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Seagate Says Ex-Employee Can't Work For Competitor
deweller writes "According to a story at MacCentral, Hard drive maker Seagate Technology LLC is seeking a court injunction to prevent a former employee, Pete Goglia, from going to work for Western Digital Corp. any time in the next 2 years, saying Goglia knows too much about Seagate's hard-drive reading and writing technology to work for a competitor."
If Pete Goglia signed a non-compete agreement with Seagate then it has stipulations preventing him from working at a competitor for a specified time. It was an agreement he may have signed to work for the company. It is nothing uncommon in the US to have this kind of contract. Usually, the company will give you stock options and the if the stock options go below the strike price than you have to pay the difference in the current stock price if you break this agreement.
Do they have a no-compete clause in his contract? If not, they're going to lose, as that's standard practice in cases like this.
Minnesota is not a Right To Work state. I'm not a lawyer, but they might actually have a case.
Residents of states without a Right To Work law are not protected from this kind of non-compete suit in the same way as RTW residents are.
According to this article, he did sign something.
Uselessful technology (Air-Charged
In the UK such contractual clauses are explicitly null and void: it's called restraint of trade.
Bad analogies are like waxing a monkey with a rainbow.
As a law clerk who has researched this specific topic extensively over the passed few weeks, I can say that 1) even with a non-compete agreement, the enforceability of such a clause is not a foregone conclusion (it is subject to reasonability tests e.g. duration and geographic limitation in most states); and 2) without a non-compete agreement, there is almost no legal precedent for Seagate to enjoin someone from practicing in their chosen profession/field of expertise. Should be an interesting outcome should there be no agreement in place.
I know in Indiana they have what is known as "at will employment." While companies can make non-compete clauses, the employer can not make it stick.
My old company sort of worked around this. They had their customers sign "non-compete" clauses. We had a guy quit and apply for a posision at one of our customers. My old firm found out, sued the company, not the individual, and won.
I think they settled though, the company agreed to continue purchasing a support contact for XX years (i.e. to show that they weren't hiring this guy to replace their contract.)
Don't know if CA is "at will" or not *shrug*
http://www.akingump.com/docs/publication/412.pdf
Only in very particular situations are non-compete clauses applicable in CA, and given that the employee worked for Seagate for 17 years, he may not have even signed one when he joined the company.
Probably, unless he signed a non-compete, about all Seagate can do is is cost him a bundle in legal fees. (Hopefully WD will cover those fees.)
However, that could depend on the state laws. I was surprised by how different things were between California, my home state, and Georgia, where I am now. Interestingly, both states call themselves "Right To Work" states. In California, that means that an employer can't prevent you from working for another employer later; non-competes in that state are not binding. In California, you do indeed have the right to work, and no prior employer can restrict that right.
In Georgia, on the other hand, things are quite different. Here, from what I learned through the grapevine, the employer seems to hold most of the cards, and has most of the rights. You can be terminated at any time for any reason, or for no reason at all, and you have no recourse. Even so, you can still be held to a noncompete. This, apparently, is supposed to encourage employment, and thus they call this the "Right to Work". I think that's an AMAZING display of spin. In English, this Southern euphemism translates to "Right to Bend Over".
Moral: if you don't want to be held to a noncompete, make sure to sign it in California and make sure that your next job is also in California. Unless something has changed in the last two or three years, all they can do to you there is rattle their sabers a bit.
I know in California, except for very limited circrumstances, these contracts are indeed unenforceable. Specifically, I refer to:
CAL. BUS. & PROF. 16600 "Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."
Canada too. I went through this at one point where I was working for a contracting company and decided to move to another. First tried to scare me out of it but I lawyered up. They dropped it.
From what I read from the article and from what I remember about signing my previous non-compete agreeement with Seagate (if his was worded the same way), they aren't trying to prevent him from working at Western Digital, just the read/write head division of WD. The way I understood the clause and had it explained to me was that you can't go to work for a competitor and work on the same exact thing you were working on at Seagate. So I don't think they would have a problem with it if he went and worked for WD in some other division, say firmware development or testing.
I think WD should hire him and put him somewhere else for the two years, then move him over to read/write if they want. I think it's fairly reasonable that Seagate wouldn't want him working on the same stuff he was doing for them just a few weeks ago. It's almost impossible to expect that at least some confidential information won't be disclosed.
California is an "at will" state, and more importantly, we have a specific anti "non-compete" statute in our contract law which states that a company may not restrain someone from making a living. Now, the problem comes in with the nondisclosure agreement, which may be valid long after the period of employment. It could be argued - and successfully - that this person could not function at a competing company without making use of trade secrets from his former employer.Even so, the interests of the former employer are now balanced against the needs of the new one, and of the employee himself. The former employer rarely wins in such a tug-of-war.
In practice, however, noncompete clauses are rarely upheld in California because state contract law always supercedes what might be written into a contract.
