Employment Contracts-Satisfying Hackers AND Lawyers

JabberWokky asks a question that (intentionally or not) ties in to the one asked on Sunday: "My company is ready to hire several developers. Of course, the VC's lawyers say that there must be confidentiality agreements, non-disclosure agreements and non-complete agreements, to the point that the company would own private Web sites, or anything else written on your own time. I have one week to come up with something that will satisfy the lawyers, and still allow some freedom for the to-be-hired developers to work on side projects of their own, which I think is ultimately beneficial to everybody, including the company. Any ideas?" Certainly there must be some happy middle ground that can be agreed upon!

And yet here is a question for you: Why do Venture Capitalists think it's sensible to significantly curtail the rights of the people they wish to employ (in the name of confidentiality) when well- written NDA's should be legally binding enough to insure such things?

Comments

Overly Broad Employment Contracts

[EuroBryce]

I wish that I still had a copy of my current employer's contract as it provides an excellent example of what not to do! When we were acquired, the acquiree foisted these contracts on us as a "condition of employment." In seven simple bullet items it said that we may not work for or found a company in a remotely related field, may not hire company employees even if they initiated contact, that the company would own any "ideas" that we had even if they were unrelated to any business that the company is currently or has future plans to be in, and assigned all copyright and patent interests to the company. With a final stipulation that it would be governed by the laws of a state that I've never set foot in (I work in a different country now, making that stipulation even more laughable).

My team refused to sign, and in the 18 months since I've declined on two additional occassions.

A proper contract should simply exercise common sense. If I worked in network engineering at UUNet, my ideas on how to make routers more efficient belong to them as a product of my employment. My ideas on 3D rendering belong to me. I shouldn't solicite fellow employees, but if they come to me they are fair game. If I want to work for, or found, a company focussed on something that isn't a core business of my employer (or directly related to my specific employment), that's my option, that's the American way.

-Bryce

Re:Overly Broad Employment Contracts

[CharlieG]

Bryce,
The good news is that I've BEEN to a lawyer over this, and most contracts that are written as broadly as yours are NOT valid, unless you are SENIOR management of the company (Like President or CEO). The contract, in effect, can NOT stop you from making a living in your field, in your area of living.

That said, I'm REALLY happy with were I work now in this regard. It's the first BIG company that doesn't claim ANYTHING of your IP developed after hours. I guess the reason is that they deal with TV script wrtiers, directors etc, and THEY would never stand for it

GPL in contract

[eMBee]

hmm, when i found this:

Employee also agrees that all inventions/advancements developed or created by Employee while employed by the Company, are the sole property of the Company and may not be used independently for financial gain or advancement of the Employee.

in the contract, i was asked to sign, i send back this response:

i don't like this one at all, as it sounds, even the work i do at home, would be property of the company. I CAN NOT ACCEPT THIS!
i must be able to continue working on other open source projects at my discretion. neither do i like the fact that i may not use my own ideas as i wish. i have no problem that you uses my code however you want, but i want to be able to do the same.
i want to work for you because i want to advance myself, if i can not use my work for my own advancement, where is the point?
in the beginning you wrote:
> We are a 100% linux shop and believe in Open Source.
if that is true, then please allow me to continue to publish my own code as open source.

the paragraph was changed with out any further argument to this one:

Employee also agrees that all inventions/advancements developed or created by Employee while employed by the Company, are the sole property of the Company and will be published with the GNU General Public License Version 2.

other than that it's a standard contract, with a lot of legaleeze inside....
i have no idea though if that was looked over with the companies lawyers, i am guessing not, but i think it's worth a try...
if not there are other jobs.
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Fairness

[FigWig]

I will be working at a very large company in Silicon Valley, which seems to treat its employess well. My contract specifically states that anything I come up with that wasn't done with company property, on company time, or using company knowledge is my own. I believe there is also no non-complete clause, which is good since such clauses are illegal in California. Of course I wouldn't be able to take confidential knowledge with me on my next job, but that's only reasonable.

I think you can always find someone to agree to an overly restrictive contract, but those people probably won't be the best and the brightest, they could always go find a better deal. I know I wouldn't take a job with a company offering such a contract, or at least ammend the contract before signing.

Re:Fairness

[Black Parrot]

> I think you can always find someone to agree to an overly restrictive contract, but those people probably won't be the best and the brightest

If I were hiring, I would use it as a litmus test to screen out the lusers. Mention it at the interview; if they agree, no offer. If they laugh, then drop the requirement without argument, and continue the interview with deeper interest.

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Question.

[Black Parrot]

When does a prospective employee usually find out about these things? It would really bite to go job hunting, get several offers, and still not know which ones are going to be hardasses when you accept.

