Professional Documents
Culture Documents
Did ACME wrongfully terminate Mr. Smith in retaliation for reporting sexual
harassment?
No, ACME did not wrongfully terminate Smith. Smith was not being sexually
harassed and because he was an at-will employee ACME could terminate his employment
for any reason or no reason.
II.
Since the non-compete commenced as of his termination and for a period of two years
thereafter. Smith established a competing business which was a breach of the non-
III.
knowledge of Peanuts skills and abilities was ACMEs confidential information that
Smith would not have known but for his position at ACME. It is likely a court will find
that Smith breached his fiduciary duties owed to ACME.
IV.
Did Smith violate the Utah Unfair Competition Statute when he established a
declining for the previous 4 years. Most of the senior toy engineers had no problems with
Ms. Smitten, but Joel Smith caused multiple problems.
On June 20, 2014, he mocked Ms. Smittens idea to market educational
toys, and as a result on June 21, Ms. Smitten contacted senior management about the
issues Smith was causing. In response, senior management suggested terminating his
employment unless she had another idea for a better outcome.
Early on June 23, Ms. Smitten responded to senior management that she
wanted to take Smith to lunch and establish trust with him. She was instructed to
terminate his employment if he remained uncooperative.
Smith refused her lunch suggestion and later that day was fired for
insubordination.
Shortly after his employment ended, on December 15th, 2014, Mr. Smith
filed articles of incorporation for an educational toy company with Mr. John Van De
Camp.
The next day Mr. Smith hired Peanuts Inc. to assist with marketing of the
companies first toy. Mr. Smith knew of Peanuts because Peanuts worked for ACME. Mr.
Smith signed an agreement with Peanuts Inc. as the corporations president.
Our clients, ACME Toys Inc., and Sandra Smitten, are suing Joel Smith for breach of
employment contract and unfair competition. Joel Smith is counter-suing, alleging that sexual
harassment and wrongful termination have occurred.
RULES
I.
Wrongful Termination
reason that retaliation for complaining of sexual harassment must also be considered outrageous
and intolerable. (Retherford v. AT&T Communications, Utah Supreme Court, 1992)
covenant of good faith exception. The implied-contract exception may apply; however we have
not at this time heard of any separate assurances regarding job security made to Smith.
Smith claims that he was sexually harassed by Ms. Smitten, however the court should
note that Smith is the only one claiming that such incidents occurred. The facts are very similar
to the case Stokes v. Board of Review, 832 P.2d 56 (1992) the employee claiming sexual
harassment was the only employee who had noted anything wrong was happening, and no one
else at the company could support these claims. Smith has claimed that Ms. Smitten was
harassing him, but he is unable to prove that anything of a sexual nature occurred.
Retherford v. AT&T Communications, 844 P.2d 949 (1992), noted that sexual harassment
includes repeated offensive sexual flirtations, advances, propositions; continued or repeated
verbal abuse of a sexual nature; graphic verbal commentaries about an individuals body;
sexually degrading words used to describe an individual; and the display in the workplace of
sexually suggestive objects, pictures or posters. Smith has reported Ms. Smitten for sexual
harassment without proving that any of the following occurred. Her comments about the quality
of his work are not considered sexual advances, and therefore ACME would have no reason to
fire him as retaliation for reporting sexual harassment.
II. Smith is in violation of his original non-compete agreement because he failed to re-negotiate
new terms of employment when his contract expired.
The terms of Smiths original employment agreement remain valid despite the fact that he
did not sign to renew it after his second year for employment. If he desired at that point to
change the terms of his employment, his only two options at that time were to end his
employment or to negotiate a new contract, as upheld in Kasco Services Corporation v. Benson,
831 P.2d 86 (1992). Because he chose to simply ignore the situation and continue working at
ACME, Smith accepted the terms of the original employment contract to continue working for
ACME at the will of himself and ACME. In the original employment agreement it, contained a
covenant by Mr. Smith that he would not compete with ACME for two years from
separation/termination from ACME. When he started his own toy company less than a year
after his employment was terminated this was clearly a violation of the non-compete clause in
his employment agreement.
While Smith will no doubt argue that the terms of his contract were unreasonable, the
term was for only two years, and Smiths job required enough special training to make toys that
the company should be allowed to protect its investment in his training, which distinguishes this
case from the circumstances found in Robbins v. Finlay, 645 P.2d 623 (1982).
III. Smith breached his fiduciary duties by abusing ACMEs confidential information in hiring
Peanuts Inc.
