Legal action to set precedent in the overbroad
use of non-compete, confidentiality, and non-disparagement
agreements
Veeva Systems (NYSE: VEEV) today announced it filed a lawsuit in
the superior court of California to stop companies’ widespread
misuse of non-compete, confidentiality, and non-disparagement
agreements that restrict employees’ basic rights. Clauses in these
agreements can materially impact an employee’s ability to pursue
new job opportunities. Veeva is taking legal action to address the
increasing limitations companies are placing on employees. The case
can set an important precedent in the enforcement of employment
clauses that are illegal in states such as California.
The widespread use of non-competes impacts an estimated 30
million American workers, which reduces employees’ mobility and
presents a potentially significant threat to innovation and
economic growth, according to a national study co-authored by J.J.
Prescott, University of Michigan law professor.1
“Employees, employers, and economies can all suffer as a result
of non-competes,” said Prescott. “The negative effects on wages,
mobility, and job satisfaction can be substantial. In many, if not
all, circumstances there are better ways to protect trade secrets
than non-competes, which often just limit fair competition.”
Veeva filed suit against three companies, Medidata,
QuintilesIMS, and Sparta, for using illegal provisions in their
employment agreements, including post-termination non-competes and
overly broad confidentiality and non-disparagement clauses. All of
these provisions make it harder, if not impossible, for employees
to change jobs and provide services to California-based employers.
The suit asserts that such agreements restrict fair competition and
violate California law.
“Under the law in most states, companies essentially have the
power to dictate where employees can work and keep them locked in
jobs,” said Peter Gassner, Veeva founder and CEO. “We are taking
action because people should have the fundamental right to use
their skills and experience to advance their careers as they choose
without the threat of being sued.”
In addition to limiting mobility, research shows that employees
in jurisdictions that enforce non-competes take lower paying jobs
and make less overall. Areas without non-competes see stronger
growth, greater numbers of new business start-ups, and patents
filed.2
“Non-competes are meant to strike fear in employees and
discourage competition,” said Alan Hyde, Rutgers University law
professor who has extensively studied the impact of non-competes.
“It’s clear that the free flow of ideas and employees from company
to company can be a factor for new businesses and innovation. This
case could help limit practices that are clearly bad for employees
and bad for the economy.”
“I’m thrilled to see broad action being taken to curb these
unfair agreements. All workers should have the liberty to move
between jobs and be free to compete,” said Orly Lobel, a professor
of employment and labor law at the University of San Diego and the
author of Talent Wants to Be Free. “Confidentiality and
non-disparagement clauses can be as big a constraint as
non-competes. Our research shows that these anti-competitive
practices can hurt employee performance, reduce company innovation,
and hinder the economy.”
Non-compete agreements have long been banned in California. A
double standard exists where companies outside the state can hire
freely from California companies while, at the same time, use
non-competes to stop their employees from joining California
companies.
A recent study co-authored by Mariko Sakakibara, professor of
strategy at UCLA Anderson School of Management, evaluated groups of
workers in states that enforce non-competes versus those that do
not.3 “Our research shows that non-competes lower a person’s
earnings power, not just at a point in time, but the negative
impacts are seen throughout their career,” said Sakakibara.
“Actions to limit the enforcement of employment practices that
suppress growth and wages can be beneficial for workers.”
Veeva has taken this legal action to protect employees from
abusive employment clauses and enable them to freely pursue career
opportunities at Veeva. The company competes for employees on
the merits of its competitive wages and benefits, work environment,
and innovative services and products. It does not require
employees to sign non-compete agreements and it will not let a
current or past non-compete prevent it from hiring a qualified
candidate.
Learn more about Veeva’s work to prevent the widespread misuse
of non-compete, confidentiality, and non-disparagement agreements
by visiting veeva.com/OpenOpportunity.
Additional Information
Learn more about Veeva’s work to protect employee rights:
veeva.com/OpenOpportunity
Connect with Veeva on LinkedIn:
linkedin.com/company/veeva-systems
Follow @veevasystems on Twitter: twitter.com/veevasystems
Like Veeva on Facebook: facebook.com/veevasystems
About Veeva Systems
Veeva Systems Inc. is a leader in cloud-based software for the
global life sciences industry. Committed to innovation, product
excellence, and customer success, Veeva has more than 525
customers, ranging from the world’s largest pharmaceutical
companies to emerging biotechs. Veeva is headquartered in the San
Francisco Bay Area, with offices in Europe, Asia, and Latin
America. For more information, visit veeva.com.
Forward-looking Statements
This release contains forward-looking statements, including the
potential future impact of the lawsuit described in this press
release and general business conditions. Any forward-looking
statements contained in this press release are based upon Veeva’s
historical performance and its current plans, estimates, and
expectations, and are not a representation that such plans,
estimates, or expectations will be achieved. These forward-looking
statements represent Veeva’s expectations as of the date of this
press announcement. Subsequent events may cause these expectations
to change, and Veeva disclaims any obligation to update the
forward-looking statements in the future. These forward-looking
statements are subject to known and unknown risks and uncertainties
that may cause actual results to differ materially. Additional
risks and uncertainties that could affect Veeva’s financial results
are included under the captions, “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations,” in the company’s filing on Form 10-Q for the period
ended April 30, 2017. This is available on the company’s website at
veeva.com under the Investors section and on the SEC’s website at
sec.gov. Further information on potential risks that could affect
actual results will be included in other filings Veeva makes with
the SEC from time to time.
1 Starr, Evan P, Bishara, Norman and Prescott, J.J., Noncompetes
in the U.S. Labor Force (July 1, 2017).
2 Hyde, Alan, Should Noncompetes Be Enforced? (Winter
2010-2011).
3 Balasubramanian, Natarajan, Chang, Jin Woo, Sakakibara,
Mariko, Sivadasan, Jagadeesh, and Starr, Evan, Locked In?
Noncompete Enforceability and the Mobility and Earnings of
High-Tech Workers (January 25, 2017).
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version on businesswire.com: http://www.businesswire.com/news/home/20170718005532/en/
Veeva SystemsRoger Villareal,
925-264-8885roger.villareal@veeva.com
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