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How a Startup's Legal Battle With a Software Giant Could Redefine Tech Workers' Rights

On September 6, Jessica Bell couldn't wait any longer. Rumors of layoffs at ShareFile, a unit of Citrix Systems, a 28-year-old software maker valued at $12bn, had been swirling through the summer.

How a Startup's Legal Battle With a Software Giant Could Redefine Tech Workers' Rights

A virtual sales engineer ShareFile and a single mom with an 18-year-old daughter, Bell had started looking for new jobs as the whispers persisted. "I had to look elsewhere to make sure I could feed myself and my family," she says. Bell gave notice to her manager and was walked out of the building later that day.

The night before, Bell had received an offer letter from a ten-year-old Silicon Valley startup called Egnyte; she accepted and her first day there was September 18. A competitor to Box and Dropbox — and to ShareFile — that’s raised more than $60m in funding, Egnyte operated in the file sharing market, too. CEO Vineet Jain declared the official opening of Egnyte’s new sales office in Raleigh, the same town as ShareFile’s headquarters, the following day: “Planting a new flag… in Raleigh!”

Bell wasn’t the only former Citrix employee who’d made the jump to Egnyte. Six others had resigned over August and September, forming the heart of Egnyte’s 10-person team in Raleigh.

That didn’t sit well with their former employer. On September 22, Citrix sent Egnyte and cease-and-desist letter warning that Bell and the others were violating their non-competition agreements by working for the startup. A few days later on October 6, Egnyte sued Citrix in California court. Why California? Egnyte is based there, and non-compete agreements are generally unenforceable in the state, and Egnyte alleged the ones Citrix was seeking to enforce were overly broad. Citrix fired back with a lawsuit in Florida, the state where it’s headquartered, on October 11, naming Egnyte and all seven employees as defendants. Bell and her colleagues had violated the terms of their non-competes, Citrix asserted; the company even alleged that some, including Bell, had downloaded sensitive documents with proprietary information.

Citrix’ and Egnyte’s ongoing legal dispute raises questions relevant to tech companies big and small. At its core are two drastically different worldviews on non-compete clauses — and the latest challenge to how California’s pro-employee rules apply to staff of California companies elsewhere in the U.S.

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A virtual sales engineer ShareFile and a single mom with an 18-year-old daughter, Bell had started looking for new jobs as the whispers persisted. "I had to look elsewhere to make sure I could feed myself and my family," she says. Bell gave notice to her manager and was walked out of the building later that day.

The night before, Bell had received an offer letter from a ten-year-old Silicon Valley startup called Egnyte; she accepted and her first day there was September 18. A competitor to Box and Dropbox — and to ShareFile — that’s raised more than $60m in funding, Egnyte operated in the file sharing market, too. CEO Vineet Jain declared the official opening of Egnyte’s new sales office in Raleigh, the same town as ShareFile’s headquarters, the following day: “Planting a new flag… in Raleigh!”

Bell wasn’t the only former Citrix employee who’d made the jump to Egnyte. Six others had resigned over August and September, forming the heart of Egnyte’s 10-person team in Raleigh.

That didn’t sit well with their former employer. On September 22, Citrix sent Egnyte and cease-and-desist letter warning that Bell and the others were violating their non-competition agreements by working for the startup. A few days later on October 6, Egnyte sued Citrix in California court. Why California? Egnyte is based there, and non-compete agreements are generally unenforceable in the state, and Egnyte alleged the ones Citrix was seeking to enforce were overly broad. Citrix fired back with a lawsuit in Florida, the state where it’s headquartered, on October 11, naming Egnyte and all seven employees as defendants. Bell and her colleagues had violated the terms of their non-competes, Citrix asserted; the company even alleged that some, including Bell, had downloaded sensitive documents with proprietary information.

Citrix’ and Egnyte’s ongoing legal dispute raises questions relevant to tech companies big and small. At its core are two drastically different worldviews on non-compete clauses — and the latest challenge to how California’s pro-employee rules apply to staff of California companies elsewhere in the U.S.

Read Full Article

How a Startup's Legal Battle With a Software Giant Could Redefine Tech Workers' Rights