Under the glow of the moon

April 19, 2004
Acme must contend with an employee's off-hours activities

The gentle rain that's been falling for the past two days completely melted what was left of the dirty winter gray that had draped the Acme plant in the suburban industrial park across the valley. The afternoon promised to be as gloriously bright and sunny as Acme's recent economic fortunes. Orders have drawn down the finished goods inventory and production lines are running at an easy lope, a situation not seen in several years.

Acme is relatively fortunate compared to other industrial plants in the area. Some of these troubled enterprises simply didn't have enough staying power to make it through the rough times. Now, with their buildings shuttered and parking lots as empty as the prospects of their former owners and employees, they will never again be contributing even one thin dime to the county's tax coffers.

Those that weathered the storm did so with minimal staffing levels and zero outlay for engineering and maintenance. With business picking up, they again find a need for technical talent to augment the labor pool that's been turning out product. Unfortunately, the people who once provided that brainpower, having been laid off, moved on to bigger and better opportunities and are no longer available. Most wouldn't return, even if they had the opportunity.

"The whole situation is perfect for me," declared Mabel Lee Fragg, the up-and-coming half of Acme's maintenance engineering department. "Getting my little consulting business started was relatively easy. I went to a few Chamber of Commerce meetings, got to know some folks, sent out a few fliers and e-mails to local plant managers and -- what do you know -- some needed my help."

"That doesn't surprise me, Mabel. You're a damned good engineer and a workaholic," replied Ed Selford, Acme's sales manager, as they ate lunch together in the company cafeteria.

"C'mon, Ed, I'm not that bad," she retorted. "I still have a social life. Heck, the consulting is easy. Every plant in the area is doing pretty much the same kind of work. And I'm just doing it to help make ends meet. Think about it. Nobody here has seen a pay raise in more than three years."

"I know what you mean," Ed said. "We're enhancing cash flow by delaying payment on everything, including our commissions and employee expense accounts. What about your husband, though. Is he OK with your side jobs?"

"He's my biggest backer since he isn't working anymore," Mabel said sadly. "His job with that no-name fast food franchise ended 18 months ago. I guess they didn't need a regional service technician."

"I'm sorry. I didn't know," Ed replied. "How are you guys doing?"

"It's a struggle, hence the consulting," Mabel said. "One example. We're homeowners. But, so much industry here bit the dust, property taxes have shifted from the business to the residential sector. The assessment and rate hikes are hefty, and it's starting to cost us some serious money. Entrepreneurialism is the order of the day, especially after the head of the Fed just told us not to expect any payments from that great Washingtonian myth, Social Security. I'm just doing what I must to survive."

That afternoon, Mabel was in the plant field checking dimensions to ensure there was enough space available to convert Number 3 line into Acme's fourth manufacturing cell, a concept she championed to the highest levels in the organization. Her analysis showed that, in this particular instance, the production modifications exhibited a stunning positive net present value. This promises to be the most profitable changeover she's made. Mabel was feeling quite confident this project, like several of the others she handled, was going to be recognized as more than merely another program-of-the-month. Her reverie was cut short by a nasal, high-pitched drawling. "Mabel, I need to talk with you."

Recognizing that voice, Mabel cringed as she turned around to face Tom Fullery, Acme's assistant deputy plant manager in training, and cousin of Acme's CEO.

"Who, exactly, do you think you're working for these days?" Tom asked.

"I don't understand your question, Tom," Mabel said, somewhat edgily. "I work for Acme. I thought you would have realized that fact when you can plainly see my Acme badge, my Acme windbreaker, my Acme hard hat and my Acme notebook."

"I'm talking about you giving competitors our company secrets," Tom sneered. "We know what you're doing, Mabel."

"It's too late in the day to talk about it, Tom," Mabel said in the calmest tone of voice she could summon under the circumstances. "I was under the impression that what I did on my own time wasn't any of your business. And your accusation is totally unwarranted and, quite frankly, I find both it and you quite insulting."

"You know what I'm talking about," Tom replied, his high-pitched drawl starting to sound like chalk on a blackboard. "You're probably even using our telephones to run your side business. And all our other equipment as well."

"Tom, let me simplify things for you," she sighed hopelessly. "Even I can afford my own fax machine, paper, computer and software. Besides, what I do on my own time is really for Acme's benefit. I'm broadening my horizons. Look at it as continuing education, something that's already demonstrated a payoff for Acme. Just look around you, check the records. Talk to people who know."

"I already talked to people who count," Tom said with a sneering grin, as he handed her an envelope. "We couldn't wait for you to pick up your e-mail."

