Whenever someone plays a role in your business, there are certain topics that frequently become relevant to their service. Probably the most common among these personnel issues are confidentiality and noncompetition. Quite simply, confidentiality provisions instruct your representatives to maintain your company’s nonpublic information in strict confidence, and noncompete clauses prohibit these persons from competing with your business once they depart. See Sample Confidentiality Agreement (NDA) and Understanding Noncompete Agreements for more information.
In addition to the prominent concerns of confidentiality and noncompetition, other personnel matters that commonly arise are non-solicitation, non-disparagement, the protection of proprietary rights, and the return of company property. This article will provide standard contract language for these other personnel provisions.
Whenever your company enters into a contract with a representative, the personnel provisions that you choose to include in that contract will depend on that person’s particular role in your company and the specific interests you want protect. For example, if you’re entering into an agreement with an independent contractor who is in an entirely different field of business than you, a non-solicitation provision will likely be unnecessary because you probably don’t have employees with skills that would be useful to the contractor. Here are the most common examples of business representatives where you may want the protection of one of more of the personnel provisions covered in this article: employees, former employees, independent contractors, brokers, and volunteers.
Always remember that any contract including one or more of the personnel provisions must also include remedies and consequences that effectively incentivize the representative to comply with those provisions. In addition, you may need to tailor or change the language of the provision to fit your particular circumstance.
Simply put, a non-solicitation provision prohibits a resigning or terminated employee or contractor from poaching personnel vital to your company’s business. The following is a standard provision:
“Non-Solicitation. The [Employee] further agrees that at all times following the date hereof, the [Employee] shall not in any capacity, either separately or in association with others: (i) employ, engage or solicit for employment or engagement, or endeavor in any way to entice away from employment or engagement with the Company or its affiliates, any employee or contractor of the Company or its affiliates, nor (ii) solicit, induce or influence any supplier, customer, agent, client, consultant or other person or entity that has a business relationship with the Company to discontinue, reduce or modify such relationship with the Company.”
Your workforce likely includes people who either have exceptional skills or accrued years of institutional knowledge regarding your business operations, and, as a result, these persons would be difficult (or nearly impossible) to readily replace. It’s quite possible that a departing employee or contractor has cultivated strong relationships with one or more of these valued colleagues or co-workers. As such, a non-solicitation provision can be vitally important, because you want to prevent your departing employee or contractor from taking advantage of these relationships by influencing these people to leave your company for another opportunity.
A non-disparagement clause specifically enjoins a departing employee or contractor from making any statements that could possibly either harm your company’s goodwill or malign you or your business. Here is some standard language:
“No Disparagement or Misappropriation. At no time (i.e., indefinitely) following the Effective Date shall the [Employee] (i) make any statements, or take any other actions whatsoever, to disparage, defame, sully or compromise the goodwill, name, brand or reputation of the Company or any of its affiliates (collectively, the “Company Goodwill”) or (ii) commit any other action that could likely injure, hinder or interfere with the Business, business relationships or Company Goodwill of the Company or its affiliates. The [Employee] hereby represents and warrants that, prior to the Effective Date, the [Employee] has not committed any of the foregoing actions described in this Section [__].”
Note that it is helpful to include the last sentence above because it compels the departing representative to disclose any problematic statements that they might have made about you or your company prior to the effective date of the agreement.
People often confuse confidentiality provisions with proprietary rights protection. For this reason, companies often omit proprietary rights provisions in their agreements with personnel. However, if pertinent to your business, the protection of proprietary rights is a separate, distinct, and critically important matter that your agreements should always cover, particularly if your business has a vested interest in protecting the ownership of its intellectual property (IP) and trade secrets. A proprietary rights provision establishes that the company automatically owns any IP or inventions that its representatives create in connection with their service to the company.
Here is a standard provision that is intended to comprehensively protect your company’s proprietary rights:
“Proprietary Rights and Goodwill. The [Employee] acknowledges and agrees that all know-how, documents, reports, plans, proposals, marketing and sales plans, client lists, client files, trade secrets and any materials or Intellectual Property (as defined below) made or developed by the [Employee] or by the Company (collectively, “Proprietary Information”) are the property of the Company and shall not be used by the [Employee] in any way adverse to the Company’s interests. The [Employee] shall not deliver, reproduce or in any way allow such Proprietary Information to be delivered or used by any third party without the specific direction or consent of the Company. The [Employee] hereby assigns to the Company any rights that the [Employee] may have in any such Proprietary Information. At the Company’s request (which request the Company can make at any time, in its sole and absolute discretion), the [Employee] shall return to the Company all of its material property in the [Employee]’s possession, including any Proprietary Information. The [Employee] shall also have no right or interest in the goodwill of the Company arising from its dealings with clients and affiliates.
For the purposes of this Agreement, “Intellectual Property” shall mean all domestic and foreign patents, patent applications, trademarks, service marks and other indicia of origin, trademark and service mark registrations and applications for registrations thereof, copyrights, copyright registrations and applications for registration thereof, Internet domain names and universal resource locators, trade secrets, inventions (whether or not patentable), invention disclosures, moral and economic rights of authors and inventors (however denominated), technical data, client lists, corporate and business names, trade names, trade dress, brand names, know-how, show-how, maskworks, formulae, methods (whether or not patentable), designs, processes, procedures, technology, source codes, object codes, computer software programs, databases, data collectors and other proprietary information or material of any type, whether written or unwritten (and all goodwill associated with, and all derivatives, improvements and refinements of, any of the foregoing).”
While the clauses above are intended to be broad and encompassing, you should read them carefully and add any additional language that you might deem necessary to safeguard your company’s proprietary rights. In particular, technology companies might have specific interests that they want to add to the language above, even if to do so might seem redundant or overly-cautious. It’s better to be safe than sorry.
Note that you can also invoke proprietary rights protection in agreements that cover other contractual arrangements. For example, the above provisions can sometimes be useful in connection with certain service provider agreements, depending on the nature of the service (see How to Draft a Service Agreement).
Your employees, contractors, and other representatives commonly come into contact with, and make use of, company property in connection with the performance of their duties. In times past, it might’ve been the case that when a representative was terminated, that person might sneak away with some random office items (highlighters, pens, paperclips, and the like), and you wouldn’t necessarily care about these minor infractions. However, given recent technological advances, employees can steal away with terabytes of company data using inconspicuous, portable hard drives. The following is a provision that puts your representatives on notice that they must return all company property when they leave your business:
“Vacation of Premises and Return of Property. The [Employee] acknowledges that, upon termination, the [Employee] shall vacate the Company’s premises and remove all personal property therefrom and shall not be entitled to further access to the Company’s premises. By signing this Agreement, the [Employee] covenants that, as soon as possible following termination, the [Employee] shall return all of the Company’s property, including (without limitation) all equipment, documents, memos, keys, disks, drives, and files, and that the [Employee] shall not retain copies or duplicates of same.”
Note that for those employees or contractors to whom you either owe a severance payment, an outstanding debt, a settlement, or some other obligation, you can use that leverage to ensure that the representative has fully satisfied the provision above, and returned all company property, before your company makes any such payments.