This is the May 2021 edition of our monthly series of Ethics case studies titled What Do You Think? This series is comprised of case studies from NSPE archives, involving both real and hypothetical matters submitted by engineers, public officials and members of the public.
Your peers and the NSPE Board of Ethical Review have reviewed the facts of the case as shown below. And, here are the results.
Your opinion has been registered for the May 2021 edition of our monthly series of Ethics case studies titled What Do You Think?
Your vote is recorded as:
Want to know how your peers voted? We’ll send you an email with the poll results on May 25.
Your opinion has been registered for the May 2021 edition of our monthly series of Ethics case studies titled What Do You Think?
Your vote is recorded as:
Want to know how your peers voted? We’ll send you an email with the poll results on May 25.
A Review of the Facts
Scott currently works for ABC Engineering Company. Scott has a very good working relationship with a major client, Clover City, which is a neighboring city. ABC is currently under contract with Clover City for the preparation of a report on an expansion of the city’s water treatment plant. As an employee of ABC, Scott develops the report by which the city will get funding for the water treatment plant expansion. The report includes a section for the funding of an elevated storage tank. Those aspects of the report that deal with the elevated storage tank are not part of the scope of work originally negotiated between ABC and Clover City, and no contract exists between the city and ABC for the design of the elevated storage tank. Clover City is impressed by Scott’s initiative on this project. The city has paid ABC for this report.
Recently, officials in Clover City have suggested that Scott open his own engineering company in Clover City. The city indicates that it would consider a city retainer contract and also a contract for the design of the elevated storage tank.
Six months later, Scott decides to establish his own firm in Clover City without soliciting work from ABC’s clients, including Clover City, for a period of time. However, after a year has passed, Scott begins soliciting work from ABC’s clients, including Clover City. There was no “no-compete agreement” between Scott and ABC Engineering Company.
Was it ethical for Scott to establish his own firm in Clover City and begin soliciting work from ABC’s clients, including Clover City after a year had passed?
Here is the result of our survey of your peers:
Applicable NSPE Code References:
Code II.4: Engineers shall act for each employer or client as faithful agents or trustees.
Code III.4: Engineers shall not disclose, without consent, confidential information concerning the business affairs or technical processes of any present or former client or employer, or public body on which they serve.
Code III.4.a: Engineers shall not, without the consent of all interested parties, promote or arrange for new employment or practice in connection with a specific project for which the Engineer has gained particular and specialized knowledge.
Code III.4.b: Engineers shall not, without the consent of all interested parties, participate in or represent an adversary interest in connection with a specific project or proceeding in which the Engineer has gained particular specialized knowledge on behalf of a former client or employer
Discussion
It is not unusual for engineers employed by others, at some point, to break off from their employer and go into business for themselves. This is a fundamental principle of this nation’s free enterprise system and generally should not be discouraged. As a general matter, this practice raises no ethical issues for the BER’s consideration.
However, the Code does address some issues that could arise in this context and provides ethical guidance, where the engineer considers this business option. The Code addresses the use of confidential information concerning the technical affairs or processes of the former employer, promotional activities and negotiations for employment or business, and the involvement of the engineer in adversarial situations relating to the former employer. (See Code III.4, Code III.4.a., Code III.4.b.).
The Board has previously addressed similar cases. In Case No. 86-5, a city requested proposals from various consulting engineers for a major job that was planned. Engineer A, a principal in a large engineering firm in the city, decided to have his firm submit a proposal. Engineer A asked three engineers on his staff, Engineers X, Y, and Z, to develop the proposal for the firm. Engineers X, Y, and Z developed the proposal, which was ultimately submitted to the city. Soon thereafter, the city learned that Engineers X, Y, and Z are the engineers who actually developed the proposal, for the firm and a city official approaches Engineers X, Y, and Z and asks if they would agree to a contract as consultants, independent of Engineer A’s firm. Engineers X, Y, and Z disclose the facts to Engineer A, resign from the firm, and enter into negotiations with the city. The Board concluded that a strict interpretation of the Code under the facts of this case led to the conclusion that it would be ethical for Engineers X, Y, and Z to agree to a contract for consulting services independent of Engineer A’s firm.
In reaching its conclusion in Case No. 86-5, the Board reviewed two earlier BER cases, Nos. 77-11 and 79-10. In Case No. 77-11, the Board found that four engineers who left the employ of a firm founded a new firm and contacted the clients of the former firm were not in violation of the NSPE Code for doing so. However, the Board did determine in Case No. 77-11 that the four engineers did violate the NSPE Code with regard to projects for which they had gained specialized knowledge while in the employ of the firm.
In Case No. 79-10, the Board determined that an engineer employed by a firm that was winding down its operations, who sought to offer his services to complete projects under his own responsibility and risk without the concurrence of the principal of his employing firm, was ethical. In reviewing each case, the Board noted the need to balance (1) the interests of the client in retaining the firm of its choice; (2) the interests of the individually employed engineers; and (3) the interests of the firm and its interest in maintaining business goodwill with its clients. No one can deny that a client has a right to retain the engineering firm of its choice. What must be addressed, however, is a method to the effect that right in a manner that is both fair and equitable to all of the concerned parties.
Turning to the specific facts of this case and balancing the interests of all parties involved in this matter, the Board believes that Scott’s actions and conduct were ethical. The Board can find no general ethical proscription limiting Scott’s decision to establish an engineering firm. Regarding Scott’s solicitation of business, the interests of the client mandate BER concern. It is clear that the client, Clover City, is favorably disposed towards establishing a contractual relationship with Scott. Although Clover City was a major client of ABC, under the facts, it appears that ABC’s business with Clover City was related strictly to the presence of Scott in the firm. There does not appear to be any indication that Clover City’s interest in ABC’s services goes beyond the services provided by Scott.
