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January 3, 2000

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Legal Impact:
Managing In The New Millennium
Keep temp assignments temporary and use a standard proprietary info agreement to avoid the painful scenario of paying twice for the same work

By Susan H. Nycum

Susan H. Nycum n today's business world, your company's most valuable asset--and scarcest resource--is its personnel. Hiring and retaining good employees and consultants is a top priority.

Managing your workforce is not just a business challenge; there are a host of legal requirements that permeate the relationship. One group of issues involves how an employee or consultant is treated. These include questions of hostile work environments, harassment, and discrimination.

In one recent case, a whistle-blower alleged he was fired for telling his supervisor the company was violating federal tax laws and for refusing to violate those laws. His employer said he was fired for performance reasons. A jury awarded him $4,535,148 in damages.

In another case, a 41-year-old Jewish man sued his employer and his supervisors, saying he was discriminated against because of his age, religion, and ancestry. A jury awarded him $2,210,000 in damages.

The lesson from these and other examples: You need to enforce company policies against discrimination and harassment rigorously.

Other tough issues arise because today's workforce, especially technology workers, is highly mobile. Businesses are relying more and more on "off-head-count" workers, free agents who work for one company and then for another--and sometimes for two simultaneously. Issues arise concerning the status of this type of worker: Is he or she an outside contractor with limited rights, or an employee entitled to full fringe benefits, including stock options? Who owns the work product of the knowledge worker? Is it the employer or company that engaged the contractor, the worker, or even a third party?

The line between a temporary contractor and an employee is not always easy to draw. The company may strive to protect itself by observing technical distinctions, such as having the temp pay for all of his or her own benefits, but these measures may not be effective. For example, in May, the 9th U.S. Circuit Court of Appeals awarded discounted stock to thousands of Microsoft "permatemps" (those who had worked more than five months with the company). The company is appealing the decision.

Make sure your temp assignments are just that, and don't keep giving someone work because you're comfortable with that person. This will let you avoid the double whammy of paying a consultant's high hourly rates only to have a court find that person has become a de facto employee who is owed benefits.

Companies can also become involved with outside workers in disputes over intellectual property. Full-time employees and consultants hired to create software, for instance, are bound by different intellectual-property laws. The employee's work product is automatically a "work for hire" that is owned by the employer, but the consultant will own that work product unless he or she assigns it to the company in a signed document. Many companies have been forced to pay substantial amounts to former consultants to buy ownership rights to software they had paid the consultant to create.

If your company uses outside software developers, here are some actions you can take to avoid this painful scenario.

Use a standard proprietary information and inventions agreement that:

Spells out the worker's duties to protect the rights of your company, third-party suppliers and customers, and his or her former employer concerning confidential and proprietary information;

Assigns to the company all work product he or she creates that is related to the company business, results from work performed for the company, or uses company resources;

Says that he or she has no conflicting work from third parties; and

Lists, where possible, all prior inventions and original works of authorship the person has made before the engagement.

Conduct entrance and exit interviews in which the interviewer emphasizes the worker's responsibilities to the company. At the exit interview, collect keys, computers, cell phones, documents, and other items belonging to the company. Terminate access codes to computer systems, E-mail, and voice mail.

Minding the legal P's and Q's with your workforce aids productivity and avoids costly exposures--and makes for a happier new year.

Susan H. Nycum is an international partner with Baker & McKenzie in Palo Alto, Calif. She can be reached at susan.h.nycum@bakernet.com.

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