Yelp’s attempt to hire a former Groupon vice president in Seattle has sparked a legal battle between the companies over Washington state’s non-compete law.
In a lawsuit filed this week in King County Superior Court in Seattle, Yelp alleges that Groupon is illegally enforcing provisions of its standard non-compete agreement in violation of the Washington state law.
Groupon is “deceiving its Washington-based workforce, potential future employees in Washington, and other companies who are also interested in hiring employees in Washington on an even playing field,” Yelp alleges in the suit. It seeks financial damages and a declaration making the agreement unenforceable.
Chicago-based deals platform Groupon filed its own suit against Sung Shin in November in federal court in Illinois. A former Amazon advertising leader, Shin worked as Groupon’s vice president and global head of advertising and ancillary review for seven months in 2021 before accepting a job with Yelp in Seattle as vice president for product management, multi-location, according to court documents.
Yelp’s lawsuit notes that it did not hire Shin as head of advertising.
However, Groupon’s lawsuit says Shin “is armed with the technical and insider knowledge to help a competitor, particularly Yelp, develop and enhance its advertising service and product offerings to unfairly compete against Groupon.”
A judge in the Illinois case issued a temporary restraining order against Shin in response to Groupon’s complaint, preventing him from starting in the new job at Yelp for now.
In a statement Friday afternoon, a Groupon spokesperson spokesperson called Yelp’s lawsuit “an unfortunate and reactionary attempt by Yelp to evade an Illinois court ruling, and we believe that we will prevail on the merits” of its argument that Shin is refusing to comply with a valid agreement.
It’s the latest in a string of disputes between tech companies over non-compete deals. Such agreements have long been a subject of controversy in the tech industry. They have been rendered virtually unenforceable in California, where Yelp is based.
Non-competes are still allowed in Washington state. However, under a state law passed in 2019, they can’t be applied to employees who make less than $100,000, and they can’t cover a period of more than 18 months, among other restrictions.
“It’s quite frankly scary what corporations can do with even the threat of a lawsuit,” Shin said via phone Friday afternoon, explaining that he has learned a great deal about the issue through this process. “I applaud Washington state and the attorney general for speaking up for employee rights, and hopefully this case will be settled under that umbrella.”
An attorney representing Shin, Jesse Wing of MacDonald Hoague and Bayless, called it “an affront to Washington to have an out-of state company come in and say, ‘We want to use the talents and skills of somebody who lives in Washington,’ and then flout the law here, and say, ‘We don’t like the law that we would be subject to, so we’re going to use the law of another state,’ which doesn’t protect the interest of Washington employees.”
Groupon defended its position in its statement:
Groupon has complied with all obligations under Washington law and there is no basis for Yelp’s claims. We can understand why our competitors would want to tap into Groupon’s expertise on how to successfully monetize a local marketplace, but we must protect Groupon’s confidential information and trade secrets.
All Groupon employees work very hard for the benefit of our company, small business merchants and customers, and we must take legal action to protect their work when someone at a very senior and highly compensated level leaves to go to a direct competitor. Taking the initial legal action in this matter was not something that was done lightly.
We tried at length to find a workable solution here, but we were left with no other option.
As detailed by Yelp in its lawsuit, the standard Groupon employment agreement signed by Shin includes a clause that requires any disputes to be adjudicated in Illinois state and federal courts.
Yelp points to a provision of Washington state law, passed in 2019 to put new restrictions on non-compete provisions, that renders non-competition agreements void and unenforceable if they require adjudication out of state.
Citing GeekWire’s coverage of Groupon’s Seattle office and hiring from rival companies in the area, Yelp’s suit says Groupon is “violating the very statutory workplace mobility protections that help provide Groupon with its steady stream of skilled technology workers in the first place.”
It adds that Yelp “is interested in hiring more Washington-based employees.”
Yelp’s suit continues:
Specifically, Groupon seeks to “enforce” against its Washington-based employees unreasonable post-employment form provisions in noncompetition covenants that purport to require the employees to not work for any company “in competition” with Groupon for 18 months—without defining the competition or providing examples of what Groupon has in mind, and completely untethered to the length of the time the employee actually works for Groupon. … Groupon restrains trade by interfering with the mobility of Washington’s workforce and interfering with other employers’ ability to hire Washington workers and put them to work. Yelp is one of the employers who have been injured through Groupon’s conduct, and is suing to put a stop Groupon’s illegal and unfair business practices.
A hearing on Groupon’s motion for a preliminary injunction is set for Tuesday in Illinois.
Here are the complaints filed by Groupon and Yelp in the two court cases.