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Non-Compete Agreement Beyond Term of Employment?
stellar7 writes "I work in IT for a large company. They have recently asked me to sign a new non-compete and confidentiality agreement. I signed an agreement when I began employment, but now they want me to sign an updated one. Behind the link are a few paragraphs from the new agreement. It states that the company has a royalty-free license to any 'Invention' I create including up to six months after leaving (and the company fully owns any Invention that relates to the company in this same period). Has anyone signed a similar agreement that reaches beyond the end of employment and includes things not related to the business?"
A. Employee shall promptly and fully disclose in writing to [Company] any inventions, improvements, discoveries, operating techniques, or "know-how", whether patentable or not (hereinafter referred to as "Inventions"), conceived or discovered by Employee, either solely or jointly with others, during the course of Employee's employment with [Company], or within six (6) months thereafter.
B. Employee shall, on the request of [Company], and hereby does, assign to [Company] all of Employee's right, title and interest in any of the Inventions which relate to, or are useful in connection with, any aspect of the business of [Company], as carried on or contemplated at the time the Invention is made, whether or not Employee's duties are directly related thereto. [Company] shall be the sole and absolute owner of any of the Inventions so assigned. Employee shall perform any further acts or execute any papers, at the expense of [Company], which it may consider necessary to secure for [Company] or its successors or assigns any and all rights relating to the Inventions, including patents in the United States and foreign countries.
C. [Company] shall be the sole judge as to whether the Inventions are related to or useful in connection with any aspect of the business of [Company] as earned on or contemplated at the time the Invention is made and as to whether patent applications should be filed in the United States or in foreign countries.
D. [Company] shall have the option of taking a permanent, royalty-free license to manufacture, use, and sell any of the Inventions conceived or discovered by Employee during the course of Employee's employment with [Company], or within six (6) months thereafter, that are not assigned to [Company] under paragraph B. of this Agreement.
A. Employee shall promptly and fully disclose in writing to [Company] any inventions, improvements, discoveries, operating techniques, or "know-how", whether patentable or not (hereinafter referred to as "Inventions"), conceived or discovered by Employee, either solely or jointly with others, during the course of Employee's employment with [Company], or within six (6) months thereafter.
B. Employee shall, on the request of [Company], and hereby does, assign to [Company] all of Employee's right, title and interest in any of the Inventions which relate to, or are useful in connection with, any aspect of the business of [Company], as carried on or contemplated at the time the Invention is made, whether or not Employee's duties are directly related thereto. [Company] shall be the sole and absolute owner of any of the Inventions so assigned. Employee shall perform any further acts or execute any papers, at the expense of [Company], which it may consider necessary to secure for [Company] or its successors or assigns any and all rights relating to the Inventions, including patents in the United States and foreign countries.
C. [Company] shall be the sole judge as to whether the Inventions are related to or useful in connection with any aspect of the business of [Company] as earned on or contemplated at the time the Invention is made and as to whether patent applications should be filed in the United States or in foreign countries.
D. [Company] shall have the option of taking a permanent, royalty-free license to manufacture, use, and sell any of the Inventions conceived or discovered by Employee during the course of Employee's employment with [Company], or within six (6) months thereafter, that are not assigned to [Company] under paragraph B. of this Agreement.
"Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."
The rest of the relevant chapter addresses mainly those instances where one sells an interest in a business. In those cases noncompetes are enforceable.
California courts routinely void noncompetes under B&P 16600.
No Inflation Taxation without Representation
While the answer varies from state to state, I'll quote what my lawyer told me when I took him one of these employment agreements. "Warner, never hesitate to sign a vague, badly drafted employment agreement." Basically, for my situation, the upshot was that the agreement was so vague as to what it covered that read literally one would have to tell the company everything I ever thought. New idea for a flavoring for brownies, tell the company. New sexual position to try with the wife, tell the company. Plot for a sitcom staring 13th century spanish cardinals talking about the philosophical conundrum the Islamic occupation of the Iberian peninsula presented, tell the company. Clearly, no court in its right mind would enforce such an over-reaching and broad contract.
In addition, certain states, such as California, have laws that say, as a matter of public policy, that if you do something on your own time with your own resources, you own it.
