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

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.