Employment agreements

Noncompete agreements must be signed as a condition of employment before someone joins your firm, because there is ample judicial precedent that renders such a provision unenforceable if it is imposed on current employees as a condition of keeping their jobs. Some states, such as California, only recognize the enforceability of noncompete agreements if they are an integral part of a business acquisition contract. 

With respect to your trade secrets, the best way to keep others from using them is to establish a policy that will stand up in court, showing that you have developed a process or formulation that is not widely known and that you make a consistent effort to protect them from being disclosed to anyone not authorized to have access to them. It may be tiresome and time-consuming, but you will not get employees to treat trade secrets seriously—or convince courts that you are taking proper steps to do so—unless you take at least most, if not all, of the following steps  

With respect to this last point, do not mark everything secret or confidential, or such labeling will be obvious that this is a sham. Genuinely confidential information should always be locked up in a cabinet or drawer when it is not actually in use. Customer lists in particular cannot be considered confidential unless they would be difficult to assemble and you make a genuine effort to protect them. If you do not make a credible effort to treat your trade secrets as such, a court will not do the job for you. 

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The life of a trade secret may extend indefinitely if the owner of the secret has taken the proper steps to safeguard the iavention, in contrast to a 17-yr patent term, after which time the iavention is in the pubHc domain. TraditionaHy, trade secrets have been protected by confidentiaHty agreements, nondisclosure agreements, and employment agreements. 

The Code of Professional Responsibility of the American Bar Association, Disciplinary Rule 2-108, provides in part that a lawyer shall not be a party to or participate in a partnership or employment agreement with another lawyer that restricts the right of a lawyer to practice law after the termination of a relationship created by the agreement, except as a condition to payment of retirement benefits. DR 4-101 provides for the protection of confidences and secrets of a client presumably forever unless disclosure is necessary under conditions set forth in the fine print, as, for example, to collect his fee. Interestingly, DR 2-106 (B) (2) provides that the determination of a reasonable fee includes "the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer. A lawyer cannot serve both sides in a dispute, and taking one client may later bar lucrative employment. 

Similarly, some employment agreements in technical fields provide that a departing employee will not accept employment at variance with the interest of his previous employer for a reasonable fee for a limited period of time—say six months to a year on payment of his salary. Consider such secrecy protection in connection with the chapter on employment agreements. 

T he majority of inventions made in the United States today are made by employees of corporations. These employed inventors are required to sign written employment agreements in 98% of the cases (1). Why are such contracts so popular The common law (i.e., the law that applies if there is no written agreement) governing inventions by employees appears to be straightforward. Professor Stedman puts it this way ... 

Disputes arising over whether an employee is hired to invent in the scope of his work assignment cause the problems. Employment agreements, which vary widely from corporation to corporation, are placed before a newly hired employee to avoid these disputes. They... 

This finding contradicts Neumeyer and O Meara (2, 3) who found that most large companies, 60% of them in O Meara s evaluation, gave monetary rewards to employed inventors. Having failed to receive adequate support in another survey of employers in order to clear up the discrepancy, I have proposed that the American Chemical Society (ACS) sponsor such a survey since they possess the resources to complete it successfully. Based on the small amount of response (20%) I received in my survey, however, and on 10 other employment agreements given to me by the ACS Council Committee on Professional Relations, I have found certain common features in these agreements. 

A contract of adhesion occurs when the terms are prepared entirely for the benefit of one of the parties, and the other party does not have sufficient bargaining power to alter the terms. Today the employment agreement is a contract of adhesion. Whether it is enforceable or not depends on whether it is unconscionable. Automobile warranties, insurance contracts, and other kinds of contracts have, in some instances, been ruled unconscionable contracts of adhesion. However, I know of no case dealing with an ordinary employment agreement although there is at least one case pending which raises this issue. 

Another employment agreement has an express provision that the employee must serve faithfully and to the best of his ability and to devote his entire time, energy, and skill to promote the corporate interests. It could be argued that many every day activities of an employee do not promote the corporate interest, such as going home at five o clock even though an experiment is not completed. 

My study of employment agreements gave broadly similar results as reported in 1965 by O Meara, though a major distinction is the apparent lessening today of post-employment restrictions. That is, in 1965, 25%... 

Q. My attention has been drawn recently to an employment agreement which requires the prospective employee to sign an authorization by an employer to allow a consumer reporting agency to inquire into many personal aspects of his life. Doesn t this seem to go as a rather undue invasion of personal privacy to ask an individual to sign such an agreement This is in fulfillment of Public Law No. 91-508. 

II. Legal obligations of the employee to the employer must be clearly set forth in an employment agreement. 

For many organizations, orientation is a short, mechanical process that involves signing the employment agreement, safety indoctrination, and a review of the work rules and practices of the site and new employee s department. These are necessary functions but, if there is nothing more to orientation, the new employee may feel disappointed. When done right, orientation programs will address a variety of needs for the new employee and the organization. They help to... 

Trade secrets are created and maintained by enforcing secrecy, either by employment agreements or policies or by confidential disclosure agreements. Trade secrets are extinguished by disclosures that are inconsistent with maintaining the secrecy of the information. Violation and extinguishment of a trade secret most often occur when one who is under an obligation to the owner to maintain the secret makes an unauthorized disclosure of the secret. The information in a... 

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