Things to Know About an Employment Contract

When you're contracting for various companies you will find that its quite normal to sign NDA'a and various confidentiality agreements,  along with your own contract. Within this will be various restrictions, covenants and terms that you need to know about. Read our fast guide for an insights in contract jargon.

Contract terms explained

1)      Once you’ve signed a contract, the law assumes that you have read it and that you understand it.

So one of the most important tips is to make sure you read the contract before you sign it and if you don’t understand it completely, you mustn’t sign it. In this case you should find legal advice first. You would be surprised on how many people sign contracts without reading them. 

2)      Watch out for phrases like “attached” “hereto” and/or “incorporated by”

Often it’s not enough to read the contract itself. Sometimes other documents like employee or personnel handbooks will be made a part of the contract by reference. That is why it is so important to make sure you read those as well. 

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

A “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 are on vacation or at home! 

It is important to read these carefully as well to avoid disputes over ownership rights later. 

4)      “Choice of forum” clauses

These are the clauses that most individuals don’t understand or don’t even read them. No one ever thinks 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” clause

Ditto for what is called a “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 language, 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. In other words your employer will try to protect 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)      Let’s contrast that with what we call “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 construct these provisions strictly; the argument against them is that they must not “deprive individuals of their livelihood”.

8)      One of the most important tips is to remember that the time to negotiate any kind of contract is BEFORE you’ve signed it!

Believe it or not- everything is negotiable, but you can’t negotiate if you don’t understand it. That is what brings us to the ninth point, which is the same as the first one:

9) READ THE CONTRACT BEFORE YOU SIGN IT!

The best advice we can give to you, is to get professional advice when signing any contract that could effect you negatively, most solicitors will offer you a free consultation, but a few dollars spent could save you thousands.