Veeva Turns the Tables in Fight Over Tech Hiring Barriers

Updated on
  • Cloud computing firm challenges non-compete clauses in court
  • Company is fighting claims it poached employees, trade secrets

Veeva Systems Inc., a target of lawsuits over hiring away employees from rivals in life sciences cloud computing, is now trying to turn the tables.

In a complaint filed in state court in California, the world’s leading technology hub, Veeva seeks to liberate itself and other local employers from restrictions on hiring from competitors based in other states.

Veeva operates at the intersection of two of the fields that attract some of the best talent in Silicon Valley: cloud software and life sciences. It went public almost four years ago at $20 a share, raising $300 million including an overallotment. The shares closed at $63.85 each on Monday in New York, giving the company a market value of almost $9 billion.

While the most populous U.S. state is one of just a handful where non-competition agreements can’t be enforced as a matter of policy, employees whose company headquarters are based elsewhere can still be blocked by their contracts from taking new jobs in California.

In announcing its suit against three companies that have sought court orders to block ex-employees from joining Veeva or allegedly threatened litigation -- Medidata Solutions Inc., Quintiles IMS Inc. and Sparta Systems Inc. -- Veeva said it’s taking a stand to end a practice it views as anti-competitive.

Unfair Competition

Veeva is asking a court to declare that it’s a violation of California’s unfair competition law for any employer that does business there to try to block its workers, regardless of where they live, from going to work for a rival based in the state.

“Employees should have the right to move freely between jobs, advance their careers and improve their lives without fear of being sued by their former employers,” Peter Gassner, Veeva’s founder and chief executive officer, said in a statement. “Many companies outside California take advantage of that fact that non-competes are banned and freely hire from California companies, yet require their employees to sign agreements that do not
allow them to work for California companies.”

A copy of Pleasanton-based Veeva’s complaint in Alameda County Superior Court in Oakland was obtained by Bloomberg News. It couldn’t be immediately verified in court records.

Medidata, based in New York City, said it supports and respects the rights of workers to build their careers, but said the reason it sued Veeva in January over the defection of five employees was to challenge the California company’s “illegal targeting and unfair use of our trade secrets.”

“Medidata will not tolerate the misappropriation of its intellectual property, and has a responsibility to its customers, employees and investors to protect its substantial investments,” the company said in a statement.

Representatives of Quintiles IMS and Sparta Systems didn’t immediately respond to email messages seeking comment on Veeva’s complaint.

Condition of Employment

Typically, a non-compete agreement -- which many job candidates in the tech world have to sign as a condition of employment -- bars them from working on rival products for a set period of time, say a year, after leaving their current employer.

Other common contract clauses that Veeva claims undermine fair competition -- those requiring departing employees to keep all company information confidential and forbidding them from making disparaging statements -- are also targeted in Monday’s complaint. Veeva says these provisions bar employees from even discussing their wages or working conditions -- information it needs to know when considering a hire -- and prohibits them from ever criticizing their former employer even while competing against it.

Supporters of non-compete agreements argue they help protect trade secrets and other confidential information and prevent rapid turnover at companies that have made big investments to train employees. Critics say they suppress wages and stifle innovation and economic growth. A Treasury Department study last year found that about 30 million U.S. workers had contracts with non-compete provisions.

Veeva’s lawyer, Chris Baker of Baker Curtis and Schwartz PC in San Francisco, is fighting similar battles against other companies. He represents a former Google manager who claims the internet giant illegally muzzles employees from disclosing salaries, work skills and working conditions to future employers and the media.

He also filed a suit against Binary Capital LLC on behalf of a former employee who claims she was harassed and defamed after she resigned from the venture capital firm, following revelations that co-founder Justin Caldbeck made unwelcome sexual advances toward female startup founders. Baker declined to discuss those cases.

Aggressively Hiring

Veeva executives regularly discuss their desire to keep hiring aggressively to support Veeva’s long-term growth; at the end of March, the business employed 1,874, almost a quarter more than a year earlier.

Veeva has a policy that it won’t let non-compete agreements stop it from hiring job candidates and has pledged to provide legal defense for its hires if their former employers threaten them with legal action.

Veeva has sparred over hiring with each of the rivals it sued, all of whom it says maintain a significant presence in California, according to Monday’s complaint.

After Medidata filed its January complaint, Veeva asked a federal judge in Manhattan to move the dispute out of court into private arbitration.

A predecessor of Danbury, Connecticut-based Quintiles IMS and an affiliate threatened legal action over former employees moving to Veeva, causing the California company “increased expenses and lost productivity,” according to Veeva’s complaint.

Veeva also details repercussions it faced when it recruited a Sparta Systems employee -- the Hamilton, New Jersey-based company got a judge in its home state to temporarily bar him from providing certain services in California, according to the complaint.

The case is Veeva Systems Inc. v. Medidata Solutions Inc., California Superior Court, Alameda County (Oakland).

(Updates with Medidata’s comment in ninth paragraph.)
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