It’s business, and it’s personal: How Amazon Web Services decides to enforce non-compete contracts
Career decisions are always stressful, but employees at Amazon Web Services face an additional source of anxiety when evaluating new opportunities: am I about to get sued?
That worry came true for Gene Farrell last week, when Amazon Web Services sued to prevent him from taking a job at Smartsheet, a workplace collaboration technology company. After a judge granted a temporary restraining order preventing Farrell from starting at Smartsheet, it seems likely that every AWS employee — and companies recruiting AWS employees — have wondered exactly how AWS chooses its battles over the enforcement of non-compete agreements in employment contracts.
After all, AWS doesn’t sue every single person that leaves the company to work for a competitor. Notable examples include Dorothy Copeland, who just left AWS to take what appears to be a very similar — and senior — role with IBM’s partnerships group, and Adam Selipsky, who left Amazon Web Services to become CEO at Tableau Software last year after a long career helping make AWS the cloud powerhouse it is today.
It’s much easier to argue that AWS competes with Tableau and IBM than with Smartsheet. Amazon launched its QuickSite business intelligence and data visualization service last year, competing with Tableau. And IBM is one of the tech giants pursuing Amazon in the larger public cloud market.
Smartsheet, on the other hand, is actually a big Amazon Web Services customer that plans to expand its presence on AWS in the coming months, Smartsheet CEO Mark Mader recently told GeekWire, so it’s not like the cloud company was being petty over losing business.
“From what I have observed, it feels as though they are being selective,” Mader said.
Interviews with former AWS employees and veterans of the Seattle tech scene don’t paint a complete picture of the decision-making process. “Usually it’s just personal and someone is pissed off,” said one tech recruiter who didn’t want to be named discussing one of the biggest hiring operations in town. After employees give their two-week notice, conversations about the non-compete tend to begin, and sometimes the outcome just depends on the relationship between departing employees and their managers.
But it’s also clear that sometimes AWS is just trying to send a message to employees thinking about leaving. People familiar with its employment tactics suggest it’s more aggressive than its fellow Seattle-area tech companies, some of whom don’t even force employees to sign non-competes, even though they can. (Amazon representatives did not respond to a request for comment on this story.)
With the competition for cloud talent — and cloud talent in Seattle — as fierce as it has ever been, Amazon’s aggressive and scattershot approach to non-competes might one day backfire as it tries to recruit.
Just win, baby
Farrell’s experience was quite familiar to Zoltan Szabadi, a former AWS employee who left to join Google Cloud Platform in 2014 in a similar role to his job at Amazon. Amazon sued Szabadi, and the parties settled later that year. (Szabadi was unable to discuss the terms of the settlement.) As he recalled during an interview this week, AWS seemed very intent on making sure his case went to trial.
In most cases, according to Szabadi and others interviewed for this story, AWS sits down with a departing employee and negotiates some sort of agreement about their activity at their new company. Most of the time, this isn’t very dramatic: sales people in certain territories or on certain accounts agree not to talk to those accounts for a period of time, or the employee makes assurances to AWS about discussing sensitive information with their new employer.
And then, sometimes those conversations go awry, and it’s not always clear why.
To some extent, AWS has to enforce non-compete agreements in court every once in awhile, otherwise they lose all meaning. And any sizable company has a few disgruntled employees that managers know have the potential to cause trouble. But other times, it seems quite personal.
“It’s probably coming from Andy Jassy,” Szabadi told GeekWire, referring to the CEO of Amazon Web Services. “He’s a win-at-all-costs type of person. This is just one of the many tactics that he thinks will help his business.”
Business is certainly booming at AWS. It continues to set the technical agenda for public cloud computing, and while Microsoft and Google are competing harder than ever, Amazon Web Services remains the first name on the list of nearly any organization evaluating a move to the cloud. And it’s not that surprising, in general, that people inside a fiercely competitive company culture would use all the tools at their disposal to try and win.
But is the selective enforcement of non-competes something that really helps AWS win?
“The idea that you need non-competes to protect your business, it’s demonstrably not true: look at Silicon Valley,” said Steve Willey, a partner at Seattle law firm Savitt Bruce & Willey who has sat on both sides of the table in disputes over non-compete agreements.
Non-compete agreements have long been considered unenforceable in California, and it’s hard to imagine what the tech industry would look like if the reverse were true. Over the last fifteen years, people have streamed out of big companies like Google, Facebook, and Apple to start their own businesses or join competitors, and it’s impossible to argue that these companies were harmed by the free movement of workers. (The non-poaching agreements were a novel way around all that, of course.)
There are already plenty of laws on the books to prevent the disclosure of things are are truly damaging, like trade secrets, as the epic Waymo-Uber lawsuit can attest. But as long as “reasonable” non-competes are enforceable in the state of Washington, companies will try and use them in cases where the knowledge involved doesn’t rise to that level.
Washington Representative Derek Stanford has been trying to get the state to change this law. A worker-friendly bill he sponsored passed the state House of Representatives (after it was significantly watered down under lobbying from Amazon and Microsoft), but it won’t be considered by the state Senate during this session.
“Employees should have clarity: they should know, if I apply here or there, that’s going to violate my non-compete, or if I apply here, that’s ok,” Stanford said in an interview with GeekWire Thursday. “With our current system, that employee can’t find that out until they do it, and that’s a fundamental part of the problem for me.”
Are you next?
As Farrell’s case plays out, we might get more clarity about the specific reason Amazon Web Services chose to target him for enforcement. Lawyers for AWS presented their arguments regarding Farrell’s specific product knowledge in private to the judge that granted the temporary restraining order, and it’s not clear if those arguments will see the light of day.
But the real question is whether or not AWS is playing a dangerous game insisting on non-compete agreements but selectively enforcing them based on criteria that is unclear to employees. AWS isn’t always the villain every single time it enforces a non-compete agreement, but the capricious nature of how it decides to enforce the agreements can make well-meaning employees nervous about taking a new job when they see what happens to their friends and colleagues who are targeted with a lawsuit.
“I think that a lot of employees don’t play it out in their head,” Willey said, noting that most new employees don’t think through the endgame of a non-compete agreement. “You hope and think that everything is going to work out great because you’re excited about that job.”
Szabadi said he often hears from friends who are still at Amazon Web Services when they are considering leaving for a new job, asking for advice on how he handled the situation. The desire to seek out a new opportunity often butts heads with the fact that AWS pays its employees well, is the leader in a fast-growing market, and will come after you with a vengeance if it doesn’t approve of your career choices, he said.
If you’re thinking about relocating to Seattle, be forewarned: when it comes to changing jobs, Cloud City operates a little differently than the Valley.
Source: Life – GeekWire.com