Most startups will start out with a small team, but the time will come when the team needs to expand. There will also be times when a member might not be performing or providing enough value and the tough decision will need to be taken to fire him or her. In both of these situations, the person either being hired or fired is a liability. They possess information about the company and could do harm.

Here is what to do in both cases:

When New Hires Come On Board

  • Have new hires ink an agreement with a “present assignment” clause that assigns everything they invent or create, whether it’s patentable or not, to the company, effective on their date of hire. The agreement should include:
    • a “further assurances” clause, in which the employee agrees to cooperate in the future, if needed, to assist with showing that the startup owns the Intellectual Property
    • confidentiality obligations, permitting them to use or reveal confidential information only for the startup’s benefit
  • To make a contract valid, you must give something to the other party in exchange for a signature
    • Equity is fine, but it’s not essential, and the payment doesn’t have to be large

When You Think You’ll Be Firing Someone

You’ll know when things turn sour before the employee suspects they are on the chopping block.

  • If they have never completed paperwork assigning Intellectual Property rights to the company, have them do it before you begin the termination process. Otherwise, they may flat-out refuse, or embroil the company in costly negotiations and make oppressive demands

We watched a client hit a snag when it wanted to lay off a number of its workers. Because the client had been spun-off from another company, some long-time employees had never been asked to assign their Intellectual Property rights to the new company. The Founders took our advice and delayed announcing their reduction in force until every employee had an assignment on file.

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