Paper on DCS Sanitation Management V. Eloy Castillo Case Analysis

Legal Implications

Noncompete agreements were mainly established to protect the employer from unfair competition from their workers. This agreement primarily prohibits former workers from soliciting the customers of a company they worked for within a stipulated period.  However, this contract may be rendered invalid if it is overbroad depending on the state law it is being applied. Primarily, these contracts are made on the ground that when an employee is fired from a firm or quits, he or she may resolve to work for one of its competitors or even start a company, and he or she may have a slight advantage over the former company. Most employers fear that this slight advantage could be derived from the information and experience that the employee gained when working for their organizations.

Confidential data such as the trade secret of the company and operations need to be protected, and the noncompete contract is one way for an enterprise to do so. For noncompete agreement, the legal implications may include fines and prohibiting the employee from contacting any client. However, these implications should not prohibit the employer from exploiting their skills.

In DCS Sanitation Management vs. Eloy Castillo Case, the three appellant decided to repeal the decision of the Ohio court by arguing Nebraska’s noncompete laws should have been applied. In Ohio law, courts have the discretion of the court of making unreasonable cases reasonable. As a result, the court mainly considered factors which showed that the workers took advantage of their expertise to solicit customers of their former company. Firstly, the judge established the employees’ likelihood of sharing some of the trade secrets because they had experience in the chemicals mixing ratios.  Secondly, the court found that these former employees had assisted another organization in soliciting the former company’s clients.  Lastly, the court concluded that the noncompete was enforceable even though the agreement was overbroad. However, following their appeal, the Nebraska court decided that the state law was applicable since the parties were subject to the law of that state.

According to this state’s law, the noncompete contract was mainly created to protect the employer from unfair competition, and since a tendering process was used, the court concluded that the competition was fair. More so, the court determined that the contract provisions were enforceable and overbroad mainly because no existing relationship between former client and employer was found. Hence, the court concluded that noncompete agreement was enforceable and overbroad.  In this case, the court decisions, the factors that were considered included the place of contacting, location of the matter in contention, domicile resident, place of incorporation, nationality and place of business of the involved parties.

The Ohioan and Nebraska’s law regarding noncompete agreement was different. This is because, in Nebraska states,   the courts have no jurisdiction of amending unreasonable noncompete agreements and make them reasonable and enforceable. However, in Ohio states, the court had the right of changing overbroad and unreasonable agreement for the noncompete to be reasonable. According to this case study, Nebraska court Nebraska rejected the Ohio district court decision since it was directly violating the Nebraska law.

Ethical Reasoning

Nebraska’s court decision was ethical because it upheld the judicial precedence and it protected the employees from exploitation from their former employer. The materiality criterion is essential when determining which states laws are applicable in a given situation. In this case, the condition affected Nebraska since both the aggrieved parties were its residents; hence it was ethical applying Nebraska’s law instead of Ohio law.  Thus, the court of Ohio acted unethically because it undermined Nebraska’s noncompete laws jurisdiction.

Mainly, the court of Ohio was unethical because it helped DCS Sanitation in exploiting its former worker. For example, it issued an injunction to the current employer not to continue working. As a result, the employees and the investors could have lost a significant amount of money. Similarly, it decided to reemploy them for them to be rewarded the tender. Indeed, the Ohioan court judgment was not ethical since it gave the former employer unfair competitive advantage.

The decision can be seen as unethical because it restricted the former employees from utilizing their skills to earn a living because it was against the noncompete agreement. The appellant had no working relationship with the client when they were still working at the DSC Sanitation, which suggests shows that they were awarded tender due to merit and this was fair. Consequently, the decision by Nebraska’s court was ethical moral because it promoted investment and increase employment opportunities. Lastly, fostering competition will enhance consumer’s welfare translating to lower prices of commodities and services and improving the quality of life.