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Options trading Amazon’s lawsuit against a former exec is shining a spotlight on its use of noncompete agreements — a practice that critics say is unfair and will scare away talent (AMZN)


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Options trading Amazon’s lawsuit against a former exec is shining a spotlight on its use of noncompete agreements — a practice that critics say is unfair and will scare away talent (AMZN)

Amazon Web Services CEO Andy Jassy. Associated Press This story is available exclusively on Business Insider Prime. Join BI Prime and start reading now. Amazon makes new corporate employees sign a noncompete agreement saying they won’t work for competitors for 18 months after they leave the company.The agreements are controversial: Critics charge that with Amazon…

Options trading Amazon’s lawsuit against a former exec is shining a spotlight on its use of noncompete agreements — a practice that critics say is unfair and will scare away talent (AMZN)

Options trading

options trading Andy Jassyoptions trading Andy Jassy

Amazon Web Services CEO Andy Jassy.

Associated Press


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  • Amazon makes new corporate employees sign a noncompete agreement saying they won’t work for competitors for 18 months after they leave the company.
  • The agreements are controversial: Critics charge that with Amazon involved in everything from retail to cloud computing to shipping logistics, these agreements unfairly limit career options for anybody who leaves the company. 
  • That controversy was renewed in June when it was revealed that Amazon filed a lawsuit against a former marketing vice president who took a similar job at Google Cloud.
  • Many Amazon employees believe noncompetes will only be enforced at the highest levels of the company, but there are examples to show that’s not always the case.
  • Ultimately, critics say, Amazon’s practice of suing former employees could hurt recruiting, especially in light of this most recent lawsuit. 
  • Are you a current or former Amazon Web Services employee? Contact this reporter via encrypted messaging app Signal (+1-425-344-8242) or email (astewart@businessinsider.com).
  • Visit Business Insider’s homepage for more stories.

A former Amazon employee thought she was free to work where she wanted — until the company’s lawyers came knocking.

The employee, who asked not to be named to protect current and prospective employment, worked as a Level 4 software engineer for the company’s Amazon Web Services cloud computing business – the lowest engineering level at Amazon. Her colleagues frequently moved between engineering roles at Amazon and its competitors without incident, she said.

So when she took a job at Microsoft, she didn’t expect any issues with her former employers at Amazon. That is, until about a month into her new gig, when she says she was asked to sign an agreement blocking her from performing specific job functions for at least one year — part of a settlement agreement between Amazon and Microsoft.

“They told me I basically didn’t have a choice,” the former employee, who provided supporting documents for Business Insider to review, said. Amazon did not provide comments in response to inquiries for this story, including about whether the company’s lawyers ever sought to block software engineers from certain job functions through settlements with their current employers.

At issue was an agreement the employee signed when she started working for Amazon. It’s called a noncompete agreement, and Amazon requires new corporate employees to sign them and agree not to work for a competitor usually for a period of 18 months after leaving the company.

The controversy around noncompete agreements was renewed last month when a lawsuit Amazon filed against a former marketing vice president became public — the third high-profile lawsuit of its type filed by Amazon in recent memory, following the company’s lawsuits against a sales executive who took a job at Google Cloud, and a former technology vice president who left to work at Seattle-area collaboration software company Smartsheet.

In this most recent case, Amazon is suing Brian Hall, a former vice president of cloud marketing within its Amazon Web Services unit, over allegations that he violated the terms of a noncompete agreement by taking a similar job at Google Cloud. Hall in court filings said he was led to believe the agreement would not be enforced. On LinkedIn, he now lists his job title as “VP in Purgatory, Google Cloud,” barred from getting to work pending resolution of the suit.

These agreements have long been the subject of controversy. Supporters believe they are necessary to protect intellectual property, while critics say they stifle innovation by preventing employees from starting and moving between companies. That’s especially true, critics say, because Amazon’s growing reach in retail, cloud computing, logistics, and even Hollywood makes it hard to find anybody who isn’t competing on some level. Hall previously declined to comment on the lawsuit beyond the court filings, and a representative for Hall has yet to respond to a request for this story.

But beyond arguing the ethics of such noncompetes directly, critics charge Amazon’s agreements are too broad, and applied inconsistently and even punitively. Ultimately, these critics say, this practice of suing former employees could hurt Amazon’s ability to recruit the talent it needs to stay competitive.

“You can check into the Hotel AWS, but you can never leave,” Charles Fitzgerald, a Seattle angel investor, former Microsoft general manager, and critic of noncompetes, said. 

Amazon did not provide comment or information in response to multiple requests for this story. 

Options trading Amazon has a history of suing over noncompete concerns.

While California historically does not allow noncompete agreements to be enforced, Washington state — where Amazon and Microsoft are both headquartered — allows companies to enforce them in many cases.

There was an effort in Washington last year to limit such agreements, but the state legislature ultimately voted to allow noncompetes to be enforced for employees who make more than $100,000, following a lobbying effort from Amazon. Many workers in the technology industry make above this threshold, freeing Amazon to enforce noncompete agreements against even lower-level employees. 

Amazon last year sued Philip Moyer, a sales executive who left AWS last summer and took a job at Google Cloud as a vice president. AWS claimed Moyer violated a noncompete agreement with the company and argued the hiring risks Amazon’s confidential information. A federal judge ultimately limited Moyer’s role at Google for the duration of the noncompete agreement.