I belive a non-compete clause, such as ones alluded to here, exist in a number of industries. Speaking as a physician and member of the medical community, most of our contracts have non-compete clauses that state, in effect, "Upon leaving The Practice, you will not practice within your specialty in a similar hospital/clinic located within 5 miles of any of The Practice's locations". Of course, in this field it's so as not to "steal" patients (and therefor business) rather than technology.
No man's an island, unless he's had too much to drink and wets the bed.
In the UK such contractual clauses are explicitly null and void: it's called restraint of trade
You are completely and utterly wrong. The circumstances in the UK are similar to most of the rest of the western modern world: appropriately scoped non-compete agreements are allowable and enforceable. What "appropriatley scoped" means all depends upon the circumstances and nature of the work, but for R&D employees working on new technologies, 12 months is not uncommon.
Back in those days, Borland went after Microsoft, not the little guy.
Is this a differce in the times, or are the specifics of the situations different?
A quick googling produces this link. Good site to check before moving.
I believe one of the requirements for a valid CA non-compete is the specific listing of the companie(s) you agree not to seek employment with. A self-restraining order, in effect.
Often wrong but never in doubt.
I am Jack9.
Everyone knows me.
The parent's article points out two facts glazed over in the original one: 1) He did sign an NDA and 2) Seagate isn't try to keep him from working at WD altogether, just certain divisions.
I think it's fairly reasonable for Seagate to ask that he not work in the same division at another company that he just left at Seagate. I still can't tell from the article if he signed a non-compete clause. Also, when I signed my non-compete with Seagate, the term on it was 1 yr. (of course, I was just a lowly intern, so I don't think they would have cared one way or another)
There was Cowboy Neal at the wheel of a bus to never-ever land.
In the US, non-competes are enforceable in almost every jurisdiction exception California. However, there are generally substantial qualifications, the most significant of which is that the agreement cannot prevent competition solely for the purpose of placing restrictions on the marketplace. Instead, employers who use non-competes must generally demonstrate that they have a legitimate protectable interest that is promoted by the non-compete (mere restraint of trade is generally not legitimate). Examples of protectable interests include maintaining secrecy of proprietary methods of doing business (used most frequently by manufacturing businesses) and other secret trade information such as customer lists that are not publicly available.
In general, courts will not enforce non-competes when the worker involved uses a generic set of skills (like manual labor and most retail sales jobs) and doesn't use proprietary information in the successor job.
As alway, the above are gross generalizations and may vary from state to state (and certainly from country to country).
What's ironic is Seagate is crying foul about this when they have been on the other side of court for this issue. Back in the 90's I was told a story from a seagate employee who had been present for one of the famious Alan Shugart (then CEO) lunch room chats. Alan liked talking to the rank and file casually.
Apparently back in the mid-late 90's seagate was getting their butts kicks in price because of IP. They were paying companies like Hutchingson Technologies to make parts because they lacked the internal IP and expertise. This outsourcing was costing them money. So they hired engineers from a competing company, IBM. This gave seagate a nice edge... until IBM sued. That basically created another drain on the company that negated any cost savings they had found.
After that I'm told Alan Shugart said "this time around we hired the right engineers." I would assume they covered their bases by hiring a broad range of engineers, or going overseas where it's much harder to sue a US company.
At any rate the defendant would do well to look up Seagates own cases. I'm guessing he can defend himself with their own words.
bullshit, just cos your contract says so don't make it so. Most UK companies give gardening leave to get round this because they know a legal battle would hurt them.
I can't cite precedent right now, but I can tell you that non-compete clauses are generally valid and have survived both jury trial and appellate review. That said, such clauses must typically be appropriately limited in scope.
Yet in your follow up you quote a decision that seems to generally undermine that statement. Notably:
Noncompete agreements are enforced only to the extent reasonably necessary to protect a legitimate business interest
This clearly states the limitation of scope I presume you're discussing. However, note the limitations on the scope:
- Noncompete agreements must be bargained for, and supported by adequate consideration
- It must be signed before you work for the company
- The employee must have agreed to the NC before his employment begins.
The article doesn't state whether any of these conditions have been met or broken, it only states that he'd been there for a long time ("Goglia worked at Seagate for 17 years"), and that Seagate were concerned that he would disclose some information useful to the competitor (""We believe he will inevitably disclose some of that proprietary information that he has gained through working at Seagate.")It does not state that Goglia had signed a "non-compete" agreement, only that Segate were "concerned" that he may disclose secrets
For perspective: I've worked for my company for 10 years. I've learnt a lot about electronic commerce in that time simply because that's the field I've been working in. Should it be possible for my company to prevent me working for any other electronic commerce software house for (n) years, simply because they're afraid I may actually use my experience in this area? If this were the case, I'd have zero future job prospects. The easiest way for me to change job is to take one in the field I'm currently working, and have recent experience (10 years in one field is a long time. The 17 that Goglia had been working is even longer!) If I have to remove myself entirely from the e-commerce site, my last 10 years of experience is practically worthless.
The ways of gods are mysteriously indistinguishable from chance.
