Legal Break: From Banker To Entrepreneur

Okay. Hold your horses. Before you decide to jump ship and join/start that TexMex text delivery service, here's a few things to check with your employment contract to avoid a court summons, and make a CLEAN legal break from your old job.

Many employment contracts contain provisions that can make it difficult for entrepreneurs to pursue their startups unfettered. - Stephanie Singer, WilmerHale (Law Firm)

Three Common Places Where People Find Run-Ins Are:

• Intellectual Property
• Competition
• Solicitation

-Explanation-

Intellectual Property:

Assignment of intellectual property, also called “assignment of invention,” ensures that the ideas, discoveries and techniques that you developed for your employer remain the property of the company

For example, if you developed a clever data-mining tool as part of your job, you can’t use that same technology in your startup. It’s the property of your employer. This typically includes any work you did during working hours or using company technology or property

But, some of your airtight clauses could assert that ANY work you did on ANY device during your employment is the property of the company.

The key is to make sure the idea behind your startup is not part of an idea, or based on any technology or other intellectual property, that you assigned to your current employer. If it is, you either need to come up with another idea or ask your employer for permission to pursue it.

Non-Competition:

This usually is the most common issue of the three run-ins, and involves the non-competition clauses.

Non-Competition clauses restrict an employee from starting a business that competes with the employer. They usually extend for one year after employment ends and cover the geographic area in which the company operates.

The challenging aspect of non-compete clauses is determining what constitutes competition. Usually the agreement will contain a description of your employer’s business or industry.

So, think thoroughly of the sector you plan to enter with your proposed startup and review the non-compete clauses. Could they make a credible case that your venture would compete with the company?

Solicitation

Non-Solicitation clauses prohibit you from soliciting employees or customers of your employer. Some agreements go a step further and prohibit the hiring of any employees. This means that if an employee decides to apply to a job at your company, even without any overtures from you, you could be found in violation of that agreement if you hire that employee.

Likely this means you can't take off with a few buddies from your old job if you signed an employment contract containing this clause.

The positive though, is that this clause usually is restricted to a short amount of time.

Wrap-Up

Just to finish this off, if you do find yourself in a rough place while trying to jump ship and take a shot at entrepreneurship, try these solutions:

Determine if the language is overly broad or vague.
Examine your state’s laws.
Ask your employer for a waiver.

Remember though, I'm not a lawyer and this post shouldn't take the place of any real legal advice.