Ayende @ Rahien

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Do you sign the default contract?

This is just something that came up recently in a mailing list, we were talking about copyright, ownership and such. The topic of who owns the code you write on your own time (and on your own machines) came up.

The opinion of some people was that the employer may own the code even under those circumstances. It seems that it isn’t usually part of the law (that depend on where you are at, of course), but it is part of standard employment contract templates.

When I started looking for a job, I insisted on taking the employment contract home and going over it with:

  • a calm mind
  • having another set of eyes go over it

I had one case of not properly reading what I was signing on with bad consequences, I learned since then.

There is no such thing as a standard contract, you can always negotiate.

For that matter, I rejected an offer from one place after verbal agreements that we reached didn’t get into the contract (twice!). I decided that if they were trying to effectively cheat me when I wasn’t even working for them, I had better things to do than to put my head into this sickbed.

Some of the things that I found in employment contracts are of the sort that would make your head curl. Non compete agreements that basically say that you are not allowed to do any work (for anyone) for 2 years after you stop working for the company. Ownership on anything you do (be in software artifacts, a book about flowers and quite possibly any children you have during your employment terms).

Some of them are unenforceable at court, but you would be at a much better position if you didn’t have to deal with annoying section in a contract that you are signed on in the first place.

My usual approach to reading contracts is to debug them, assuming that the other side is nefarious, evil, double dealing and likes kicking puppies before breakfast. Most places will go with the “Try and you shall succeed” method for contracts. If you signed on to them without complaints, they are good. If you object to something, they can amend the contract to be more reasonable. It isn’t that they are nefarious, or that they even plan to act according to the contract. But it is best if they don’t have any leverage on you.

An interesting point that I run into is that it is often useful to be bold when negotiating a contract. I deleted the non compete clause for my employment contract when I viewed it, and required a lot of clarifications about what of my work amounts to company’s property. I followed the same logic as they did, “Try and you shall succeed”, if they didn’t care about that, I was good.

We ended up with a 1 year limitation for clients that they sent me to, and agreeing that any software work that I am making on the company’s time or using their equipment belong to the company, which I considered reasonable.

Not reading the contract is a crime, once you did, be very careful in deciding what is acceptable and what isn’t. And if you are already signed on a contract, make sure that you know what is in it.

Comments

Mark
10/02/2009 11:16 PM by
Mark

I'm guessing that most of the stipulations in an employment contract are put there by (somewhat disconnected) company lawyers; after all, it's a cookie-cutter document, so there's likely room to negotiate.

Haacked
10/02/2009 11:33 PM by
Haacked

Excellent advice! It's very clear that most employees don't even know what's in their employee contract nor consider the fact that they should care and should negotiate terms.

Corey
10/02/2009 11:52 PM by
Corey

Ayende, I think it's much easier doing things as you've suggested when you're sought after. If you're just "applying for the job" then from the employers perspective why would there be any room for negotiating? I'm not disagreeing with what you've stated because the principle is sound, just not sure it applies to everyone.

Ayende Rahien
10/03/2009 12:22 AM by
Ayende Rahien

Corey,

No, it isn't.

The story that I outlined here happened in 2005, I was a nobody, no university education and had hard times getting into interviews.

If they are offering you a contract, they already got a lot invested in you anyway.

They will want you.

Steve Py
10/03/2009 01:09 AM by
Steve Py

With small business, the "boiler plate" contract typically has some pretty strange stuff I've had to see reworded or removed. Typically it's because the company is being over-protective and really doesn't know any better. The funny ones are non-compete clauses for "businesses in similar industry." (Does that mean "software"?:) Anything they attempt to get you to sign about ownership on your own time with your own equipment is completely unenforceable. It does become a brackish area if you're doing work for the company from home on your own equipment. Make sure these conditions are clear, or there are no restrictions on your own time/equipment.

Recruitment agency contracts have to be some of the worst I've seen, mainly because they should know better. Making their margins visible to all parties is difficult enough, but then when they put non-compete clauses in for 6-12 months (after finding you a 3 month contract) and trying to base it against the client, anyone who's worked for the client, anyone the client has worked for, etc. etc. etc. The key to negotiating with these types is to "play nice" but don't sign anything until the client has extended an offer. Then set your terms. Typically you won't make friends this way, but they're not about to let a sure thing walk out the door, and they're the ones that were unreasonable in the first place.

My advice to friends is that non-compete clauses are generally non-enforceable for contract roles, provided you or the client doesn't attempt to do anything underhanded. They're there to protect agencies and businesses from being short-changed. Once the negotiated contract term is complete, it's effectively open-market, especially after longer-term contracts. Clients may decide that your agency is too expensive and not competitive; after you've completed your obligated contract, non-compete clauses become an issue of restraint-of-trade. For permanent roles, the water gets brackish again...

