There are three primary contracts that are vital to be in place for any organization. In particular, your knowledge workers need to have these three contracts in place: A Employee Contract, A Non-Compete Agreement, and a Non-Disclosure Agreement. Learn why they are so vital to your organization.
As the CIO role evolves more and more into boardroom politics, we are increasingly responsible for the protection of our companies' Intellectual Property (IP). IP ranges from client lists to vital business processes to product design or just about anything that would damage a company or provide a competitive advantage to its competition should it leak out.

IP can be found in yellow post-its, email, word documents... even software that's been developed to automate workflows or perform more specific tasks. It's everywhere. As IT professionals our security schemes are often protecting the most important of company assets.

Corporate theft, however is most often conducted from within. This can happen in many different ways. Some examples might be: Executives stealing ideas and property from associated people, employees copying data and emailing outside of the company or leaving with it in their brief case, outside hackers using social engineering to enter a company's computer systems.

Corporations have responded with a number of contract vehicles to deal with the internal theft situations. The Non-Compete Agreement, the Non-Disclosure Agreement and the Employee Contract are these mechanisms.

The doubious non-compete agreement has some problems as it may conflict with the right to work laws that state a person has the right to earn a living with their knowledge. We're not attorneys here, but keep in mind that an agreement that has an unrealistic time or scope associated with it, might be contestable in a court of law. If an employee is a rocket scientist and leaves a company with a non-compete, does that mean he cannot design rockets for another employer? Actually, no... The skills possessed by that employee were those required to design rockets... so he can do that to earn a living. What he cannot do is design a rocket using IP specific to the previous employer. More often than not, I am told that these agreements cannot hold up in court.

That brings us to non-disclosures. NDA's are designed to prevent an employee or associate or associated company from talking about or in any way disclosing IP or the inner workings of a company. It's designed to prevent an employee from leaving a company and talking about it outside to the public, the companies competitors or business partners. Let's face it, there are enough bad businesses out there that are built like a house of cards. If certain information were to leak out, they would all fall apart. Standard terms for such agreements are about a year.

I recently was given a contract that I turned down for a number of reasons. Related to NDA's it had a five (5) year NDA associated with it. My response is rather simple... if you want silence for 5 years, pay for it. Some form of compensation should be awarded for complying with this clause.

Remember, if the hiring company wants an NDA, it can work both ways. If the company desires ultimate secrecy for a period, shouldn't the employee have a right to the same as well? Reciprocal agreements work best here as both sides are incented to protect the other in the public eye. Most importantly, client information remains under close control of the proper owners, which may be owned by the employee and/or the company.

Which brings us to the oh so powerful employee agreement. For starters, it's important to know that a piece of paper is NOT required to be called an employee. It is, however, important for the hiring compnay to treat individuals like employees. Even when contractors are treated like employees, action can be taken. Remember the case where the group of contractors sued Microsoft for benefits as they were basically being treated like Microsoft employees? I believe they won.

Here are some key signs that you're an employee:
1) Benefits Provided By Company
2) Regular Paychecks from the Company
3) Regular Performance Reviews from the Company
4) Employment Taxes Being Paid on Your Behalf by the Company
5) W2, W4 or 1099 form filed by the Company Covering Your Payments

Why is it so important to know if you're an employee? There are strict rules of ownership related to IP based upon the relationship between the individual and the employee. If the company cannot prove that an individual is/was an employee, it cannot claim outright ownership of the IP the individual created during their associated time with the company. Indeed, this works into a sticky situation for the company as it may have based major business on what it believes is proprietary technology or information, when in actuality the individual has full right to take the technology and do with it what they desire.

So, in addition to the normal compensation and benefits declaration of an employment agreement, it's vital to helping an company protect its IP. As an employee, you want to make sure proper contracts and agreements are in place. If not, and you have an issue with your employer, consult a labor attorney for more accurate information based upon your home state. If you're an employer, make sure you have all of these issues addressed with your employees to prevent potentially ugly IP ownership situations later. Have your general council draft and/or review your current IP situation and your contractual situation with your employees. Added together, these three contracts provide individuals and companies with the means and framework to protect the individual and the company from any malicious behavior.