Ethical Issues in Employment Agreements Essay

Abstract

The paper aims to understand the ethical issues involved in the making o a fan employment contract of a company. The research is based on the study of the employment contract of various well-known companies. Then choosing one for the paper (in this case Convergys) and then identifying the ethically questionable clauses. The paper summarizes the general ethical concern which is found in employment contracts with other companies and their outcomes.

The employment contract

Employment contracts, once reserved for higher-level executives, have become a tool to be used in the case of all employees. The primary reason for such a shift is due to the emergence of a fast-moving service sector where intangible property and information are at the hands of the employees. Thus, in such an era of knowledge workers, it has become imperative for organizations to safeguard their intangible property against possible malpractice.

Ethical issues to be covered in employment contracts with employees have become a common practice that organizations today employ. Such practices have to be endorsed by both parties. But still, there are certain clauses in the employment agreement that raises certain ethical issues of concern, for instance, non-disclosure clause, termination clause, and intellectual property right et al. This paper tries to evaluate the employment agreement of Convergys Inc. and find possible ethical issues in the contract.

Before evaluating the employment contract it is important to understand the business of the company. Convergys is a multi-national corporation that provides relationship management solutions, outsourced customer and HR management solutions, consulting and professional services, billing services, and multichannel self-care technology solutions to its clients.

The employment contract (see Appendix A) covers almost all the areas and they can be summarized as follows:

• The name of the employee and the capacity in which he has been hired. The duties and responsibilities of his office have been given.
• The agreement has a date of termination i.e. five years from the date of the agreement.
• The working hours, compensation, and benefits have been clearly defined in the contract.
• It deals with confidentiality and invention-related issues wherein the policies have been clearly explained.
• The contract deals with employment termination of the employee voluntarily by the employee or by the employer with/without cause or on ‘good cause’.

The areas which have not been dealt with in the contract are as follows:

• § It is silent on the issue of a “Change of Control”
• § It does not state anything regarding what the employee can do with his/her own time, with his equipment.
• § Silent about monitoring of the employee’s work.

Certain ethical concerns that are raised through the clauses of the contract are:

• Confidential Information and Trade Secrets: most companies today have this clause and in legal terms, they are not against law. But on ethical grounds, they encroach upon the employees’ freedom of expression especially after the employee no longer works with the company.
• The clause of New Development (Appendix A, 8) mentioned in the contract states that all inventions or ideas conceived by the employee during the working tenure with the company will be a property of the company. This is without exception for the ideas conceived during non-office hours using the personal property. This is an ethical issue wherein the personal space of the employee is being constrained.
• Further after the termination of an employee’s job, he is bounded by the contract not to disclose confidential information regarding the company, employees, derivatives, customers, or vendors to a third person. This is a hindrance created to avoid whistle-blowing even if it is ethical.

The other ethical issues which find prominence in organizations, especially in the dot-com industry, are issues of surveillance and employee privacy. For instance, companies like Xerox, Dow Chemicals, and New York Times et al. have employed employee surveillance to monitoring the employees’ emails, telephone calls, etc. Dow Chemical fired fifty folks for exchanging dirty jokes via email. Xerox fired forty, and the New York Times twenty-three for the same kind of offenses. But the question that arises is whether such encroachment into an individual’s privacy not a violation of the Universal Declaration of Human Rights (Article 12). Further, nondisclosure of salary to any other employee in the company except for HR and the direct reporting boss again curbs the freedom of expression of the employee.

Conclusion

The question that arises is, are these clauses in the employment contract curbs the individual’s basic fundamental rights. To a certain extent, the answer is yes because the work environment today demands so.

References

Stim, R. , Fishman, S. (2001), Nondisclosure Agreements: Protect Your Trade Secrets and More. Nolo Publication.

Finch G. A. , (1999), Employment Contract Primer. Library of Law. Web.

Covansys Code of Conduct. Web.

Hoffman, I. , (2000), The Employment Agreement. Web.

Harris, L. , (2005), Achieving a Balance in Human Resourcing Between Employee Rights and are for the Individual, Business &Professional Ethics Journal, vol. 21, no. 2.

Appendix A

Convergys Inc.

Employment Agreement

This Agreement is made as of January 1, 1998 (the “Effective Date”) between MATRIXX Marketing Inc., an Ohio corporation (“Employer” or “MATRIXX”), and Ronald E. Schultz (“Employee”).

