| Former employees and business associates | | | | broad-based non-compete agreements.Tip: Add |
| become competitors every day.When hiring | | | | non-solicitation provisions to your agreements, |
| others to work on your team, be mindful that | | | | such as:"You agree not to divert any business |
| employees and contractors might: | | | | opportunities from the Company to yourself or to |
| - Leave and start a competing practice; | | | | any other person or business entity.""You also |
| - Go to work for a competitor; | | | | agree that for a period of one year following |
| - Solicit your clients; or | | | | termination of this agreement, that all clients to |
| - Use and/or disclose company confidential | | | | which you were introduced by Company shall be |
| information.So, how do you reduce the risk of | | | | considered Company clients and that you will not |
| training your future competitors?The best | | | | pursue or accept any additional work with those |
| business relationships are grounded in trust and | | | | clients without written permission from Company. |
| mutual benefit. Many people work on a handshake | | | | In the event that you violate this provision, you |
| understanding, which is fine until something goes | | | | agree to pay Company 20% of your first year |
| wrong. A little paperwork on the front end can | | | | billings to Company's clients."(3) "Assignment of |
| prevent problems down the road. But, all the | | | | Rights" for employeesUsually, employment terms |
| paperwork in the world won't prevent someone | | | | provide that an employer owns the rights to |
| from leaving. So, to retain key people, they need | | | | works produced by an employee. The employee |
| to feel that this situation is a "good fit" for | | | | is the inventor (patent) or creator (copyright) and |
| them.Tip: Be fair and reasonable about your terms | | | | it is important to have a clear assignment of the |
| and compensation. Recognize and reward the | | | | employee's rights to the employer. Without such |
| contributions of high-performing employees and | | | | assignment, inventions of the employee belong to |
| contractors.The following documents can be used | | | | the employee, even though the employee |
| to protect your interests. Your agreements should | | | | developed the invention during work hours and |
| be reasonable and use plain English (avoid legalistic | | | | using the employer's materials and equipment. The |
| boilerplate!). Being heavy handed in your | | | | employer retains "shop rights" in the invention. |
| agreements may actually be counterproductive.(1) | | | | This means that the employer can use the |
| Non-Compete AgreementsRequiring employees | | | | invention without cost in its operations.Tip: Require |
| and contractors to sign 'non-compete' agreements | | | | employees to sign an invention disclosure and |
| is a common practice. Unfortunately, the | | | | rights assignment form.(4) "Work for Hire" for |
| enforceability of non-compete agreements is | | | | contractorsAn independent contractor retains |
| often unclear.The basic rule is that non-compete | | | | rights in works that s/he creates unless there is |
| agreements will be enforced if they are: | | | | an explicit statement that it is a "work made for |
| - Fair and reasonable (in scope, duration & | | | | hire." Contractor agreements need to clearly |
| geography); | | | | identify that the Company owns the rights to |
| - Protect legitimate business interests; and | | | | works created and whether any intellectual |
| - Do not impose substantial hardship (preclude a | | | | property rights are retained by the Contractor.Tip: |
| person from earning a living).What is fair and | | | | Include in the independent contractor agreement a |
| reasonable? | | | | provision that says contractor is performing a |
| It's a legal concept that gets interpreted | | | | "work for hire" and contractor assigns all rights.In |
| differently in different industries and locations. For | | | | conclusion, it is a good business practice to |
| example, a reasonable term for a non-compete in | | | | protect the company's rights by requiring that |
| a traditional company may be one year. For | | | | employees and contractors sign an agreement |
| Internet companies, the reasonable term may be | | | | that includes confidentiality, non-competition, |
| 6 months or less because the technologies and | | | | non-solicitation, and assignment of rights provisions |
| markets are changing so quickly.Tip: Non-Compete | | | | as well as specifies the scope of work and |
| Agreements -- Less restrictive is more | | | | compensation. If you use a standard agreement, |
| effective.Using a boilerplate agreement, "one size | | | | it should be reviewed periodically by a |
| fits all situations" is not a good approach. You are | | | | knowledgeable business attorney, to ensure that it |
| usually better served by tailoring an agreement to | | | | covers the legal bases in light of recent court |
| the specific employee/contractor and identifying | | | | decisions.Doing the paperwork up front reduces |
| the specific business interests that you are | | | | the risk that you are training your future |
| protecting (e.g., customer confidential information). | | | | competition.Jean D. Sifleet, Esq, CPA is a practical |
| The courts are showing a trend of enforcing less | | | | and experienced business attorney. Jean has |
| restrictive non-competes and not enforcing broad, | | | | extensive experience in dealing with intellectual |
| boilerplate agreements.(2) Non-Solicitation | | | | property matters in the large and small companies |
| AgreementsWith a non-solicitation agreement, you | | | | and as a small business owner. She has authored |
| can protect your legitimate business interests | | | | numerous books and publications on avoiding legal |
| without unduly restricting an employee or | | | | pitfalls in doing business. This article is excerpted |
| contractor's ability to earn a living. Non-solicitation | | | | from her new book, A"dvantage IP - Profit from |
| agreements are more easily enforced than | | | | Your Great Ideas" (Infinity 2005). |