Legal action to set precedent in the overbroad use of non-compete,
confidentiality, and non-disparagement agreements
PLEASANTON, Calif.--(BUSINESS WIRE)--
Veeva
Systems (NYSE: VEEV) today announced it filed a lawsuit in the
superior court of California to stop companies’ widespread misuse of
non-compete, confidentiality, and non-disparagement agreements that
restrict employees’ basic rights. Clauses in these agreements can
materially impact an employee’s ability to pursue new job opportunities.
Veeva is taking legal action to address the increasing limitations
companies are placing on employees. The case can set an important
precedent in the enforcement of employment clauses that are illegal in
states such as California.
The widespread use of non-competes impacts an estimated 30 million
American workers, which reduces employees’ mobility and presents a
potentially significant threat to innovation and economic growth,
according to a national study co-authored by J.J. Prescott, University
of Michigan law professor.1
“Employees, employers, and economies can all suffer as a result of
non-competes,” said Prescott. “The negative effects on wages, mobility,
and job satisfaction can be substantial. In many, if not all,
circumstances there are better ways to protect trade secrets than
non-competes, which often just limit fair competition.”
Veeva filed suit against three companies, Medidata, QuintilesIMS, and
Sparta, for using illegal provisions in their employment agreements,
including post-termination non-competes and overly broad confidentiality
and non-disparagement clauses. All of these provisions make it harder,
if not impossible, for employees to change jobs and provide services to
California-based employers. The suit asserts that such agreements
restrict fair competition and violate California law.
“Under the law in most states, companies essentially have the power to
dictate where employees can work and keep them locked in jobs,” said
Peter Gassner, Veeva founder and CEO. “We are taking action because
people should have the fundamental right to use their skills and
experience to advance their careers as they choose without the threat of
being sued.”
In addition to limiting mobility, research shows that employees in
jurisdictions that enforce non-competes take lower paying jobs and make
less overall. Areas without non-competes see stronger growth, greater
numbers of new business start-ups, and patents filed.2
“Non-competes are meant to strike fear in employees and discourage
competition,” said Alan Hyde, Rutgers University law professor who has
extensively studied the impact of non-competes. “It’s clear that the
free flow of ideas and employees from company to company can be a factor
for new businesses and innovation. This case could help limit practices
that are clearly bad for employees and bad for the economy.”
“I’m thrilled to see broad action being taken to curb these unfair
agreements. All workers should have the liberty to move between jobs and
be free to compete,” said Orly Lobel, a professor of employment and
labor law at the University of San Diego and the author of Talent
Wants to Be Free. “Confidentiality and non-disparagement clauses can
be as big a constraint as non-competes. Our research shows that these
anti-competitive practices can hurt employee performance, reduce company
innovation, and hinder the economy.”
Non-compete agreements have long been banned in California. A double
standard exists where companies outside the state can hire freely from
California companies while, at the same time, use non-competes to stop
their employees from joining California companies.
A recent study co-authored by Mariko Sakakibara, professor of strategy
at UCLA Anderson School of Management, evaluated groups of workers in
states that enforce non-competes versus those that do not.3
“Our research shows that non-competes lower a person’s earnings power,
not just at a point in time, but the negative impacts are seen
throughout their career,” said Sakakibara. “Actions to limit the
enforcement of employment practices that suppress growth and wages can
be beneficial for workers.”
Veeva has taken this legal action to protect employees from abusive
employment clauses and enable them to freely pursue career opportunities
at Veeva. The company competes for employees on the merits of its
competitive wages and benefits, work environment, and innovative
services and products. It does not require employees to sign non-compete
agreements and it will not let a current or past non-compete prevent it
from hiring a qualified candidate.
Learn more about Veeva’s work to prevent the widespread misuse of
non-compete, confidentiality, and non-disparagement agreements by
visiting veeva.com/OpenOpportunity.
Additional Information
Learn more about Veeva’s work to protect employee rights: veeva.com/OpenOpportunity
Connect with Veeva on LinkedIn: linkedin.com/company/veeva-systems
Follow @veevasystems on Twitter: twitter.com/veevasystems
Like Veeva on Facebook: facebook.com/veevasystems
About Veeva Systems
Veeva Systems Inc. is a leader in cloud-based software for the global
life sciences industry. Committed to innovation, product excellence, and
customer success, Veeva has more than 525 customers, ranging from the
world’s largest pharmaceutical companies to emerging biotechs. Veeva is
headquartered in the San Francisco Bay Area, with offices in Europe,
Asia, and Latin America. For more information, visit veeva.com.
Forward-looking Statements
This release contains forward-looking statements, including the
potential future impact of the lawsuit described in this press release
and general business conditions. Any forward-looking statements
contained in this press release are based upon Veeva’s historical
performance and its current plans, estimates, and expectations, and are
not a representation that such plans, estimates, or expectations will be
achieved. These forward-looking statements represent Veeva’s
expectations as of the date of this press announcement. Subsequent
events may cause these expectations to change, and Veeva disclaims any
obligation to update the forward-looking statements in the future. These
forward-looking statements are subject to known and unknown risks and
uncertainties that may cause actual results to differ materially.
Additional risks and uncertainties that could affect Veeva’s financial
results are included under the captions, “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and Results
of Operations,” in the company’s filing on Form 10-Q for the period
ended April 30, 2017. This is available on the company’s website at veeva.com
under the Investors section and on the SEC’s website at sec.gov.
Further information on potential risks that could affect actual results
will be included in other filings Veeva makes with the SEC from time to
time.
1 Starr, Evan P, Bishara, Norman and Prescott, J.J., Noncompetes
in the U.S. Labor Force (July 1, 2017).
2 Hyde, Alan, Should
Noncompetes Be Enforced? (Winter 2010-2011).
3 Balasubramanian, Natarajan, Chang, Jin Woo, Sakakibara,
Mariko, Sivadasan, Jagadeesh, and Starr, Evan, Locked
In? Noncompete Enforceability and the Mobility and Earnings of High-Tech
Workers (January 25, 2017).
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Source: Veeva Systems Inc.