Also, since you didn't post the entire agreement, there's no way to know if there's anything else in it that might be bad, or worse than what's presented here.
However, without having both a license to practice law, or the entire text of the document in question, the above is prelude to the following non-legal advice: See a lawyer. It cost me about $300 when I needed to get a couple of different documents reviewed.
Not enforceable in California. Bus & Prof Code Section 16600.
In Europe (at least in those parts that I know) it's fairly simple: Nothing you create outside of work can be claimed by your employer, unless he can somehow prove (or at least convince a judge) that you were using company resources to create it.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
Seeing as how the 9th Circuit Court is federal, it was probably interpreting California law and California case law when it made that decision.
Anyway. I must believe you don't work in USA then, because I've never seen an IT job without a non-compete requirement in the last 13 years of my career.
The only difference between this non-compete and non-competes I've signed is their claim of ownership on new products developed after termination, however I've seen non-competes laying claim on very general things from everything created after hours to things created on your personal desktop.
First, it's a bullshit scare tactic. Second, signing doesn't mean you're signing your freedoms away. Here, if a contract violates the law, it's unenforceable regardless of your signature. And third, you really have no choice but to sign if you plan to work in USA. I suppose you could find a very small IT company that doesn't push non-competes, but it'll be hard to find that. You won't be unemployed for a "couple of months", you'll be unemployed for YEARS with that sort of search criteria.
Camping on quad since 1996.
Yup. I saw that in a contract, told my soon-to-be boss that there was no way in hell that I'd ever sign such a thing, he talked to his lawyer, and we got it stricken from the contract. That easy.
Negotiate for what you want. You may find theirs is a defensive position, one that seeks to prevent making off with work they paid you for under the guise of it being "done on my own time."
For example Paragraph B says the invention must be related to their company, its goals, etc. If you work in IT and devise a solar collector, it's yours.
If you can't live with these kinds of binds at all, you may be unemployable.
".. who then basically took the whole codebase and founded a competing company. ... But yeah, beyond term of employment is a bit of a problem."
Look at the two clauses, and you can see the problem. If any ideas are "yours" the moment you quit, then the second you have a great idea you can simply quit.
Most non-competes extend past the end of employment precisely to ward off such an event. They're also used for non-technical types likes salespeople in order to prevent them from wandering off with their entire client base. I've even seen some that extended for up to two years.
Any sect, cult, or religion will legislate its creed into law if it acquires the political power to do so.
I'm the original poster. I spoke to a lawyer, and he told me that in my state this type of contract would hold and that the employer can punish employees in any way for not signing. So, I'm thinking I just need to find a better employer.
hi stellar7,
I've had year-long non-competition agreement with the Ferrari Formula 1 team when I left them at the beginning of 2005. Their reasoning (fear) behind it was that I could immediately take my knowledge of the race car design to another team. But after a year, with the speed of technology development, this design knowledge would be outdated.
I did have discussions with lawyers if such a contract is legal or not. Well: in Europe is IS legal IF THEY CONTINUE PAYING YOU after leaving the company. Otherwise a judge in Europe will take about 20 second to review the case and say you are right. So Ferrari continued paying me for a year for not working for another F1 team (I had no restrictions for the rest). (I offered to sign a contract for life instead of 1 year, guaranteeing never to work again for a Formula 1 team, but unfortunately they did not accept my generous offer!!!!).
Regularly with my work as a consultant customers try to make me sign such non-competition contracts. They always quickly drop it after I point out to them that I'd happyly sign it....if they pay me for it.
The type of contract they are trying to make to sign doesn't sound legal at all to me.
good luck! Chris
I would strike out the whole "all works owned for up to 6 months after employment" and offer to sign that. If they wouldn't accept that, I'd turn in my notice of intent to leave as of X date. Give as much notice as you can, something like a month. Depending on the state, they may have to pay you for the total time, if they decide to let you go before then.
If enough employees insist on not signing that block, they may remove it anyway.
