Employment Contracts

Tuesday November 15, 2016

Employment Contracts

Speakers: • Margaret H. Paget, Founder and Partner, Kurker Paget,

LLC • Timothy P. Van Dyck, Partner, Bowditch & Dewey, LLP • Colleen Wilson, MBA, Vice President, Human Resources,

Chiasma, Inc. Moderator: • Mike Biro, PhD, MS, Senior Counsel, CRISPR

Therapeutics • Lindsay Manning Burke, Litigation Attorney, Kenney &

Sams, P.C.

Negotiating the Employment Relationship

November 15, 2016

Margaret H. Paget, Partner, Kurker Paget LLC Timothy P. Van Dyck, Partner, Bowditch & Dewey, LLP Colleen Wilson, Vice President Human Resources, Chiasma

Nature of the Employment Relationship: The Interview Process – Do’s and Don’ts

• Interviews are very important. It is the “first impression” on both sides (employer and potential employee).

• It is a “2-way” process – can the candidate see themselves working at the company and vice-versa.

“Do’s” when Interviewing • As the hiring manager or interviewer, your goal is to

assess the candidate’s ability to perform the job you are hiring for.

• Ask questions related to past work experience and education that would help you to predict if the candidate can do the job. – Behavioral-based interview questions are the best way obtain this

information. – Example: if trying to assess a candidate’s ability to collaborate with

others, you could ask: Describe a situation where you had to work with someone with whom you did not get along. What happened?

– A candidate’s past behaviors are the best predictor of how they might behave if they worked at your company.

• Fit with the company culture is important. Ask questions to assess if the candidate can exemplify the company’s values and support the mission of the company.

“Don’ts” When Interviewing • To avoid the appearance of discrimination

during interviews, do not ask questions on the following topics (list is not exhaustive): – age, marital status, number of children or family

planning, home life, religious preferences, political or social group association, nationality, medical history, drug or alcohol habits

• If a job candidate reveals information that you’re not allowed to ask, please don’t inquire further and immediately change the subject.

• Case studies/litigation

Offer Letters vs. Employment Contracts

• Both help to define the employment relationship.

• Common terms shared by both: – Position, start date, salary, bonus, sign-on bonus,

expenses, stock options/awards, benefits – Conditions of hire (e.g., non-compete/non-solicit,

criminal background check, arbitration agreement) – Both may be used in an “at will” employment

relationship – What does “at will” really mean? Employment may be

terminated by either employer or employee, for any lawful reason, at any time.

Where Offer Letters and Written Employment

Agreements Usually Differ

• Offer letters most often used in “at will” context; employment agreements often used in employment for a particular term (i.e., length of time).

• Written employment agreements provide greater clarity and detail regarding parties’ relationship, rights and responsibilities.

• More often used with higher level executives with greater bargaining power and more complex terms and conditions.

• Often negotiable.

What Every Job Offer Should Include

• Job title, position and duties • Start date • Whether employment is “at will” or for a

definite term • Exempt or non-exempt • To whom employee will report • Expected working hours: full-time, part-time

or per diem • Location

What Every Job Offer Should Include (Cont’d)

• Compensation and eligibility for benefits, including bonuses, stock/equity.

• Whether employee will be required to sign a noncompete, nonsolicitation or nondisclosure agreement (NDA)

• Whether employer will perform background check

• Whether employee must sign arbitration agreement

• Any other conditions precedent (i.e. satisfactory criminal records check or other background check)

Employment Offers

Rodden v. Savin Hill Enterprises, LLC (Superior Ct. 2016) • Employee claimed that employer induced him

to join company by promising him: a “comparable salary” to his former job, “job security”, position of General Manager and potential share in profits.

• No written offer or employment agreement between parties.

