Work-for-hire Agreements versus Knowledge Partnerships
Work-for-hire agreements are legally defined in copyright law as work arrangements in which the hiring party owns all the rights to the work created in exchange for remuneration. In the past this concept has worked well for particular situations. For example, artists worked on specific designs for a company and sold off their property rights to another company. Musical composers may write a song and sell it to a music company which then can hire musicians or an orchestra to perform it. These are examples for the receiving party paying for the result of the knowledge worker’s work. There are many examples where knowledge workers are performing an act and get paid for. Traditionally, lawyers give advice and represent in court and medical practitioners help patients and find ways to cure them. What is common in all these examples is the fact that IT Knowledge these settings were mostly involving individual knowledge workers working autonomously and, more importantly, the knowledge remained with the knowledge worker. What was sold off or paid for were the property rights to a work result, such as a sculpture, or a service, such as the representation in court by a lawyer.
In today’s Knowledge Age, however, there are many more situations in which knowledge workers perform such work but the line separating the performer and the receiver of the work is no longer as clear. In addition, the above examples show how the benefit of creating the knowledge always remained with the expert and not with the hirer. For example, the lawyer can use the knowledge created by her intensive research and apply it to her next client. After a while she can become a specialist in a particular field of law by servicing clients who need advice in specific subsets of the law. Nobody would expect the lawyer to give up her ownership rights to the knowledge she created simply because she was paid for legal representation. Similarly, it would seem ridiculous for a patient to claim ownership of a medical cure that his physician invented to cure him, just because he paid for the treatment. Unfortunately, in other more modern settings today organizations try to impose such extremely one-sided bargaining on their employees.
Some may argue the quest of companies to collect and protect “their” knowledge seems unconscionable. In many situations, however, this has been pushed pretty far and created outcomes that are detrimental to society and the free market. For example, it is common practice for employment agencies to impose non-competes on their employees. Granted, employment agencies spend their money on establishing networks of contacts with other organizations and this effort and value created needs to be respected because it helps matching company with candidate. Apart from the scenario where the agency receives a one-time fee for its service, many contingent workers employed by agencies effectively agree to pay the agency a percentage on their hourly rate.
While this is fine for short-term assignments, the question arises of what effect non-competes have in the long-term. Assume the same contingent worker changes work every three months. It is then to be expected that such workers will effectively lock themselves out of their local labor market because the non-compete will apply to every potential company on the local market. Even if workers make contacts on their own within their current workplace, the non-compete clause will prohibit them from doing so. The rationale is that because the agency brought that worker in, it has a claim to the proceeds of future projects, even if those were not arranged by the agency. Ergo, agencies have created a legal leach protection designed around a seemingly legitimate business interest. Unfortunately, the organization hiring the worker pays a higher price, the worker receives less than fair pay, and the customer of the organization ultimately overpays for the final product or service. Non-competes can therefore come to the detriment of society and are an active area of current legal disputes. Moreover, non-competes show how knowledge assets can be abused and how knowledge workers may not be compensated fairly for their work.