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employment agreement

Hello, I recently had to consider whether to sign a new employment agreement at my organization.  The terms included a) to not be involved with any form of employment outside of work (unless approved), and b) to not approach clients for a number of year(s) after leaving the organization.  I don't have equity, and it is a large company.

My feeling is that a) is a privacy issue - I shouldn't need permission on how to spend my own time.  What if I wanted to contribute to open source, brush up on web skills (with a personal web page), volunteer at the hospital, or yes even become an entrepreneur, etc?  Hypothetically speaking.

Regarding b)... I don't see justification for artificially prohibiting an individual's right to make a living, and I don't think it would hold up from a legal viewpoint...

It's the principle of the thing that ruffles my feathers.

I suppose the intention is to err on the side of caution with their hires, but not everyone is the same...

Has anyone run into this, and what are your thoughts?  Thanks in advance for responses.

Wednesday, April 2, 2003

I'm pretty sure they can't dictate how you spend your time outside the office, unless it is a conflict of interest:  Writting software for a related product, or even making money doing similar tasks in a similar industry.  They can't stop you from working on something that isn't related to work.  I'm pretty sure the law is pretty clear on this.  As for not taking future clients, do they mean their clients?  I think thats understandable and enforceable.  If you mean you can't get another tech job,  I know thats against the law in some states (for sure in my state California).

Vincent Marquez
Wednesday, April 2, 2003

there's a pretty good prinicple in negotiation that you should walk away from any first offer you would find unacceptable under any circumstances.

That said, there may be circumstances under which you would accept these terms and that is why contracts are always negotiable.

In the case you give, if they are asking to control the 16 hours a day when you are not at work, then you are basically on standby and you should be paid for that. It would be reasonable to find out what rate they are proposing to pay you for these off hours during which they expect to place restrictions on your activities.

Regarding the clients thing, that's more common at least. I wouldn't sign it myself unless they present you with a list of their clients in advance so that is undefined. if you go into this with a client list  that is undefined in scope you may later regret it. For example, is the US government one of their clients? Do they sell shrinkwrap and have millions of clients? Etc. I'd insist on seeing an exact list of these clients.  Likewise, if agreeing to not work for a competitor for X years, you need to see a list of who those competitors are. Some companies believe they are in competition with the whole world. Also, for the years during which you can not work for certain people, you should *definitely* be expecting a severence package to be granted regardless of the terms of parting. Without a irrevocable and undeniable severance package in writing, you should never agree to post employment restrictions on your activity. You reasonably need to be paid for that service.

Dennis Atkins
Wednesday, April 2, 2003

My thoughts are that they are probably well within their bounds in requiring these things.  And I would also guess, if they are a large organization, that their lawyers have already advised them regarding the legality of these provisions.

You say, "My feeling is that a) is a privacy issue - I shouldn't need permission on how to spend my own time.  What if I wanted to contribute to open source, brush up on web skills (with a personal web page), volunteer at the hospital, or yes even become an entrepreneur, etc?  Hypothetically speaking."

First of all, the only "right to privacy" people have is under U.S. or state constitutions (and it's even pretty controversial under those).  That prevents state or federal governments from violating any "outside work" right to privacy you have, not private companies (though there may be other laws enacted preventing it).  My guess is there aren't. 

I believe there are laws in most states prohibiting employers from placing restrictions on the "recreational" (i.e., uncompensated) activities of employees outside work hours.  So you don't have to worry, your open source work, brushing up on web skills, and volunteer work at the hospital would not be prohibited. 

But I doubt whether most states prohibit employers from restricting paid outside work, with good reason.  For example, a software developer who is paid an annual salary may be expected to work long hours when needed, say when a project is behind schedule and a deadline is approaching.  When this happens, an employer does not want to be told by the employee that they have outside work obligations that prevent them from working extra hours on their main job.  Does that seem unreasonable?

You also say regarding their restriction on approaching their clients for a number of years after you leave employement with them:  "I don't see justification for artificially prohibiting an individual's right to make a living, and I don't think it would hold up from a legal viewpoint..." 

I can guarantee you that many of these clauses are legal and that they are upheld in courts.  It is called a "noncompete clause" and there are fairly clear rules regarding which ones are enforceable and which aren't.  I believe in most jurisdictions there is a standard that says the terms of a noncompete clause will be upheld only if "reasonable", and what exactly is "reasonable" has been fleshed out in many cases.

