xxxJonBoyxxx ( 565205 ) on Monday June 12, 2017 @11:16AM (#54602823)
    We're seeing Google's "GCP" start to eat into Amazon's cloud solutions, and we know Microsoft believes Azure and Office 365 are peas in a pod. Does this mean that Amazon was planning to fight back with some kind of "Amazon Docs" solution?
  • The Neuralyzer [wikipedia.org] yet? This would save them the signature and legal shebang of non-compete agreements...
  • by Anonymous Coward

    Frankly, any non-compete that does not involve severance pay for the duration of the non-compete should be illegal. It doesn't have to include benefits or bonuses, but it should be the same salary.

    Most of the time the people involved do not have any information vital to the development of the product. As noted in the article, Amazon uses non-competes for unskilled, SEASONAL warehouse workers. This is done more often to intimidate people into not quitting rather than to protect the company.

    If it is reall

    • Frankly, any non-compete that does not involve severance pay for the duration of the non-compete should be illegal. It doesn't have to include benefits or bonuses, but it should be the same salary.

      Should this apply to top executives as well?

      "I will pay you $3M per year, under the condition that you don't quit and work for a competitor" does not seem entirely unreasonable.

      For a programmer making $65K, maybe so.

      • "I will pay you $3M per year, under the condition that you don't quit and work for a competitor" does not seem entirely unreasonable.

        But is smartsheet really a competitor? I can see preventing him from going and working for rackspace but if smartsheet is considered a competitor then that eliminates 90% of his potential jobs. A non-compete should require a company to explicitly list who they consider and don't consider a competitor. An overly broad non-compete basically makes you unemployable. If a company really wants a non-compete like that then instead of paying them 3M per year, they should pay them only 2M per year and save the e

      • Yes, but there should be a federal law prescribing that if you as a company include a non-compete in any employee or contractor agreement, you are required to pay 1.5x their annual salary per year the non-compete is applied as severance, up to a limit of 4x the average wage paid by the company. If Amazon's average wage paid is $50k, then top executives top out at $200k/year. The point of making it 1.5x is so that the employee can also continue to buy and have benefits. A programmer making $80k/year woul

    • by whoever57 ( 658626 ) on Monday June 12, 2017 @12:10PM (#54603283) Journal

      There is a simpler solution: work in California.

      California law voids almost all non-compete agreements (the exceptions are quite specific and would not apply here). There are studies that show that the state benefits from banning non-competes.

    • Nobody owns what's in your head. The legal claim Amazon has made is that they own what's in this guys head.

      This is the kind of thing that should get companies stomped in court. Unfortunately with the current administration I would expect justice to support Amazon. After all this guy should never be able to work again because he can't forget the stuff he did at amazon therefore amazon owns him, forever.

  • The issue is that there is a legal concept called "restraint of trade." You cant from a non-compete stop someone from working in their profession and provide for themselves. A lot of these non-competes end up violating this concept which is why the courts are frequently not supporting employers in non-compete disputes.

    • Depends on the state you live in. In some states non-competes have basically been rendered unenforceable for the vary reason you state. Other state courts have not arrived at the same conclusion and have varying rules for what make a non-compete enforceable or not.

      As in ALL legal matters about which you have questions, I strongly recommend you pay a lawyer for advice before you sign anything.

      In my personal experience, I've been sued over a non-compete issue that I considered frivolous. I can tell you

      • Excellent point, the state employment laws dramatically differ. And agree, specifically want an employment lawyer (a normal lawyer wont usually know the intricacies of these things).

      • by deesine ( 722173 )

        Hire a lawyer, great advise!

        We hired a truck driver who had a teamsters pension but before working for us didn't check his contract which clearly spells out transportation jobs would be subject to time restrictions, for him like 14 hours/week allowed after which point his pension is reduced. He didn't read his contract, but instead just asked a couple of his buddies. He lucked out, and didn't lose the $15k they were going to dock him. But he did have to quit.

  • We can look at the top end of this, and maybe we forget about the fact that non-competes have been exploding in all industries, including a (paywall) sub sandwich maker [nytimes.com]. So we erode worker rights by hammering on unions, and now we take even more rights by preventing people from staying in the same career.

  • by Anonymous Coward

    In the UK, non-compete clauses are not enforceable as it would be deemed "restraint of trade" for the individual. You may be asked to work your notice period while on leave, but they need to pay you.

    Also, an organisation can't prevent you from using "know-how" to implement the thing you did at a previous company.

    I don't understand how people in the US let this happen. I thought the US was all about competition?

    • I thought the US was all about competition?

      No, it's about capitalism, which is private ownership of the means of production. Many business people take this rather literally when as in the tech business the employees ARE the means of production.

    • In NZ a "restraint of trade" clause against an individual is enforceable.
      However it can be challenged in Court as unreasonable; in that instance the Court will amend the RoT clause to make if reasonable and then apply it to the facts.
  • by sdinfoserv ( 1793266 ) on Monday June 12, 2017 @12:39PM (#54603589) Homepage
    Non-compete agreements are not worth toilet paper - if you have a good attorney.. You have the right (in the US) of "Life, Liberty and pursuit of happiness", which legally includes your chosen profession. Therefore, nobody can deny you the opportunity to work in your chosen, educated and expert profession - to do so is quite literally unconstitutional.
    There may be a period of time before you can bring some "break through" product to market, but you can't be denied work.
    This is NOT to be confused with the Uber case of stealing company work and starting your own company or bringing it to another party. That's a whole different level.
    • by boulat ( 216724 )

      Well hate to break it to you but there is a provision in that toilet paper of a Constitution about 'due process' - and by signing a legal document you agree to be deprived, vis-a-vis to your right to be deprived of liberty and yada yada, to not compete or pursue such happiness - as part of your employment contract.

      Now if your employer sued you after you've left for the competitor without you having signed NDA/Non-Competent, then yes, you can try citing a constitution or 13th amendment as your reasons, but i

      • by mishehu ( 712452 )
        Just because you sign something does not defacto make it binding. This is why most contracts have a clause that states that if any provision is found illegal or otherwise not-binding, it does not impact the remainder of the contract. That normally doesn't prevent the contract writer from adding creative ideas to the contract even if he/she knows that it cannot be enforced.
      • "Due Process" has to do with being guilty of a crime. Employment is a civil matter and does not apply.
  • Amazon is shooting itself in the foot. Smartsheet runs on AWS, I don't see how Smartsheet can be competing with AWS , when it requires AWS.
    • See Amazon WorkDocs. It does seem that this individual did leave to go to a direct competitor of a product he had provileged knowledge of. I am sure he could have found other work that doesn't compete directly with the AWS team he was involved in leading.

      See also Amazon Prime Video and Netflix.

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