The Fine Print:
Protecting your business through Properly Drafted Employment Agreements.
By: Shannon M. Whitemore, Esq.
The success of you and your business relies on the hard work and dedication of your employees. You know this; you give your employees the respect and compensation they deserve. But what can you do now, to protect your business in the event an employee becomes disgruntled? What about the high-level employee who leaves to start his own business? Through comprehensive employee agreements, you can plan now to protect your business from negative consequences in the future.
Independent Contractors.
Your company may rely on independent contractors or outside professionals, who “come in” to your business to perform some work on its behalf. These individuals are not employees; whether they are “temps” or vendors who provide work to the company, they do not obtain the benefits and protections that employees may have. While you may treat these individuals as if they are employees, special considerations may be necessary in order to protect your company from future use or disclosure of information and knowledge gained by the individual. Special agreements may be drafted for independent contractors to protect your company without creating an employment relationship.
Confidentiality.
Your employees have access to your company’s trade secrets–those aspects of your business methods and information that you keep confidential and wish to keep out of your competitor’s hands. Trade secrets, also called proprietary information, may include employee lists, sales methods, formulas and recipes, and other business processes developed by your company to make you competitive in your field. In order to protect your proprietary information, your employment agreements should contain confidentiality and nondisclosure provisions that work to restrict your employee’s ability to disclose information during the term of his employment and after his employment ends.
Nonsolicitation.
Your employee may have access to your past, present and future clients, investors and other employees. Should the employee leave to work for your competitors, or to start his own competing business, an employment agreement containing a nonsolicitation clause will prevent him from recruiting his fellow employees, taking your clients, or proposing competing investment deals. A well-crafted employment agreement will restrict this solicitation during and for some period after the employee leaves your company.
Noncompetition.
Like the nonsolicitation provision, the noncompetition clause in an employment agreement can protect your company from an employee who leaves to work for your competitor or to start a competitive business, using the special training and knowledge he or she gained during his or her employment. Noncompetition agreements are enforceable in Washington to the extent that they are reasonable–common test is to question whether the agreement is reasonable in scope (type of work considered “competition”), geography (generally the geographical area in which the employee is prevented from working if the work competes with your company’s business) and duration (time that the employee is prevented from working in the competitive field). Because of the scope/geography/duration restrictions recognized by Washington law, these agreements must be carefully crafted.
Invention Agreements.
Your company’s success may be grounded on innovation in technology, business processes, or other useful inventions. Unlike copyright law, discussed below, which recognizes ownership of works created during employment, patent law does not recognize any inherent rights to the employer for inventions created during employment, and so requires that the assignment of an innovation or patent to an employer be in writing. All employees and independent contractors who may contribute to the invention process should be required to sign an invention agreement. Further, Washington law requires that the employee disclose his prior inventions as part of an invention agreement.
Copyright “Work Made for Hire” Agreements.
Under copyright law, your employee’s creative works done within the scope of his employment are owned by the company, with the company having copyright status as the “author” and owner. However, where your company relies on independent contractors for some creative works, or wishes to make clear with your employees that their creative works are owned by you, a carefully-crafted employment agreement is necessary. A Work Made for Hire and/or Assignment clause in an employment contract can create clarity so that the employee or independent contractor does not later attempt to sell or otherwise profit from something created during his or her employment.
At-Will Status of Employment
Under Washington law, employment relationships are “at will,” unless a contract with your employees states differently. Your employee may leave, or you may terminate his employment, at any time and for any reason, so long as it is not discriminatory. Other states’ laws may differ; we can research and develop an employment agreement for your Washington or out-of-state employees. Employment agreements, employee manuals and other representations made to an employee may alter this “at will” status, so these must be carefully crafted to work with your particular company.
Axios Law Group has counseled a diverse group of companies with different protection concerns—from restaurants and clothing designers to software companies and nuts-and-bolts inventors. Axios Law Group will review your company’s business and practices to create an employment agreement that gives you the best protection.
