Making the Most of Your Employment Agreements

Presented at ENG on March 30, 2006

by Daniel Felix

Summarized by John Marcus

jmarcus@w9dg.com

Statistics Show that people sign employment agreements without reading them.  Illinois is an “At Will” state; you can be fired for any legal reason.  There are many myths about employment contracts.  How to dissect and read an employment contract is important and requires attention to detail.  A contract is a really negotiation tool, not a means to win a dispute.  An employment manual is not an agreement.  There is a difference between mediation and arbitration.

Daniel started the meeting by passing out a confidentiality agreement, which stated that no one would copy or discuss any part of his meeting, to see how many people would blindly agree to his terms.  Everyone quickly realized that since this was a talk involving employment agreement, it was a tool for gaining our attention.  However, Daniel pointed out that in the real world, many people blindly sign ridiculous employment agreements.  Agreements that prevent a salesman from keeping his rolodex or preventing a person from working in the same line of business for a year go beyond the taking of intellectual property or sharing of company secrets and should be evaluated more carefully.  Agreements are “tools for negotiation” and may be altered.  Feel free to strike out statements that do not apply to the situation or cause a problem.  Negotiate and re-negotiate these agreements until they are reasonable.  Do not believe the statement, “it is a standard contract”.

Illinois is an “At Will State”, meaning that an employer may fire you for any reason that is within legally recognized limits.  Questions were raised about interstate and global issues of employment agreements and policies.  Daniel pointed out that typically these contracts can be very difficult to follow.  However most likely, an employee is bound by the contract issued in or for the state in which they were hired.  There were questions about international agreements; however again, Daniel indicated that the enforceable parts of the contract may be limited to the hiring location of the company or that part of the company within your state.  Interstate or global contracts are extremely difficult to properly interpret and went beyond the scope of the presentation.

There are many myths about employment agreements.  Daniel mentioned a few and periodically referred to them throughout his presentation. 

1. If I can do my job, I cannot be fired.  This is false, as in Illinois, a company can fire you for any legal reason.
2. I cannot negotiate a form or standard contract or my severance package.  This is false, as all agreements can be negotiated.  There is no such thing as a standard contract.  Severance packages can be negotiated.
3. Monetary value of a job is solely within the salary.  This is false, as education, training and access all add value to the job.
4. Non-Compete agreements are enforceable.  True.  Most non-compete agreements in Illinois are enforceable and should be read very carefully.  A well written non-compete agreement is enforceable and can be dangerous to you as an employee.

Non-Compete means relationship portability.  Money or value is hidden within this type of agreement.  There are 3 areas that are covered in a Non-Compete agreement.

1. personnel
1. Team
2. Clients (current or prospects) – there may be some wiggle room here
3. Suppliers
4. Rolodex
2. competing work
3. confidentiality

An example of a Non-Compete may be the formula of Coke or other trade secrets.  Confidentiality agreements may be broad.  They would include financial operations and procedures. 

In trying to interpret and understand a contract it is important to dissect its parts.  A key here is to look for the nouns and verbs and “parse them out”.   Keep in mind, than an employment agreement is a “tool for negotiation”, not to help win a battle.  “Being right does not win”, but it can give you the leverage to negotiate, as Daniel put it.  If you would like to use agreements to win disputes, be prepared to shell out $50,000 for a lawyer.  Even then you may not win.

Other important thoughts:

• Intellectual property rights
• Not just for inventors.
• Commissions
• You may loose a commission if you receive a pink slip after the close of the deal.  Get it in writing that commissions are paid to you even after termination.
• Lack of Clarity
• Pro-rating, bonuses at the end of the year
• Dispute resolution
• Mediation Vs. Arbitration
• Mediation is like a marriage counselor.  It involves an independent 3rd party.
• Arbitration is an arbitrary, privatized trial.  It requires payment, is binding and leaves no room for appeal.
• Agreement auto-renewals
• Termination / Severance

Do not blindly sign agreements, read them thoroughly and take time to think about them.  Ask to take them home and read them further.  Some companies do not ask for them back and it is just a matter of routine to pass them out.  You can be fired for any legal reason in Illinois.  There is no “standard” agreement and all agreements can be negotiated.  An agreement is a tool for negotiation, not for winning disputes.  If the agreement is complex, look at nouns and verbs to dissect it and remember an employment manual is a guide, not an agreement.

Hand-outs and extras:

• Mock Non Compete.pdf
• 8 ways money left on the table handout.pdf
• topic check list.pdf