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Episode Date: December 10, 2020
- An at-will employment agreement, which contains IP assignment and confidentiality provisions, should be signed by all employees before they start working for you.
- A fair number of lawsuits arise simply because people's emotions get heated. If you can avoid that and be reasonable, you're likely going to end up in a better position from a dispute perspective.
- In the fundraising process, the company will need to mention any lawsuits pending, threatened, or reasonable belief that any one of those is coming their way. A good framework is to over disclose, including things you aren't legally obligated to disclose.
- If you mess up with the basics of an employment agreement, you have someone on the other side, the employee, who will feel wronged and take action.
- Handshake, verbal, or email agreements can lead to "she-said he-said" situations. Properly drafted and signed agreements are critical.
- Offer letters are usually the first document you will put in front of a potential candidate. It lays out the basic terms so you are on the same page regarding the salary, equity, and bonus of the candidate. At the end of the day, it's kind of like a term sheet to get you to the next step, but the offer letter isn't necessary.
- An at-will employment agreement is what you really need to care about. It means you can leave at any time and the employer can fire you at any time. No advance notice is required, but state-by-state employment laws vary. If you include a provision that is not acceptable according to a specific state's employment law, you jeopardize the enforceability of the agreement. This is governed by where the employee is located, not where the company is located.
- This document will have your confidentiality provisions and most importantly your IP assignment provisions. You need to have your employees sign this on the very first day that they start. If they create IP for you before signing it, the default is that they own that IP, not the company.
- Investors will ask for these.
- IP includes trademarks, patents, code, copywriting, and even ideas.
- When it comes to co-founders or key employees, if they decide to leave the company or you fire them, you can give them an exit agreement with a reminder of the IP assignment agreement and confidentiality agreements they signed. Most companies don't have the average employee sign exit agreements because it's not enforceable unless you give them some sort of consideration, like letting them vest more shares or giving them a cash payment.
- Let's say you're working from home, take a break during work hours, and decide to put together a business plan for a side hustle. Chances are that IP will belong to your employer.
- If you want to do a side-hustle, do it on your own time, on your own equipment, and make sure it has nothing to do with your current employer.
- Investors are going to run from you if you're being sued by your former employer when you leave to start a company. Leave on good terms, don't burn bridges.
- Usually, there's a non-solicit agreement that prevents a former employee from poaching people from their former employer, at least for a period of time. However, if someone joins them after learning about the opportunity through a publicly available ad, not directly promoted to them, then the non-solicit agreement doesn't apply.
- If two or more employees want to leave to start a company together, they should speak to their employer. They should make it clear that none of them solicited each other but that they want to work on this idea together. Very often, the employer will be supportive. The key is communication and good-faith behavior.