Employer and Employee agree as follows:

• EMPLOYMENT. By this Agreement, Employer and Employee set forth the terms of Employer’s employment of Employee on and after the Effective Date. Any prior agreements or understandings with respect to Employee’s employment by Employer are canceled as of the Effective Date, provided that the terms of the Non-Compete and Non-Disclosure Agreement attached to Employee’s employment letter from Employer dated October 5, 1995 shall continue in effect and shall not be superseded by this Agreement.
• PERIOD OF AGREEMENT. This Agreement begins on the Effective Date and, subject to the terms of Section 13, will end on the day preceding the fifth anniversary of the effective date.
• DUTIES.
  • Employee will serve as Chief Operating Officer of Employer or in such other equivalent capacity with Employer or an Affiliate as may be designated by the President of Employer. Employee will report to the President of Employer or such other officer as may be designated by the President of Employer. For purposes of this Agreement, “Affiliate” means each corporation which is a member of a controlled group of corporations (within the meaning of section 1563(a) of the Internal Revenue Code of 1986, as amended) which includes Employer.
  • Employee shall furnish such managerial, executive, financial, technical, and other skills, advice, and assistance in operating Employer and its Affiliates as Employer may request.
  • Employee shall also perform such other duties as are assigned to Employee by the officer to whom Employee reports.
  • Employee shall devote Employee’s entire time, attention, and energies to the business of Employer and its Affiliates. The words “entire time, attention, and energies” are intended to mean that Employee shall devote Employee’s full effort during reasonable working hours to the business of Employer and its Affiliates and shall devote at least 40 hours per week to the business of Employer and its Affiliates. Employee shall travel to such places as are necessary in the performance of Employee’s duties.
• COMPENSATION.
  • Employee shall receive a base salary (the “Base Salary”) of at least $225,000 per year, payable not less frequently than monthly, for each year during which services are performed under this Agreement, subject to proration for any partial year. Such Base Salary, and any other amounts payable hereunder, shall be subject to withholding as required by law.
  • In addition to the Base Salary, Employee shall be entitled to receive an annual bonus (the “Bonus”) for each calendar year for which services are performed under this Agreement. Any Bonus for a calendar year shall be payable after the conclusion of the calendar year in accordance with Employer’s regular bonus payment policies. Employee shall be given a Bonus target of not less than $100,000 for each year, subject to proration for a partial year.
  • On at least an annual basis, Employee shall receive a formal performance review and be considered for Base Salary and/or Bonus target increases.
• EXPENSES. All reasonable and necessary expenses incurred by Employee in the course of the performance of Employee’s duties to Employer shall be reimbursable in accordance with Employer’s then current travel and expense policies.
• BENEFITS.
  • While Employee remains in the employ of Employer, Employee shall be entitled to participate in all of the various employee benefit plans and programs in which Senior Vice Presidents of Employer are participating.
  • Notwithstanding anything contained herein to the contrary, the Base Salary and Bonuses otherwise payable to Employee shall be reduced by any benefits paid to Employee under any disability plan made available to Employee by Employer.
  • In each year of this Agreement, Employee will be granted stock options under Cincinnati Bell Inc. 1997 Long Term Incentive Plan or any similar plan made available to employees of Employer.
  • If Employee’s employment with Employer is terminated after the fifth anniversary of the Effective Date for any reason other than those set forth in Sections 13.A., B. and C., Employer shall pay Employee an amount equal to two times the sum of Employee’s annual Base Salary rate in effect on the date of termination plus Employee’s Bonus target in effect on the date of termination.
  • If Employee remains in the employ of Employer through October 1, 1998, Employee shall receive a restricted stock award of 13,500 common shares of Cincinnati Bell Inc. (“CBI”). Such award shall be made under the CBI 1997 Long Term Incentive Plan on the terms set forth in Attachment A.
• CONFIDENTIALITY. Employer and its Affiliates are engaged in the telecommunications services, information services, and telecommunications support services industries within the U.S. and world wide. Employee acknowledges that in the course of employment with the Employer, Employee will be entrusted with or obtain access to information proprietary to the Employer and its Affiliates with respect to the following (all of which information is referred to hereinafter collectively as the “Information”); the organization and management of Employer and its Affiliates; the names, addresses, buying habits, and other special information regarding past, present and potential customers, employees and suppliers of Employer and its Affiliates; customer and supplier contracts and transactions or price lists of Employer, its Affiliates and their suppliers; products, services, programs and processes sold, licensed or developed by the Employer or its Affiliates; technical data, plans and specifications, present and/or future development projects of Employer and its Affiliates; financial and/or marketing data respecting the conduct of the present or future phases of business of Employer and its Affiliates; computer programs, systems and/or software; ideas, inventions, trademarks, business information, know-how, processes, improvements, designs, redesigns, discoveries and developments of Employer and its Affiliates; and other information considered confidential by any of the Employer, its Affiliates or customers or suppliers of Employer, its Affiliates. Employee agrees to retain the Information in absolute confidence and not to disclose the Information to any person or organization except as required in the performance of Employee’s duties for Employer, without the express written consent of Employer.
