The rocky road to greener pastures

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/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/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 that had signed "executive agreements." This action goes further than the Amazon suit in that it formally accuses the executives of absconding 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 unfolded 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, 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.