Experienced business leaders know how difficult and expensive it is to
hire, train and retain good employees. It can take years of “on the job”
training for an employee at any level to become master of their trade.
Businesses invest thousands of hours and dollars in honing those skills and
often do nothing to protect their most valuable asset, their people. You must
take steps to protect your business up front; otherwise, former employees and
contractors may be free to solicit your employees and customers or claim
ownership or co-ownership in your intellectual property.
In over 30 years, I have received many calls from anxious clients regarding
former employees. Do any of these statements sound familiar:
·
“What can I do, my office manager just took a job with
another company and he/she is calling on all of my best employees/customers to
jump ship?”
·
“What can I do, I assigned one of my employees to
create a new marketing plan [product], he/she left and is claiming ownership.”
·
“What can I do? I hired a company to do [blank] for
me, and now they’re using that same concept for my competitors.”
The Good News
One agreement which is required to be signed by all employees and independent contractors can make
a world of difference in the answers to these questions. For instance, a
standardized confidentiality, non-piracy and non-compete agreement may handle
many of these issues and allow an employer to protect its business when
relationships change.
Confidentiality
The confidentiality aspect of the agreement describes the employee’s or
contractor’s exposure to proprietary information of the company. This may be
anything from trade secrets, customer lists, processes, financial history to
pricing policies. The agreement basically puts the employee/contractor on
notice that this information is considered proprietary to the company and that
the employee/contractor is required to keep it confidential for the company –
not only while engaged with the company – but for a period of time after they
cease to be engaged and, possibly with regard to trade secrets, for periods as
long as ten years.
Non-Compete/Non-Piracy
The non-compete aspect of these agreements (typically, if it’s an
across-the-board agreement) is to ensure that there is no moonlighting without
the consent of the employer. However, it is possible to ask, although
questionably enforceable, that an employee or independent contractor not work
for a competitor for a period of time after they work with your company. We
find that most employees/contractors (who actually read the agreements) would
object to a post-termination restriction on working with a competitor because
of concerns about making a living and feeding their families.
There are fewer
objections to issues regarding (i) non-solicitation/piracy of employees and
customers and (ii) non-piracy of intellectual property. These agreements often
include a clear delineation that all work done on behalf of the company which
may be copyrighted, patented or otherwise protected, is produced on behalf of
the company as part of the employment/engagement, is work-for-hire and is
actually owned by the company and not the individual (or contractor) who is
performing the tasks.
Most employees and contractors find it fair that the work product they are
producing and being compensated for should be owned by the person/company who’s
paying them. We rarely hear objections regarding the prohibition on soliciting
your workforce. Most people feel it is fair to prevent former employees from
raiding their old company’s workers. You just don’t want them calling their old
friends at work and saying, “I just went to work for Z Company and it is great
over here! Why don’t you come join me?”
Bottom Line
Making this type of form standard for all of your employees and all of your
contractors can go a long way towards avoiding the headaches that might occur
after the relationship ends. Often the exit interview contains a reminder of
the confidentiality and non-piracy obligations under the contract signed as a
condition of employment. While it may be one more step in the hiring process,
the cost of implementing a standard contract requirement like this is much
cheaper than finding yourself losing customers, trained employees or valuable
intellectual property.
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