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Employment Contracts Meet Technological Innovation

Monday, 4 February 2013

The need for employment contracts to meet technological innovation is something that any modern employment lawyer will be familiar with. Although the contract of employment can contain a variety of protections for employers such as confidentiality clauses and restrictive covenants, businesses should always be prepared to expect the unexpected.

Recent news that a US software developer outsourced his job to China so that he could spend his days surfing the internet has highlighted the potential risks posed by technological innovation.

Technological Innovation

With high speed internet connections now widely available, the possibilities for more flexible working arrangements are endless. Business should remain cautious though; unsupervised working arrangements require a significant degree of trust which even the most rigorous employment contracts cannot foster. When trust is broken a contract may offer only limited scope for repairing the damage.

Employee Outsources Job

The recent case of a US software developer outsourcing his job to China may have raised a few alarm bells for employers. A software programmer at a US infrastructure company used his VPN access (Virtual Private Network) to enable programmers in China to do his job for him. He then paid the Chinese contractors around $50,000 for the work, a fraction of his six figure income.

The activity was discovered by Verizon which was tasked by the employer with reviewing a potential security breach – an open connection to the employee’s VPN was discovered in Shenyang, China. The employee had granted the Chinese contractors access by FedExing his security authentication to China.

Employment Law Implications

Although much has been made of the employee’s entrepreneurial nous and the praise he received from the HR department for ‘his’ work, he was rightly dismissed. The case was centred in the US and subject to US employment law but it highlights a number of employment law issues.

The deliberate breach of security would almost certainly have been contrary to the terms of his employment contract. He would also have breached a number of general duties owed to an employer including: the duty of care, the duty of fidelity and confidentiality and the duty to provide personal service.

It is likely that he would have breached several explicit clauses too. If the employee carried out other work instead of the job he was employed to do (reportedly he had replicated the scam at a number of companies at the same time) then he would have been in breach of any exclusivity clauses that his contract might have contained, for example.


No matter the quality of the work done in this case and the ‘efficiency’ savings that the employee made, his actions cannot be justified. Employers that outsource work normally follow strict guidelines and due diligence procedures before entering into appropriate contractual arrangements with outsourcers. An employee acting in their own interests by sub-contracting to sources unknown to the company could have potentially been very damaging.

If you need help ensuring that your employment contracts meet technological innovation, Rollingsons has experienced lawyers who can advise you. Please contact Aneil Balgobin via e-mail or by telephone on 0207 611 4848.

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