
Apple lawsuit tests if an employee can plan rival startup while on payroll - pseudolus
https://www.reuters.com/article/us-apple-nuvia-lawsuit/apple-lawsuit-tests-if-an-employee-can-plan-rival-startup-while-on-payroll-idUSKBN1ZK16R
======
baryphonic
If what Apple alleges is true, the ex-employee was particularly brazen about
his competitive activity on company time and using company property. IANAL,
but if you're planning a startup while employed somewhere else, have a wall of
separation between the two. Don't use _any_ resource that has any sort of
relationship to the employer other than through you. That includes property,
equipment, time, employees and infrastructure. You are not only better
protecting yourself legally, but also showing respect to your employer by not
misusing/countermanding their resources.

~~~
mattnewton
IANAL, but what does not using company time mean for salaried employees? I'm
never "on the clock" vs "off the clock" in my current role, I just have target
dates to hit.

~~~
bigiain
Where I am (Australia) an employer is not allowed to pay a salaried employee
less than they'd earn working the same hours as an equivalent role paid on a
per hour basis.

When I've had employers try to claim weekend/evening work was "theirs", I've
sent them a link to that legislation and a pro forma invoice for all my time
during employment with them for the difference between 168 hours per week at
equivalent hourly rate and what they've actually paid me so far. That nicely
sets the tone for further discussion.

(I only got threatened with being fired on the spot once for doing that, on
which they did not follow through, and I was already interviewing elsewhere
anyway...)

~~~
nmfisher
> Where I am (Australia) an employer is not allowed to pay a salaried employee
> less than they'd earn working the same hours as an equivalent role paid on a
> per hour basis.

IIRC the wording in Australian legislation is that employers can require full-
time employees to work "reasonable overtime". So that doesn't sound right - at
least, not as a rule across the board. Perhaps under certain awards.

Even then, it's fairly useless wording. It does nothing to resolve
disagreements between employer/employee as to what's reasonable. An extra hour
once a year? 10 hours every week? Big difference between the two.

~~~
madeofpalk
IIRC (usually) the "reasonable overtime" request is closely followed by a
clause saying that, over the course of 4 months, you still must do an average
of 38 hours/week or something to that effect.

How often it’s ‘enforced’ is, like you said, probably isn’t great

~~~
nmfisher
Australian employment law is the most bizarrely vague field I've ever come
across.

"Reasonable overtime" is only one example - there's a whole host of other
really basic questions that you can't get simple, definitive answers to.

For example, can I employ someone on a 12 month contract? What about 24
months? 36 months? At some point, they become a full-time/ongoing employee and
get the benefits of unfair dismissal/redundancy, which means the whole "fixed-
term" thing becomes meaningless. The problem is, it's _never clear at what
point that actually occurs_.

Gut feeling is that this is because all politicians know it's an absolute
minefield, so none of them is willing to touch it. Better to leave it vague
enough that no-one can accuse them of favouring business or employees, because
no-one really has any clue what's going on. Kick the can down the road and let
FWA deal with it.

~~~
daurnimator
As far as I know, after working for more than 180 days in a tax year they
become an employee.

~~~
nmfisher
Sounds like you're referring to the "employee" versus "contractor" question,
which is a whole other distinction.

I'm talking about "full-time employee for a fixed-term" versus "full-time
employee on an ongoing permanent basis".

In both cases, they're employees, not 'contractors' (so you withhold PAYG, pay
their superannuation, etc).

But in the first case, you don't have an obligation to continue employing them
after (say) 12 months.

The second, you are obliged to do so, so you can't turn around and say "we
just don't want to employ you any more" after 12 months. You need to follow
the redundancy provisions or terminate them for cause.

The problem is that it's not explicit whether businesses can actually offer
the first type of contract (or more specifically, that if I employ someone on
an 18-month, it's not explicit that they can't claim a redundancy payout when
those 18 months end).

------
alasdair_
Isn't this a traditional thing to do at Apple? After all, Steve Jobs condoned
it :)

"After several months of being sidelined, Jobs resigned from Apple on
September 13, 1985. He told the board he was leaving to set up a new computer
company, and that he would be taking several Apple employees from the
SuperMicro division with him."

[https://en.wikipedia.org/wiki/NeXT](https://en.wikipedia.org/wiki/NeXT)

~~~
cia-killer
He wasn't being paid by Apple while he was working on NeXT though (at least I
don't believe). I think the issue arises when the person is working for Apple
then starts to work on their own company, not sure though

~~~
alasdair_
>He wasn't being paid by Apple while he was working on NeXT though (at least I
don't believe).

He resigned on the same day he told them about NeXT, which had already had a
good amount of work put into its planning (including poaching several apple
engineers). I think it's reasonable to assume that before he resigned, he was
being paid.