• NEW DEVELOPMENTS. All ideas, inventions, discoveries, concepts, trademarks, or other developments or improvements, whether patentable or not, conceived by the Employee, alone or with others, at any time during the term of Employee’s employment, whether or not during working hours or on Employer’s premises, which are within the scope of or related to the business operations of Employer or its Affiliates or that relate to Employer or Affiliates’ work or project, present, past or contemplated (“New Developments”), shall be and remain the exclusive property of Employer. Employee shall do all things reasonably necessary to ensure ownership of New Developments by Employer, including the execution of documents assigning and transferring to Employer, all of Employee’s rights, title and interest in and to all New Developments, and the execution of all documents required to enable Employer to file and obtain patents, trademarks, and copyrights in the United States and foreign countries on any of all New Developments.
• SURRENDER OF MATERIAL UPON TERMINATION. Employee hereby agrees that upon cessation of Employee’s employment, for whatever reason and whether voluntary or involuntary, Employee will immediately surrender to Employer all of the property and other things of value in Employee’s possession or in the possession of any person or entity under Employee’s control that are the property of Employer or any of its Affiliates, including without any limitation all personal notes, drawings, manuals, documents, photographs, or the like, including copies and derivatives thereof, relating directly or indirectly to any confidential information or materials or New Developments, or relating directly or indirectly to the business of Employer or any of its Affiliates.
• REMEDIES.
  • EMPLOYER’S REMEDIES. Employer and Employee hereby acknowledge and agree that the services rendered by Employee to Employer, the information disclosed to Employee during and by virtue of Employee’s employment, and Employee’s commitments and obligations to Employer and its Affiliates herein are of a special, unique and extraordinary character, and that the breach of any provision of this Agreement by Employee will cause Employer irreparable injury and damage, and consequently Employer shall be entitled to, in addition to all other remedies available to it, injunctive and equitable relief to prevent a breach of this Agreement, or any part of it, and to secure the enforcement of this Agreement.
  • EMPLOYEE’S REMEDIES. Employee agrees to submit to final and binding arbitration any dispute, claim or controversy, whether for breach of this Agreement or for violation of any of Employee’s statutorily created or protected rights, arising between the parties that Employee would have been otherwise entitled to file or pursue in court or before any administrative agency (“Claim”), and Employee waives all right to sue Employer, its Affiliates, and all of their agents, employees, officers and directors.
    • This agreement to arbitrate and any resulting arbitration award are enforceable under and subject to the Federal Arbitration Act, 9 U.S.C. Section 1 ET SEQ. (“FAA”). If the FAA is held not to apply for any reason, then Ohio Revised Code Chapter 2711 regarding the enforceability of arbitration agreements and awards will govern this Agreement and the arbitration award.
    • All of Employee’s Claims must be presented at a single arbitration hearing under this Agreement. Any Claim not raised at the arbitration hearing is waived and released. The arbitration hearing will take place in Cincinnati, Ohio.
    • The arbitration process will be governed by the Employment Dispute Resolution Rules of the American Arbitration Association (“AAA”) except to the extent they are modified by this Agreement.
    • Employee has had an opportunity to review the AAA rules and the requirements that Employee must pay a filing fee which Employer has agreed to split on an equal basis.
    • The arbitrator will be selected from a panel of arbitrators chosen by the AAA in White Plains, New York. After the filing of a Request for Arbitration, the AAA will send simultaneously to Employer and Employee an identical list of names of five persons chosen from the panel. Each party will have 10 days from the transmittal date in which to strike up to two names, number the remaining names in order of preference and return the list to the AAA.
    • Any pre-hearing disputes will be presented to the arbitrator for expeditious, final and binding resolution.
    • The award of the arbitrator will be in writing and will set forth each issue considered and the arbitrator’s finding of fact and conclusions of law as to each such issue.
    • The remedy and relief that may be granted by the arbitrator are limited to lost wages, benefits, cease and desist and affirmative relief, compensatory, liquidated and punitive damages and reasonable attorney’s fees, and will not include reinstatement or promotion. If the arbitrator would have awarded reinstatement or promotion, but for the prohibition in this Agreement, the arbitrator may award front pay. Compensatory, liquidated and punitive damages for breach of this Agreement, if awarded, may not exceed the greater of the amount provided in case of a termination under Section 13.D, and the maximum amount otherwise payable under the applicable terms of this Agreement. Compensatory, liquidated and punitive damages, for a dispute, claim or controversy other than for breach of this Agreement, if awarded, are limited to a combined total of one year’s salary. The arbitrator may assess to either party, or split, the arbitrator’s fee and expenses and the cost of the transcript, if any, in accordance with the arbitrator’s determination of the merits of each party’s position, but each party will bear any cost for its witnesses and proof.