Dan
10/03/2009 02:03 AM by
Dan

Great post, this sort of thing can get ugly if you get it wrong

Mr_Simple
10/03/2009 02:24 AM by
Mr_Simple

Once you have read it have your attorney read it. It will be the cheapest $500 you ever spent.

Of course he will advise you not to sign it, the same way we advise clients not code before doing some design work, but nonetheless, after a few sessions with attorneys you'll be doing your own markup then submitting the changes to your attorney for approval.

Of course the client wont want to sign then.

Oh well, if it was easy everyone would sign and we'd do verbal agreements too - NOT!

If you dont have a written contract dont work.

Vijay Santhanam
10/03/2009 07:46 AM by
Vijay Santhanam

I agree with this mostly, but how much you can negotiate does depend on how much you're wanted/needed. Ayende, I think you make the assumption that job seekers have any leverage. I would not doubt that the great Ayende can easily say no to unfavorable terms, but i wouldn't say this applies to everyone.

For recent graduates, i agree that it's a great idea to get a sense of standard industry terms and suggest these changes - like 2 years non compete sounds excessive to me. .. really excessive.

firefly
10/03/2009 08:24 AM by
firefly

Just something to add... being single also help. Because the right company will always come along, especially if you got the right skills. Having a family to feed take away a lot of room for negotiation.

CBP
10/03/2009 08:34 AM by
CBP

By the time you are presented with an employment contract, you already have the job. It would be very unusual for you not to be able to negotiate the fine print of the contract at this stage. If the company is going to be a dick about it, then you probably don't want to work there anyway.

I had to cross off a portion of my contract that stated I couldn't do any work for a business 'of the same nature' as my current business for 5 years after leaving the company. Pretty ridiculous when you think about it. Once I pointed it out, the employer happily scratched it.

yel
10/03/2009 08:40 AM by
yel

From the point of view of a company that will be doing a financing soon or is looking to be acquired, there is a lot to like about everybody having signed the same employment contract... it just means a lot less explaining has to be done come due diligence. Nobody will care about the details, it'll just be another red flag on a lawyer's list. And it'll be about "ownership of IP", so it'll be a big red flag.

Ayende Rahien
10/03/2009 09:21 AM by
Ayende Rahien

Vijay,

By the time a business makes you an offer, they already spent a LOT of time & money on the deal.

You have leverage.

And beside, it is better not to walk into a trap

Vijay Santhanam
10/03/2009 09:37 AM by
Vijay Santhanam

"By the time a business makes you an offer, they already spent a LOT of time & money on the deal."

In my experience, I don't think middle managers always rationalize things this way. It may be true, but going through fuss for junior guys isn't worth the effort. It all depends on the experience of the applicant and the importance of the position.

I totally agree that many developers don't look at their contract in enough detail and don't look at clauses in the context of A:what's industry standard, B:what's fair (by their own conscience/rationalization). I've been in a situation before where I was so thrilled at the job offer I signed anything. Learning to tame the emotion in negotiations is tough, and is very good advice.

Overall, this is an important message to give IT grads and job seekers in general. I'll definitely spread it.

Michael Langford
10/03/2009 10:17 AM by
Michael Langford

If you don't own what you do off company property, you aren't being paid enough. If they aren't paying you 3x what you'd make anywhere else, never sign something that gives them everything you do out of the office, on your own time.

And non-competes? Please make sure they are reasonable.

Bunter
10/03/2009 12:13 PM by
Bunter

I wonder in what country is it possible (legal) for the company to own what you do on your free time?

Frans Bouma
10/03/2009 12:35 PM by
Frans Bouma

It's a bit problematic. For example in the netherlands, if a section in the contract violates a law, it's not valid, the rest still is. It's however hard for a non-lawyer to determine which sections are not valid and which are.

Indeed, if you're not agreeing with a passage, negotiate or bail out.

For ISV owners: always sign a contract with source contributors that they hand you the full copyright, if you're planning to sell the code or the compiled form. Several cases are known where years later the original author filed a suit against the ISV that it infringed their copyright and won. Don't think/assume it's all right or covered by a law (it's not), legally transfer it with a contract.

Michael Levy
10/03/2009 02:13 PM by
Michael Levy

Good advice and the same can be said about your insurance policy. Most people don't read their policies and are then very surprised when an incident is not covered.

Steve Py
10/04/2009 10:27 AM by
Steve Py

As a graduate you can't expect to have much leverage, but you should still take responsibility to ensure you aren't signing yourself into a difficult situation. The simple question is: If they're insisting on setting things up to intimidate and possibly exploit you, is it really somewhere you want to work?

In these economic times, a bird in the hand is better than nothing, but honestly, more businesses are out there that won't be expecting a pound of flesh.

Ayende Rahien
10/06/2009 09:49 AM by
Ayende Rahien

Once you get an offer, the company put a LOT of time & money into searching a person.

That is a lot of leverage.

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