Moreover, unlike Case No. 77-11, it does not appear that Scott has obtained any particular specialized knowledge as an employee of ABC that would restrict his ability to establish his own firm and eventually compete with ABC. There was no formal written agreement between Scott and ABC that would address the issue of whether and under what terms Scott could compete with ABC after departing from ABC. In fact, Scott still declined an apparent offer of work by Clover City, decided not to compete directly with his former employer, ABC, and waited for a period of over a year before deciding to go into competition with his former employer, ABC.
We believe Scott’s conduct is appropriate and within the bounds of what would be considered reasonable, particularly since Scott was an employee of ABC and not a partner or principal of the firm. While Clover City may have expressed preliminary interest in Scott’s future services, there was no formal agreement between Scott and the city and no guarantee that with the passage of the year, Scott’s solicitations for work would be positively received by Clover City.
This case does not appear to be dramatically different than Case No. 86-5 in that a client with a relationship with an engineering firm has sought out personnel within that firm to perform services for the benefit of the client. However, there appears to be one difference. In Case No. 86-5, the three engineers disclosed the fact that the client was interested in their services to their employer before resigning, while in the present case, there is no disclosure between Scott and ABC. However, weighing all factors, the Board does not consider this to be particularly significant because (1) the engineers in Case No. 86-5 provided disclosure and did not seek consent or concurrence and (2) in the present case, Scott’s decision to depart from ABC and establish his own firm clearly appears to be motivated by factors independent from any relationship that Scott might be developing with Clover City.
The Ethical Review Board’s Conclusion
It was ethical for Scott to establish his own firm in Clover City and begin soliciting work from ABC’s clients, including Clover City, after a year had passed.
BOARD OF ETHICAL REVIEW
James G. Fuller, P.E.; William E. Norris, P.E.; Paul E. Pritzker, P.E.; Richard Simberg, P.E.; Jimmy H. Smith, P.E., Ph.D.; C. Allen Wortley, P.E.; Donald L. Hiatte, P.E., Chairman
Note – In regard to the question of application of the Code to corporations vis-a-vis real persons, business form or type should not negate nor influence conformance of individuals to the Code. The Code deals with professional services, which services must be performed by real persons. Real persons in turn establish and implement policies within business structures. The Code is clearly written to apply to the Engineer and it is incumbent on a member of NSPE to endeavor to live up to its provisions. This applies to all pertinent sections of the Code. This opinion is based on data submitted to the Board of Ethical Review and does not necessarily represent all of the pertinent facts when applied to a specific case. This opinion is for educational purposes only and should not be construed as expressing any opinion on the ethics of specific individuals. This opinion may be reprinted without further permission, provided that this statement is included before or after the text of the case.
It seems that the engineer didn’t really even need to wait the year that he waited to solicit work from ABCs clients, from the example of the case studies given. Agree?
Consider for a moment if this situation was indeed unethical…
Then nearly every firm that offers services and which was created by former employees of some other firm would be unethical by their mere existence. Pursuit of ethical purity would result in the dissolution of nearly every such firm, leaving us with only the handful of true, original proto-firms — all monopolies.
Clearly, the Ethical Review Board’s discussion above points out that there are competing interests which must be evaluated and balanced. In this case they clearly were.
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In some ways, this case serves as a miniature version of many discussions going on in society today. Boiled down, the fundamental question is: Does the existence of an unethical / questionable / tainted condition among many other acceptable conditions spoil all results of the entire endeavor?
Schoepenauer’s Law of Non-Reciprocity (Add a teaspoon of wine to a barrel of sewage and you get sewage.
Add a teaspoon of sewage to a barrel of wine and you get sewage.) suggests the answer is “Yes”.
I think reality and the human condition renders most human endeavors as less that 100% pure but still overall acceptable. Some examples that come to mind are WWII, the Space Program, and the discussion of whether 1619 or 1776 is the founding year of our country. Each of these has portions which are not humanity’s finest hour.
So there, I’ve taken a simple engineering ethics case and expanded it to cover nearly every human endeavor.
I tapped “unethical”, because it didn’t “feel right” to me. Ambiguity should be resolved in favor of the party more likely to be harmed. In this case, Scott’s firm has a prior relationship with Culver City and is the party likely to be harmed by Scott’s solicitation, and the lack of a non-compete agreement actually makes things worse, not better. It isn’t clear from context if Scott has special knowledge as a result of his prior employment that would be advantageous in pursuing work with Culver City. A non-compete agreement would have set clear boundaries.
I’m not dug in with regard to my response, and I can be comfortable with regard to the BER’s response. Very slight differences in the circumstances would have changed my vote. For example, if Culver City had come to Scott after a year I would have voted “ethical”, since he wasn’t pursuing a former client, they were pursuing him.
The wording of the event is unclear. It says “Scott currently works for ABC Engineering”. By “currently”, I interpret that he was still employed by ABC Engineering, but had started his own company as a sideline business. If he was still employed by ABC Engineering, any sideline business activity that overlaps his ongoing employment with ABC Engineering would be Unethical (Code II.4).
If Scott had resigned from ABC Engineering, which is not stated in the facts description, then his own company operations would be ethical. This is a natural growth of talent in the Engineering field. Engineers gain experience, and the good ones often breakout and start businesses on their own.