Friday, July 29, 2005

Judge Grants Microsoft Injunction In Washington State Court

At yesterday's hearing, Washington state Superior Court Judge Steven Gonzalez granted a temporary restraining order preventing Kai-Fu Lee from working at Google on any product, service or project similar to those he worked on at Microsoft, including Internet and desktop search technology. (click here for article)

Google requested that Microsoft provide it with a more specific list of items that Dr. Lee is precluded from working on. Microsoft agreed to provide the list by Monday. However, Microsoft has to be careful to not make the list too broad, because Google will likely run into the Santa Clara, California court and waive the list before the court claiming that it violates California law and effectively prevents Dr. Lee from earning a living.

Another note, I have not seen Google make the argument that Microsoft's non-compete agreement is too broad because it is not limited to a geographic area. Google could make the argument that Microsoft is not really trying to prevent Dr. Lee from disclosing trade secrets (which are covered by law), but rather prevent Dr. Lee from using his acquired experience. Dr. Lee's experience and skills are probably so unique that he cannot work at any other job except for a company that is in direct competition with Microsoft. Therefore, Google could argue that Microsoft's non-compete agreement is void because it prevents Dr. Lee from working anywhere in the world for one year.

Furthermore, in California, if a court finds that the non-compete agreement to be overbroad, the court will strike the entire agreement as opposed to refining the agreement to bring it into compliance with California law.

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Thursday, July 28, 2005

Google Counters and Microsoft Files For Restraining Order

On July 25, 2005, Microsoft filed a Motion for Temporary Restraining Order in Washington state court to “prevent the actual and substantial injury that will result if Dr. Lee is allowed to violate his non-competition promises.” Dr. Kai-Fu Lee worked at Microsoft’s Chinese Research facility for two years. In 2000, Dr. Lee was promoted to Vice President of the Natural Interactive Services Division within Microsoft in the United States. On August 8, 2000, Dr. Lee signed an Employment Agreement with Microsoft. The non-competition agreement provided in relevant parts that:

Non-Competition and Non-Solicitation. While employed at Microsoft and for a period of one year thereafter, I will not (a) accept employment or engage in activities competitive with products, services or projects (including actual or demonstrably anticipated research or development) on which I worked or about which I learned confidential or propriety information or trade secrets while employed at Microsoft…. If during or after my employment with Microsoft I seek work elsewhere, I will provide a copy of this Agreement to any persons or entities by whom I am seeking to be hired before accepting employment with or engagement by them.

In arguing for the temporary restraining order, Microsoft argued that this restriction would be no greater than necessary to protect Microsoft’s legitimate business interests, the Agreement imposes no undue burden on Dr. Lee or the public, and that if Dr. Lee is not stopped, Microsoft will suffer actual and substantial injury. Google countered by stating that the non-compete agreement is unreasonable because it would bar Dr. Lee from working “anywhere in the software industry, for a full year.” The hearing was set to take place today.

Google’s California Complaint for Declaratory Relief:

In an attempt to gain an advantage over the litigation, Google brought a Complaint for Declaratory Relief in the Superior Court of Santa Clara on July 21, 2005. The complaint attempts to “seek judicial relief from an overreaching and unlawful non-compete provision drafted by defendant Microsoft Corporation.” Google contends that California’s Business and Professions Code section 16600, which invalidates any contract that restrains anyone from “engaging in a lawful profession, trade, or business of any kind….”

Google, however, has an uphill battle in persuading a California court that this case should be heard in California. Dr. Lee signed the non-compete agreement in Washington, the non-compete has a provision that states that it is governed by the law of the State of Washington and the agreement provides for venue in a state or federal court located in King County, Washington. Google argues in its motion that:

The laws of the State of Washington relating to contract provisions such as the
Covenant Not to Compete are in fundamental conflict with California law. The
State of California has a materially greater interest than the State of
Washington in having its law applied to decide the enforceability of the
Covenant Not to Compete (a) because of the strong public policy in California in
favor of free mobility of employees and against provisions restraining anyone
from engaging in any lawful profession, trade, or business, and (b) because the
Covenant Not to Compete is interfering with the California-based employment
relationship between Google and Dr. Lee.

It is all from certain what a California judge could find persuasive, but Google’s best argument (and one which they make) is that Microsoft’s Washington state non-competition contracts are now having an effect on California businesses and its residents, and that California’s courts are more “enlightened” than other courts in their approach to non-competition agreements. If the California court accepts this argument it could have dramatic effects on the enforceability of non-compete agreements across the United States. (In fact, a California court has held that California law applies to the enforceability of a noncompetition agreement between a Maryland-based employer and an employee who was recruited to work in California but was not a California resident.) Note to every employee who has a non-compete agreement: Move to California, get a California driver’s license, move your cat and dog to California, and then magically you may not be bound by your noncompete agreement under another state’s laws.

It is also interesting to note that Google’s complaint does not mention that Microsoft has already filed suit in Washington state to enforce the non-competition agreement. The fact that Microsoft beat Google to the courthouse could have a very dramatic effect on the outcome of this litigation. The fact that there is already a pending lawsuit on the exact same issue in another state could bar a California court from hearing the case. (Note: Microsoft anticipated Google’s attempt to move the litigation to California by filing a complaint for declaratory relief in California, and that is why Microsoft did not even let Dr. Lee leave the meeting in which he was terminated before it served him a copy of the lawsuit filed in Washington state.)