Fair warning, it's not always that simple. I've been dismissed 12 months into a job because I wouldn't sign (That wasn't the stated reason- I was "laid off"; which in reality was they let me go, they "let go" someone in the California offices and "hired" a contractor for the position that was strangely the same person they "let go".)- be prepared to get told "NO" on this. My situation will probably be resulting in a lawsuit as it's pretty much illegal for them to pull this stunt in the first place- you can't pull the "you have to sign" thing after you've let me work for you any length of time (magic deal there...).
As it stands, there's far, far too many "clever" corporate counsels, too many businesses that think they own you and they're entitled to shake a stick at. Thankfully, there's more than enough places that aren't idiotic about this that it's only moderately problematic.
I am not merely a "consumer" or a "taxpayer". I am a Citizen of the State of Texas
Note that here in Washington, we have at-will employment laws too. The idea is that an employee can quit without notice, and an employer can terminate the employment without notice. This is fair. I have unfortunately had to be in both sides of this in the past and have had to quit a job without notice and yet remain on good terms with my former employer. But this varies from state to state.
Anyway the key thing about employment contracts is that they should be bilateral. This shouldn't be the employee giving up additional right in exchange for employment but either a clarification of expectations or an exchange of additional promises (you agree to give x weeks notice, and I agree to a severance package if I terminate your employment without notice, for example).
Typically non-compete clauses do last beyond the terms of employment though my business has no need for such terms. They should be appropriately scoped, however. I.e. when I worked for Microsoft I was barred from competing with them in areas where I had access to trade secrets for a period of 6 months (iirc, might have been a year) after working for them-- the goal was quite clearly to prevent me from taking Microsoft source code and giving it to competition. This was reasonable. Their moonlighting policies were also somewhat reasonable (but less reasonable since at one point I had moonlighting permissions revoked because Microsoft decided to get into a market where I would be competing with them).
If things are too one-sided you need to be looking for another job. If you are a good worker you should always be able to find a way (even if it means starting your own business). I hate to plug Microsoft on this forum but I did find their practices reasonable in these areas. I would sooner work there again then at a place that was much more one-sided regarding employment. But then, my company is hiring Perl and PL/PGSQL programmers (email resume to chris@metatrontech.com) for work on FOSS projects.
LedgerSMB: Open source Accounting/ERP
While asking a lawyer might be a good idea, a lawyer cannot give you all the information you need to make this decision. You really need a good handle on:
1) Your relationship with your boss
2) Where this initiative is coming from (how far removed from your boss and how influential)
3) The perceived value of you personally to the company
4) The level of your own personal negotiation skills
5) Your perceived integrity
Unless you can accurately assess all of those items, in addition to the legal questions of enforceablilty and compliance with labor regulations, you cannot answer your question. Remember that the legal questions, especially enforeceability, only matter if you have the cash, stamina, strength of will, etc. to go to court. Most people don't. Don't expect the company to give hoot about what your lawyer thinks.
I faced a nearly identical situation 5 years ago, an additional agreement, even the language reads remarkably like what I saw. I had a strong enough position and was perceived to have sufficiently rare skills that I was able to stare down the requests, but not without some *very careful* negotiations. I had to answer verbal cajoling like the following:
"Aww, the company doesn't ever really expect to enforce those provisions, we trust you, they're just to make the lawyers happy" -> "If you don't then we don't need a signed agreement, right?"
"You're the last one not to sign this." -> "I'm the only one left who invents stuff around here."
"It's perfectly legal." -> "Are you practicing law now? I'm still waiting to hear from my lawyers and the Department of Labor."
"You're an at-will employee." -> "Then why should I agree to a contract that extends my obligations, but not yours? What's my consideration?"
"We don't want anything but ideas that you invented here." -> "You've already got those, and besides that's not what the contract says."
So my advice is:
0) Be nice about it. Express honest misgivings. Don't be a prick, and don't confront.
1) Delay delay delay. You may be on your next job anyways by the time it's resolved.
2) Go out on the market immediately, and assess your hireability elsewhere. Have an offer in your back packet just in case. DO NOT BLUFF. (You may just find you're happier elsewhere anyway..)
3) Consult a good labor lawyer IFF you have the will to go to court to enforce whatever rights he says you have in your venue.
I did all the above exept #3, and was offered a much better place to work while the issue dragged out over 3 years. I did not sign, and I left voluntarily. YMMV.