in Title9 Things to Know About an

Employment Contract …before you sign it!

Professor Laura L. Hollis, JDClinical Professor of Business AdministrationSeptember 30, 2008

#1. Once you’ve signed it, the law assumes that you have read it AND that you understand it.

• Make sure you READ the contract before you sign it• If you don’t understand it, don’t sign it; get legal advice first

#2. Watch out for “attached hereto and incorporated by reference herein”

• it’s not enough to read the contract itself• other documents like an employee or personnel handbook can be made a part of the contract by reference• make sure you read those, too!

#3. What does the company own? “Shop rights” and “work for hire” clauses

• “shop right” refers to your employer’s ownership and/or right to patent anything you create, develop, or conceive of while you are in their employ• “work for hire” is a comparable provision that refers to copyright, as opposed to patent protection• these clauses are often drafted broadly – it could refer to anything you think of, dream about, discuss with someone, write down, or doodle, anytime or anyplace during your tenure with that company – even if you’re on vacation, or at home.• read these carefully to avoid disputes over ownership later

#4. “Choice of forum” clauses

• No one thinks that they’ll ever be embroiled in litigation with a current or former employer, but it does happen• one of the biggest surprises is finding out that you’re stuck litigating in a state far from where you live or work• look out for a “choice of forum” clause; this is a paragraph that indicates WHERE litigation will take place in the event of a dispute. These are common with large or multinational corporations that may have offices all over the country, but want all litigation to take place where their corporate headquarters or legal department is located, which MAY or MAY NOT be where YOU work.

#5. “Choice of law” clauses

• ditto for “choice of law” clauses, which may provide that the law of a state OTHER than the state where YOU work• this may not seem like a big deal, but it can be• the law of the state your employer has chosen to govern the contract may be much less favorable than the law of the state where YOU work and live.• “choice of forum” and “choice of law” clauses are what’s sometimes called “boilerplate” language• this is standard form language• it’s often copied from other contracts or form books• you’d be surprised how often the other party to the agreement won’t have read it, or won’t understand it

#6. A contract can bind you after you leave, too:non-disclosure agreements

• these clauses are intended to protect your employer’s intellectual property: trade secrets, customer lists, formulas, etc. • anything that is not public knowledge and which gives your employer a legitimate competitive advantage• a non-disclosure agreement prohibits you from revealing your employer’s confidential or proprietary information to anyone, at anytime• these are looked upon favorably by courts, generally speaking, and enforceable

#7. Bound and gagged, cont’d: covenants not-to-compete

• a covenant not-to-compete prohibits you from working for one of your employers’ competitors• watch out for these – they should be for a reasonable length of time, cover a reasonable geographical area, and be reasonably necessary, given your job title, responsibilities, and the access you had to confidential information while working for your former employer• courts tend to construe these provisions strictly; the argument against them is that they must not “deprive individuals of their livelihood”• BUT! some states’ laws are more favorable to employers and some are more favorable to employees (ex: Illinois)

#8. Remember: the time to negotiate is before you’ve signed the contract

• everything is negotiable• but you can’t negotiate if you don’t understand it, SOOOOOOO……

#9: I’ll say it again – READ the contract before

you sign it!!