As businesses increasingly turn to Big Data, cloud computing and digital infrastructure, CIOs immersed in proprietary projects may find themselves in the crosshairs of noncompete clauses, The Wall Street Journal reports.
Earlier this month, IBM sued its former CIO Jeff Smith for allegedly breaching his noncompete clause when he accepted a position at Amazon Web Services. IBM cited Smith’s familiarity with company product development plans as problematic given AWS’ position as a key cloud computing competitor.
A hearing on Monday will determine if Smith must wait until May 2018 to assume his new role and if he must return $1.7 million in IBM stock bonuses from his last year of employment.
In July, AWS found itself on the other end of a noncompete disagreement when it filed a suit against Gene Farrel, its former VP of AWS enterprise applications and Windows and head of the workplace tools division, for taking a position at Smartsheet.
Disputes over noncompete agreements tiptoe the line between companies' desires to protect intellectual property and foster a nontransient workplace and workers' desires for increased mobility and spillover between industries.
Noncompete clauses are complicated by the lack of consistent legal regulation among states. For example, California prohibits the use of noncompetes. But Idaho, in an effort to nurture its own tech workforce, tried the opposite approach and made it easier for employers to enforce noncompetes this July.
Although research has found one-third of all technology employees find themselves bound by noncompete contracts, the issue is especially poignant for high-valued employees deeply embedded in a company’s IT strategy and infrastructure. As noncompete litigation grows year over year, CIOs need to demonstrate caution as they negotiate entry and exit terms.