Is there a kosher way to ask at the interview to see what sort of things you would be asked to sign if you got an offer and accepted?

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Re:Question.

[Spud Zeppelin]

Is there a kosher way to ask at the interview to see what sort of things you would be asked to sign if you got an offer and accepted?

It's a meaty question, so if you want to keep it kosher, you have to hang it up and let it drain for a while, and don't mix it with anything cheesy. But seriously, why not say it in a way that makes you seem *more* dazzling and brilliant by virtue of needing to ask (the meaty part) -- and then be very upfront about asking it (hanging it up and letting it drain)?

For example, I tell people going in, "I'm involved with a number of personal and/or side projects, and a number of projects involved with the free software community, and I'm not going to sign any intellectual property waiver which impinges my right to do so in my off hours." This makes several points right off:

• You're savvy enough not to be taken advantage of. This is generally impressive, unless the hiring manager is an idiot.
• You're not the sort of person who puts down the keyboard the minute he leaves the office. This is generally VERY impressive, even if the hiring manager IS an idiot.
• Most importantly, that you have talents whose product YOU feel important enough to be worth protecting. This is generally the clincher: it says that something about you ADDS VALUE.

And the thing to remember about offers is this: it's a seller's market for IT labor. Employers are aware of this; more importantly, they're generally afraid of it... so the prospect of losing good candidates over extraordinarily strict IP clauses is something that they (at a high enough and wise enough level in the organization) would like to avoid strategically. It never hurts to write a letter to someone in a company's senior management AFTER you've rejected their offer because of a nasty IP clause, telling them politely why... I personally haven't done it (because I've generally screened such companies out early on in my searches), but the outcome could be good for the industry as a whole if enough people did; you're basically telling said VP, "You're a smart guy, how much sense does this make to you? You're losing the best people you're making offers to because they want to do projects in their spare time capitalizing on their expertise you've already recognized."


My opinion only, IANAL.

Re:Question.

[radja]

I got hit with basically the same thing. Wasn't much of a problem though. my contract approx. says:

everything I write at work is for the company.
everything I write at home is my work, unless:
-what I am writing at home is something I have been ordered to write, when I started writing it
-what I write at home is something I know I will be ordered to write.

this works for me, and for my boss. :)

Get first refusal

[luckykaa]

My contract says something along the lines of the company gets first refusal on anything developed in my own time, and I'm not allowed to offer a more desirable deal to any other company.

It might also be possible to insist on a perpetual non-revokeable licence for company use of any work written by the employee.

If they want to release under GPL, then this is not a problem. If they want to release as shareware, then they get all the money, apart from what the company would have paid.

I'd also insist on restricting it so that it only applies to work directly relating to the company, or fields that the company might reasonably be expected to branch into.

Lawyers

[Detritus]

I think the VC's lawyers are idiots. They are so concerned with protecting their client that they have ignored the effect this will have on recruitment. The people that they would most like to hire are likely to be the most offended by efforts to turn them into company slaves. I can understand an NDA, but what I do on my own time is none of their business. I would only sign a non-compete agreement if they agreed to continue my salary and benefits during the non-compete period.

Standard Contracts

[bueller]

Companies typically use a standard contract that they offer to employees, and in it many employers will try to get everything but your first born to belong to the company. In your case the VC lawyers are trying to maximise the potential return on their investment risk.

The important thing to realise is that employment contracts are negotiable. If there are clauses in a contract you don't like, ask to have them changed, if things appear confusing get them reworded.

Don't be afraid to get unrelated work that you do in your own time specifically mentioned, as per some of the examples in the topic What happens When Open Source And Work Collide

When working for a cool little Australian start-up we had a pretty employer friendly contract that some staff had ammended to something less one sided. The MD was also happy to let specific instances of code be retained by the employee who wrote them. The intent here was to protect the core system and underlying patents.

Under Australian law one of the differences between employees and contractors is that unless a contractor signs away their copyright and IP then it resides with the contractor. Employees on the other hand don't keep copyright and IP unless they make specific arrangements to do so.

It can be hard to remember employees do have a good bargaining position. It takes a lot of work to find someone you want to hire and it is often less expensive to spend some time getting lawyers to revise contracts than to interview another 20 odd people.

When next at an interview ask how long positions take to be filled. In small companies in particular are looking for a cultural fit as well as a skill fit - a happy team works much better than the equally skilled team that hates each other's guts.

Change the contract yourself...

[neonsam]

In all instances I'm aware of you can legally cross out language, add new language, etc. as long as you date and initial it on the contract. If the company then signs it (although in some cases the company is stupid enough to already have "pre-signed it") Then it IS legally binding. Just be sure to get a copy, and that nothing you added is inherently illegal. It works, and most people don't know you can do it. I even did it on my health care provider contract...