~~~
flomo
IIRC, there was a lawsuit which was settled. Check old Infoworld or other
traderags.

------
coolsank
The irony here is amazing. Woz built the Apple I while being employed by HP
and now Apple making sure that doesn't happen again.

~~~
whalesalad
Not really a fair comparison. While Woz was at HP, he wasn't the
executive/leader of their personal computing division.

I don't see how anyone can fault Apple here when the person doing this was
leading their entire chip division.

Scenario: I own car washes and hire someone to run and manage one of my
locations. I pay them well and put them at the helm of the entire location.
This person is able to completely learn the ins and outs of my business and in
the meantime is slowly working on poaching other members of my staff and
getting things lined up to open a competitive car wash.

Who's side are you on?

~~~
musicale
> Whose side are you on?

I'm on the side of allowing all employees, including executives and rank and
file employees, to quit and work for a competitor without being sued. This is
how a competitive labor market is supposed to work.

~~~
briandear
> quit and work for a competitor without being sued

"Quit" is the operative work here. The employee in question was building the
competitor using Apple resources. He didn't quit and work for a competitor. He
worked for a competitor and then quit.

------
zweep
I feel that the law needs to have more customization due to power imbalances
than it does today. Google cloning a startup's product should be less legal
than a startup cloning Google's. A low-level employee should have few
restrictions on planning a startup while employed, but a senior exec making
millions has more power to stay unemployed for some time, a greater insight
into his employer's business, etc, and perhaps should have more restrictions
on the same. But business law doesn't usually have any such calibration for
situation, the way that criminal law does where they take into account who you
are and what situation you are in to determine a punishment.

~~~
brobdingnagians
I see what you mean, but that would kind of change "equal before the law".
Laws should apply equally to everyone. Otherwise, you would have the same kind
of twisted lobbying as we have now, but it would be on an uneven field, and
the people with money would eventually turn the situation to _their_
advantage. At least if everyone's equal before the law, you can appeal to
everyone in trying to repeal or change laws.

~~~
kelnos
That's the difference between equality and equity. I'd argue that people push
too much for the former when the latter is sometimes more appropriate. I'd say
this is one of those times.

Since we're talking about the idea of different treatment under the law for
rich vs. poor (well, "comfortable", in this case), tax law in the US is a fine
example: the more income you make, the higher your marginal earnings are
taxed.

~~~
jlarocco
> Since we're talking about the idea of different treatment under the law for
> rich vs. poor (well, "comfortable", in this case), tax law in the US is a
> fine example: the more income you make, the higher your marginal earnings
> are taxed.

That's technically true, but misleading.

The long term capital gains tax, which is what most high income earners end up
paying, maxes out at 20%, which is lower than most of the regular income tax
brackets. It's the reason some CEOs opt for a $1 salary.

~~~
pb7
Capital gains tax generally only applies to assets that have been previously
taxed as income. Equity grants whether to CEOs or normal employees alike are
taxed as income at vesting time with subsequent gains taxed as capital gains.
Capital gains taxes apply to both the rich and the poor, with the latter
paying a whopping 0%.

