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Mark Rudy has never seen so many angry employees. Some 40 dot-com workers who’ve been laid off in the past four months have tried to hire Rudy, a partner at San Francisco’s Rudy, Exelrod, Zieff & True, which specializes in employment disputes. The employees are mad because they claim they were lured to technology companies with promises of instant wealth. But in light of a volatile stock market, investors have lost their appetite for Internet ventures. Subsequently, many tech companies are seeing funding dry up and their stock prices languish. In response, those companies have trimmed workers to cut costs. The workers are crying foul, saying they gave up secure, high-paying jobs on a ruse. Few of them actually have a case, but stock options have driven people to try to force the issue anyway. In recent months, employment lawyers say, technology company employers and employees have been pointing fingers over who let the other down, now that the Internet picture isn’t so rosy. Internet company employees are certainly not the first to cry foul when the market rocks an industry. But with so many stories in Silicon Valley of options creating overnight riches, it’s almost become a crime when they don’t. Even short-term employees, those let go after just a few months, are trying to bring claims, said Jeffrey Wohl, an employment partner at Orrick, Herrington & Sutcliffe’s San Francisco office. “They have a shot at damages, at stock options, they wouldn’t otherwise have a shot at, [so] they’re claiming fraud,” Wohl said. And the accusations of misrepresentation are going both ways, with the companies sometimes blaming the disgruntled employees for the companies’ shortcomings. “There’s a lot of finger-pointing in the Valley about whether [employees] have been fraudulently induced into coming to work or whether they oversold the skills,” said Fred Alvarez, a partner at Palo Alto, Calif.-based Wilson Sonsini Goodrich & Rosati. More than half of Alvarez’s workload these days consists of defending companies from complaints that managers misrepresented their companies’ chances of success. “It’s a whole new approach to wrongful termination,” Alvarez said. “If you plead fraud, that gets you juries and punitive damages and compensatory damages and maybe gets you the stock.” Lucrative payoffs from stock options even have plaintiffs’ lawyers getting creative. Some have begun to apply California’s sweeping Business & Professions Code 17200 in wrongful termination cases. The statute enables an ex-employee to exact deep penalties from a company to compensate for wrongdoing on behalf of all employees, not just the individual filing the matter. How the law applies in such circumstances is not widely understood, however, said Rudy. He’s used it in just a few cases but expects further guidance from the courts as other cases wind their way through the system. But even with a powerful tool like 17200, the number of cases is relatively small, compared with the number of disgruntled technology workers. While employment lawyers may be fielding phone calls like mad, very few of the callers have suffered real fraud, Rudy said. “They took the risk, and there was no deceit. People are acting somewhat recklessly at times, and they’re really ruining their careers because of this get-rich-quick idea,” he said. Even in the few instances where employees may have been misled, their chances of scoring in court are slim, given the high demand for tech workers. “A lot is not going to surface because a lot of these people are talented and marketable, and we don’t rush into a matter unless the person is going to suffer,” Rudy said. For plaintiffs’ lawyer Cliff Palefsky, the thorniest problems occur when venture capitalists step in and force management to unmake their promises to employees. “The people providing the money impose restrictions and obligations that force them to break promises or fire people,” said Palefsky, a partner at McGuinn, Hillsman & Palefsky in San Francisco. But even with the stock market in turmoil, these are good economic times — especially for technology workers. Most get other jobs soon after being laid off, and the fact that people won’t suffer diminishes the value of a claim, lawyers said. “It’s better … to get fired today than it was before,” said Richard Levine, a partner at San Francisco’s Levine & Skigen. “The people who are finding themselves without jobs have a brighter future than middle managers getting canned from larger companies years back.”

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