The Law and Ethics of Restrictions on an Employee’s Post-Employment Mobility

44 Pages Posted: 17 Mar 2012

See all articles by Norman Bishara

Norman Bishara

The Stephen M. Ross School of Business at the University of Michigan

Michelle Westermann-Behaylo

Kogod School of Business, American University

Date Written: January 1, 2012

Abstract

Employee mobility as a conduit for knowledge transfer to a business competitor is a growing source of concern for many employers in the modern business environment where the skills, relationships, and knowledge embedded in a firm’s employees has become an important source of competitive advantage. Employers may seek to restrict the post-employment mobility of their employees to address this concern through the use of various legal mechanisms. Accordingly, policymakers are increasingly asked by employers and employees to address these concerns by adjudicating disputes in the courts and in legislatures, despite not having a full ethical grounding for these policy decisions. We first analyze the incentives and preferences of employers and employees related to employee mobility and then examine three legal mechanisms used to address employee mobility: covenants not to compete, the inevitable disclosure doctrine, and garden leave. We then review the business ethics implications of each mechanism and make recommendations for the policy makers based on property rights, utilitarian, and fairness perspectives.

Keywords: covenant not to compete, noncompete, garden leave, inevitable disclosure, business ethics, restrictive covenants, human capital law and policy, employment law, employment contracts, employee mobility

JEL Classification: J2, J23, J3, J4, J6, K1, K12, K2, L2, M1, M12, M5, M51, M55, O15

Suggested Citation

Bishara, Norman D and Westermann-Behaylo, Michelle, The Law and Ethics of Restrictions on an Employee’s Post-Employment Mobility (January 1, 2012). Ross School of Business Paper No. 1172, American Business Law Journal, Vol. 48, No. 1, 2012, Available at SSRN: https://ssrn.com/abstract=2023205 or http://dx.doi.org/10.2139/ssrn.2023205

Norman D Bishara (Contact Author)

The Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-647-6823 (Phone)

Michelle Westermann-Behaylo

Kogod School of Business, American University ( email )

4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States
202-885-1770 (Phone)

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