IBM made headlines last month when it filed a lawsuit against its former Chief Diversity Officer and Vice President of HR, Lindsay-Rae McIntyre, claiming that her decision to accept a new position as Chief Diversity Officer of Microsoft violated a year-long non-compete agreement she had signed with IBM. McIntyre, the suit claimed, was privy to data and methods pertaining to IBM’s diversity and inclusion program that constituted trade secrets and would inevitably influence the work she did for their competitor.
In a court filing Monday, IBM revealed that it had settled the suit on February 25 and that McIntyre would delay the start of her new position at Microsoft until July, GeekWire reports:
Terms of the settlement weren’t disclosed, but Microsoft said in a statement this afternoon that McIntyre will be officially starting in her new position this summer. … A judge in the case had issued a temporary restraining order preventing McIntyre from working at Microsoft pending a preliminary injunction hearing that was slated to take place next week.
“We’re pleased the court granted IBM’s motion for a temporary restraining order, protecting IBM’s confidential information and diversity strategies,” an IBM spokesperson said. “We’re glad the action has been resolved to the satisfaction of all parties and that Ms. McIntyre will not begin her new responsibilities until July.”
Last March, the US Treasury Department issued a report examining and criticizing a recent trend in which employers were including non-compete clauses in contracts for workers who were unlikely to become privy to the kinds of trade secrets such clauses are meant to protect. In a feature last week at the New York Times, Conor Dougherty explored the impact this trend has had on employees, many of whom find themselves unexpectedly unemployable after leaving a company with whom they had signed a non-compete agreement:
Companies have always owned their employees’ labor, but today’s employment contracts often cover general knowledge as well. In addition to noncompete clauses, there are nonsolicitation and nondealing agreements, which prevent employees from calling or servicing customers they have worked with in the past. There are nonpoaching agreements that prevent employees from trying to recruit old colleagues.
Put it all together, and suddenly some of the main avenues for finding a better-paying job — taking a promotion with a competitor, being recruited by an old colleague — are cut off.
A bill that would have limited employers’ ability to enforce non-compete clauses died in the Massachusetts state house on Sunday night, after the House and Senate were unable to agree on its terms, Curt Woodward reports for the Boston Globe:
The two sides’ final disagreement revolved around a so-called garden leave, which would require companies to pay former workers to stay out of the job market. The House’s approach would have limited the noncompete period to one year, and required employers to pay half the worker’s salary. The Senate version would have limited those leaves to three months, and required a full salary. The House version also would have allowed companies and workers to substitute garden leave pay for some other mutually agreed-upon arrangement. But venture investors and startups argued that language was so vague that it could allow companies to provide essentially no compensation.
Given that the House passed its version of the bill unanimously in June, it is likely to be revisited in the next legislative session. It seems inevitable that Massachusetts will get in line with other states like California that already have such bans in place. In the meantime, the failure of the Massachusetts bill might slow the momentum of a push by legislators in various US jurisdictions to crack down on non-competes, which Steve Lohr reported on for the New York Times in June:
The Defend Trade Secrets Act, which President Barack Obama signed into law on Wednesday, helps businesses protect their secret sauces by expanding their ability to sue anyone who steals them—a phenomenon that costs the US economy over $300 billion a year. Jon Hyman at Workforce breaks down what employers need to know about the new law in brief, while Andrew McIlvaine at HRE Daily relays the views of some employment law experts on what it means for HR:
Trade secret claims have long been a key component of employee non-compete agreement lawsuits, writes Chris Marquardt, a partner at Alston & Bird’s labor and employment law group. For this reason, the new federal law “not only gives employers another tool to protect their confidential business information, but will also likely shift many routine employment-agreement lawsuits into the federal court system,” he writes. …
Brett Coburn, also a partner with Alston & Bird, writes that one of the less-frequently discussed aspects of the new law is one that will impact nearly all employers: “The law grants both criminal and civil immunity under both federal and state trade secrets laws to individuals who disclose a company’s trade secrets to the government” if the person has reason to suspect that a legal violation has occurred. It also requires employers to notify employees of this immunity “in any agreements that govern the use of trade secrets or other confidential information.”