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Five Essential Provisions for a Tech Company’s Employment Agreement

Apr 29, 2014

By Reed Morris

            Hiring processes often move rapidly and offer letters are hastily thrown together. Planning for this process ahead of time can mitigate risk during and after that employment relationship begins, something that is difficult for positive-thinking companies to even consider during the excitement of expansion and bringing on new talent.

            Early preparation for a hiring process not only demonstrates the care and attention of your company to important details, it sets a process in motion that can be replicated and refined in the future, bringing consistency across your workforce. Partners and investors like to see this housekeeping in order as well. The employment agreement should be carefully reviewed and controlled by a person or department within your company who understand the consequences of bringing in someone new to the company. The offer letter, handbooks and policies are all part of good HR controls, as are the terms of a formal employment agreement with the employee which, at a minimum, should include the following:

1)      Confirmation that the new employee does not have any conflicts of interest or prior contractual commitments to their past employers such as non-competes or confidentiality terms that might limit or prevent them from doing their job.

Addressing issues up front regarding your new hire’s former work commitments can prevent surprises down the road. No company want to take on a new hire only to find itself on the receiving end of an unexpected cease and desist letter. 

2)      Written agreement to keep your company’s confidential information private.

This is good policy, and the practice of protecting confidential information should be detailed in other company policies, contracts and manuals. Confidential information protection including trade secret protections should be articulated in writing. The confidentiality provisions should also extend to the confidential information of third parties (such as customers) which your company is entrusted with and must protect. 

3)      Written agreement to return your company’s confidential information upon termination or departure from employment.

This agreement provides a vehicle for revisiting and “reminding” an employee of other contractual limitations on his/her departure either by termination or otherwise.  

4)      Non-solicitation and non-compete agreements to the extent consistent with company policy and enforceable under Colorado law.

Non-solicitation provisions can prevent a party from stealing customers or recruiting employees from your company.  Non-solicitation provisions are usually legally enforceable, but can be difficult to implement.  Non-competition provisions can also be difficult to enforce and have strict legal limitations on their nature and the types of employees they are enforceable against.

5)      Assignment to the company of all intellectual property generated by the employee during his/her employment with the company.

If you are hiring someone to develop ideas, designs, projects and inventions, you want to make sure their work is considered work “for-hire.” You want the proprietary rights to such work assigned to the company. Again, your partners and investors will want to see this in your employment agreements as well.     

            Particularly with startups, the employment agreement or language of the offer letter is thrown together at the time of the offer.  Our advice is to start thinking about these issues ahead of time so that the investment in new talent minimizes associated risk at the same time. 

            If you have questions about your employment agreement or offer letter, please do not hesitate to contact us. 

 

Mallon & Lonnquist, LLC, is a business and real estate law firm. Reed F. Morris is a Colorado a litigation attorney with Mallon & Lonnquist, based in Denver, Colorado. Reed regularly represents businesses and individuals in transactions in and commercial disputes and can be reached at rmorris@mallon-lonnquist.com or 303-777-1411.



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