ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Sunday, July 31, 2005

Who owns employees' knowledge?

Socioeconomic_review With the decline of unskilled or traditional assembly-line jobs, the concept of "human capital" has become more prominent.  When employers invest substantial amounts of money to give workers a set of valuable skills, what rights do employers have in those skills?  Contractual provisions -- usually noncompete clauses -- are often used in an attempt to protect the employer's interest.  Should that interest be protected?

In Thinking and Doing -- The Regulation Of Workers' Human Capital in the United States, forthcoming in the Socio-Economic Review, Katherine Van Wezel Stone (UCLA) looks at the issues from a relational angle and concludes that current law is out of step with reality.  Click on "continue reading" for the abstract.


The ownership of human capital has become a hotly contested issue in the United States. Covenants not to compete are widely used in the American workplace and the source of an enormous volume of litigation. Trade secret disputes are also widespread. The issues raised by these cases are not new, but they are arising with increasing frequency and are posed in a new way.

The new focus on workers' human capital is a result of the fact that, in the past two decades, the employment relationship has changed from one in which workers' knowledge about production was devalued to one in which it is highly prized. This change in the nature of the employment relationship has many far-reaching implications for many aspects of employment regulation, of which the ownership of human capital is high on the list.

This article examines the current disputes and legal trends concerning the issue of who owns the workers' human capital from an historical perspective. It begins with a review of the regulation of employee human capital in earlier employment systems and a description of the new employment relationship. It then discusses the current controversies and changing legal framework governing the ownership of human capital to show that the law is out of step with the changes in the nature of work. Part III proposes an approach that is consistent with the implicit promises and understandings that underlie the new employment relationship.

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