Well, the question was whether it was unethical, and the ethics to me seem pretty clear. He is lying to the company about what he's doing and when he's doing it. He also had an agreement with the company to work 40 hours for wages, which he has clearly broken. Neither of those things are ethical in any way shape or form.
However resolving this in a just way is now extremely difficult (this is mostly his own fault but still). The way I see it he (morally) still retains the rights to the code, since the company didn't pay him to write it. However the company has also been wronged because he has lied to them and broken his contract. The question now is if the value of his code is enough to compensate the wrong he did to the company, and if so by how much. That's not an easy question to answer, hence the discussion.
>SO post: The system is really old - and although I was hired as a programmer, my job is pretty much glorified data entry
To me, this is justification to not tell them about it. Programmers are almost always distinct jobs from data entry. That he is only being given this task is harmful to his career as a programmer. Take any discussion about interviewing or careers from here, and all of the discussion about bad programmers repeating 1 year of work over 10 years, and it's pretty obvious this is a weak position to grow in.
Imagine this programmer was applying to a company from here, telling them his only task he was ever given was spreadsheet data entry. And he automated it. It's good, but not when it's the only thing you've done.
However resolving this in a just way is now extremely difficult (this is mostly his own fault but still). The way I see it he (morally) still retains the rights to the code, since the company didn't pay him to write it. However the company has also been wronged because he has lied to them and broken his contract. The question now is if the value of his code is enough to compensate the wrong he did to the company, and if so by how much. That's not an easy question to answer, hence the discussion.