This is a lot more complicated then what is visible on the surface.
Of course, whether there was a clause in the initial contract between the employee and Seagate about non-complete makes a big difference. Then again, some can argue about the legalities of such clauses even if it is there - which may then depend on the specific state as well.
Even if Seagate agrees to pay the employee for the two years what he would have earned otherwise - there is an opportunity cost that will not be paid. The opportunity cost is what the employee would have learned in the two years in the industry and improved his skill sets and how that will factor in the compensation for the rest of his career.
On the other hand, if he is allowed to work at Western Digital and even if he does not divulge any "Top Secret" Seagate information - the fact that he knows that information is sufficient enough for Seagate to worry. He may know very critical business information such as Seagate's complete roadmap for the next few years, their pricing structure, the new and exciting technologies that they may be bringing to market etc. Now even if he doesn't give this information away to western digital, there is nothing stopping him from using that information while making critical business decision at Western Digital. To give an example, if he is in charge of coming up with what features in what different products should be and when they should come to market - he can make excellent decisions by utilizing his prior knowledge of seagate products even without explicitly telling western digital anything. This is exactly what Seagate wants to avoid. It is very difficult/impossible to enforce a person to make decisions while enforcing that he does not use all the data that is stored in his mind.
This is the exact scenario that Seagate does not want. Imagine that for every product Seagate launches, Western digital comes with a better product with same (or better) feature-sets at 5% the Seagate's price one week ago. This would kill Seagate.
Osho
Disclaimer: I do not work or either Seagate or Western Digital or even in the hard drive industry. But such concerns are ubiquitous across all different industries.
This is the most important post in the thread. Mods, make sure it stays at 5.
They key word here is consideration. I can't contractually obligate you do do something, no matter what is signed, unless I've given you something for that obligation. A signing bonus or other lump sum is acceptable consideration for a contract. Making the obligation a "condition of employment" is generally not. There must be quid pro quo for the contract to be legal.
who are those slashdot people? they swept over like Mongol-Tartars.
The problem is trade secret is different from patent. In many industries, there are special skills or designs that had better be left as trade secret. The formula of Coke Cola is one. Trade secret is not like patent: you cannot disclose that to the public at all. Or else, you will lose it... In some other cases, these are simply design issues that you want to avoid your competitor from copying. For example, if you are going to make a budget CPU, you may want to create an impression to your competitor that you need to include a new production line for it... But, in fact, it may simply be disabling some cache...
Although I realise that's a need for the former employer to protect its IP, I am more inline with the German system mentioned in some posts upstairs... If the secret is so critical to Seagate, they should pay for the difference of salary to the former employee esp when no NCA was signed...
That doesn't mean that such clauses are not legally enforceable in Canada, or in the UK. There's a solid foundation of case law supporting the validity of non-competition clauses in both countries. Put very simply, the restrictions must be for a reasonably limited time, and must restrict using the specific knowledge gained from the former employer, but typically not restrict a person from using their general expertise in the area of research/development.
These contracts are legal, I believe, if and only if there is consideration for the signee. This would mean you would have to recieve compensation, or something, in exchange for you not working. So if Seagate was willing to pay him a fair amount - likely his standard wages, or the difference between what he made there and a non-competing firm - then a judge in Canada would find this reasonable.
As a rider on a standard employment contract, based on what I know about contract law, any judge would interpret there to be no consideration for the signee making the contract void. Canadian judges tend to be sane and reasonable, for the most part.
I'm not a lawyer, of course, and this is a layman's interpretation from a text.
..don't panic
This doesn't sound like it's about non-compete clauses or contracts. (Admittedly, I've only read the linked-to MacCentral article and haven't done any other digging for details, so it very well could be.) I would guess Seagate is trying to protect its trade secrets wrt read/write technology related to their Recording Head Operation.
The Seagate spokesperson used the magic words "inevitably disclose", which probably refers to "inevitable disclosure" doctrine in trade secret law. This is a very fact-based doctrine, but it comes up when the employee has deep knowledge of the business/technology of the old employer, and the nature of the new job would lead "inevitably" to disclosure (verbal or otherwise) of that knowledge. Many states follow this doctrine (though I don't know if Minnesota does), and most of these would allow suing for injunctions to prevent "inevitable disclosure" of their trade secrets, which is what Seagate is probably doing. This is why it doesn't really matter if there was a non-compete or not.
i remeber a court case a while back with a radio "disc-jockey" in ohio.
I guess she was fired from one station and got a job at another under a different stage name and they tried to stick her with the non-compete clause. The courts threw it out because they said you can't force someone from making a living in thier trade or somethign like that (has been several years ago).
what i am wondering is, if the job that i was contracted to do originaly, had a certain set of responsabilities and i signed the non-compete clause knowing what the limits would be, then the company moved or promoted me to another position or started doing work in other areas that further reduce my ability to find a job by covering more market areas, is the original non-compete contract still covering the changes? Or would the contract only cover what was originaly expected?