IBM`s decision to sue a longtime hiring manager for accepting a new job at Microsoft raises questions among lawyers who specialize in employment contracts and non-compete obligations. The widespread use of non-compete obligations has been tested in recent years. Traditionally used to protect intellectual property, it is increasingly expected that lower-level employees will sign it. The sandwich worker forced to sign a non-competition clause has become a symbol of the phenomenon. Non-compete obligations are hampered by the lack of uniform legal regulation among States. For example, California prohibits the use of non-compete obligations. But Idaho tried the opposite approach in an effort to promote its own tech workforce, making it easier for employers to enforce non-compete rules in July of this year. Employers who wish to hire persons subject to non-compete obligations may also obtain useful information from this decision. Venkat Balasubramani of Focal PLLC, a Seattle-based lawyer who represented a former Amazon executive who was sued for allegedly violating a non-trust clause by taking a job at Smartsheet, also said he finds the IBM lawsuit surprising at a time when the entire tech industry is trying to improve its diversity.

While the court was ultimately unnecessary for its decision – since it had previously ruled that IBM had not demonstrated a legitimate business justification for enforcing the restrictions – it ruled that the application of the agreement would undue hardship to Visentin. The court recognized Visentin`s claims that a one-year anallocation would put him at a disadvantage in a rapidly changing industry and impair his ability to prove his worth to a new employer. Yesterday, IBM sued Microsoft for poaching its chief diversity officer, Lindsay-Rae McIntyre, in violation of its non-compete obligation with IBM. Specifically, IBM found that all employers, whether they want to enforce anti-competitive agreements or undo them, have a lot to learn from IBM v. Visentin, 2011 WL 672025 (S.D.N.Y. February 16, 2011), aff`d, 437 Fed. Appx. 53 (Cir. 2, 2011). To the extent that other courts follow suit, this decision may make the enforcement of non-compete obligations considerably more difficult. While waiting to see if the New York State courts will follow the Federal Court`s reasoning, employers should consider the impact of this decision on the applicability of restrictive agreements.

“IBM has a long history of recognition for its leadership in a diverse and inclusive workplace. As IBM`s Chief Diversity Officer, Lindsay-Rae McIntyre has been at the center of highly confidential and competitive information that has contributed to IBM`s success in these areas. While we can understand the need for Microsoft to address growing criticism of its diversity record, IBM intends to fully enforce Lindsay-Rae`s no-compete obligation – just as we do with all of our executives – to protect our competitive information. In July, AWS was on the other side of a competitive dispute when it filed a lawsuit against Gene Farrel, its former vice president of AWS and Windows enterprise applications and head of the Workplace Tools division, for taking a position at Smartsheet. In IBM v. Visentin, IBM sought an injunction to prevent Giovanni Visentin from joining IBM`s competitor, Hewlett-Packard. Visentin worked for IBM for twenty-six years and was ceo of a $2.5 billion company at the time of his resignation. Visentin signed a non-compete agreement prohibiting it from engaging or joining a “company” or “competitor” in a geographic area where Visentin had worked for IBM the previous year for a period of twelve months after the end of its employment relationship. An “enterprise” was defined as an enterprise that competes in the previous three years with “any business unit or department [sic] of the company in which [Visentin] was active at all times”. IBM argued that Visentin was aware of trade secrets because of its position and work in a management group responsible for developing IBM`s corporate strategy and a subgroup focused on analyzing customer data to support customers in their business.

To address this excessive magnitude, the Court suggested that employers tailor their agreements specifically to the unique information to which each employee will have access and consider listing the industries that the employer wishes to protect. “I can`t understand why they`re doing it,” said Robert Ottinger, a San Francisco-based labor attorney who has been working on nontrust for nearly 20 years. “I think they`re really angry with Microsoft because they took their HR manager,” he said, describing McIntyre as “a chess piece” that “is in the middle.” The court analysed in detail what it considered to be too broad in Visentin`s non-compete agreement. The Court held that restrictive agreements had to be narrowly defined in order to protect legitimate business interests and held that IBM`s agreement was too broad, as it would have been intended to prohibit Visentin from working for a competitor in areas where IBM was not doing business and should have limited itself to restricting work in the same areas of activity. in which he worked for IBM. In addition, the court appeared to have a very narrow view of what constituted the same industry. Ottinger, who practices in California and New York, said he has never seen an HR employee sue for violating a non-compete competition code. McIntyre worked for IBM for more than 20 years before taking the position at Microsoft, where she will compete for many of the same types of parameters.

Microsoft announced mcIntyre`s new role as Chief Diversity Officer over the weekend. Balasubramani believes that the broader scope of non-compete obligations could create an anti-competitive environment. As companies increasingly turn to big data, cloud computing and digital infrastructure, CIOs immersed in proprietary projects may find themselves in the crosshairs of non-compete rules, reports the Wall Street Journal. Earlier this month, IBM sued its former CIO Jeff Smith for allegedly violating its non-compete clause when he accepted a position at Amazon Web Services. IBM called Smith`s familiarity with the company`s product development plans problematic given AWS` position as a major competitor to cloud computing. The court clearly reacted strongly to the particular facts presented in the present case. Nevertheless, it is to be expected that its full statements and legal conclusions will be regularly cited by parties wishing to avoid the application of restrictive agreements. Even if the decision is not binding on New York State courts, employers should consider the court`s guidelines when negotiating future non-compete obligations and considering applying existing agreements. Disputes over non-compete obligations shift to a tenth point between companies` desires to protect intellectual property and promote non-transgender employment and workers` desires to increase mobility and spin-offs between industries. While research has found that a third of all technology employees are bound by non-compete obligations, the problem is particularly poignant for highly valued employees who are deeply rooted in a company`s IT strategy and infrastructure.

As non-compete obligations increase year on year, CIOs need to be cautious when negotiating entry and exit terms. Earlier this week, IBM filed a lawsuit against its former vice president of human resources and chief diversity officer, Lindsay-Rae McIntyre, claiming her new role as Microsoft`s chief diversity officer violated a one-year non-compete clause. While non-compete obligations are prevalent in the technology industry, it is unusual for a company to enforce them through a role that is not related to its product or core business. In New York, where IBM filed its lawsuit, the ubiquity of non-compete obligations has become “incredible,” Ottinger said. “Everyone gets a non-compete clause, and that`s a problem.” The court was also convinced that the true nature of the IBM deal was not to protect trade secrets, but to detain employees – in fact, an IBM witness said the company viewed its failure to compete as “retention devices”. In addition, the court found that a collection provision in the agreement was punitive in that its “sole real purpose was to make it prohibitive for an employee to leave his or her current employment.” This argument does not apply to everyone in the world of labor law. .