On October 21 2011, Groupon, Inc. sued two former sales managers who left their employment with Groupon to join a competing venture, Google Offers, which was allegedly started by Google after its unsuccessful attempt to buy Groupon. The lawsuit, which was filed in Chicago, Illinois, accuses the two former employees of breaching their employment agreements and alleges that the former employees took and will be called on to divulge Groupon’s trade secrets and confidential business information in the course of their new employment with Google. The lawsuit also alleges that the two former employees breached a non-compete provision in their employment agreements by going to work for a direct competitor within 24 months of the termination of their employment with Groupon. 

One of the former employees is alleged to have emailed Groupon customer and business information to a personal email account on the day he resigned. The lawsuit requests the Court to enjoin the defendants from, among other things, using this information in their new employment.  Further details about this lawsuit can be found at here.

One thing to remember is that the applicable state law is key in a lawsuit such as this one.  Under Illinois law, a court can enforce a restrictive non-compete agreement if its terms are reasonable to protect a legitimate business interest of the employer.  This is not the case in California.  Under California law, a non-compete provision is almost always unenforceable in an employment agreement. Had this lawsuit been filed in California, it is almost certain that the court would dismiss the breach of contract claims arising out of the employment agreement’s non-compete provisions.   (See “Often But Not Always Void” in this blog.)

Also, neither Google nor Google Offers are named as defendants in this lawsuit (yet).  There may be several strategic reasons for this.  First, any injunction issued by a court against the two former Groupon employees will likely contain language enjoining not only them, but “any person acting in concert with them.”  This could bind Google (or at least restrict its ability to employ the two former Groupon employees) without Groupon having to litigate directly against Google.  Second, Groupon could be using the case against its two former employees to conduct discovery to determine whether Google has any potential liability before suing Google.

This lawsuit highlights the pitfalls that can arise when hiring employees from a direct competitor.

By:       Chuck Post

Because employers and employees have the right to reach agreement as to the terms, conditions and nature of the work, many employers believe that anything they can get an employee to agree to is legal and permissible. This notion can lead an employer into a violation of law. Some obligations, however, such as the obligation to pay overtime to non-exempt workers, the provision of worker’s compensation, and the obligation to provide a safe work environment (to name just a few) cannot be bargained away. An employee’s agreement to surrender these statutory protections is void, and can also constitute a violation of criminal law.

Continue Reading Wage and Hour Refresher: Are You Committing a Misdemeanor?

By:     Charles L. Post

        Lawyer Answer: It depends.

        Here, that answer is not simply a dodge but is instead a reflection of what can be some complicated legal terrain. The question of advanced training costs arises in a number of situations: (1) where an employer advances costs for training to obtain a license or certification that is required by an ordinance or statute; (2) where such certification or licensure is not required by statute or ordinance but the employer requires it as a condition of employment; and (3) where the training is neither a requirement of statute, ordinance or by the employer, but reimbursement or supplement of such training costs or tuition is provided as a benefit. 

Continue Reading When Can an Employer Seek Reimbursement for Training Costs Advanced to an Employee?

By:       Lizbeth (“Beth”) West, Esq.

Governor Brown signed a significant number of bills into law during the 2011/12 legislative term, many of which will have a direct impact on almost every California employer, regardless of size. Many laws impose new obligations on employers and prevent employers from engaging in what they may otherwise thought was previously permissible. Below is a summary of the employment-related legislation that goes into effect on January 1, 2012 (except where noted).

Continue Reading 2012 Brings A Whole New Set Of Obligations And Challenges For California Employers – Failure To Comply Could Be Devastating

It is common in employee defection and trade secret cases for the plaintiff company to rush into court screaming that a robbery is underway that must be halted by the court.  The plaintiff cries that, absent the immediate intervention of the court, it will be stripped of any effective ability to compete and may be destroyed or pushed to the very brink of destruction.  Courts often respond to such cries.  When a business claims that the entirety or a significant portion of a critical business unit has been “stolen” along with critical business information and know how, courts will often take the claims seriously.  While it is a truism that “preliminary injunctions are rarely granted,” the truth in that statement more likely lies in grants of preliminary injunction as a percentage of all civil cases filed, rather than as a percentage of preliminary injunctions granted from the population of such applications that are filed.  My sense is that most well prepared preliminary injunctions in these cases are granted.  When properly supported by declarations from computer experts, business managers, and others who can demonstrate that: (1) that the defendant’s conduct is improper; and (2) that the plaintiff company business operations will be seriously disrupted, courts are often inclined to grant the motions, at least as to a temporary restraining order.

In cases where there has been an exportation of employer information or where a large number of employees have departed one employer to join another, a temporary restraining order or preliminary injunction may not be particularly difficult to obtain.  While such applications require great energy by the moving party to prepare a compelling application, the application for such injunctive relief is sometimes the defendant’s first notice that a lawsuit has been filed, and can come as something as a surprise attack.  Defendants are almost always at an immediate disadvantage.  Within a very short time, responding counsel must promptly identify potential conflicts, organize a defense, effectively investigate the facts, and organize and articulate a response to the plaintiff’s application.

 These applications are often accompanied by a request to the court for expedited discovery.  When granted, these applications, plus the short response deadlines to respond to a preliminary injunction application, can keep the defendants on the defense and may slow, and on occasion even prevent, a defendant from timely articulating counter claims or developing a sufficient factual understanding to aggressively defend the complaint.  If it is true that “speed is the essence of attack” then it is certainly true that speed often assists an applicant for a preliminary injunction in these cases.  Nor is speed wholly tactical.  Delay can often work against a preliminary injunction application.  If weeks or months pass from the alleged misconduct, a court is less inclined to find that there is immediate irreparable injury that must be enjoined.