Depending on your length of employment with the employer and the position you held with them, I would guess that in many cases 2 and perhaps 3 year restrictions on poaching company clients after your employment ends would easily be considered "reasonable". 

An employer has an obvious interest in retaining its own clients, clients that you are introduced to only because the employer puts you in a position to deal with them, clients that the employer may provide you with special training to service, etc.  You can go after those clients when the noncompete clause ends, but you can't just quit your job and plan to poach a number of your employer's clients if you've signed a noncompete clause.  I'm surprised that would seem unreasonable to anybody.  You're free to reject the company's offer of employment, of course.  Or free to accept the offer and abide by its terms whenever your employment terminates.  So long as the restrictions are "reasonable" I don't see how anybody can complain.

Herbert Sitz
Wednesday, April 2, 2003

Writing open source is, most of the time, not employment.  So you'd likely be in the clear, just so long as your contributions are not comptetive with your employer.  Same goes for web development, unless you're getting paid for it.  Additionally, most employers will gladly grant you the time and blessing to publish for money - just so long as it doesn't interfere with your schedule, and that whatever you publish not be in conflict with their priorities.

The most likely thing, is that they don't want you moonlighting with their client list.  Steer clear of that and consult with your boss - they will probably never care.

Nat Ersoz
Wednesday, April 2, 2003

Aside from the legal arguments, you need to put yourself in the shoes of the hiring manager.  If you hold up the hiring process because you want to negotiate the right to do side work, the hiring manager is likely to recind the offer.  I know I would, and I've seen it happen.  If you've got several qualified candidates to choose from, are you going to pick the guy that's a pain in the ass?  I'm not.

Instead, do what everyone else does.  Sign the contract, then keep hush about the side work.  As long as it doesn't interfere with your day job or compete with the company's business, nobody really gives a sh*t.

Lastly, I don't think all contracts are negotiable.  the last two companies I worked for were very large (+100k employees).  Much of the "employee agreement" stuff was boilerplate handed down from corporate headquarters.  The local HR minions had no wiggle room to negotiate out those terms.

Wednesday, April 2, 2003

Nick has the answers for you:

"Recognize that signing an NCA costs you money and confers a benefit on the company. For the deal to be fair, the NCA should cost the company money, too, and it should confer a benefit on you.

If a company wants to restrict your ability to earn a living, it should give you something in return: a guaranteed severance package for the term of the NCA, to tide you over while you're out of work and not competing."

Wednesday, April 2, 2003

Nick Corcodilos that is.

Wednesday, April 2, 2003

Bottom line: some companies will push for as much as they can get, even though they know it's excessive and that smart people would object.

Work out the bits that oppress you and insist on them being changed.

Restraints on employment with other companies are often unenforceable because the employer was greedy and made them too sweeping, or failed to provide suitable compensation for restricting you.

Wednesday, April 2, 2003

AFAIK, in most states employers can only require you to sign an proprietary information/non-compete agreement when you are first hired. The cannot legally force you to sign an updated agreement if you're already there. However, they have all sorts of ways to make your life uncomfortable if you don't.

One company I know tied signing of an updated agreement to stock option grants. They usually grant options every year to all engineers, but when they needed to update PIA, they said the only way to get the options is to sign the agreement. I don't think many people refused.

On the other hand, it's very rare for a company to enforce the PIA unless you really piss them off. Of course the "really" part varies with how touchy your employer is. Most companies you'd want to work at will be very flexible on dealing with these issues.

Wednesday, April 2, 2003

Regarding  a), I've seen a 'no other employment that would affect this job' clauses but not 'no other employment period'. I wouldn't want to agree to that on principle but in this market, i'd have to consider whether this is a real problem.  I would consider any unpaid, non-competitive work on anything else to be a non-issue. Only things that directly affect your performance on the job should be of concern.

fool for python
Wednesday, April 2, 2003

Am I the only one disturbed by the idea of "Go ahead and sign, because they won't enforce it anyway?"

Presumably because you posted here, (nameless), you're looking for opinions, not strict legal advice (for which you'd talk to a lawyer).  My opinion is that (b), on not approaching clients, is quite reasonable of them to ask, but as others have said you need to see that you'll get a list of these clients so you know whom not to ask.