~~~
mamon
>> Capital gains tax generally only applies to assets that have been
previously taxed as income

No, it does not apply to previously taxed assets at all, only to an additional
income you made from those assets. Equity grant is taxed when you excercise
your stock options based on their current value. If the stock price goes up
later, capital gains tax is only applied to the amount you gained, not the
whole sum.

~~~
pb7
>No, it does not apply to previously taxed assets at all, only to an
additional income you made from those assets.

I would call that applying to previously taxed assets. Unvested RSUs (read:
not taxed yet) that gain considerably over many years prior to vesting are
still wholly taxed as regular income. Without additional income, there is
nothing to be taxed therefore there shouldn't be any confusion as to what I
mean by that.

Stock options are only one type of equity grants, the other being RSUs which
have a cost basis of $0 and therefore the entire sum is subject to income
taxes at vesting. Exercising stock options is not free, you must pay to do so
at the exercise price which is done using post-tax cash, which again, had to
have been taxed as regular income at some point.

------
hn_throwaway_99
Man I hope Apple loses hard on this one, but more importantly in the long run
I really think _Apple_ should hope they lose hard, too. A vibrant startup
ecosystem can have tons of benefits for any platform company like Apple.

California may have tons of shit wrong with it politically, but man did they
get it right when it comes to making non-competes and non-solicits
unenforceable. Coming from Texas, non-competes and non-solicits have a _huge_
stifling effect on startup formation in the tech world. I've hit it myself,
and it is a major pain in the ass. Most companies have a non-solicit of fellow
employees for a full year after you leave. Of course if you start a startup
you're going to want colleagues you really liked to come work with you.

I hear about other states and locales that say they want to "be the next
Silicon Valley" and I just laugh if they have enforceable non-competes and
non-solicits.

~~~
shoyer
Employee non-solicitation is in fact enforceable in California, e.g., see
[https://hkm.com/los-angeles/non-competes/non-solicitation-
em...](https://hkm.com/los-angeles/non-competes/non-solicitation-employees/)

------
immy
When I worked at Apple there was mandatory training on non-compete, which
included a lesson example that it would be in violation to create an iPhone
app for _gardening_. Nuvia's genesis seems egregious in comparison. Will be
interesting to see how this plays out.

~~~
musicale
Let me get this straight: You work 50+ hours a week (40 of which Apple
actually pays you for) at Apple on official Apple projects. Then you buy an
Apple computer with your own money, spend a bunch of your own "free" time at
home writing a new app for Apple's iPhone, and submit it to Apple's App Store.
Now Apple apparently has the gall to demand 100% of the revenue rather than
their (already generous) 30% standard cut?

Talk about egregious.

~~~
ksec
It depends. There are some jurisdiction that argue, you are suppose to take
rest and do your own personal stuff during your free time. Not working. Hence
you are not allow to have a 2nd Full Time Job which will degrade your 1st full
time job's performance.

~~~
unlinked_dll
My company doesn't get to tell me what I can do during my free time, does
yours? Do you think that's normal?

~~~
ksec
I think it is normal in Good Faith. Your Company is paying you for your full
time job, most people describe it a 9 to 5 when it is not. You are working
during those hours, traveling back to home and then "resting". While traveling
is not counted inside your working hours, some laws protect employees from the
moment they step out of their home to work.

While it is entirely up to you what you do in your free time, but if your free
time activities hinder your Full Time Job's performance, then it is a problem.
And your employees do get to tell you what to do. You cant party all night and
come back to work feeling sleepy just because it is "your" free time.

And that is especially true for someone in higher up position.

------
pastor_elm
>allowing the case to proceed but barring Apple from seeking punitive damages.

> Apple is not suing Nuvia itself or any of Williams’ co-founders and it did
> not allege any intellectual property or trade secret theft.

What exactly would Apple get here then if ruled in their favor? Petty revenge?
A message they can send to current employees? Comp for hours he spent on the
phone?

~~~
henryfjordan
They'd probably be claiming ownership of the new company based on the fact
that they own their employee's work product.

In reality they will get far enough into the case to determine whether or not
they (likely) own any of the business and then settle for a tidy sum or some
stock or something like that. They're probably also interested in locking up
an IP the company owns (which is probably more important than the money).

Sending a message is a nice perk.

------
Rafuino
I don't get how Nuvia competes with Apple though. Apple isn't in the server
chip business... they just are in the mobile chip business. That is, unless
Apple is admitting they're designing their own Arm-based CPUs for their data
centers?

~~~
sjg007
Just abstract it to chip provider.

~~~
ClumsyPilot
That's not reasonable and is not the same market. There are chips which manage
jet engines, MPTT solar panel chips, FPGA's, etc. You cannot possibly claim
those are relevant.

------
m0zg
How is it even a "rival"? Apple does not make server-grade CPUs. Nuvia does
not compete with them at all. I hope to dear god Apple fails at this.

