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Canadian Employment Issues (Page 4)
DISCLAIMER The information provided here is of a general nature and may not apply to any specific or particular situation. It is not to be considered as a legal advice nor presumed to be indefinitely up to date.
Defense is the best offense in the non compete arena, and litigation is usually a last resort. Litigation diverts management's attention, and it is almost always expensive. A well crafted non compete agreement may discourage employees from violating the agreement without the need for a court battle. As a supplement to a company's non compete, a company may defer compensation (e.g., stock payments or salary) to encourage the employee to remain with the company until the salary accrues or the stock vests. Moreover, such agreements can include forfeiture clauses where employees lose compensation if they leave to work for a competitor.
Appropriately styling a non compete clause is the first step toward assuring judicial enforcement. Judges are more likely to view an employer's non compete language in a positive light if the actual proscribed activity is defined with precision, such as "Covenant not to Misappropriate Proprietary Information." Drafting with precision normally demonstrates to a judge that the employer's goal is to protect its property interests rather than to punish an employee who decides to leave.
Work for Hire and Assignment of Rights Agreements
Because intellectual property is usually central to an entrepreneur's business plan, it must be protected prudently. Pre employment work for hire and assignment of rights agreements do that by ensuring any copyrightable or patentable work product produced during the course of employment is, and remains, the employer's property. Failure to protect the company's intellectual property could result in losing it entirely or having to purchase a license from the employee owner.In both situations, the financial future of the company may be severelycompromised.
Copyright law provides statutory protection for employers and businesses that specifically hire a contractor to develop a work. For start ups, because software is copyrightable, a business must eliminate any ambiguities by having a contract provision assigning any copyrights to the employer before the employee or contractor begins services. Otherwise, the contractor or consultant has a claim to the work performed.
Assignment of rights provisions are important in consulting relationships and in employer employee relationships. In virtually all venture backed start ups, employees are required to assign to the employer all rights to any invention or patent. Such agreements are often found in the research and development (R&D) business sector. Especially for emerging biotech and information based companies, solid assignment of rights provisions ensure that the intellectual property developed remains with the company.