Work Relationship Agreements and Intellectual Property Considerations
Regardless of industry or business practice, relationships between employers and employees, firms and consultants, independent contractors and contractees–or all of the above–will almost certainly be a substantial portion of any business activity. Employment matters are far reaching, and implicate diverse issues such as negotiations, breach of contract, contracting with third parties, confidentiality, employee policies and procedures, and intellectual property protections. In order to provide our clients with adequate protection in all business relationships, we at Neek Law Firm take the time and effort to ensure each of these relationships and obligations are well-documented in a way that addresses our clients’ needs going forward. In doing so, we help clients to avoid distracting and disruptive employment issues moving forward. At Neek Law Firm, we offer legal services in the following areas:
- Employment Agreements and Policies, including:
- Offer Letter as Contract of Employment
- Executive Employee
- Managerial Employee
- Salesperson and Commission Agreements
- Notice of Contract Renewal
- Notice of Breach of Employment Agreements
- Termination Agreements
- Employment Handbooks, Policies and Procedures
- Consulting Agreements
- Independent Contractor Agreements
- Intellectual Property and Work-For-Hire Considerations, including:
- Non-Disclosure Agreements
- Confidentiality Agreements
- Work-for-Hire & Fall-Back Assignment Agreements
- Inventions and Proprietary Rights Agreements
- Founder’s IP Assignment Agreements
For a more detailed explanation of work related matters and considerations, please see below descriptions:
Employment agreements can take a number of forms, each with its own unique implications and challenges. At Neek Law Firm, we have the experience with a broad range of such contracts, and can assist clients in structuring employment agreements in most any context. To gain a better understanding of how employment contracts function, we have provided additional information below, including the relevant matters to consider in a variety of employment contexts.
*Note that though Non-Disclosure Agreements, Work for Hire Provisions, and Intellectual Property Assignment Provisions are most often included within an employment agreement, they are discussed separately in our practice section on intellectual property.
More often than not, employees are hired on an “at will” basis, and may never sign an actual contract. Though these employees may, technically, be released by their firms at any time, there are several laws in existence preventing certain termination practices (particularly in California). Frequently, an at-will employee may sign a standard form agreement, perhaps a non-disclosure agreement, and any other waivers the employer may require. However, depending on the specifics of a given scenario, those agreements and waivers may or may not be valid as a matter of law. To avoid any such issues, Neek Law Firm can help make sure that the at-will clause is clear and well-noted in the employment agreement.
For our employer clients looking to draft a standardized employment agreement and accompanying provisions, we cannot emphasize enough, how important it is to take the time to carefully tailor one’s employment contract to his or her business. Neek Law Firm specialize in drafting employment agreements with an eye towards the future of our client’s business, and in doing so, we help our clients to avoid costly and disruptive employment disputes moving forward.
As for clients on the other side of the negotiating table, we strongly encourage to have Neek Law Firm review any relevant documentation before a client brings any potential issues to his or her employer’s attention. Particularly where agreeing to or waiving one’s right to something is a condition of employment, California law offers substantial opportunities for recovery if that condition is found to be against the law. However, in the case that an employee does not take the time to read and understand an employment contract prior to agreeing to employment terms, he or she may be bound to those terms.
Employment Agreements with Negotiated Term
In certain situations, it may make more sense for the parties to actually negotiate and draft a contract unique to the hiring of the new employee. This is particularly likely where the employee is an executive officer or some other critical officer in the business—anyone who might have substantial bargaining power against ownership. These agreements will generally layout the term of employment, the amount the employee will be paid, any intellectual property assignments or other IP matters, non-disclosure or non-compete conditions, and the terms of terminating employment (by either party). They will often include provisions such as:
- Duties and Responsibilities of the Employee
- Monetary Compensation
- Employee Benefits
- Reimbursement of Expenses
- Inventions and Patent Rights
- Non-competition and Use of Confidential Information
- Term and Contract Renewal
- Termination of Contract
- Arbitration Clause or other Dispute Resolutions
Because, particularly in California, employment disputes have become increasingly litigated issues, Neek Law Firm encourage our clients to take time and care when drafting employment contracts. We have dealt with employment agreements and arrangements of all varieties–whether assisting a client in drafting a new agreement or reviewing an agreement on behalf on an employee, we can help all parties involved to create successful and lasting employment relationships.
Generally speaking, a consulting agreement is simply a contract between two parties in which one agrees to pay the other in exchange for some type of consulting services, whether those be related to technology, finance, or otherwise.
While the broad term “consulting agreements” covers a wide range of different contract types between a variety of consultants and their respective clientele, most of these agreements do share some key similarities. Much like an independent contractor agreement, a consultant is not an employee, and the contract must be structured to acknowledge that fact. Usually, a consultant will be granted access to secure and private information of a firm, and those firms need to be sure that that information is safe and will not be used inappropriately. Similarly, many consultants have their own proprietary processes, software, or other private and distinguishing characteristics, and those consultants need to be sure to protect themselves from any inappropriate information leaks; failing to do so could compromise a consultant’s business and can create legal liability.
