Is Mercedes ‘Gardening leave’ too restrictive?

Back in 2007, McLaren infamously was entangled in the Spygate saga when they were found to be in possession of a complete Ferrari technical manual. At the time, then Renault boss, Flavio Briatore, suggested that it was a tad silly to do something like that because the easier way is to just hire engineers from other teams and the gray matter comes with them.

These days, that’s a little more difficult to do. When Renault hired an FIA technical boss with tribal knowledge of all the team’s secret designs for 2018, the three-month gardening leave was a major talking point in the paddock two weeks ago. That wasn’t long enough according to many team bosses and to be fair, given his position, they may be right.

It now seems that as Renault grow as a works team, they are poaching (or re-poaching) high profile staff having lost many when the team was near life support as Lotus. The problem is, other teams have gotten very aggressive in their contracts by locking down key personnel to serious amounts of gardening leave as the British call it or a NCA (Non-compete Agreement here in the US).

Employers usually insist on non-compete agreements because of the possibility of an employee, upon termination or resignation, working for a competitor or starting a business, and gaining competitive advantage by abusing confidential information about their former employer’s trade secrets or sensitive information. This is what Flavio was advocating ten years ago. It has been a part of Formula 1 for a very long time.

Now Renault boss Cyril Abiteboul says that Mercedes has gone too far in securing their staff to long-term NCA’s.

“Red Bull is not too aggressive in the way they are keeping their people, but Mercedes are the most aggressive,” said Abiteboul during a sponsor event with Infiniti at Austin.

“We signed up a senior person from Mercedes last year, and he is not due to join before 2019 because of the contractual situation.

“The UK is very favourable to protect employees for the benefit of the employer, but that is giving us a bit of a hard time. We know it, so we simply have to deal with it.

“Red Bull are not stupid in the way they are protecting their staff. Mercedes have the right to do what they are doing, but I think it is a bit unfair.

“They already have the financial resources but now they are blocking the system by making sure no one can go anywhere.

“It is still a sport and we need to provide a good show and interesting show and that is not what is happening if you are doing that.”

In the US, NCA’s are not looked upon quite as favorable as other countries. Anything beyond 12 months is considered potential egregious and it prevents a person from making a living in the field they are uniquely skilled to perform. As a business owner, I’ve fought a few NCA battles and they just aren’t very easy to defend. The concept of hiring someone in 2016 and not having them start until 2019 is seriously harsh and most likely wouldn’t fly here in the US.

I am intrigued about this case and wonder how the litigation went in British courts because denying a person a living for three years seems very egregious. Is Cyril embellishing the amount of time? IS he right about F1 establishing a standard for NCA’s in the sport? Does it prevent cross-pollinating in F1 and technical innovation sharing?

In the US, because non-compete agreements are so restrictive, they are often restricted or non-enforceable. In some states, they aren’t legal and if any portion is litigated, only the trade secret portion of the agreement is enforced, not the work restrictions.

One-third of the States have some restriction on the enforceability of a NCA. Many look for a compensation component for the NCA and in many cases, employers have not offered one. In the case of Mercedes, perhaps they have a compensation component but is it activated if the employee leaves versus being released?

It’s all a tough question but clearly, Mercedes has a right to protect its IP and on the other hand, it is an 800lbs gorilla in F1. Each individual case most likely has to be litigated and that gets very expensive.

Hat Tip: Autosport

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Negative Camber

I wonder what Toto’s NCA looks like. :)

Salvu Borg

“when managing a F1 team, the number one most important things is to know what others are doing or intends to do” ROSS BRAWN while managing the FERRARI team.

Qarbon Nubia

Given the fast pace of development it seems six months should be the maximum. That is the usual stipulation where I live.

Salvu Borg

if you don’t like the contract, don’t sign it. that goes for the employee who wants to join a team, as well as for the competitor who wants to hire that employee away from that team.
surely gardening leave is “paid-up” leave.