IN MOST COMPANIES TODAY, NEWLY HIRED MANAGERS ARE
asked to sign a noncompete agreement. While these agreements vary
from company to company, the general thrust is that if the manager
resigns, he or she cannot take a position in a competing company or
one that’s in a similar business to the one he or she left for a specified
period of time. Theoretically, this protects the employer from the possibility that the former employee will use confidential or proprietary
information against it. For the employee, however, particularly one
who is highly specialized, it precludes him or her from taking a position in his/her chosen field.
In most cases, particularly if the employee leaves on good terms,
these agreements are resolved to everyone’s satisfaction. That is not
always the case, however. From time to time, there
are high-profile cases that warrant the attention of
supply chain managers (or any manager, for that
matter). Currently, there are two in our industry
that bear watching. (Author’s note: In commenting on
these cases, I’d like to note that I have no legal or confidential insights but am relying solely on public information, court filings, and my own personal opinions.)
On March 21, Amazon filed suit against its former vice president of operations after his hiring by
Target as its new chief supply chain and logistics
officer. The executive in question had signed a
noncompete agreement at Amazon that prohibited
his joining a competitor for 18 months after his
departure. Amazon claims that his knowledge of Amazon’s operations
can be used to its (Amazon’s) detriment. It further alleges that he
has already shared trade secrets in the interview process. Target has
countered that it has taken every precaution to ensure that proprietary
information remains confidential.
Earlier, on Feb. 3, XPO Logistics filed suit against YRC, claiming
theft of trade secrets enabled by YRC’s hiring of XPO executives who
had signed “executive agreements.” This action goes further than the
Amazon suit in that it formally accuses the executives of abscond-
ing with XPO trade secrets. YRC has described the suit as meritless
and stated that it was “fortunate to have created a culture [that] has
attracted many industry professionals who want to work with proven
leadership.”
Up until these two actions, the best-known case of its kind in the
supply chain was one that was filed in 1999 and involved J.B. Hunt
and Cardinal Carriers. Two executives left Hunt of their own accord,
and neither had signed a noncompete agreement. They had, however,
BY CLIFFORD F. LYNCH fastlane
The rocky road to greener pastures
signed a confidentiality agreement. In filing
suit against the ex-employees, Hunt complained that the knowledge they took with
them about Hunt, its strategy, its plans, and
its operations gave Cardinal an unfair competitive advantage. The Arkansas Supreme
Court agreed and prohibited the executives
from utilizing in their new position much
of the knowledge and information they had
gained at Hunt.
In such cases, the employer does not
always win, but whatever the outcome, the
individual and/or the new
employer can incur significant legal fees.
Of course, a deeper philosophical question is how
you would refrain from
using knowledge you
have. The Target COO
described the employee
in question as a “creative
supply chain strategist.”
How can he ignore the
experience he gained at
Amazon? Are there really
many secrets in the logistics business? I’m
not sure there are.
While I would not condone the outright
theft of trade secrets, I do not think that
anyone should be deprived of the right to
change jobs or work in his/her chosen field
of endeavor. However, when individuals
take a new job, they should be very careful
about what they sign, how they conduct
themselves in their positions, and the possible consequences of their actions.
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider of logistics management advisory services, and author
of Logistics Outsourcing – A Management Guide and co-author
of The Role of Transportation in the Supply Chain. He can be
reached at cliff@cflynch.com.