~~~
rconti
Mac Pro Rack:

[https://www.apple.com/shop/buy-mac/mac-
pro/rack](https://www.apple.com/shop/buy-mac/mac-pro/rack)

~~~
ricefield
Wow, TIL. Does this even make sense financially for anyone?

~~~
rconti
Looks like it starts at only $500 more than the desktop version but I didn't
bother comparing specs. I have a friend with a 192GB new Mac Pro he's using
for video production and he's currently testing it and finds it outperforms
his HP Z8, he's very happy so far.

~~~
m0zg
Does it have the same CPU as Z8? Because if it does, I don't see how it would
"outperform" Z8. It's a PC, in a nice, expensive machined case.

~~~
rconti
It actually has a slower CPU, and fewer of them, according to him. But these
kinds of machines are where GPUs, architecture, and software all come into
play. Cores, bus speeds, subsystem speeds.

There's vastly more to computer performance than the reductionist "It's a PC,
in a nice, expensive machined case". In fact, that sounds condescending and
dismissive rather than a comment in search of enlightenment.

~~~
m0zg
But all of those things you've enumerated are available in a PC - Apple only
makes the board and a few smaller unimportant chips that don't affect
performance. You're not comparing apples to oranges when you say that MacPro
is faster somehow. It'd run at identical speed given the same CPU, same GPU
and same RAM.

~~~
p_l
There might be benefit from some of the extra bits available (the specific GPU
in Mac Pro is not exactly easy to replicate elsewhere as it's a custom twin
GPU setup with extra bus for cooperation with another unit if necessary) + the
FPGA codec card that might be exploited by the stuff he does for work.

Replacing a software-only codec with hw accelerator card would go a long way
to explain performance difference.

------
toktok555
Lucky Californians. Here I am with a non-compete clause that prevents me from
working in my industry for 12 months...

~~~
outworlder
How are you supposed to survive if you can't work in your field for a full
year? And then if you are required to work in another field, you are going to
get punished by the interview process when you try to come back.

~~~
paulgb
In finance, where non-comptetes are regularly enforced, the answers are
typically 1) garden leave [1] and 2) generally not, it's a built-in
expectation.

[1]
[https://en.m.wikipedia.org/wiki/Garden_leave](https://en.m.wikipedia.org/wiki/Garden_leave)

~~~
outworlder
Ok, that doesn't sound so bad now, kind of a 12 month PTO, which is unheard of
anywhere else. What am I missing?

~~~
paulgb
One big thing that makes it not as good as it sounds is that it's just your
salary. In the industry, that can easily be less than half of your total
compensation with bonus. Not that that's anything to sneeze at, but it
certainly adds to the opportunity cost of switching roles.

------
sigzero
"Apple sued Williams in August, alleging that he breached an intellectual
property agreement and a duty of loyalty to the company by planning his new
startup while on company time at Apple, spending hours on the phone with
colleagues who eventually joined the venture."

If that's the case, then "no" that shouldn't be allowed.

~~~
alpha_squared
The article does go on to say:

> The case will likely hinge the specific facts of Williams’ planning for
> Nuvia, Palefsky said. Given that work at modern tech jobs rarely sticks to
> traditional business hours, it may be difficult to untangle whether calls
> were made during company time or personal time.

That's actually a pretty fair thing. Apple may define, for example, its
"company time" as any time the office is open and accessible to employees --
which is a pretty wide window.

~~~
jessriedel
But like most tech companies they give their employees a lot of freedom to
adjust their hours. If the employee is free to take an hour during the normal
workday to pick up groceries, it stands to reason they can use it to recruit
their friends for a venture.

~~~
kelnos
Yes, that's what I was thinking too. If it's normal and commonplace for
someone to step out for an hour to run an errand, how is that any more
"company time" than ducking into a conference room, or (safer) heading to the
garage and sitting in your car to make some recruiting phone calls?

------
just_myles
I'm really interested in the findings. How can Apple prove any of these
claims?