Mabel remained silent as she opened the envelope and read a memo that instructed her to report to the executive conference room before she went home to explain her off-hours activities. "It looks to me like you could stand to broaden your own horizons, sonny," Mabel replied as she walked toward the offices.

Is Mabel acting unethically by running a side business? Illegally? Should employers prohibit employees from running their own businesses?

An academician says:

This interesting problem crops up because many employment contracts don't cover the issue. Occasionally, one finds a "non-competition" or "confidentiality" clause in an employment contract, particularly for individuals with access to anything considered to be sensitive information.

These clauses usually specify that the employee can't reveal to anyone outside the company any information about the company, and can't do work for a competitor (or maybe anyone in the industry) while employed by the company. Sometimes the restriction is extended to three or five years after the individual's employment ends.

There also may be something in the employee handbook, often in very general language, that covers this problem. If you don't have such a clause in your company handbook, it might be worth putting one in. Better to be safe than sorry.

The issue is not whether Mabel is running a side business. She could be selling real estate on the side, which would be OK as long as it didn't interfere with her obligations to Acme and, as Tom suggested, if the side business didn't use Acme's time or resources.

The issue is whether her side business involves sharing her knowledge and expertise with competitors. That isn't ethical. If she's working for competitors, directly or indirectly, she is acting against Acme. I would see that as cause for her dismissal.

Would it be acceptable if Mabel consults for companies that have no relation to Acme's business? That question is a little trickier. Some companies would see this as permissible, as long as it didn't interfere with the person's obligations to the company. There are other companies that would insist on a total commitment to their cause and wouldn't permit any outside employment, period. Acme's managers will have to decide where they stand on this question and communicate this to Mabel and other employees.

Prof. Homer H. Johnson, Ph.D.

Loyola University Chicago

(312) 915-6682

[email protected]

An attorney says:

While Mabel's moniker isn't one of my favorite Scott Joplin tunes, I may well come down on her side of this issue, depending on other information we don't know at this point.

What Mabel is doing is perfectly ethical and legal provided the following are all true: (1) Acme has no policy that prohibits employees from "moonlighting" or moonlighting for competitors; (2) Mabel hasn't signed a non-compete agreement with Acme; (3) Mabel does no consulting work at Acme; (4) Mabel uses none of Acme's equipment or supplies and (5) she is neither using nor divulging Acme's trade secrets or other confidential information in this business.

The first issue is whether Acme has any policy that prohibits employees from "moonlighting," that is, having a second job, or moonlighting for a competitor. Many employers do have such policies. One type precludes an employee from moonlighting without the company's permission. Another variation prohibits employees from holding second jobs if they in any way interfere with the employee's primary job. Obviously, if Acme has a no-moonlighting policy, it has every right to be annoyed with Mabel for violating it.

Similarly, if Mabel has signed a non-compete agreement with Acme, Tom Fullery is justified in his criticism. While non-compete agreements normally are targeted at precluding an employee from working for a competitor after leaving the company, many also prohibit the employee from working for a competitor while employed by the company.

If Mabel is doing work for her own consulting clients while she is on the clock at Acme, she is guilty of the theft of time and deserves to be terminated. The principle is the same if she is using Acme's telephones, photocopy equipment, computers or any other company resources to operate her business.

The most critical issue for Acme well may be whether Mabel is using or disclosing proprietary information belonging to Acme while performing services for other companies. Trade secret information can be the lifeblood of a company -- the unique processes or improvements that distinguish it from the rest of the pack. While many employers require employees who are privy to sensitive information to sign an agreement promising to keep proprietary information confidential, trade secret information is protected by law in most states even if an employee hasn't signed an agreement to keep it confidential.

If Mabel clears all of these hurdles, she is absolutely correct that what she does on her own time is none of Acme's business.

Julie Badel, partner

Epstein Becker & Green P.C.

(312) 499-1418

[email protected]

A consultant says:

What Mabel does on her own time most certainly is Acme's business if the companies for whom she is consulting are indeed competitors. If they aren't competitors, Acme has no basis to object, as long as her moonlighting isn't interfering with her job performance.

As I read the case, however, Mabel's moonlighting doesn't seem to be the real problem. It's an easily resolved issue. Either she's working for competitors and must stop, or she isn't working for competitors and can continue. The larger issue is the extremely unprofessional way both Tom and Mabel communicated with one another. In both tone and content, they were condescending, sarcastic and disrespectful. Both of them should be ashamed of themselves for their adolescent behavior.

Francie Dalton

Dalton Alliances Inc.

(410) 715-0484

[email protected]

Our "in the Trenches" stories are created as a learning tool; the names of the companies and the people described within them are fictional.

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