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May 19, 2009

IP and Non-Competes for Employees

Got the following email the other day, concerning intellectual property issues and non-compete agreements:

I was wondering how Hashrocket handles intellectual property and non-competes with its employees.  Is it something that your developers are required to sign as a new employee?

I ask because I got into a deep discussion with my boss about this.  The employee agreement he came up with basically says that he owns any software / web related intellectual property that I work on (on and OFF the clock).  The non-compete section says that I can't start my own business or work for another firm in the same or surrounding states.

I have an issue with him owning the intellectual property for work I do off the clock.  It makes me less motivated to learn and be innovative when I'm tinkering around on my own. I have my pet projects that I don't want him to have any part in.  His argument is that he doesn't want his employees using company resources (software and laptops) to start their own business... which gets into the non-compete.

The answer is an emphatic "NO!" I do not require non-compete agreements to be signed by new hires at Hashrocket. Neither do I try to claim ownership of work that they do off the clock (open or closed source), a practice I learned from and admired at my former employer, ThoughtWorks.

Work done on the clock is a different story. We have the notion of chartered projects, internal initiatives which you are paid to work on for at most 5 hours per week or when paying client work is not available. If I'm paying someone to work on something then Hashrocket owns it, end of story. Actually, there could be some gray areas there, like bringing interesting outside projects in-house in order to make more progress on them, but in that case reasonableness is key.

Anyway, a non-compete agreement (or non-compete clause in a larger contract) restricts employees from engaging in similar work after leaving your firm. I didn't like them as an employee and I don't like them as an employer either, because I think they're fundamentally unfair. If as the owner of the firm I'm insecure about my people leaving and competing with me, then I'm doing it wrong. Keeping my people from being innovative on and off the job is exactly the opposite of what I need to be doing.

The rationale that your boss used with you, that he "doesn't want his employees using company resources (software and laptops) to start their own business", is IMO such a cynical asshole thing to say to anyone. I've heard it before, and it always pisses me off. The thought process doesn't come up at Hashrocket because I require my people to buy and maintain their own computers. Professional craftsmen have their own tools, yada, yada... that's the subject for a different blog post.

And paid software? Really? What do we actually use for Rails development that costs money? Texmate? (Use vim to solve that problem.) I guess Adobe products are a notable exception there, but I still can't bring myself to look at the situation with such shortsightedness as to try and prevent someone from using tools that I purchased for them to further their career. I just realized why that is -- I see my mission as their "boss" to help further their career! (The rewards from treating your employees this way are immeasurable.)

Incidentally, non-compete agreements are not enforceable in California, but elsewhere in the USA they are legally binding, so you should be very careful signing anything with a non-compete clause.

My suggestion to people presented with non-compete clauses in their offer letters or as part of agreements signed post-hiring, is to strike the offending clause from the contract and initial the change. Do that or refuse to sign the agreement altogether. Yes, it takes chutzpah to do what I'm suggesting, but c'mon now... you shouldn't kick off your new job by bending over and taking the corporate shafting from day one. Given the time and expense needed to find qualified hires nowadays, after some initial fussiness from HR or the hiring manager, the whole matter will be forgotten. If they try to force you to sign under threat of termination then you really should be evaluating whether you wanted the job in the first place. Seriously.

I do believe in a particular type of informal non-compete agreement, which I make verbally with all my people. I ask my people to refrain from "moonlighting" (doing side work) of the same type that they do during the day at Hashrocket. As an employer, you should do that too, but only if you pay competitively!

I can't forcefully prevent my people from moonlighting, but I discourage it strongly for one simple reason: burnout risk. Rocketeers work very hard every single day of every single week, putting in 35-40 hours per week doing intense pair-programming. I want them to go home and relax, so that they're fresh the next morning. Think that's an unreasonable request? Don't come work for me.

On a final note, I think it's a good idea, as a company that sponsors open-source projects and encourages open-source work on the clock, to have signed contributor agreements from all employees. I haven't done this at Hashrocket but I'm going to look into it soon.

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