Cresco Labs and Green Thumb Industries have been fierce rivals since Illinois issued its first licenses to grow and sell medical marijuana in 2014.Now, as the two River North-based firms battle for market share in states across the country, Cresco has filed a lawsuit accusing GTI of poaching a high-level employee who allegedly violated a non-compete clause in his contract when he switched sides this year....The lawsuit states that Christopher Tonge, a chemist who served as Cresco’s director of technical services, notified the company in May that he was resigning. He then took what’s believed to be a similar job at GTI. Tonge had signed an employee agreement with Cresco that “barred him from working for a substantially similar company” for a year.Tonge was integral to developing “a unique process” to extract cannabis oil from pot plants that “helps drive revenue while enabling significant cost savings,” according to the suit. “The process provides such value to Cresco that it has applied for two patents on it, on which Mr. Tonge is a co-inventor,” the suit notes.Tonge was allegedly recruited to GTI by Matt Ingram, its senior vice president of operations. Ingram previously worked at Cresco and has knowledge of the firm’s manufacturing operations and its contractual non-compete provisions, the suit states.Meanwhile, Ingram has been reaching out to other Cresco workers “and urging them to resign to work for GTI, despite knowing that these employees are subject to covenants not to compete,” the suit holds. Cresco CEO Charlie Bachtell even confronted his GTI counterpart, Ben Kovler, in April and warned him that Ingram was attempting to hire “multiple senior-level employees” from Cresco.
It'll be interesting to see how this lawsuit plays out - I imagine that someone thinks they've got a pretty solid case here.
(I'm broadly against non-compete agreements in that it seems like they're good for the employer, bad for the employee (and I think) the economic understanding is that it's bad for sectors for there to be lack of labor mobility. In this case, it seems like it's reasonable for an employer to attempt to lock an employee in - I guess doing with incentives ('we'll pay you more') is better than 'we're chaining you to us.')
The problem is that noncompetes put substantial costs on the employee without any costs on the employer - if you're fired or laid off, you can't work where your skills are. It would be fairer that if the employer restricts you from working in your field for a year, they should have to pay you for a year if they lay you off, but I assume they'd just weasel a "fired for cause" out (though in that case, the noncompete should also be terminated). - Hap
ReplyDeleteThe most recent non-compete I had in industry didn't apply if I was laid off, but did apply if I was fired "for cause" (presumably so I didn't tank to be able to take a different position). Other non-competes I have seen apply in either scenario, which seems particularly unfair. If you were actually paid a higher wage for signing a non-compete, then maybe they would be more economically fair between employee and employer, but I haven't really seen that in practice. It seems to me that the "fairest" way would be to either provide an option to sign a non-compete with a higher salary or not sign it and have a lower salary, or require the employer to allow you to leave for a new job offer or match the compensation. Remember that the official explanation in most legal cases for most non-competes is not to reduce labor's bargaining power, but to protect intellectual property of the employer (while remembering that the official explanation is mostly false in practice).
ReplyDeleteIt seems like in practice that it appropriates all of a worker's knowledge in a field - it is legitimately hard to distinguish IP in some cases (which is why the employer uses non-compete to avoid unauthorized IP use, because a suit even with cause might not succeed) but not all of an employee's knowledge in a field can be attributed to the employer (or likely is protectable IP). It seems like the anticompetitive effects (and intent?) of noncompetes are a lot greater than its IP protective effects. - Hap
DeleteWhen I worked for a big chemical company, every time they threatened to sue a former employee working for a competitor and the person fought back, the company always dropped the lawsuit because they knew they didn't have a case. The one time I know of the company successfully suing was a blatant case of IP theft. Non-competes are usually all bark and no bite.
ReplyDeleteNon-competes are notoriously difficult to enforce. However, for the person leaving, the "process is the punishment" as they say, if the former employer attempts to enforce the agreement. The employee will have to lawyer up, and go through that whole process. KT is right and the employee should lawyer up quickly and counter sue.
ReplyDelete