• Court: alleged promises too vague to be enforceable against employer (but allowed case to proceed on other grounds)

Typical Terms of an Employment Contract

• Employment for a set period of time: – Job title and duties: whether employer may modify

them, etc. – Compensation and circumstances under which

compensation/benefits will be adjusted – Confidential information defined

• Employee representation that he/she has no obligations to prior employer that conflict with employment

• Non-compete/non-solicitation clauses • Termination for cause – cause defined

Typical Terms of an Employment Contract

(Cont’d)

• Resignation for “good reason” • No improper use of prior employer’s

information • No other employment • Choice of law/jurisdiction • Arbitration provision • Integration clause • Provision that contract cannot be modified

except in writing by designated personnel

Employment Contracts/Case Studies Aspect Software, Inc. v. Barnett (D. Mass 2011) • Employee Barnett signs employment agreement with

Aspect Software, which includes MA choice of law provision.

• Barnett later quits and goes to competitor, Avaya, in California. Barnett argues that because it is California, restrictive covenant is null and void.

• Court disagrees, enforcing contract’s MA choice of law provision.

• Court also concludes that employment with competitor will trigger “inevitable disclosure” of Aspect’s trade secrets.

• Court enjoins Barnett from working at competitor.

Kurra v. Synergy Computer Solutions, Inc. (D. Mass 2016) • Employee signs non-compete with Michigan

employer, but later moves to MA. • Employee files complaint in MA against MI

employer, asking court to declare non-compete unenforceable.

• Court: The parties’ forum selection clause, agreeing to resolve disputes in Michigan, is enforceable; court transfers case to USDC in Michigan.

Employment Contracts/Case Studies

Nature of the Employment Relationship: Typical Terms of an Inventions Contract

• Assigns inventions to employer • Invention tail

Non-Compete & Non-Solicitation Agreements

• Employee considerations in deciding whether to sign: – Will this prevent me from working for an employer of my

choice in the future?

• Employer considerations in deciding whether to require employee to sign: – Is it necessary to protect legitimate interests? – Is it reasonable?

• Employer considerations in deciding whether to

enforce: – What are likely consequences if I fail to act? – What will it cost to enforce? – What are my chances of prevailing?

Non-Compete/Non-Solicitation Agreements

• These agreements are used by employers to prevent employees, during and after employment, from: – Competing with employer – Soliciting employer’s customers and clients – Soliciting employer’s employees – Using or disclosing employer’s confidential information

and trade secrets on behalf of others

Non-Compete/Non-Solicitation Agreements

Agreements are enforceable only to the extent they are: • Reasonable in duration, geographic reach,

and scope of restricted activities;

• Necessary to protect the enforcing party's legitimate business interests; and

• Consonant with public policy.

Non-Compete/Non-Solicitation Agreements

What is “reasonable”? Courts will determine by balancing protection of employer’s legitimate interests against employee’s interest in earning a livelihood. What are employer’s “legitimate interests”? Protection of: Goodwill, confidential business information and trade secrets. *Preventing ordinary marketplace competition is not a legitimate use.

Arbitration Agreements: Key Considerations

• Cost • Privacy • Efficiency – difference in process • Barriers to entry • Fact finder • Likelihood of Split Decision • Limited appeal rights.

Nature of the Employment Relationship: Typical Terms of a Separation Agreement

• Return computer, security badge, lab notebooks, files, credit card, other company materials

• Severance • Non-compete/non-solicit, sometimes with

claw-back on severance if a violation • Release of claims • Confidentiality/non-disparagement

Exit Interviews: The Good, the Bad and the Ugly

• Companies use Exit Interviews as a way to assess what might need to be changed about the way a company operates (or what is really good that should continue).

• They are NOT used to “get dirt” on an employee or force an exiting employee to divulge anything they are not comfortable offering.

• Information shared (whether in a survey/written format or verbally in a meeting) should be blinded along with feedback from other exiting employees to look for trends and not one-off personal experiences.

Questions

Thank You!

Margaret H. Paget, Kurker Paget LLC 781.652.4902 margaret@kurkerpaget.com Timothy P. Van Dyck, Bowditch & Dewey, LLP 617.757.6536 tvandyck@bowditch.com Colleen Wilson, Chiasma 617.928.5308 colleen@chiasmapharma.com

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