    • Employer and Employee recognize that a primary benefit each derives from entering this Agreement is avoiding the delay and costs normally associated with litigation. Therefore, neither party will be entitled to conduct any discovery prior to the arbitration hearing except that:
      • Employer will furnish Employee with copies of all non-privileged documents in Employee’s personnel file;
      • if the claim is for discharge, Employee will furnish Employer with records of earnings and benefits relating to Employee’s subsequent employment (including self-employment) and all documents relating to Employee’s efforts to obtain subsequent employment;
      • the parties will exchange copies of all documents they intend to introduce as evidence at the arbitration hearing at least 10 days prior to such hearing;
      • Employee will be allowed (at Employee’s expense) to take the depositions, for a period not to exceed four hours each, of two representatives of Employer, and Employer will be allowed (at its expense) to depose Employee for a period not to exceed four hours; and
      • Employer or Employee may ask the arbitrator to grant additional discovery to the extent permitted by AAA rules upon a showing that such discovery is necessary.
    • Nothing herein will prevent either party from taking the deposition of any witness where the sole purpose for taking the deposition is to use the deposition in lieu of the witness testifying at the hearing and the witness is, in good faith, unavailable to testify in person at the hearing due to poor health, residency and employment more that 50 miles from the hearing site, conflicting travel plans or other comparable reason.
    • Arbitration must be requested in writing no later than six months from the date of Employee’s knowledge of the matter disputed by the claim. Employee’s failure to initiate arbitration under this Agreement within the time limits herein will be considered a waiver and release by Employee with respect to any claim subject to arbitration under this Agreement.
    • Employer and Employee consent that judgment upon the arbitration award may be entered in any federal or state court that has jurisdiction.
    • Employee will not commence or pursue any litigation on any claim that is or was subject to arbitration under this Agreement.
    • All aspects of any arbitration procedure under this Agreement, including the hearing and the record of the proceedings, are confidential and will not be open to the public, except to the extent the parties agree otherwise in writing, or as may be appropriate in any subsequent proceedings between the parties, or as may otherwise be appropriate in response to a governmental agency or legal process.
• COVENANT NOT TO COMPETE. For purposes of this Section 11 only, the term “Employer” shall mean, collectively, Employer and each of its Affiliates. During the two-year period following termination of Employee’s employment with Employer for any reason (or if this period is unenforceable by law, then for such period as shall be enforceable) Employee will not engage in any business offering services related to the current business of Employer, whether as a principal, partner, joint venturer, agent, employee, salesman, consultant, director or officer, where such position would involve Employee in any business activity in competition with Employer. This restriction will be limited to thegeogr aphical area where Employer is then engaged in such competing business activity or to such other geographical area as a court shall find reasonably necessary to protect the goodwill and business of Employer. During the two-year period following termination of Employee’s employment with Employer for any reason (or if this period is unenforceable by law, then for such period as shall be enforceable) Employee will not interfere with or adversely affect, either directly or indirectly, Employer’s relationships with any person, firm, association, corporation or other entity which is known by Employee to be, or is included on any listing to which Employee had access during the course of employment as a customer, client, supplier, consultant or employee of Employer and that Employee will not divert or change, or attempt to divert or change, any such relationship to the detriment of Employer or to the benefit of any other person, firm, association, corporation or other entity. During the two-year period following termination of Employee’s employment with Employer for any reason (or if this period is unenforceable by law, then for such period as shall be enforceable) Employee shall not, without the prior written consent of Employer, accept employment, as an employee, consultant, or otherwise, with any company or entity which is a customer or supplier of Employer at any time during the final year of Employee’s employment with Employer. Employee will not, during or at any time after the termination of Employee’s employment with Employer, induce or seek to induce, any other employee of Employer to terminate his or her employment relationship with Employer.
• GOODWILL. Employee will not disparage or act in any manner, directly or indirectly, which may damage the business of Employer or any of its Affiliates or which would adversely affect the goodwill, reputation, and business relationships of Employer or any of its Affiliates with the public generally, or with any of their customers, suppliers or employees.
• TERMINATION.
