Know your employees.

On November 17, OpenAI, the leading artificial intelligence company behind ChatGPT, announced that it had removed Sam Altman as the company’s CEO. Mr. Altman has been a long-time well-respected entrepreneur in the Silicon Valley tech community. The decision to remove Mr. Altman was made by the firm’s Board of Directors after they determined Mr. Altman had not been “consistently candid in his communications with the board.” Within days, Microsoft, a major investor in OpenAI, announced that it was hiring Mr. Altman and others from OpenAI to lead a “new advanced AI research team.” The news shocked many, not the least of whom were OpenAI’s employees.

In a November 20 letter to the OpenAI Board, OpenAI employees objected to Mr. Altman’s removal and requested his reinstatement. The employees argued that the Board “lack[ed] competence, judgement, and care for our mission and employees,” and threatened to resign en masse to join Mr. Altman’s new team at Microsoft. More than 700 of OpenAI’s 770 employees signed the letter. In response to the news, Salesforce CEO Marc Benioff offered a job to any OpenAI researcher who resigned.

The next day, OpenAI retreated, announcing it had reached an agreement with Mr. Altman for him to return as CEO, coupled with the departure of the Board that had forced him out.

The episode provides lessons for employers:

  • Know your employees. The OpenAI Board apparently did not understand the bond between Mr. Altman and OpenAI’s employees. The fact that more than 90 percent of its employees threatened to resign, demonstrates that they had faith in Mr. Altman and enjoyed working for him. The Board seemingly was either ignorant of or indifferent to this rapport. Companies making major decisions, including changes of leadership, must be attuned to how their employees might respond.
  • Respect your employees’ leverage. OpenAI’s employees are, by and large, highly skilled and highly sought after in one of the most important and exciting fields today. As evidenced by the offer from Salesforce, most of them have no shortage of suitors for interesting and lucrative jobs. When employees have that kind of leverage, it is all the more important that employers be mindful of their opinions when making major decisions.
  • Know the National Labor Relations Act. The NLRA generally protects the rights of non-supervisory employees to engage in concerted activity -- that is, taking actions on behalf of one other relating to their employment, or preparing for group action. Employers who attempt to interfere with, discourage, or penalize employees who engage in such activity may face penalties for violating the law. The actions taken by the OpenAI’s employees could be considered concerted activity. If OpenAI were to subsequently attempt to discipline or terminate any employees for their actions (there is no indication that it did), the company would potentially be in violation of the NLRA.
  • Know California law. California famously prohibits restrictive covenants that prohibit employees from leaving one employer to go to work for a competitor. Here, the OpenAI employees are working on highly complex and sensitive projects of potentially enormous commercial value. These are the types of employees typically subject to non-compete clauses. However, because OpenAI is based in California, it could not stop its employees from resigning and potentially going to competitors. OpenAI in all likelihood requires employees to sign agreements not to share or use confidential trade secrets at a later place of employment, but those agreements are difficult to enforce and do not replace the lost talent.

The OpenAI situation seems to have had a happy ending. Mr. Altman returns to a job he says he loves, and the employees get back the boss they want. A crisis averted, with lessons for employers of all kinds. Now let’s hope OpenAI can return to focusing on making sure artificial intelligence doesn’t take over the world.