As for (a), it sounds absurd to me.  Perhaps the clause is actually more specific than what you describe, but if it really means "You may have no other job but this one," it sounds outrageous, whether or not it's legally enforceable (and I have trouble seeing how it could be, but I'm not a lawyer).  Of course, most people who sign these things do so because they figure they have no other job options...

Wednesday, April 2, 2003

How much do you want the job?                        X
How important is outside work?                        - Y

The net 'how you feel' result tells you whether you want to work there or not.

As for post employment restrictive clauses unless I had direct contact with these clients I'd probably demur at that clause and if they said it was standard decline the offer.  But that's me.

In the EU, except for some excluded professions, lawyers I think still have non-compete clauses, it would be almost impossible to enforce that kind of clause.  Of course it would still be theft if you took the client list with you, and that happens a lot.

Simon Lucy
Wednesday, April 2, 2003

The problem with these damn non-compete clauses is that almost all employers include them in their contracts.  So turn down this one, and the next offer will have the same crap.  The only good thing though is that the more blatant the restrictive conditions are, the more likely it will be unenforcable - so ironically you may actually be better off by signing a ridiculous contract.

Early in my career, I got an offer that came with a huge pay increase (over 50%) but they had an eight-page contract with all sorts of outrageous conditions, including that I was supposed to repay them for every training dollar they spent on me if I left them before a certain number of years, and I was to refund them for lost profit resulting from my departure.

I turned them down, but then they started calling me back practically begging me to join, but still refused to change the contract.  I reconsidered but I first sought an opinion from a relative who was a retired judge.  He said the contract was so laughable that I shouldn't worry about it having a chance in court.  That contract cost the company money too, as instead of resigning with notice, people would just vanish from work, sending in an email or letter of resignation days or weeks later.  After I was there about a year, they realized it was making people flee and scaring away potential recruits so they re-signed everybody to a new milder contract.

If you have concerns, don't ask advice from faceless people on a message board. Pay for 1 hour of a lawyer's time - preferably a labor lawyer who specializes in the *employee's* side of things to go over it with you.  Unless you're being considered for a very senior position, it is highly unlikely they will actually change the contract.  You'll just have to decide whether to take the job based on the degree of risk.

Don't tell your employer about your outside activities; just evaluate the risk of being caught AND being penalized, then go and do whatever you want as long as it doesn't cut into the time for the job.

T. Norman
Wednesday, April 2, 2003

"I was supposed to repay them for every training dollar they spent on me if I left them before a certain number of years, and I was to refund them for lost profit resulting from my departure"

That's a good one. The craziest thing I ever refuse to sign was in a 18 page contract in a tiny font and narrow page margins that I was handed after working at a place for 1 year. One of the clauses was that I was not to speak with, write, socialize or in any other way interact with or have contact with any employees of any competitor. The competitors were unspecified, and I complained and was given to meet with the company's attorney. He claimed the scope of the company's work was 'the IT industry" since our products were "of a general nature". I asked what happens if I talk to a competitor inadvertantly on USENET while I'm at home on the weekend reading comp-dot posts and they said "use of USENET is not consistent with your acceptance of the contract." And that was just one clause, the whole thing was full of other stuff almost as crazy. So I refused to sign and they fired me because of that. This stalled their development efforts since I was the key person working on several critical systems. Eight months later they cashed out, selling the company to a big name firm.

Tony Chang
Wednesday, April 2, 2003

I worked in a place which had the (a) clause in my hiring contract.  The job involved a lot of computer-based work.  When I asked abou it, I was told that it was to ensure we didn't do too much of the same sort of work (ie computer-based) and wind up with RSI or the like, for which the company would then be liable (in terms of compensation and rehabilitation). 

It just came down to me notifying the HR mob when I did do external work. 

Wednesday, April 2, 2003

Something that may or may not be common is for the non-compete portion of the contract to be waived if you are made redundant - my contract has this (although that's because I wrote it). While it may mean that the employer might fire you rather than offer redundancy, I suspect that if redundancies were on the cards then the employer would have more important things to worry about, and leaving themselves open to lawsuits is something companies tend to avoid.