~~~
brokenmachine
I wonder if they would use his iphone data (assuming he has one)?

~~~
codyb
Would that be admissible in court?

Does Apple just have carte blanche access to any data they have?

I mean, I guess so, there’s probably some EULA I haven’t read.

But I’d think their privacy stances would let you sue them if they snooped
through your iCloud backups.

Unless it was a company phone in which case their employees probably have a
separate EULA like most corporate devices.

Just like you hopefully wouldn’t stream a torrent over your corporate VPN.

~~~
gamblor956
In a case like this, they would just request the information through a legal
procedural called "discovery" in which a party is required to turn over
requested information relevant to a legal matter to the opposing party.

In short, it doesn't matter if they don't have EULA or technical access to the
data.

------
deogeo
> According to a copy of Williams’ agreement that Apple attached to its
> complaint, the contract required that Williams “will not plan or engage in
> any other employment” that competes with Apple or is directly related to the
> company.

"You may not engage in work, necessary for your survival, with anyone but us."
\- how is this not one step removed from slavery? Unless he works for Apple,
all he's allowed to do is untrained labor!

And just like forced arbitration, this will become a standard element of
contracts if we allow it.

------
jammygit
So much for being open minded about ever working for Apple. This is extremely
hostile to individual freedom

~~~
ricefield
Doesn't seem hostile or unreasonable. He was a senior director that
potentially stole IP and also committed a breach of contract by poaching
employees.

I'd say if he _did_ do those things, that seems like something that would
merit serious legal action.

~~~
nrp
It doesn't seem Apple is even claiming he stole IP. Apple's complaints seem to
be [0]:

1\. "Breach of Contract" in starting a competing business while employed
there, which was apparently prohibited in his employment contract.

2\. "Breach of Duty of Loyalty", again for starting a competing business while
employed there.

There are no claims around theft of trade secrets or violation of copyrights
or patents. This seems like an overreach by Apple, but Williams also seemed to
be playing with fire by being fairly cavalier in breaching his contract with
an employer known to be litigious. It will be very interesting to see where
the courts land on this.

[0]
[https://regmedia.co.uk/2019/12/10/apple_v_gerard_williams.pd...](https://regmedia.co.uk/2019/12/10/apple_v_gerard_williams.pdf)

~~~
donarb
He also had access to employee’s personnel files, which included salaries and
stock vesting dates. This gave him info on who to recruit and the best time
for that employee to leave. That’s a bit different than asking a co-worker if
they'd like to quit and join a startup.

~~~
nrp
That doesn’t sound illegal or especially unethical, and probably in itself
isn’t even a violation of his employment contract (though solicitation
probably was). If he was deliberately depressing bonuses or promotions to get
people to leave, that would be different, but that doesn’t seem to be the
case.

------
newnewpdro
> duty of loyalty to the company

Oh please my sides, they hurt, I can only laugh so hard.

~~~
ricefield
Not sure why you're laughing, this is an actual legal term:
[https://www.nolo.com/legal-encyclopedia/fiduciary-
responsibi...](https://www.nolo.com/legal-encyclopedia/fiduciary-
responsibility-corporations.html)

~~~
outworlder
That's for directors and stockholders, not random employees.

~~~
ricefield
> Apple filed the lawsuit in Santa Clara County Superior Court against Gerard
> Williams III, who left the company last year after more than nine years as
> chief architect for the custom processors that power iPhones and iPads to
> start Nuvia Inc, which is designing chips for servers.

~~~
outworlder
Chief architect. AKA engineer.

~~~
ricefield
His LinkedIn literally says, "Senior Director":
[https://www.linkedin.com/in/gerard-williams-
iii-27895aa/](https://www.linkedin.com/in/gerard-williams-iii-27895aa/)

It's not like he was some kind of low-ranking IC engineer

~~~
kelnos
Director in this sense does not mean what it means in the definition for "duty
of loyalty", which is talking about board members, not (even high-ranking)
employees.

~~~
gamblor956
Wikipedia is good for a broad definition of the term "duty of loyalty" but in
CA that duty extends to all employees (see e.g.
[https://www.sandiegouniontribune.com/business/sd-fi-
eaton-26...](https://www.sandiegouniontribune.com/business/sd-fi-
eaton-26-story.html)).

------
gigatexal
I get the impression he’s trying to extort Apple into buying this new company
— which, if true, is not cool man

~~~
ClumsyPilot
Putting a price on his skills and talent? How dare he!

