A court ruling Friday adds yet another entry to the long-running legal battle over how Amazon enforces its noncompete agreements, a potent contractual cudgel that the Seattle-based technology giant has used to corral talent.
Amazon erred when it sued Seattle-based former real estate manager Carl Nelson in Virginia last year for violating his noncompete agreement, King County Superior Court Judge Michael Scott ruled. The company should have tried its suit in King County, as mandated by Nelson’s employment contract, Scott said.
Nelson’s attorney, Shawn Larsen-Bright, also argued that Amazon had violated a year-old Washington law requiring employers to enforce noncompete clauses for Washington employees within the state.
The lawsuit is riding sidecar to a Byzantine legal back-and-forth between Amazon and Nelson, who is being investigated by the FBI after Amazon reported to the agency that he had orchestrated a kickback scheme related to data center leases in Northern Virginia — claims Nelson has strenuously denied.
Nelson, who sued Amazon in King County Superior Court last year, asked the judge to declare that his Amazon noncompete agreement is “unreasonably overbroad, unenforceable, and in violation of Washington law.”
Similar agreements bar many of the company’s 60,000 Seattle-area office employees from working for Amazon competitors for 18 months after they leave the company.
Scott ruled Friday that Nelson’s case can proceed — but ordered a stay until after the conclusion of the case Amazon brought against Nelson in Virginia, which may not come for years.
In addition to its claims of fraud, conspiracy and racketeering, Amazon contends Nelson violated the terms of his noncompete agreement by steering real estate deals to companies who had pledged to pay Nelson and his associates bribes and kickbacks through a complicated web of shell companies.
But the broader clash over how Amazon enforces its noncompete contracts has a lengthy history and real consequences for the livelihoods of many workers at Amazon’s Seattle-area offices, nearly all of whom have signed such agreements. The technology giant, and particularly its cloud-computing division, Amazon Web Services, is known for chasing down workers it believes may have violated their noncompete agreements.
Former Amazon employees have said the company misleads workers into believing the restrictive agreement is boilerplate that won’t be enforced even if they take a job with a competitor. But as shown in a slew of Amazon lawsuits filed against its former employees, the tech giant occasionally does enforce noncompete agreements — aggressively.
Amazon also in 2019 lobbied Washington lawmakers to lower the salary cap under which the state ruled noncompete agreements are unenforceable from $180,000 to $100,000. The amendment allowed Amazon to continue enforcing noncompete agreements for most workers at its Seattle-area offices, who typically earn in excess of $100,000.
In court filings, Amazon has said noncompete restrictions protect its trade secrets, including its customer and business relationships as well as its “confidential plans, pricing, developments, and strategies.” Amazon’s attorney did not respond to questions.