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