A friend recently asked me about his employment situation, and it’s worth sharing. Given that:
- “Jon” has a great relationship with his boss, the CEO.
- Jon wants to start his own company, and he told the CEO about it.
- The CEO said, “Do it and best of luck, but please stay with us while you get the new project off the ground.”
What should Jon do?
He did the right thing, which was to actually read his employment agreement.
This is the second “right thing” that Jon did, since he was absolutely right to discuss his plans openly instead of trying to pull something sneaky. Sneakiness can lead to years of hard work, only to have someone swoop in later and claim ownership of everything. Or, since life rarely resembles courtroom dramas, sneakiness could just lead to getting fired.
But back to the contract. Like a lot of developers, Jon’s contract has a “work-for-hire” clause. This means that any work product created during the term of the employment belongs to the company, even if it’s created on personal time in international waters on Jon’s personal laptop. This particular “work-for-hire” clause was not wholly draconian because it was limited to work product “related to the business of the company.”
Jon and his boss agreed verbally that his proposed start-up (an iPhone app) was unrelated to the employer (which does online gaming). But what happens when:
- One year later, Jon’s iPhone app is a raging success.
- Jon’s former company gets acquired by a private equity firm.
- While having a drink with his new bosses/buddies, the nice CEO brags, “You know, that app was created by a guy who used to work for me. Great guy.”
- The private equity firm calls their lawyers.
- Now Jon is paying to defend a lawsuit, and the 60-year-old judge has no idea how an iPhone app is different from online gaming. Is the app “related to the business of the company”? Bring on the lawyers!
Solution: Shoot a low-key e-mail confirming that the iPhone app isn’t related. When the CEO responds, his green-light is a contractual interpretation of the clause “related to the business of the company” that (1) was made by a director or officer who has the power to bind the company and (2) was communicated in writing. Easy, clear, painless.
Print and keep the e-mail. If anyone ever digs up the issue, Jon stays out of court and the nice CEO stays out of a tough spot.
Moral of the story: Clear, honest communication is good policy, and clear communication in writing is the best lawsuit repellent.
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