ProfessorBernice Grant

WHARTON MBA WORKSHOP:

EMPLOYMENT AGREEMENTS:LEGAL CONSIDERATIONS

October 1, 2018

Please note that this workshop is for educational and informational purposes only. It does not constitute the provision

of legal advice or the creation of an attorney-client relationship between

attendees and the presenter, Fordham University School of Law, or Lincoln

Square Legal Services, Inc.

DISCLAIMER

¡ Slido.com¡ Code: Wharton

JOIN THE CONVERSATION!

¡ Introduce Case Study ¡ Overview of Employment Agreements¡ Restrictive Covenants§ Social Media§ Non-Disparagement§ Moonlighting§ Confidentiality and IP§ Non-Solicitation§ Non-Competition

¡ Q&A

AGENDA

Wharton MBA Student with job offer

INTRODUCE CASE STUDY

JOB OFFER

JOB OFFER LETTER OR EMPLOYMENT

AGREEMENTCOMPENSATION

PACKAGE

POSITION, DUTIES, AND LOCATION

RESTRICTIVE COVENANTS

¡ Position, Job Duties, Work Location ¡ Compensation Package: § Base Salary§ Employee Benefits§ Bonus?§ Equity Compensation?§ Severance?

¡ Restrictive Covenants

OVERVIEW

RESTRICTIVE COVENANTS

¡ Social Media¡ Non-Disparagement¡ Moonlighting¡ Confidentiality and IP¡ Non-Solicitation¡ Non-Competition

RESTRICTIVE COVENANTS

¡ Does your employer have a social media policy?

¡ Might prohibit:§ Defamation§ Offensive language (e.g., racist, sexist, etc.)§ Harassment§ Confidential information

¡ Might require disclaimer¡ Must comply with NLRA

SOCIAL MEDIA

¡ Disclosing confidential info can violate securities laws

¡ Recent Example: Elon Musk, CEO of Tesla§ SEC imposed $40M fine and required Elon Musk to step

down as Chairman because his tweets misled investors§ Tesla will enhance its social media policy for executives

and corporate governance

SOCIAL MEDIA –SECURITIES LAW CONCERNS

¡ Might apply during and/or after employment¡ Sometimes negotiated as part of severance

package¡ Must comply with NLRA

NON-DISPARAGEMENT

¡ Increase due to “gig” economy¡ Employer might prohibit or limit moonlighting¡ Typical provisions:

§ Advance written notice/approval § No interference with work schedule§ No conflicts of interest, confidential information

disclosure, or competition§ No use of company property, equipment, email, etc.§ Restricted to volunteer roles

¡ State/local law and IP considerations

MOONLIGHTING

¡ Confidentiality and Invention Assignment Agreements

¡ Review to assess:§ Definition of work product (how broad?)§ Activity restrictions (how restrictive?)§ Duration (is there a holdover clause re: IP?)§ Reps & warranties (any conflicting obligations?)

¡ Consider state law limitations (CA, DE, IL, KS, MN, NC, UT, and WA)

CONFIDENTIALITY AND IP

¡ Some companies want IP rights to inventions created post-termination as well

¡ Courts vary, but generally use balancing test¡ More enforceable if duration and scope are limited:

§ Conceived or substantially begun during employment/engagement

§ Created as a result of work performed during employment/engagement

§ Relates to company’s confidential information or trade secrets

TRAILER/HOLDOVER CLAUSES

¡ Non-solicitation of employees (no poaching)¡ Non-solicitation of clients/customers¡ Consider duration and scope of provision

NON-SOLICITATION

NON-COMPETES

Confidentiality, Noncompetition and Invention Assignment Agreement

As a condition of your employment, you must sign the enclosed Confidentiality, Noncompetition and Invention Assignment Agreement (the "Agreement"). The Company's willingness to grant you the restricted stock unit award referred to above is based in significant part on your commitment to fulfill the obligations specified in the Agreement. You should know that the Agreement will significantly restrict your future flexibility in many ways. For example, you will be unable to seek or accept certain employment opportunities for a period of 18 months after you leave the Company. Please review the Agreement carefully and, if appropriate, have your attorney review it as well.

RESTRICTIVE COVENANT NOTICE

¡ What are non-competes?¡ Why do employers use them?¡ How prevalent are they?¡ Are they legally enforceable?¡ Key issues to consider?¡ Impact on your future job mobility?¡ When to retain a lawyer?

NON-COMPETE QUESTIONS

PREVALENCE

ENFORCEABILITY BY STATE

¡ Although non-competes are seen as a disfavored restraint of trade, NY courts generally will enforce non-competes if the restrictions are deemed to be reasonable:§ Reasonable in duration and geographic scope§ No greater than required to protect employer’s legitimate protectable

interest (e.g., trade secrets, confidential information, goodwill, or employee’s unique, special, or extraordinary services)

§ Not impose undue hardship on employee§ Not cause injury to public

¡ Case-by -case determination

¡ Recent developments regarding low-wage workers

NEW YORK LAW

¡ New law effective today

¡ Employers can’t enforce non-competes against undergraduate or graduate students participating in internships or short-term employment , employees 18 or younger, non-exempt employees, or employees terminated without cause or laid off.

¡ Additional requirements: § Signed writing that states employee may consult with attorney§ Max of one year (or two years if employee breached fiduciary duty or

took employer’s property)§ Reasonable in scope of geography and activities § Certain timing and consideration requirements§ Payment of garden leave pay or other mutually-agreed upon

consideration

MASSACHUSETTS LAW

¡ Non-competes are generally unlawful under California statute, except in sale of business context (or termination of an ownership interest in an LLC/partnership or of the entity itself)

¡ Trade Secrets Litigation

I m a g e c r e d i t : r e c o d e . n e t

CALIFORNIA LAW

§In addition to state-based prohibitions (e.g., CA, OK, and ND), prohibitions often apply in certain industries, such as:§ Lawyers§ Medical professionals in some states§ Tech employees in Hawaii § Low-income workers in Illinois§ Customer-preferred registered representative

at FINRA-regulated firms

INDUSTRY PROHIBITIONS

¡ Impact on future mobility¡ Leverage (or lack thereof)¡ Duration¡ Scope (location and type of business)¡ Circumstances when non-compete applies ¡ Severance ¡ Consideration ¡ Whether to retain a lawyer¡ Other restrictive covenants

KEY ISSUES TO CONSIDER

RESOURCES

¡ Startup LAWnchpad Podcast: available on Apple Podcasts and at startupLAWnchpad.org

¡ 50 state non-compete chart: https://www.faircompetitionlaw.com/wp-content/uploads/2018/08/Noncompetes-50-State-Survey-Chart-20180805.pdf

¡ UpCounsel (access to lawyers on-demand): https://www.upcounsel.com/employment-legal-services

¡ Obama Administration Materials: https://obamawhitehouse.archives.gov/the-press-office/2016/10/25/fact-sheet-obama-administration-announces-new-steps-spur-competition

RESOURCES

CONCLUSION/Q&A