The Three Agreements to Know When Reviewing a Job Offer

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By Vincent DiForte
| Contracts Employment

Congratulations! After a lengthy and stressful interview process, you got the job you’ve been coveting. While you may be excited, it’s important to review the terms of the offer carefully. Before signing on the dotted line, you may want to enlist a lawyer to ensure that you understand the various agreements that will establish your new employment relationship.

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Here’s what you need to know about the different documents you may receive:

1. Offer Letters and Employment Contracts

Don’t quit your job the second you get an oral offer from elsewhere! It’s a best practice to wait until the offer is memorialized in writing, usually in the form of an offer letter or an employment contract. Both documents provide information about the position and set general expectations that will govern the relationship. The difference is that employment agreements are more complex and formal, typically reserved for high or senior-level employees.

Here are some of the terms generally included in offer letters and employment contracts:

  • Position. Your job offer should include the title of your position, whether it is full or part-time, a brief description of the duties you will be expected to perform and if applicable, to whom you will report.  
  • Compensation and Benefits. The offer should communicate your salary or wage (by hour, week, month or year), as well as explain payroll procedures. The offer will also delineate your eligibility, if any, for company-sponsored benefit programs.
  • Employee Relationship. An offer letter will most likely define your employment relationship as “at-will.” This means that the timeframe for your employment is not defined, and both you and the company can terminate the relationship at any time and for any reason (with or without cause). Employment agreements may be “at-will” or could be for a specified term. If your employment is for a term, your employer will likely reserve the right to terminate for cause before the expiration of the term. In addition, when your employment is for a term you’ll want to understand any terms for renewal, severance and change in control.
  • Non-disclosure. Non-disclosure clauses define the inventions, knowledge or information that you have the obligation as an employee to keep confidential.
  • Non-competition and Non-solicitation. These clauses can prevent you from working for a competitor, forming a competing business and soliciting other employees or clients during and even after your employment. For these clauses to be viewed as enforceable by a court the time period post-employment must be limited to a reasonable period--typically no more than a few years.
  • Other Activities. Your offer agreement, may limit your ability to engage in activities outside your position. Companies often limit their employees’ ability to engage in other employment, consulting or other business activity without their consent. If you plan on engaging in other work outside the scope of your employment, you should find out if this would be prohibited under the agreement. Violating this term can lead to swift termination of your employment. And in some cases, as discussed below in the Proprietary Information and Inventions Agreement section, even a loss of intellectual property rights in your outside work products.
  • Integration Clause. Many offers contain a clause that explicitly states that the employment documents you receive set forth the entire agreement. As a result, any oral or written discussions about your employment are superseded--excluding the other agreements that the offer incorporates by reference or attachment. Practically speaking, this means if you don’t see something previously discussed as part of your employment in your agreement, or in one of the other documents it mentions or includes, you will likely not be able to enforce it as a condition of your employment later.

2. Proprietary Information and Inventions Agreement

A Proprietary Information and Inventions Agreement (PIIA) will usually be incorporated by reference and attached with your offer letter or employment agreement. This agreement serves the dual purpose of protecting the company’s confidential information and intellectual property.

First, it limits your ability as an employee to disclose any confidential or proprietary information of the company or take it with you upon departure, such as trade secrets, customer or vendor lists, business plans and financial information. Second, a PIIA also establishes that the company will own any inventions you create in connection with your duties. This may include inventions, discoveries, designs, developments, processes, improvements, copyrightable material and trade secrets discovered or created during the course of your employment. If you will use a personal inventions in your new job or plan to work on a personal side project, you could be in danger of losing your intellectual property right to those works. A lawyer can explain how to limit your exposure to jeopardizing your rights. 

3. Option Grant

If you are receiving equity in the company as part of your compensation, you’ll likely receive an option grant. Such stock options provide the opportunity to have an ownership stake in the company and benefit from an increase in the company’s value. It is crucial to understand all terms of the option grant in order to assess the value of your stock compensation. In particular, it’s important to understand the characteristics of the security underlying the option (common stock, preferred stock or otherwise), the vesting schedule of your option (one common approach is a four-year vesting schedule, with 25% vesting at the end of year one and the 1/36th vesting each month thereafter), how long you are permitted to wait to exercise once vesting occurs and all tax implications of receiving the option grant and ultimately exercising it.  

Starting a new job is an exciting time in any career. In order to start off on the right foot, you should consult a lawyer to review the terms of your employment documents and make sure you know exactly what you’re signing on to do. Priori Legal has a curated network of vetted employment lawyers who can ensure that your employment documents match your expectations and protects your interests.

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