Key Executive away from Amazon
Amazon has recently become one of the most important companies in the US. Given the growing popularity of e-commerce, especially in the midst of the Covid-19 pandemic, the company invests heavily in numerous technologies that can enhance its logistics. Moreover, the IT giant is concerned with the security of data in the new strategies it employs. Talents that provide ingenious solutions and a holistic vision of the situation in the market play an extremely important role in e-commerce that is no longer as lucrative as it used to be a decade ago. Amazon, for instance, is currently losing money in its retail part of the business. Therefore, the company desperately seeks to develop and sustain the most efficient frameworks for determining optimal supply chains.
Amazon’s Competitive Edge
Arthur Valdez, who spent more than 16 years working for Amazon solely on positions that are related to supply chains, has been recently hired by Target, an ambitious retailer seeking to improve its current logistics. Thus, a number of questions have been raised by Amazon, as the most significant US online retailer believes the core of its business can be undermined by allowing such types of contracts. In e-commerce, a single professional who masterminded arguably the most efficient and extensive network of supply chains can substantially change the chances of a company gaining extra market share. What is more, due to economies of scale, there are few successful nationwide online retailers. Thus, much is at stake when there is a risk of losing the competitive edge in supply chains.
IT giants are always concerned about their top managers and engineers, as they can easily change their workplace and apply all their valuable knowledge and expertise for a rival’s benefit. Therefore, such companies are determined to protect their successful technologies and strategies by a variety of means. Work contracts for top positions tend to include clauses that stipulate the importance of confidentiality. In many cases, employees are even expected to refrain from working for any potential rival company for a substantial period of time. The problem is that it is always hard to determine which new workplaces of former employees may prove to be dangerous.
Moreover, it is even harder for a company concerned about the fate of its business secrets to convince local courts of the importance of preventing such cooperation between former employees and rival companies. Various states have different approaches to the issue that can range from predominantly supporting confidentiality to encouraging any new types of cooperation. In the state of Washington, where Amazon is headquartered, the courts use a three-factor test to determine whether noncompete clauses are reasonable. The restraints should be necessary for the protection of the business or the goodwill of the employer and be truly necessary to secure various business secrets. Moreover, courts determine whether the degree of injury to the public due to the loss of the service and skill of the employee warrants nonenforcement.
Despite the fact that Amazon decided to settle with Valdez, the case actually met the three-factor test of the state of Washington. The amount of information that the manager acquired while working at Amazon can allow him to create a very similar net of supply chains for a direct rival. Nevertheless, it is unclear whether 18 months is a reasonable period for such restraints. Given the fact that Valdez had access to information about the new strategies that could substantially increase the profitability of an IT giant, courts could consider the period to be reasonable. The time interval of 18 months is just enough for Amazon to introduce all the planned innovations. Thus, the IT giant will secure a competitive edge with their help.
There are various ways to address the issue, as it is hard to determine the efficiency of noncompete agreements. Nevertheless, it is essential to remember that the ability and willingness of the US courts to secure intellectual property rights and patents have contributed enormously to the rapid economic growth of the country. Moreover, it stays one of the primary factors that make thousands of talented entrepreneurs move to the US and start tech companies here. According to Reynolds (2018), the World Intellectual Property Organization promotes the use of intellectual property as an important means to stimulate innovation and creativity. Therefore, the rights of the firm to secure the benefits of the heavy investment in research and development should not be undermined in any circumstances.
Despite the numerous issues that make a settlement agreement with Valdez a complicated undertaking, there are still certain points that can satisfy Amazon, Target, and Valdez. The period of 18 months may be shortened substantially in return for a number of clauses that Valdez can agree on. These may include a clear statement that prohibits him from copying a small number of projects on supply chains that Amazon considers to be instrumental in the implementation of its long-term development strategies.
Reynolds G. W. (2018). Ethics in information technology (6th ed). Cengage Learning.