Peanuts Inc. was being hired by ACME as their marketing specialist while Smith
remained in the employ of ACME. Although His initial knowledge of Peanuts Inc. was obtained
during his time at ACME, He misused ACMEs confidential information of Peanuts after
receiving his termination from ACME in order to utilize for his own toy company. It is supported
from the case of Herbert Morris Ltd v. Saxelby (1916) He is also entitled not to have his old
customers by solicitation or such other means enticed away from him.
Regardless of the fact that the state of Utah had rejected the articles of incorporation he
had filed, it is likely that the court will find that Smith breached his fiduciary duties as supported
by 8.04, Comment c: Corporate executives and other employees in positions of trust or
confidence may not usurp business opportunities for their individual gain. Restatement of the
Law Third: Employment Law, the American Law Institute.
IV. Smith breached his duty of loyalty to ACME by directly competing with them and using
insider knowledge to do so.
After we establish that the employment agreement continued to be applicable after
Smiths non-renewal, the next issue is whether Mr. Smiths actions actually created competition
for ACME. While ACME does not manufacture educational toys, there are three counts in which
Mr. Smiths actions may still qualify as competition:
Though the goods produced are not exact replicas, Smith may still utilize
techniques in toy-making which he learned during his training and employment at ACME
Smith may have gotten the idea to move into the educational toy sector from
ACME on June 20, 2012 when Ms. Smitten brought it up in a meeting. Smith had insider
knowledge that ACME considered expanding in the educational toy sector and chose to
enter into direct competition with them
It can be said that a consumer would buy educational toys instead of regular toys,
and therefore that educational toys qualify as a substitute good for the toys that ACME
produces and could reduce their market share in the toy sector
On the first count, in Microbiological Research Corp v. Muna, 625 P.d 690 (1981)
concluded that A trade secret, whether it be a secret formula, process, pattern, device,
compilation of information or otherwise, is under the majority view held to be property
During his time with ACME toys, Smith had access to devices, information, and other trade
secrets. It is interesting that after leaving ACME he immediately went to start a competing
company that manufactured educational toys. Many toys, educational or not, may use the same
kinds of patterns, processes, and devices, all of which were found to be trade secrets in the Muna
case. By using his experience at ACME, Smith may have made use of all of the above, thus
forming a clear case for competition.
As to Smiths insider knowledge of ACMEs new business idea, in Herbert Morris Ltd v.
Saxelby, (1916), the court ruled that protection may be secured by restraining the employee
from divulging [trade] secrets or putting them to his own use. Ms. Smittens idea to push ACME
toward educational toys was property of the company, and Smith put that idea to his own use
when he started his own educational toy company.
Smith may try to claim that his actions would create no more competition for ACME, but
the last point should disprove that. Educational toys are a subcategory and a substitute for regular
toys, and therefore would create direct competition with ACME.
Smith also contracted with the marketing firm Peanuts, Inc., which was used by ACME
during the term of his employment. This is another indication that Smith intended to directly
compete with ACME by running a similar marketing campaign for a similar line of toys. This is
a clear violation of his fiduciary duties to the company he recently left.
CONCLUSION
ACME Toys and Sandra Smitten should not be found liable for wrongful termination and
sexual harassment because wrongful termination would only exist within an at will work
environment if sexual harassment was present. Sexual harassment is not present as compliments
or advances about work is not considered a sexual advance.
Even though Smith did not sign a new employment contract with ACME Toys the
contract that he had signed still applies at the will of ACME. Thus the non-compete contract still
applies. Since Smith started a competing business within 2 years of his termination of ACME, he
was in breach of the non-compete. Along with the breaching the non-compete, Smith breached
his fiduciary duty by using trade secrets for Mr. Smiths personal gain.
Mr. Smiths knowledge of Peanuts skills and abilities was ACMEs confidential
information that Smith would not have known but for his position at ACME. A company has
right to protect their patterns, process, information, and other ideas linked to their business.
Peanuts Inc. and the market ideas they gave to ACME were not common knowledge and by
using that information to compete with ACME, Mr. Smith was breaching his fiduciary duty to
ACME.
When Mr. Smith started his own toy company he violated the Utah Unfair Competition
Statute. Near the end of Mr. Smiths career at ACME, he was involved in a new product idea of
educational toys. After his termination, Mr. Smith started his own toy company that focuses on
educational toys. This is a direct violation of the Utah Unfair Competition Statute and Uniform
Trade Secrets Act.