What to Look For in an Employment Contract with a Startup Company?

A recent LawTrades user asked: What Are Important Points for an Employee to Pay Attention in an Employment Contract with a Startup Company?

You should consider having a professional review your document (that was likely written by your employer’s attorney) as negative terms in the agreement can really affect your career for years. If you’re in a time sensitive situation or simply cannot hire an attorney at this point, then I’ll try and provide you with some “important points” to look for:

Invention assignment clause. This provision basically states that anything you create during your employment is the property of your employer. However, in order for the clause to be enforceable, the product usually has to be: (1) within the scope of your employment; (2) completed while working for your employer or with your employer’s facilities, resources, or other proprietary material owned by them; or (3) competitive with your employer’s current or reasonably calculated line of business.

Non-compete agreement (NCA). The clause will restrict you from working in the same industry from that of your current employer. It’s important to note that courts generally strike down overly broad NCAs. To assess the enforceability of your agreement, courts will look at the industry scope, duration, and geographic scope. Similar to NCAs, look for a non-disclosure agreement. This also tries to protect your employer’s trade secrets by limiting your ability to talk about your employer’s methods and products.

Compensation clause. Bootstrapped startups continue to come up with creative ways to pay their employees. The language will often be confusing to a layperson, who is typically used to seeing a hourly/salary rate. If your contract includes a stock option or grant of equity then you should certainly seek legal advice as to the tax and legal implications of the arrangement.

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