Non-Compete Agreements

Abstract

Companies by and large issue non-compete agreements to their employees when they are hired. This is emphasized specifically in companies where intellectual property is a key component of their infrastructure. When an employee violates the non-compete agreement, there are ethical issues that surround this violation that must be understood through the legal eye. In the presented scenario, there are many ethical aspects that can be gleaned in terms of whether the computer programmer was in violation of the company’s terms or not.

Introduction

When companies and corporations hire their employees, there is a general consensus that that employee is required to sign what is known as a non-compete agreement. Non-compete agreements are considered to be contracts that prohibit individuals from going to a similar company within a certain market under a specific set of circumstances. For example, if an employee works for Nestle, they will more than likely be informed that they will have to sign a non-compete agreement and if that individual opts to leave Nestle; they cannot go and work for Mars Wireless usually within a certain timeframe. In the presented scenario, there are many issues presented speak to the nature of non-compete agreements in addition to good business ethics.

Ethical & Unethical Arguments

What are the ethical issues within this scenario? The computer programmer created a program as an aid in his programming work, and no one else had access to the program. Management at the company was aware of the program's creation. The programmer decided to leave the company and go and work for the competitor. It can be reasoned that the programmer was given a non-compete agreement to sign upon being hired by the company he left. Therefore, he did could not share the new program with his new employer even though he was the sole user of the program at his former employer.

Non-compete agreements are advantageous to employers because they offer reassurance that the intellectual property and classified data retrieved from data mining, as well as resources will not be available to a competitor. While it is true that these contracts provide safeguarding for intellectual property, employees are not explicitly prohibited from working for the respective company's rival in the industry. Non-compete agreements are also valuable when there are trade secrets that the particular company or corporation does not want to get out to the general public (Griffith, 2010). It can be reasoned that everything that happens at a company is of high importance and risk to being found out by the general public, hence, the need for non-compete agreements. Given this definition of non-compete agreements, the computer programmer was in direct ethical violation of the conventional dynamic that most companies/corporations adhere to.

Issues pertaining to ethics continue to be a concern for companies and corporations. Debate and discourse surrounding ethical conduct of employees has been persisted throughout the years. In most office environments, employees feel immense pressure to be accountable and responsible for what they do and perform while there. Management in addition the government, have put in control and preventative measures to ensure that there are nominal, at best, activities that occur (Ferrell et.al, 1998). The computer programmer scenario puts the issue of ethics at the forefront yet again because it is almost as if the computer programmer had the intentions all along to leave the company where he created the program at and then go work for the competitor. While it can be said that the employee who left was not technically prohibited from going to work for the competition per the non-compete agreement mechanics, the issue here is that the computer programmer utilized his former employee's materials to create the program. This gets into the issue of copyright, and trademark/patent.

If you were to ask how prevalent non-compete agreements are in today's working world, the answers may vary. It usually depends on where an individual resides and of course, the industry in which they work. All employees within certain industries are informed of whether or not they have to sign non-compete agreements or not when they interview for the job. While non-compete agreements are mostly seen in areas where intellectual property is the standard bearer, that does not negate the fact that they are important to all sectors of the working world (Villano, 2007). Given this premise, the computer programmer, like the character, Ricky from I Love Lucy stated to his wife, Lucy, will inevitably have some explaining to do as far as the legal dynamics.

Legal Aspects

Non-compete agreements in most instances contain a clause regarding intellectual property that is created while that employee is at that company. When employees are getting hired, they rarely consider the implications of the non-compete agreement that they are signing and the particular limitations that it can often impose. If an employee of one company chooses to leave that company and work for the company's competitor, as a result of the non-compete agreement, that former employer can take legal action alleging there was a violation of the agreement at that former company ("Defending Employees Accused of Non-Compete Agreement Violation," 2013). The company that the computer programmer worked for will more than likely sue the programmer for taking the program he developed while at that company to the competitor. This is a direct ethical violation of the United States Copyright Act, which states in work made for hire that “employer or other person for whom the work was prepared is considered the author for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright" (“17 U.S.C. § 201[b],” 2013). The computer programmer will have to explain in court why he performed breach of the non-compete agreement. Breach of contract is defined as a party who fails to exactly and precisely perform the obligations under his/her contract. The obligations can vary depending upon circumstance ("Breach of Contract & Remedies," n.d.).

Principles

While arguments can be made from the computer programmer’s side that he was not in ethical violation of the agreement that he signed at the onset of being hired by his former employer, per the Copyright Act and the clauses that are usually in non-compete agreements pertaining to intellectual property, the argument will not have much merit. While the majority of the explaining will fall into the hands of the computer programmer, his former employer will have to be able to show that the computer programmer made the program while at that company and used that company’s materials in the creation of the program. Given the scenario of the nominal understanding of management that the computer programmer was inventing such a program that may be difficult to prove in court. That is not to say that the computer programmer is still not in violation of the principles associated with non-compete agreements, which are to be strictly adhered to per the contractual terms. 

Conclusion

It is difficult to ascertain which side will win in this case. The judge presiding over the case will have to meticulously and thoroughly read the language in the non-compete agreement that the computer programmer more than likely had to sign to work for his former employer and then make the determination as to whether the contract was breached. Additionally, the court will have to weigh what the former employer presents in their suit against the computer programmer. There is reasoning to suggest that the judge may not necessarily rule in favor of the former employer given the lack of information that was presented in the scenario about who knew what regarding the creation of the program by the computer programmer. Even with the copyright laws and the intellectual property clause in place in the majority of non-compete agreements, every agreement has loopholes and some agreements do not implicitly prohibit individuals from going to work for the competition.

References

17 U.S.C. § 201[b]. (2013). Retrieved from Copyright Law of the United States of America and Related Laws Contained in Title 17 of the United States Code website: http://www.copyright.gov/title17/92chap2.html

Breach of Contract & Remedies [Document]. (n.d.). Retrieved from Goldsmith IBS website: http://www.goldsmithibs.com/resources/free/Breach-of-Contract/notes/Breach-of-Contract-Remedies.pdf

Defending Employees Accused of Non-Compete Agreement Violation. (2013). Retrieved from The Law Offices of Kevin J. Dolley website: http://www.missouriemploymentlawattorney.com/Labor-and-Employment-Law/Non-Compete-Agreement-Law/Defending-Employees-Accused-Violating-Non-Compet.aspx

Ferrell, O. C., LeClair, D. T., & Ferrell, L. (1998). The Federal Sentencing Guidelines for Organizations: A Framework for Ethical Compliance. Journal of Business Ethics,17, 353-363.

Griffith, V. M. (2010). Non-compete Agreements with Employees [Practical Law Guide]. Retrieved from Practical Law Company website: http://www.velaw.com/uploadedFiles/VEsite/Resources/Non-competeAgreementswithEmployees(7-501-3409).pdf

Villano, M. (2007, January 21). The Noncompete Clause: Balk at Your Own Risk. The New York Times. Retrieved from http://www.nytimes.com/2007/01/21/business/yourmoney/21advi.html?_r=0