In another battle that appears to center around agent recruiting, high-end Los Angeles-based brokerage The Agency accused Compass in a lawsuit Friday of illegally trying to prevent The Agency’s new president from soliciting Compass agents.
The suit, filed in federal court, focuses on Rainy Hake Austin, who joined The Agency in October. Austin previously worked at Compass between early 2019 until late 2020. During her final months at Compass, she served as the company’s head of operations for the West.
The lawsuit focuses on a provision in Austin’s contract from her time at Compass that would prohibit solicitation — so, things like recruiting — of Compass agents.
The lawsuit alleges Compass reached out to tried to enforce that part of Austin’s contract in March.
However, The Agency does not believe that Austin actually broke her Compass contract, and more significantly also believes that the provisions against solicitation themselves are illegal.
In a statement Friday, a spokesperson for The Agency told Inman that the company hired Austin “because of her extensive experience in the real estate industry, her leadership qualities, and her integrity and ethical principles.”
“Compass is threatening to violate Rainy’s rights by enforcing an illegal non-solicitation provision in her employment agreement,” the statement added. “This lawsuit is Rainy’s attempt to vindicate her rights as a California employee, and The Agency fully supports her efforts in doing so.”
Compass did not immediately respond to Inman’s request for comment Friday.
However, the company is no stranger to legal battles. Earlier this week, Howard Hanna also sued Compass, alleging the brokerage stole agents and trade secrets in the lead up to its initial public offering. And in January, a former Compass agent filed a class action suit against the company over what he described as “bait-and-switch” recruiting and compensation tactics.
Compass is also locked in a legal battle with Realogy that dates back to 2019. That case stems from what Realogy has claimed are Compass’ “unfair business practices and illegal schemes to gain market share at all costs.” However Compass has also countersued, arguing that Realogy is “unable to compete with Compass in the marketplace.”
Compass’ aggressive expansion and recruitment efforts have also been raising questions and generating criticism from other voices in the industry for years.
In this newest case, a review of The Agency’s lawsuit reveals that since Austin was hired as the president of the company her responsibilities have included “recruiting and hiring agents and employees to join The Agency.”
The suit goes on to say that Compass reached out to Austin twice in mid March “to remind her of her purported obligations under the Employment Agreement and cautioned her not to ‘solicit or attempt to solicit any employees or agents, or have others [solicit or attempt to solicit] on [her] behalf.'”
However, the suit continues, Austin responded to the email by saying that under California law, “post-employment employee non-solicitation agreements are unlawful.” Austin was a resident of California and working in the state at the time, so she and The Agency believe that California law applies to her contract — though the contract itself claimed that New York state laws applied.
The Agency’s lawsuit ultimately asks that a judge invalidate the non-solicitation parts of Austin’s contract and award “restitution in an amount to be proven at trial,” among other things.
Update: This post was updated after publication with additional information about the new lawsuit, and previous cases involving other companies.