Independent Contractor Agreements
An independent contractor agreement is a contract struck between a firm and a third party in which the third party agrees to perform certain services on behalf of the firm in exchange for certain compensation, but does not officially become an employee of that firm. Many businesses choose to maintain their work forces as independent contractors rather than as employees in order to take advantage of certain tax benefits and to avoid inclusion under certain employment law requirements. In other instances, the independent contractor agreement may represent a one-time transaction between the company and the contractor.
In either circumstance, we cannot sufficiently emphasize the importance of being particularly careful in constructing an independent contractor agreement. Though most firms tend to choose the independent contractor route in order to simplify things, if the underlying independent contractor agreement is not well contemplated, there can be serious ramifications for business owners.
For example, a successfully structured independent contractor agreement avoids inclusion under the majority of employment laws. More often than not, this means that the employer can avoid many of the regulations associated with terminating an employee, and also likely avoids having to provide any employee benefits to independent contractors. However, there are federal and local laws in place, as well as traditional common law, that functionally state that even if an independent contractor agreement is in place, a contractor may be treated as an employee under the law in certain circumstances. If a court was to make such a finding, it could open up the door for substantial tax issues and litigation between the independent contractor and the firm with which he contracted, as well as between that firm and any other independent contractors. Moreover, if a state or federal agency (including the IRS) come to the conclusion that an independent contractor should actually be treated as an employee, there may be penalties and back-taxes imposed, or the employer may be forced to further compensate the contractor.
In order to avoid the frustration and cost of an inadequate independent contractor agreement, we strongly encourage our clientele to engage our highly-qualified employment law experts. By doing so at the onset, clients can help to safeguard themselves over the course of an independent contractor arrangement.
Intellectual Property and Work-For-Hire Considerations
One of the most important aspects of employment law is ensuring that employers are adequately protected from their employees, particularly in terms of proprietary information and intellectual property. By bringing an employee into a firm, the employer is (more often than not) entrusting that employee with information that the employer would rather not be disclosed to its competitors. In the case that the employee is in an upper management position or has been responsible for the inventing or developing of proprietary information, securing such information is crucial to the success of the firm. For example, if the CFO of a firm decides to leave in order to take a position with competing firm, and is not legally bound to keep all material information learned at his original firm confidential, he could use that information to the detriment of his former employer. Likewise, an inventor may claim ownership of a new device when, in fact, that device was created while operating within the scope of the inventor’s employment. Regardless of the case, Neek Law Firm helps clients to maximize protection of information preemptively by structuring sound confidentiality and nondisclosure agreements and by including default intellectual property assignment provisions that favor the employer.
Invention Agreements: Work-for-Hire & Fall-Back Assignment Agreements
An important part of any employment, contracting, or consulting arrangement is determining exactly who owns the work that is created as a result of that arrangement. For example, a scientist working for a large pharmaceutical firm may invent a new drug. He would likely prefer to retain ownership rights to that drug; however, because he has invented it within the scope of his employment for the pharmaceutical company, that new drug and any rights associated with it are property of the company, not the scientist. This scenario is the same when a consultant or an independent contractor is hired to provide certain work product.
This type of work is referred to as “work for hire,” and encompasses most work that falls within the normal scope of an employee or consultant’s job description. Work for hire may also include any unique or one-time projects, particularly when the employer specifically asked for that project to be done.
Functionally, a work-for-hire provision (along with an NDA) serves to protect employers from employees trying to unjustly profit at the employer’s expense. For this reason, it is crucial to have a carefully-drafted and notarized work for hire provision.
In addition to work-for-hire, we at Neek Law Firm will generally include a fallback assignment provision in any work relationship agreement. This clause normally states that, in the unlikely case that a court declares that a piece of work does not fall under work for hire protection, the employee (or contractor, etc) has voluntarily agreed in writing that the employer shall retain any such property interest despite the court’s finding.
In most situations involving employment, independent contractors, underwriting, or the purchase, sale, or transfer of any substantial assets or liabilities (such as a stock sale, asset sale, or merger), there is likely to be the need for at least one, and likely several, non-disclosure agreements (“NDAs”). As discussed above, employers, independent contractors, and consultants have private or proprietary information on which the future success of their respective businesses usually depends.
For example, when a company attempts to merge with a complementary firm and begins searching for potential acquisition targets, the buyer will need to conduct due diligence on any likely candidate. This will probably include an inspection of financial records, balance sheets, income statements, a tour of the firm’s facilities, and potentially even interviews with the target firm’s employees. If the deal happens to fall through for any reason during due diligence, the buyer and the buyer’s agents will already have had access to proprietary information. If they use that information inappropriately or pass-on such information to others, it could be very damaging to the target firm. In order to prevent such an event from occurring, the target (in this case) needs to make sure to draft a comprehensive NDA and receive all of the necessary signatures before allowing a potential buyer to inspect or inspect any proprietary or confidential information. It is most certainly the best way to protect confidential information, particularly in the case of unfriendly negotiations.
Founder’s IP Assignment Agreement
Often, an IP assignment takes place in the context of a founder’s stock purchase agreement. If, for example, a founding member of a firm decides to leave, that firm (or any third party that may be buying the founder’s ownership stake) will want to ensure that any of that founder’s interest in the firm’s intellectual property are transferred. In this case, it is particularly important that the founder’s IP rights are fully transferred to the new ownership entity; those IP rights are a substantial portion of what the new ownership invested in.