Here’s a phrase PayPal might want to keep in mind as it wages a civil battle against two former executives who defected to Google: Location, location, location.
Because when it comes to employment breach of contract and trade-secret cases, California can be a much pricklier state for a spurned employer to prevail within than many others.
“California law is very hostile to these types of suits,” said Jason Shultz, acting director of the Samuelson Law, Technology & Public Policy Clinic at the UC Berkeley School of Law, “I’d say over at PayPal, they have a little bit of uphill battle.”
While much of PayPal’s allegations against Stephanie Tilenius and Osama Bedier revolve around alleged breach of employment contract and non-compete violations, provisions within the California Business and Professional Code actually limit the enforceability of non-compete disclosures that companies like Pay Pal make employees sign.
The result — regardless of whatever contracts an employer forces a worker to sign when they start a job — is that contracts often fall apart when they get in front of a judge.
“California is very pro-competition, especially here in the Silicon Valley. Think of startup culture. We like to entice employees to jump ship and compete with former employers,” Shultz said. “This state has a very free-trade approach to labor markets. You can’t lock in your employees forever. You have to compete to keep them.”
PayPal filed suit in Santa Clara County Thursday, accusing former employees Stephanie Tilenius and Osama Bedier, as well as Google, of misappropriation of trade secrets, breach of contract, and a host of other claims related to the recruitment of PayPal employees and the alleged improper use of PayPal’s confidential information.
Other aspects of PayPal’s claims could be held up to extra scrutiny in California as well. In its legal complaint, the company argues Bedier’s defection from PayPal’s mobile payments division to Google’s will result in the “inevitable disclosure” of unspecified proprietary trade secrets. It’s called the inevitable disclosure doctrine. “Essentially they are saying he’s the man who knows too much and can’t leave and work elsewhere,” Schulz said. “California has rejected that doctrine as well.”