  • Employer or Employee may terminate this Agreement upon Employee’s failure or inability to perform the services required hereunder because of any physical or mental infirmity for which Employee receives disability benefits under any disability benefit plans made available to Employee by Employer (the “Disability Plans”), over a period of one hundred twenty consecutive working days during any twelve consecutive month period (a “Terminating Disability”).
    • If Employer or Employee elects to terminate this Agreement in the event of a Terminating Disability, such termination shall be effective immediately upon the giving of written notice by the terminating party to the other.
    • Upon termination of this Agreement on account of a Terminating Disability, Employer shall pay Employee Employee’s accrued compensation hereunder, whether Base Salary or otherwise (subject to offset for any amounts received pursuant to the Disability Plans), to the date of termination. For as long as such Terminating Disability may exist, Employee shall continue to be an employee of Employer for all other purposes and Employer shall provide Employee with disability benefits and all other benefits according to the provisions of the Disability Plans and any other Employer plans in which Employee is then participating.
    • If the parties elect not to terminate this Agreement upon an event of a Terminating Disability and Employee returns to active employment with Employer prior to such a termination, or if such disability exists for less than one hundred twenty consecutive working days, the provisions of this Agreement shall remain in full force and effect.
  • This Agreement terminates immediately and automatically on the death of the Employee, provided, however, that the Employee’s estate shall be paid Employee’s accrued compensation hereunder, whether Base Salary or otherwise, to the date of death.
  • Employer may terminate this Agreement immediately for Cause. For purposes of this Agreement, Employer shall have Cause to terminate this Agreement only if Employer’s Board of Directors determines that there has been fraud, misappropriation or embezzlement on the part of Employee.
  • Employer may terminate this Agreement, upon written notice to Employee, for any reason other than those set forth in Sections 13.A., B., and C. In the event of a termination under this Section 13.D., Employer shall pay Employee two times the sum of Employee’s annual Base Salary rate as it exists on the date of termination plus Employee’s Bonus target in effect on the date of termination. Employee also shall be entitled to receive any Base Salary earned through the date of termination and any unpaid Bonus earned prior to the year in which the date of termination occurs. In addition,
    • Employee shall be afforded the opportunity to exercise, on the date of termination, any stock options which are otherwise exercisable on the date of termination and
    • if termination occurs after October 1, 1998, in accordance with the terms set forth in Attachment A, the restrictions applicable to a prorata portion of the restricted stock award under Section 6.E. shall lapse.
  • Upon termination of this Agreement as a result of an event of termination described in this Section 13 and except for Employer’s payment of the required payments under this Section 13, all further compensation under this Agreement shall terminate.
  • The termination of this Agreement shall not amend, alter or modify the rights and obligations of the parties under Sections 6.D, 7, 8, 9, 10, 11, and 12 hereof, the terms of which shall survive the termination of this Agreement.
• ASSIGNMENT. As this is an agreement for personal services involving a relation of confidence and a trust between Employer and Employee, all rights and duties of Employee arising under this Agreement, and the Agreement itself, are non-assignable by Employee.
• NOTICES. Any notice required or permitted to be given under this Agreement shall be sufficient, if in writing, and if delivered personally or by certified mail to Employee at Employee’s place of residence as then recorded on the books of Employer or to Employer at its principal office.
• WAIVER. No waiver or modification of this Agreement or the terms contained herein shall be valid unless in writing and duly executed by the party to be charged therewith. The waiver by any party hereto of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such party.
• GOVERNING LAW. This Agreement shall be governed by the laws of the State of Ohio without giving effect to any conflict of law provisions. Employee agrees to submit to the exclusive, personal jurisdiction and venue of state and federal courts of the State of Ohio.
• ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties with respect to Employee’s employment by Employer. There are no other contracts, agreements or understandings, whether oral or written, existing between them except as contained or referred to in this Agreement.
• SEVERABILITY. In case any one or more of the provisions of this Agreement is held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or other enforceability shall not affect any other provisions hereof, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions have never been contained herein.
• SUCCESSORS AND ASSIGNS. Subject to the requirements of Paragraph 14 above, this Agreement shall be binding upon Employee, Employer and Employer’s successors and assigns.
• CONFIDENTIALITY OF AGREEMENT TERMS. The terms of this Agreement shall be held in strict confidence by Employee and shall not be disclosed by Employee to anyone other than Employee’s spouse, Employee’s legal counsel, and Employee’s other advisors. Further, except as provided in the preceding sentence, Employee shall not reveal the existence of this Agreement or discuss its terms with any person (including but not limited to any employee of Employer or its Affiliates) without the express authorization of the President of Employer.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

MATRIXX MARKETING INC.

By: ———————————–

David F. Dougherty

EMPLOYEE

By: ———————————–

Ronald E. Schultz.