Most would agree that good leadership makes a group or organization thrive. But even effective leaders aren’t going to be successful if there is a turnover problem. Stability helps keep everyone on the same page without having to restart over or leave workers frustrated by changing policies.
Of course, when things aren’t going well, there’s nothing wrong with bringing in some fresh faces. But in those times of turmoil, the goal is to find the right person and keep them there for a long time. Sometimes, though, they leave for a better opportunity. Or maybe they faced strong resistance from others. Or they just didn’t like the job. Often others will never know due to non-disclosure agreements which prevent the employee and/or company from publicly talking about their departure.
Such is the case of GameStop, which has had quite a few executives join and leave over the past few years. For instance, one executive vice president and chief operating officer departed after seven months at GameStop. GameStop’s current CEO has only been in place since June 2021. For his half-year’s work in 2021, he got paid almost $17 million and since then has repeatedly pushed for NFTs and been criticized for planning little else. So the company, who has been loudly praising the future of blockchain, turned to a veteran from an obvious industry to take over as COO: clothing. The CEO of regional department store chain Belk, Nir Patel, became the head of the company in July 2021 after Belk filed for bankruptcy. But in May 2022, after less than a year on the job, he left to join GameStop.
And it’s this hire who is now central to some legal drama.
The Lawsuit
Belk I’m sure wasn’t pleased with having to search for a new CEO so soon, but according to a new lawsuit they filed, that isn’t the issue; it’s what Patel did next: Patel allegedly began inviting other high-ranking Belk employees to join him at GameStop. However, Patel’s contract said he could not poach from Belk for at least a year after leaving. But at least one person, Tim May, was approached by Patel in June and jumped shipped in August, but not before obtaining copies of Belk employees’ salaries and benefits. He sent spreadsheets of this confidential info to his personal email.This allowed GameStop to know what to offer Belk workers in order to beat their current compensation. The lawsuit continues by alleging GameStop encouraged Patel to violate his non-solicitation agreement with Belk to “raid Belk’s senior ranks“.
So Belk is now suing GameStop, Patel, and May, wanting Patel/GameStop to stop soliciting Belk employees, damages for these violations and obtaining private information, and preventing May from being hired at GameStop. They are seeking a jury trial, and GameStop and the other defendants have yet to respond to the lawsuit as of this writing.
As I snarkily said earlier and before, it makes no sense to me that GameStop keeps pushing the future of NFTs and such while providing little information about how they’re going to improve their stores…and yet they want to hire department store talent, a retail sector that has been struggling for years. And while contracts can be incredibly confusing, I imagine it’s pretty common to include a clause about not enticing your former (or soon-to-be former) employees to join you elsewhere — especially in contracts involving high-ranking positions like CEO.
But perhaps Belk, being in a fairly weak position, seemed ripe to find comparatively cheap workers. This despite the fact GameStop laid off much of its mid-level management and practically entire departments (like Game Informer magazine) a few months ago.
As for May, if he did steal that information, that’s pretty bad…and super dumb to send copies to a personal email address — for the employee’s security, if nothing else. Even if his spreadsheets didn’t obtain any other sensitive info like address or phone numbers, if May had gotten hacked, those workers could have had a headache. I mean, I’m all for ensuring there isn’t a gender pay gap and such, but I’m sure very few people want their exact pay and benefits package put up on the Internet. Regardless, even without those concerns, May is probably going to have to answer as to why he needed payroll breakdowns outside the office — and to make his second file even more detailed than the first.
But as for Patel, who knows what his defense will be. Will he say May came to GameStop of his own, independent volition? That he obtained salary info because he wouldn’t be susceptible to a poaching clause? That he had no idea he couldn’t talk to current Belk staff about how GameStop is better? And GameStop’s human resources didn’t flag May’s employment and double-check Patel’s departure contract to see if he could invite May?
I guess the “didn’t know” defense is probably the way to go, because in the lawsuit, which you can see here, Belk seems to have some pretty incriminating evidence several key GameStop employees met with May while he was still with Belk.
A couple of highlights:
- GameStop’s CEO, Matt Furlong, emailed May and asked if he would be interested in Furlong calling him. A follow-up email indicates they did speak, and he CC’d others, including Ryan Cohen, GameStop board chairman and activist investor.
- May used his Belk email to join a videoconference with Patel in July.
- Cohen sent a welcome email to May in late July and mentioned the human resources vice-president, Wes Burke, was working on his compensation package.
- A Belk executive received a LinkedIn message from someone at HR at GameStop. In a later interview, Burke told this individual in a video chat that Patel had brought up his name for the job.
Yeah…assuming Belk has this individual as a witness and/or a copy of this meeting, it’s going to be hard to argue Patel and GameStop weren’t going after management at Belk and that incidents like the LinkedIn message were just coincidence. It’s just going to be up to Belk to prove damages. Because “I didn’t read the agreement” generally doesn’t let you off the hook if you violate it, and according to the lawsuit, Patel’s contract had the following clause:
“[S]hall not, directly or indirectly, on [his] own behalf or on behalf of any other Person … solicit, recruit or hire, or attempt to solicit, recruit or hire, any individual who is at the time of, or was within the one-year period immediately preceding, such actual or attempted solicitation, recruitment or hiring, an employee … of the Belk Group.”
And even in the few exhibits included in the online version of the complaint, it will be interesting to see what else Belk finds during discovery if Patel, May, and/or GameStop don’t settle with Belk. After all, it’s very suspicious Patel and May were interacting just a couple of weeks before May resigned to leave for GameStop.
At the very least, it’s not a good look for GameStop to hire someone who would want to bring with them spreadsheets of data on their coworkers. That’s shady even if it doesn’t rise to the level of a legal infraction.
At the very least, I doubt any more Belk employees will be quitting to join GameStop in the near future. Even if Belk’s lawsuit is dismissed or ends without a verdict in their favor, perhaps all of GameStop’s executive suite should be dotting their i’s and crossing their t’s to make sure errors like this don’t distract them from their goal leading GameStop to success. But if GameStop’s high-level executives were knowingly violating Patel’s agreement with Belk — and there is at least a decent possibility — then there are serious questions about the culture of GameStop where blatantly breaking contracts is okay with them.