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Employee Solicitation

Background

An established fabless semiconductor company in Silicon Valley alleged that its former Vice President of Engineering breached an employment contract by soliciting and causing a number of employees to leave the company and join him at a startup company. The established company alleged that the solicitation resulted in economic harm from the loss of several senior engineers with unique skill sets and lost current and future business opportunities. The established company also alleged that the startup company was unjustly enriched from its employment of the solicited employees.


Our Analysis

Intensity performed an analysis of economic damages incurred under claims of breach of contract, breach of fiduciary duties, and unfair competition. Intensity conducted an analysis of competitive labor markets, including comprehensive evaluations of both competitive labor markets in general and the competitive labor market specific to engineers in Silicon Valley. Intensity analyzed each company’s participation in the relevant labor markets, the specific roles of the departed employees at each company, and other case-specific economic factors to quantify lost profits and unjust enrichment.

For lost profits, Intensity calculated the profits that the established company would have earned from the services of the departed employees if they had stayed with the company. This involved isolating the profits generated by employee assets from profits generated by other company assets. In another layer of the analysis, Intensity isolated profits specific to the departed employees from profits generated by other employees at the established company. Intensity also calculated lost profits relating to allegedly lost sales opportunities. In part, Intensity employed sales projections with quantified confidence levels and other case-specific economic factors to determine the probability of converting a sales opportunity into an actual sale. Applying this information in conjunction with a competitive analysis of sales shares and profit margins, Intensity calculated lost profits from lost sales opportunities.

For unjust enrichment, Intensity measured the economic profits that the startup company earned from the employment of the former employees of the established company. This calculation involved isolating profits generated by the former employees from profits generated by other assets of the startup company.