Jamie Anstice
Wednesday, April 2, 2003

Layoffs also can hurt the enforcability of those contracts.  There is actual case law where the company who sued their former employees after a layoff lost the case based on the fact that they were laid off.  The court said that the layoff showed that the employers no longer valued the employees enough to justify the 'protection' of the non-compete clauses.

Of course, IANAL, and labor law varies with each individual state, so your mileage may vary.

T. Norman
Thursday, April 3, 2003

I might just comment on the references to seeking advice from lawyers. I have actually paid a lot of money to a top law firm, and yet I found I knew more about the issue at hand than the solicitor at that firm. I ended up writing the contract.

There must be many cases where people who go this route get superficial advice from law firms.

I have also negotiated important contracts directly with lawyers from customer firms, and again found I had a much better appreciation than they did. I get the impression they're used to the other side just agreeing when they say something, even though their claim is often wrong or inadequate.

My advice is to do your own research.

Thursday, April 3, 2003

I second the do your own research comment. I've wasted a significant amount of money dealing with lawyers who didn't know any more than I leanred myself reading a handful of NOLO press books.

Thursday, April 3, 2003

I'm a former lawyer, and I would have to say I disagree with the "skip the lawyers and do your own research" comments.  Of course, you should do your own research.  And the Nolo books are great.  But a large part of what a lawyer can provide is a good "feel" for what is legal and what isn't.  You often can't get that merely from reading the rules.

Of course, you should go to a lawyer who specializes in employment law if that's the question you've got.  Law is, if anything, an even broader field with more specialized areas than software development. 

Just as I wouldn't go to an embedded systems guy if I were looking for someone to develop a database app in VB, you should take care that the lawyer you see has some special expertise in the area you're asking questions about.  They may charge more per hour than someone else, but it will be well worth it.  Not only will you get better advice, you may well get it more cheaply because the specialist is already familiar with most of the issues and won't have to do as much research.

There is a place for general practice/small business lawyers, too.  And some of them may in fact have special expertise in employment matters.  Just make sure you check before you use them.  Ask for references, etc.  Be a good consumer.

Herbert Sitz
Thursday, April 3, 2003

Herbert, maybe you should go back into business as a lawyer. You would probably be very useful.

The lawyer I used charged $450 per hour. His firm was one of the top ones. He was supposed to be an expert in the particular field but I found his knowledge was superficial and, since then, I've noticed similar patterns more widely.

I think this whole: "you need to see a lawyer" thing is part of lawyer marketing.

Thursday, April 3, 2003

I agree with the last poster. If Herbert was my lawyer I would believe what he has to say, as he obviously has done work in the field. However, just as it is hard for a non-technical person to judge whether or not a programmer really knows what he or she claims, it is pretty hard for a non-lawyer to figure out whether or not the "small business specialist" lawyer knows what he is talking about until after they receive the bill...

Thursday, April 3, 2003

Well, I agree that it is difficult for laypeople to know what lawyer they can trust. 

But it's no more difficult than it is for a businessperson who's trying to hire a programmer/consultant for their newest programming project.  It's dreadfully easy for programmers to deceive potential clients regarding their actual abilities, and many do.  The potential clients could protect themselves by asking for references of past work and checking them out.  The same thing can be done by people who are looking to consult a lawyer.

I actually don't have any expertise in employment law.  But I know enough to be able to identify the important issues.  I haven't had to consult a legal expert yet on employment issues, but when I have the need I will definitely consult a lawyer.  It will be a bit easier for me since I have friends in the business and more knowledge than most people about how the law business works.  But really I won't do anything different from what everybody should do:  ask for references to someone who has plenty of experience in the area where I have questions.

A lot of it is just knowing what questions are the right ones to ask.  Many areas of law are very specialized.  A good small business lawyer in a small practice, though, should have good answers for a broad variety of questions that a programmer would run across.  In most cities you should be able to get these services for not much more than $200/hour.  If you're careful and find the right lawyer, the advice will be as good or better than what you'd get from the average lawyer at a big high-priced firm, unless you're consulting a specialist in the field at a high-priced firm.  Even then, I don't really see any reason to go to a big firm with questions like this.  There are plenty of good small-practice lawyers specializing in small business issues who I'm sure deal with these kind of questions all the time, for both potential employees and potential employers.

Herbert Sitz
Friday, April 4, 2003

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