No-Scoop Deals Seen Growing After Star Turn in Google-Uber Feud

The $179 million saga of a Silicon Valley engineer who paid the price in a tug-of-war between Alphabet Inc.'s Google and Uber Technologies Inc. features a powerful legal tool that companies are increasingly relying on to stop employees from fleeing to competitors.

Anthony Levandowski filed for bankruptcy after being ordered to pay the massive award to Google for violating an agreement not to poach his former coworkers after leaving to run Uber’s self-driving car project. It’s unlikely that Google will recover the full award, but the financial toll the case has taken on Levandowski—he was fired by Uber and faces criminal charges for allegedly stealing trade secrets—serves as a warning shot for workers with sought-after skills, employment attorneys told Bloomberg Law.

“I’m seeing an increase in the number of cases in which the employer goes after the employee for violating these kinds of nonsolicitation agreements,” said Jonathan Segal, a business lawyer at Duane Morris in Philadelphia. “This sends a message to discourage others from violating their contractual obligations.”

Companies use the pacts to bar employees from taking their colleagues with them when they jump ship, as courts and lawmakers continue to crack down on other restrictions on worker movement. California and a number of other states limit the use of noncompete agreements, which ban workers from moving from one company to another in the same industry, and the Justice Department has been aggressive in going after companies that agree not to hire away each other’s workers.

“Legislatures and courts are coming down hard on noncompete clauses, so employers are looking for other areas to protect their investments in their workers,” Segal says. “With a nonsolicitation agreement, the company is saying, ‘You can compete, you just can’t poach.’”

Google said in 2019 that it would stop enforcing contracts that ban employees from trying to hire away former co-workers for at least a year after leaving the company. The tech giant announced the move in a court filing in a lawsuit challenging a number of Google’s employment practices.

Google, Intel Corp. and other big tech companies agreed in 2015 to pay $415 million to settle class claims that they conspired among themselves not to poach each others’ workers. The Justice Department is looking into the hiring and antitrust practices of many big tech companies, and attempting to clarify for businesses when they can and can’t use restrictions on solicitation.

A wide range of businesses have faced litigation and public criticism for moves to keep employees from jumping jobs. Jimmy John’s Franchise LLC is fighting a class action in federal court in Illinois by workers who say the sandwich chain violated antitrust law by banning workers from moving to other stores.

That means nonsolicitation pacts’ shelf life could soon be limited, Dallas business attorney Stephen Fox, a partner at SheppardMullin said.

“Judges are not crazy about them,” Fox said. “They don’t like that you end up restraining the rights of parties that are not even the parties to a contract.”