Does Your Company Make Everyone Sign a Proprietary Information Agreement?

Do you have a proprietary information agreement (“PIA”) that you require all of your employees to sign?  If not, you are making a mistake.  A PIA covers things such as confidentiality, nonsolicitation, noncompetition, at will employment (in applicable states) and dispute resolution.  These agreements are important for a variety of reasons.  First, it is a contractual protection of confidential information which is your company’s family jewels.  It also covers your ex-employees poaching from the company or competing.  Finally, it will have an arbitration provision so that if there is an employment dispute, you will end up in arbitration in front of usually an ex-judge instead of with a jury.

Comments

[Dan Frith]

Good post. I will add that each state's law will govern whether a non-compete or non-solicitation agreement is valid and enforceable. We write about these issues in Virginia at the Virginia Non-Compete Law Blog -

http://virginianoncompete.blogspot.com/

Dan

T. Daniel Frith, III
Frith Law Firm, PC
303 Washington Avenue, SW
Roanoke, VA 24016
Phone: 540.985.0098
Fax: 540.985.9198
Toll-free: 866.985.0098
dfrith@frithlawfirm.com
www.frithlawfirm.com

[David Locke]

How would you get a contractor to sign a PIA, or any other agreement for that matter? It seems to me that as a contractor signing one of these agreements would make me an employee, and make the employer liable to provide benefits under the IRS code.

So if I hire someone, I need a PIA, a non-compete, an NDA. Is there anything else that I would need beyond an employment contract?

[Brian Spross]

I use PIAs and Consultant Agreements in different ways. I only use a PIA for employees. A contractor signing a PIA could make the contractor an employee. Each state and the IRS use a set of criteria to determine if a person is an employee. This is for benefits and employment related taxes (FICA) among other things. Some of the criteria they use are things such as (i) control; (ii) location of work; (iii) type of pay; (iv) and number of different clients. That is certainly not an exhaustive list, but merely a few of the factors.

For employment hires, I like the following items (i) application; (ii) offer letter; (iii) PIA; and (iv) emergency contact information. You could also add anything that you use for benefits (for instance, beneficiary designations, direct deposit forms, etc.).

This is just what I like to do and not personal legal advice.