Is it legal (and/or ethical) to run a side business in a similar area as your employer company?

September 15, 2006 11:18 AM

Is it legal (and/or ethical) to run a side business in a similar area as your employer company?

I work at a big cell phone manufacturer, as a software engineer responsible for technical support and consultancy for developers using our platform.

However, I have some personal projects, mainly related to web and mobile software, that I would like to turn into a part-time business.

It is similar to the same area where I work at the big company, but I would be doing in my side business is what big company's customers do with my support.

Is it legal and/or ethical? Please let me hear your thoughts.

posted by anonymous to work & money (13 answers total)

Did you sign a non-compete clause?
posted by The corpse in the library at 11:27 AM on September 15, 2006

Did you sign an employment agreement? You might want to take a look at that. You likely agreed to confidentiality, agreed to assign your inventions and copyrights and perhaps agreed not to compete for some period of time after your employment ends. If the area is the same as what you do at work they will likely lay claim to any patents and perhaps to software copyrights. If they find out about it they might just fire you.
posted by caddis at 11:28 AM on September 15, 2006

I know NOTHING about law, but I think the legality of it would be subject to the terms of your employment. Many employers are required to sign for an employee handbook which indicates a "no compete" clause during your employment and for a certain period of time after your employment with the company is terminated.

As far as ethical - are you stealing your company's customers? If you use your inside knowledge with your company to gain access to their customer list and then go after those customers, that would spell a lot of trouble.

In general, I don't think it's a good idea. If you're not going to be directly competing with your employers, taking any business away from them or using any of the knowledge you gained because of the job to support your side business, you might want to talk to your boss or HR to get their ideas about it.
posted by lynda at 11:31 AM on September 15, 2006

Does it compete with a product from your employer?

Do you do anything for it on company time, including thinking about your own products?

Is it inspired by or related in any way to your employers business or your job role?

If you can answer "yes", or even "maybe" to any of these questions you probably need to talk to a lawyer or have one handy.

posted by blue_beetle at 11:37 AM on September 15, 2006

Did you sign a non-compete clause (ditto) and a bonus question, would your customers be potential clients of your employer in your absence?

The way I see it (and a judge may disagree), lets say your company only works with Fortune 500 customers, and you do similar services for companies that have fewer than 20 employees. I don't think that's "competition".

On the other hand, sniping potential clients of your boss is both unethical, possibly illegal, and definately bad karma.
posted by ilsa at 11:38 AM on September 15, 2006

Hi,

I don't have a "no-compete" agreement, but I do have a confidentiality agreement claiming IPRs and stuff.

However, I would not be competing with my current company, because my side business would most likely be targeted to end users (software for web and mobile phones), and my company's main business is to sell phones.

I could be competing with our current customers though, because they are in the business of writing software for big company's platforms and so would I!
posted by dcrocha at 11:45 AM on September 15, 2006

And now you are not anonymous, anymore.

If you could be competing with your current employer's customers, it could be a problem to your employer. But if it is totally outside your company's business lines, they might not have a problem. Especially given that you've signed a confidentiality agreement, I would suggest running it by them and getting a signoff. That way, there's no need for you hide what you're doing, and no potential nasty surprise in the future.
posted by beagle at 12:22 PM on September 15, 2006

The light of day test. Would you be comfortable if your company knew? I say give them full disclosure and proceed. You could offer to sell the product or service to them first and if they turn it down do it yourself.
posted by JohnnyGunn at 12:23 PM on September 15, 2006

IANAL.

Even if you don't have a non-compete agreement, if your side business is in direct competition with your employer, I would expect they'd fire you if there's any way they can get away with it (e.g. if your employment is "at will"). Employing the competition doesn't make good business sense.

If it's not in direct competition, it should be possible in a perfect world. Determining whether the this is the case your situation depends on a variety of things which we don't know. When setting up a new business, it is a good idea to have a consult with a lawyer and/or an accountant in any case (and many of them will do an initial consultation for free -- but it's worth paying for if that's not the case for yours). This is just one of the questions to ask the lawyer (bring your employment contract).
posted by winston at 12:28 PM on September 15, 2006

Speaking as a retired engineer, my opinion is that irrespective of whether what you're doing is actionable, I think it is totally unethical.
posted by Steven C. Den Beste at 12:42 PM on September 15, 2006

The standard of loyalty required by law to a current employer is high. If you were to damage your employer's reputation, good will or business prospects by your actions, there is a strong likelihood that your employer could initiate a number of actions in court against you and you would lose and be held responsible for damages. If you were to leave your job and set up business that exploited knowledge that was only available through the course of your employment and the actions damaged your employers' business, you could also be liable for damages.

You should not rely on anything I or anyone has said above. You should discuss it thoroughly with a qualified lawyer.
posted by zaebiz at 12:43 PM on September 15, 2006

I think it is clearly unethical unless you do it with full disclosure to your company and with their approval. I'm trying not to carp about the use of "legal" which would normally imply criminal conduct. There are a variety of ways that this could end up being actionable by your employer involving your employment agreement and the laws of your state. They would be mitigated by obtaining your employer's approval. If you think they wouldn't approve, I wouldn't do it. If I did, I'd talk to a good lawyer in your area first.
posted by Lame_username at 1:09 PM on September 15, 2006

My employer works in web and mobile, and all the contracts (AFAIK) have non-compete and IPR agreements in them. It seems to be the kind of due-dilligence boilerplate that investor types like to see.

But despite that almost every employee has an exemption signed by the MD, and we've all got side projects of one type or another. My advice: talk to your employer; every one I've worked for has been fine with agreeing to exemptions, even when I was in a quite similar space (although I should say you're in a stronger negotiating position when you first sign up, and smaller companies are more flexible, IMO).
posted by Leon at 3:25 PM on September 15, 2006 [1 favorite]