Amazon Sues an Ex-Employee Over a Noncompete Clause. He Says His Boss Called It ‘Unenforceable’

Amazon has filed suit against Brian Hall, a newly hired Google VP and former VP of product marketing at Amazon Web Services (AWS). It’s a lawsuit business leaders should watch closely.

At the center of the dispute is the increasingly controversial practice of forcing new hires to sign non-compete clauses that limit or eliminate their ability to take jobs in their areas of expertise for periods of 18 months or more. Depending on your perspective, these clauses are a necessary protection for companies with trade secrets or a modern form of slavery that binds employees to employers, preventing them from taking other jobs no matter how unhappy they become. The outcome of this high-profile case may have implications for every employer that asks employees to sign such clauses or wants to hire someone who has, as well as for employees themselves.

At issue is a particularly sweeping clause in the contract Hall signed when he joined Amazon in 2018. The clause prevents him from working on any aspect of any product or service that “competes or is intended to compete with any product or service sold, offered, or otherwise provided by Amazon (or intended to be sold, offered, or otherwise provided by Amazon in the future).” In other words, pretty much everything. When Hall, who apparently had been passed over for promotion at Amazon, quit his job and then accepted a position as a marketing VP at Google, Amazon filed suit, alleging that Hall had violated this non-compete clause. It’s also seeking a court order to block him from working on Sundar Pichai’s speeches at the upcoming Google Cloud Next conference.

Unenforceable?

Oddly, Hall’s lawyers explain in their response to the suit, Hall signed Amazon’s employment contract because that non-compete clause was so very, very broad. At the time, he alleges, Ariel Kelman, AWS VP of worldwide marketing, assured Hall that the clause was mere boilerplate. Kelman said he had never seen the company enforce the clause against a marketing executive, and in any case, the very fact that it was so far-reaching in its demands made it unenforceable as a practical matter. Hall says Kelman’s arguments convinced him that he could safely sign the contract, and so he did. Sometime later, Kelman himself left to become Oracle’s chief marketing officer, with no legal action from Amazon. That gave Hall further reason to believe the non-compete clause would not be enforced against him.

It’s rare for an employer to attempt to enforce a non-compete clause against a non-technical employee. In general, these clauses are viewed as a way to keep engineers from bringing along newly developed technologies when they decamp from one employer to another. As a marketer, Hall has no such technical knowledge. But in its suit, Amazon says that Hall’s knowledge of its product plans — and even the identities of its biggest customers — constitute trade secrets. In fact, its lawsuit says, simply by filling a marketing position at Google Cloud, Hall will “inevitably use or disclose Amazon’s confidential information.” Therefore, the mere fact of his accepting the job “threatens immediate and irreparable harm.”

Though it’s unusual to sue a non-technical employee over a non-compete clause, it isn’t Amazon’s first time. Last summer, Amazon sued an AWS sales executive named Philip Moyer for taking a sales job at Google Cloud, and a federal judge agreed to limit Moyer’s activities at Google to sales outside the financial services industry, which had been his area at AWS. However, the judge also criticized Amazon for its overly broad non-compete clause, saying, “Amazon leaves it to the Court to draft a restriction that reasonably protects its interests.”

This time around, that strategy could wind up hurting Amazon. Non-compete clauses are increasingly controversial, especially in places dominated by large high-tech employers. California has made them illegal, and Washington has a new law restricting their use to employees earning more than $100,000 a year. Hall is, of course, well above this threshold. But under the new Washington law, companies that try to enforce overly broad non-compete clauses do so at a financial risk. That’s because if a court or arbitrator winds up adjusting the non-compete clause to more reasonable proportions, as happened in Moyer’s case, the company that wrote the clause is liable for damages of a minimum $5,000 plus court costs and attorney fees. 

The intent of the law is to discourage contracts just like the one Amazon required Hall to sign. However this particular case turns out, the message is clear. If you’re an employer asking prospective employees to sign non-compete clauses, make sure they only cover what you actually need and can reasonably expect to enforce. And if you’re a prospective employee considering signing such a contract, don’t believe anyone who tells you it’s “just boilerplate.”