Different reports have speculated that Google is positioning itself to compete directly against Microsoft, and not only in search engine technology but also within desktop software. A review of the Google job openings evidences this. Google has been raiding Microsoft’s talent for some time now, and this lawsuit is a shot across Google’s bow (and other start up companies) that the talent can leave, but Microsoft has the resources to make it an expensive ordeal.

In the larger perspective, Microsoft’s attempt to prevent Dr. Lee from working at Google will not effect the two companies much. It is likely that the litigation will not be resolved within one year, which is the same time Dr. Lee is restricted to work for a competitor under the non-compete agreement. In this case, both companies are large and it would be difficult to see how one person, such as Dr. Lee could make a significant difference, at least within the short term, on either company’s China strategies. However, Microsoft has sent an effective message to smaller companies that do not have the resources to fight a legal battle in two different state courts.

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Friday, July 22, 2005

Google and Microsoft Battle Over Non-Competition Agreement

Microsoft filed suit against Google Inc. and a former Microsoft vice president, Kai-Fu Lee, an expert in search engine technology on July 20, 2005.
The suit was filed in King County Superior Court in Seattle. Google announced the day before the suit was filed that it had hired Dr. Lee and named him president of its China operations.
On July 21, 2005, Google answered Microsoft's lawsuit by filing a suit of its own in California Superior Court in Santa Clara seeking declaratory relief from the noncompetition agreement Microsoft is attempting to enforce in the Seattle court. It is likely that this move was an attempt by Google to move the case into the California courts, which take a strong position against the enforceability of noncompetition agreements.
The Employment Law Observer will continue to follow the lawsuit as it develops.

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Tuesday, July 19, 2005

Supervisor's Affairs In The Workplace Create Hostile Work Environment For Other Women

In a drastic holding today by the California Supreme Court, California employers now face liability from co-workers of employees who are romantically involved with their supervisors. The Sacramento Bee reported:
The case was brought by two former workers at the Valley State Prison for Women in Chowchilla who said their jobs became intolerable after prison warden Lewis Kuykendall became sexually involved with three female staff members, who received favorable job assignments and promotions.

In ruling that the two plaintiffs, both women, could claim they were harassed, the court determined that consensual workplace relationships can rise to the level of a hostile work environment when "the demeaning message is conveyed to female employees that they are viewed by management as 'sexual playthings' " - or when employees perceive that women must have a sexual relationship with a supervisor to get ahead.

But the court's ruling appeared to establish an almost numeric standard for when such messages are conveyed. In its ruling, the court distinguished between a single, isolated affair between a boss and employee that normally would not constitute sexual harassment and what it called "widespread" sexual favoritism.

An attorney for the plaintiffs was thrilled by the ruling. "This says you don't have to be the subject of unwanted sexual advances to show there was a hostile work environment," said lawyer Barbara Lawless.

While it appears that this particular case is unique with its facts, the ruling could open yet another avenue potential plaintiffs may use to bring lawsuits. The California Supreme Court announced this ruling today, and the Employment Law Observer will post more information about the potential effects it may have on California employers soon.

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Thursday, July 14, 2005

Politics In The Workplace

The California Chamber of Commerce recently published guidelines for political communications between employers and employees. The Chamber recommends that employers can:
"Communicate with your employees, stockholders and their families about the ocmpany's support of or opposition to state legislation, regulation or ballot measures."

But employers cannot:
"Control or direct the political activities of your employees 'through or by means of threat of discharge or loss of employment.'"

The guidelines also recommend that employers cannot communicate political messages to employees through paycheck stuffers. The guidelines also set out what employers must report what they spend as political contributions and for lobbying. To view the California Chamber of Commerce guidelines, click here.

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Thursday, July 07, 2005

Sexual Harassment Training Required for Supervisors

Supervisory employees employed as of July 1, 2005 must be given two hours of sexual harassment training by the deadline of January 1, 2006. Governor Schwarzenegger signed a bill, AB 1825, which requires all California employers with 50 or more employees to provide two hours of sexual harassment training to all supervisors once every two years. However, employers who have already provided sexual harassment training to their supervisory employees after January 1, 2003, do not need to comply with the January 1, 2006 deadline. Any “new supervisory employees” must be given two hours of sexual harassment training within six months of beginning their supervisory position. Thereafter, employers are required to give their supervisory employees the sexual harassment training once every two years. To the extent there is a question of whether or not an individual qualifies as a supervisor, employers should err on the side of caution and provide the sexual harassment training. Under other California statutes and case law, the term “supervisor,” has been defined very broadly. See e.g., Gov’t Code § 12926(r).

The training must consist of “information and practical guidance regarding the federal and state statutory provisions concerning the prohibition against and the prevention and correction of sexual harassment and the remedies available to victims of sexual harassment.” Training should include practical examples aimed at instructing supervisors in the prevention of harassment. Those who provide the training must have “knowledge and expertise in the prevention of harassment, discrimination and retaliation.”

Failure to provide the training does not, in and of itself, result in strict liability for the employer in the event an employer is sued for sexual harassment. While the specific statutory penalty only consists of an order from the FEHC to comply, questions abound as to the legal effect of noncompliance in areas such as negligence, failure to take reasonable steps to prevent harassment, representative action liability under Business and Professions Code § 17200 claims. Whether or not such an argument would prevail is currently unclear and will be decided by the courts.

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