Before that, Amazon sued another former vice president, Gene Farrell, who left AWS in June 2017 to take a job at Seattle-area collaboration software company Smartsheet. AWS sued over a noncompete agreement signed by Farrell, but dropped the suit a week later after the companies agreed on undisclosed “temporary restrictions.”

Options trading Critics say that Amazon applies noncompetes unevenly.

The conventional wisdom in the industry is that these kinds of noncompete agreements are only enforced for people at the highest levels of companies like Amazon, as a way to make sure that top talent sticks around for as long as possible. 

Corey Quinn, a cloud computing industry consultant, wrote a blog post about an offer he said he received from Amazon Web Services in which he claims he was told Amazon would “never enforce it against someone who’s not a VP” and “only ever enforced it when someone burns bridges on their way out of the company.” Amazon did not respond to a request to confirm or comment on Quinn’s claims.

However, Chris DeVore, a prolific investor and fixture in Seattle’s tech startup scene — and a staunch opponent of noncompetes — said he believes Amazon enforces the agreements arbitrarily. Whether or not the company chooses to enforce them, DeVore said, “has more to do with the tone in which you leave the organization than a standardized policy.”

The software engineer who went from Amazon to Microsoft said she had issues with one of her supervisors at the retail giant, who ultimately didn’t agree with her decision to leave. Other software engineers from similar roles at AWS have taken jobs at Microsoft before and since without facing restrictions, she said.

Even in this most recent case, Brian Hall noted that his own former boss at AWS, Ariel Kelman, left to take over as chief marketing officer at Oracle earlier this year — a move that apparently didn’t trigger AWS to file a lawsuit against Kelman. To Hall, this reinforced the idea that AWS would not enforce his own noncompete agreement, per the filing.

Kelman is based in California, which generally doesn’t recognize noncompetes, but Hall’s attorneys in a court filing wrote “if Amazon truly believe Kelman’s new role would require him to disclose its confidential information, nothing about California law would have prohibited it from seeking to enjoin that conduct.”

Furthermore, AWS CEO Jassy wished Hall “nothing but the best” after learning of his decision to join Google, according to Hall’s filing, seemingly indicating that there was no bad blood between them upon his departure.

Options trading Hall’s case is unique — and it could hurt Amazon’s ability to recruit.

What makes Hall’s case unique, in Fitzgerald’s view, is that Amazon chose to file such a suit after someone in marketing, given that the company is better-known for enforcing noncompetes against former technical talent. Asks Fitzgerald: “If they go after a marketing guy, who won’t they go after?”

While technology-focused roles have more exposure to intellectual property, DeVore agrees, it’s harder to make the case a marketing exec will have enough insight to topple the $40 billion business that is Amazon Web Services. And making that argument ultimately hurts Amazon’s recruiting, he said.

“PSA: AWS claims that it would suffer ‘immediate and irreparable harm’ if their former employee was allowed to edit slides for the upcoming Google Cloud Next conference,” Google Senior Vice President of Engineering Urs Hölzle tweeted about the Hall lawsuit. “clearly, AWS’s lead over GCP is hanging on a very thin thread.”

Ultimately, the critics say, this kind of approach could scare away potential Amazon recruits, and hurt its ability to recruit the top talent it needs to maintain its lead in the cloud computing market and elsewhere.

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Put another way, AWS is an exciting company to work for, Devore says, but if an engineer has otherwise-equivalent offers from AWS and Google, the noncompete may be the deciding factor that pushes them away from Amazon.

“Imagine if you were in that position,” DeVore said.

Options trading Amazon’s noncompetes are overly broad because of all of the company’s lines of businesses, critics say.

For those who are bound by them, Amazon’s noncompete agreements are unique, critics charge, because the giant is a significant player in so many different industries, from cloud computing to shipping logistics to Hollywood movie production. 

Daniel Vassallo, who worked for AWS as a software development engineer for more than eight years, started working for Amazon in Ireland and transferred to Seattle in 2012. At the time he transferred, he wasn’t expecting any changes to his contract, but when arrived in Seattle, he said Amazon told him he had to sign an amended contract with an 18-month noncompete clause. In his telling, Amazon said it couldn’t verify his employment unless he signed the new contract. Not signing would risk his work visa, he said. 

“I was in a situation where I would violate my visa,” Vassallo told Business Insider. “I realized it was unfair, but I signed.”

Vassallo left Amazon in February 2019 to start his own business, and reviewed the agreement he felt pressured to sign. He said it was very broad, so he took a risk of violating it, saying he reasoned it would be “super unlikely” Amazon would enforce noncompete agreements against lower-level employees. Besides, following the letter of the noncompete agreement exactly, he said, would severely limit his career prospects, he said.

“What I realized was anything in the next 18 months would be violating my noncompete if I did anything Amazon was ever doing,” Vassallo said. “I just took the risk because I would not be able to do pretty much anything if I followed it to the letter.”

That broadness is a major weakness of Amazon’s stance on noncompetes, Fitzgerald said.

“It really is the poster child for noncompete overreach,” Fitzgerald, the Seattle angel investor and noncompete critic, said. “It’s super broad, lasts 18 months, and applies to anything that competes with Amazon.” He later added: “You can’t go work in the retail business, the logistics business, the technology business — there are no bounds for Amazon’s ambitions.”

Got a tip? Contact this reporter via email at astewart@businessinsider.com, message her on Twitter @ashannstew, or send her a secure message through Signal at 425-344-8242.

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