By Emmie Martin, Business Insider
The pile of paperwork that comes with starting a new job may be overwhelming, but it’s imperative that you read the fine print.
When signing a new contract, phrases such as “non-solicit of
employees” or “noncompete” may look like standard legal jargon, but
these clauses can restrict where you work or who you can hire at your
next position if you’re not aware. According to Brad Newman, chair of
Paul Hastings’ International Employee Mobility and Trade Secret
practice, and author of “Protecting Intellectual Property in the Age of
Employee Mobility: Forms and Analysis,” clauses that restrict your
options when you leave a position are the most important ones to look
out for when signing a new contract. “If you don’t look at this on the
way into your job, it’s oftentimes too late on the way out,” he says.
Clauses such as these, aimed at protecting companies’ intellectual
property, are becoming increasingly common in employment contracts to
ensure that when employees depart, they don’t take confidential
information. “It’s never been easier from the technological standpoint
to take data inadvertently or intentionally,” Newman says. However, if
you sign a contract without reading these clauses carefully, you could
be complying to something you don’t agree with.
Newman suggests every employee understand restrictive clauses before
signing — and negotiating anything they aren’t on board with. “It’s very
much like sports teams going after the best players,” he says. “If
you’re that player right now, you can negotiate a very lucrative
contract for yourself, provided you haven’t signed anything that
prohibits you from doing it.”
Look for these four key clauses before signing your next contract — and make sure you understand the implications of each:
1. Noncompete clause
Noncompete clauses prohibit employees from working for a competitor for a
certain length of time or in a certain geographical area after leaving
their current jobs. Companies include these to protect confidential
projects or information, but they can end up hindering you from being
able to move positions or leave a job you don’t like if you don’t read
the specifications carefully. “The company wants it to be as long and
broad as possible, and the employee wants it to be as short and narrow
as possible,” Newman says. He recommends negotiating to tighten
noncompete clauses in order to give yourself more potential for job
mobility and prevent you from trying to sign a new contract, only to
realize you’re barred from working in a related field for a year.
2. Non-solicit of employees
When you leave your employer, you may want to continue to work with the
best people from your old company, Newman says. However, non-solicit
agreements restrict employees from poaching former co-workers or clients
from their previous job after transferring companies. These clauses
ensure that businesses won’t lose all their top people to a competitor
at once, but can hurt you if you try to hire a former co-worker or
entice a friend to join you after starting your own business.
3. No-hire
Similar to non-solicit clauses, no-hire agreements prevent you from
hiring people who have worked for competitors, such as if someone were
to call you after you leave and try to get a job at your new company.
These clauses became controversial after several software companies,
including Apple and Google, allegedly used them to keep wages
artificially low. Signing a contract with this clause in it can restrict
your job mobility by automatically making certain companies unable to
hire you.
4. Invention assignment agreement
Invention assignment agreements require new hires to disclose any
inventions they created before starting their employment at a new
company. These clauses protect companies from losing patents by
preventing employees from taking projects they worked on to a rival, but
can also allow them to claim ownership of your original work. “If you,
the employee, is somebody who thinks you’re going to come up with an
improvement or invention, you should disclose what you’ve already done
beforehand so that there’s no issue of who owns what you’ve already
done,” Newman says.
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