Language in employment agreements can cost you down the road.
Signing an employment contract - whether you are an independent contractor or a full-timer - can be a bit like stumbling through an enemy minefield. Buried beneath all the legal mumbo-jumbo can be a couple of paragraphs that can hurt you.
But you can avoid the damage if you know what you're looking for. In employment, as often in war, you can negotiate your way out of a bad situation.
"With an employment agreement, you can change about anything," says Frederic Wilf, an intellectual property lawyer with Morgan, Lewis & Bockius in Philadelphia. "This is all part of the dance."
Wilf, who's counted several IT consultants among his clients, acknowledges that negotiating carries some risk turning off your potential employer. But most technology companies with a track record of hiring will have experience with the contract negotiation dance.
"The companies, the HR people, and the lawyers know how to address the issues, because they do it all the time," Wilf says. "But anything involving these kinds of cases ultimately depends on the personalities. Some employees might be scared off, or the employers might be scared off. "
Areas to watch out for
Wilf breaks down potential problems in employment agreements into four major areas: copyrights, patents, non-competes, and non-solicitations. The problem, often, is the law is "not intuitive" – it's not obvious to non-lawyers what the rules are.
Courts have generally held that work done at home that's related to the company's mission - for example, a similar software program you're writing - falls under the same rules.
Employers have little need to write copyright clauses into contracts with full-time workers, other than to inform the employees of the existing rules. However, independent contractors have a lot to lose because a company may ask them to give up their copyright.
You have to determine how important the copyright is to you. If you're writing code not worth bragging about, it may not be worth a battle. If you're part of a project creating the Next Big Thing, it may be in your best interests to hang on to the copyright.
If you're working on a potentially patented project in your garage, Wilf recommends you carve out that project for yourself in your employment agreement. "You want to mention these things beforehand, or if it comes up during employment, get a sign-off," he says.
Beware that companies have been known to ask in contracts for ownership of patents, and for employee work done both in the office and at home. "All that's enforceable," Wilf says. "Employees think, 'I'll never use that,' or 'They'll never enforce that.' Surprise!"
The rules of acceptable non-compete agreements changes from state to state, with some West Coast states not allowing such agreements. But generally, they are enforceable if they are "reasonable," Wilf says.
The more essential the employee - a vice president or a lead programmer, for example - the more likely that courts will enforce non-competes. "If you're a janitor, there's not a chance in hell it's enforceable," Wilf says.
A successful non-compete agreement will include a short time frame, probably less than a year, and a small geographical region. However, a 50-mile radius doesn't make great sense in the Internet business, "where your competitor may be in Australia," Wilf says. Some companies name a handful of competitors, or describe their business, in the non-compete agreement, and that seems to be acceptable to courts.
For contractors, courts often uphold non-competes, Wilf says, on the theory that freelancers have more employment options than a narrow group of the company's competitors.
Non-solicitation agreements are similarly enforced - the narrower they are, the more likely they'll be upheld in court. In both non-compete and non-solicitation agreements, courts in some states will throw the whole thing out if it's bad, while in other states, courts will strike out, or "blue pencil," the offending sections, while keeping the rest of the agreement intact.
Read it; don't assume
Before you sign an employment agreement, Wilf offers this additional advice:
