IBM’s decision to sue a longtime human resources executive for taking a new job at Microsoft is raising questions among lawyers who specialize in employment agreements and non-compete clauses.
Earlier this week, IBM filed a lawsuit against its former HR VP and chief diversity officer, Lindsay-Rae McIntyre, claiming her new role as Microsoft’s chief diversity officer violates a year-long non-compete agreement. Although non-compete agreements are prevalent in the tech industry, it’s unusual for a company to enforce them over a role that isn’t tied to its core product or business.
“I can’t figure out why they’re doing it,” said Robert Ottinger, a San Francisco-based employment attorney who has been working non-compete cases for nearly 20 years. “I guess they’re just really angry at Microsoft for taking their HR person,” he said, describing McIntyre as “a pawn” who is “stuck in the middle.”
Ottinger, who practices in California and New York, said he has never before seen an HR staffer sued for violating a non-compete agreement.
McIntyre worked for IBM for more than 20 years before taking the job at Microsoft, where she will compete for many of the same types of hires. Microsoft announced McIntyre’s new role as chief diversity officer over the weekend.
IBM alleges in its lawsuit that “disclosure of the very type of confidential information that McIntyre possesses — non-public diversity data, strategies and initiatives — can cause real and immediate competitive harm.” The tech giant says that it is “inevitable that McIntyre will use IBM’s confidential information and trade secrets against IBM” in her new role at Microsoft.
Update 3 p.m: IBM provided the following statement to GeekWire.
“IBM has a long history of being recognized for leadership in a diverse and inclusive workplace. As IBM’s chief diversity officer, Lindsay-Rae McIntyre was at the center of highly confidential and competitively sensitive information that has fueled IBM’s success in these areas. While we can appreciate Microsoft’s need to deal with mounting criticism of its record on diversity, IBM intends to fully enforce Lindsay-Rae’s non-compete agreement – just like we do with all of our senior leaders – to protect our competitive information.”
The lawsuit shows just how critical diversity has become in the tech industry, where companies are aggressively trying to recruit people from underrepresented groups. Over the past decade, tech companies have faced increasing pressure to release employee demographic data, highlighting pervasive under-representation of women and people of color.
Given the competition for diverse talent, Michael Schutzler, CEO of the Seattle-based Washington Technology Industry Association, thinks “nobody should be shocked by the IBM lawsuit.” He added, “In our industry, the number one challenge is recruiting and developing the talent needed to fill the jobs we create.”
“In this case, we are talking about human capital as the asset,” he said. “A non-solicit clause prevents the former employee from poaching people. But the knowledge of where to find those people and how to recruit them in a brutally competitive marketplace is more valuable than poaching. The same argument holds for writing code.”
That argument isn’t flying with everyone in the employment law world.
“I doubt there’s any legitimate reason for it,” Ottinger said. “I can’t really see how an HR person could have anything truly unique so that it would be harmful to IBM because HR is something that everyone knows about.”
Venkat Balasubramani of Focal PLLC, a Seattle-based attorney who represented a former Amazon executive sued for allegedly violating a non-compete by taking a job with Smartsheet, also said he found the IBM lawsuit surprising at a time when the entire tech industry is trying to improve its diversity.
“If somebody is increasing diversity efforts, whether it’s at Microsoft or IBM, ostensibly diversity is going to increase overall,” Balasubramani said. “I can’t quite put my finger on it, but there’s something about the optics of going after a diversity officer that just felt weird to me. That made me think, ‘Wow, I wonder if they may regret doing so,’ just because I could see people looking at it and saying, ‘This is really scorched earth.'”
Broad use of non-compete agreements has come under scrutiny in recent years. Traditionally used to protect intellectual property, lower-level employees are increasingly expected to sign them. The sandwich worker compelled to sign a non-compete has become emblematic of the phenomenon.
In New York, where IBM filed its lawsuit, the ubiquity of non-compete agreements has become “unbelievable,” Ottinger said. “Everyone gets a non-compete, and it’s a problem.”
Balasubramani believes the broader reach of non-competes could create an anti-competitive environment.
“If Amazon could tell all its employees to not work at other local tech companies, it’s really putting a cramp on the market forces for the labor market,” he said. “They almost have, in a sense, captive audience over employees and can command different terms in that respect. In a way, I think restricting a recruiter raises a similar issue.”
GeekWire has contacted IBM to comment on the suit. We will update this post when we hear back.
Read the full text of the lawsuit below.