In Short
- Employment agreements protect your tech business from legal risks.
- Clearly outline employee duties, salary, and benefits.
- Include clauses for intellectual property and confidentiality.
Tips for Businesses
Ensure your employment agreements are well-drafted and clear. Outline roles, salary, and intellectual property rights to avoid misunderstandings. Regularly review and update agreements to keep them legally compliant and relevant to your growing tech business.
Say you are an employer looking to hire your first employee in your tech business. Before you make them an offer, there are a few things to consider. When hiring someone, you may have to share some of your essential business information and ideas for them to do their job, especially if you are a startup. So, how can you protect your tech business and your ideas? This article highlights the important terms to incorporate into an employment agreement to give your business the best level of protection, including:
- intellectual property clauses;
- confidentiality clauses; and
- restraints.
Intellectual Property Clause
Intellectual property (IP) refers to a person’s creation, invention, or design. Hence, we sometimes referred to it as ‘property of the mind’. Since IP is intangible, some people may not realise just how valuable it is. For most creators, their IP is an asset that belongs to them, as it can be sold, transferred or licensed.
Why Does IP Matter For My Tech Business?
IP is often the most valuable asset of a tech startup. For example, you may have created new tech platforms or developed new ways to use technology. Hence, you would not want an employee running off with your brilliant ideas since you have invested time and money into developing those ideas.
Additionally, you want to ensure you own the IP your employee creates. You can make this clear by including a clause in your employment agreement that states that the ownership of all intellectual property the employee creates while working for your business is assigned to you.
Confidentiality Clause
There are two streams of confidential information. This includes information that the:
- law says is confidential, such as trade secrets; and
- an agreement says is confidential, such as company manuals, training materials, and lists of suppliers or clients.
Why Does Confidentiality Matter For My Tech Business?
As a startup, you may not have the option of keeping information confidential from your new employee. This is because you likely need assistance in many different business areas, and ensuring you are the only one with access to confidential information would be too difficult. This is where a confidential information clause in the employment agreement will give you the best level of protection.
Continue reading this article below the formRestraint Clause
A restraint of trade clause seeks to ‘restrain’ an employee from certain conduct during and after employment. Restraint clauses are enforceable because they are ‘reasonably necessary’ to protect your legitimate business interests.
There are two main types of restraint clauses. These include:
- non-competition clauses that prevent your employee from competing against the company, for example, setting up a business in competition or going to work at your competitor; or
- non-solicitation clauses that prevent a worker from actively soliciting your clients or workers of your business.
What the Court Will Consider When Enforcing a Restraint
When determining whether a restraint is reasonable, factors that the court will consider can include, but are not limited to the:
- duration of the restraint;
- geographical restraint area;
- nature of your business and the characteristics of the employee; and
- employee’s remuneration and compensation.
Restraints are commonly drafted to include a series of ‘cascading’ clauses with successively reduced restraint areas and periods. This allows the court to ‘‘read down’’ the clause until they consider it reasonable. Consider the following example:
| Restraint Area | Restraint Period |
| a) 12 months; b) 6 months; or c) 3 months. | a) Australia; b) New South Wales; or c) Sydney. |
Additionally, legitimate business interests can include, but are not limited to:
- confidential information;
- trade secrets; and
- customer, staff and supplier connections.
Protecting Your Tech Business
Most workers are reasonable and would not try to exploit you. However, there are still some people out there that could. So, including these clauses in an employment agreement will give your business the best level of protection.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
If you operate a tech business, you are bound to have ideas and information that you want to protect. Therefore, the critical consideration for a tech business when hiring employees is to ensure that your employment agreements give your business the best level of protection. The main terms to consider are intellectual property, confidentiality and restraints.
If you need assistance drafting an employment agreement for your tech business, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
One of the best ways to protect your tech business when hiring your first employee is through your employment agreement. Including terms such as intellectual property, confidentiality, and restraints is essential.
Yes, you can. Intellectual property can be assigned from the ‘creator’ to you. You should have a clause in the employment agreement that states that the ownership of all intellectual property the employee creates while working for your business is assigned to you.
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