Groupon Countersued by Ex-Employees & Accused of Being Abusive

The Groupon controversy that surfaced in October 2011 seems to be gaining more steam with the group buying giant being countersued by the sales managers that had left the company to join a leading competitor—Google Offers. In October, Groupon had sued  two managers, accusing them of revealing trade secrets to Google.

Lawyers representing these employees filed papers in an Illinois court on January 25 2012, suing Groupon for trying to subdue its ex-employees. This case is listed as Groupon Inc. v. Hanna, 11CH36731 in Circuit Court, Cook County, Illinois.

Understanding the Issue

Groupon gained global attention during its recent public offering in 2011 when it garnered nearly $700 million, setting new benchmarks for initial public listing registered by an internet venture.

The countersuit claims that Groupon sued the two managers as a kneejerk reaction, fearing that its initial public offering might be affected adversely. It underlines that Groupon’s manipulative approach should be an indicative of how the company can arm-twist its employees, not allowing them to seek better employment opportunities.

Groupon’s behavior has been described as “abusive” and “illegal” and the company has been accused of using its lawsuit as a concealed effort to gain critical information about the business model of Google Offers.

When Groupon sued the two managers—Brain Hanna & Michael Nolan, it claimed that the employees were acquainted with critical information including Groupon’s methods of acquiring/using pricing data and its relationships with existing and prospective retailers.

Lawyers representing Nolan and Hanna have argued that their clients don’t have knowledge of such confidential information. They substantiated that the employment agreement used by Groupon is unfounded and unrealistic—this agreement has been the center of contention, allegedly used by Groupon to prevent its employees being hired by a competitor for two years after leaving the company.

The lawyers further argued that there wasn’t anything privileged about deals created or sold by Groupon since discount coupons are basically similar across most online stores and have been circulating the web for decades, emphasizing that Groupon’s existing or proposed client-list as well doesn’t represent any confidential data.

This countersuit accuses Groupon of using manipulative hiring trends, hiring young, unemployed people, luring them with false promises and concealing facts, using a confusing remuneration system which is aimed at setting unachievable sales figures so that the promised commissions aren’t actually paid.

Source: Bloomberg