Leaving Your Job to Start a Company? Make Sure You Don’t Hit These Tripwires On the Way Out

If you’re leaving your 9-to-5 job to launch your own startup, and especially if you’re in the white-collar or tech sectors and your startup is in the same industry or uses similar technology as your current job, you will likely need to worry about employment agreements you may have signed that include restrictive covenants. Such covenants include invention/IP assignments, NDAs, and non-compete agreements. If you’re bound by agreements such as these, you may be prevented from starting your company for a period of time after leaving your job, or even prevented from starting your company altogether. If you’ve signed an invention or IP assignment, you must be careful when beginning to work on your startup while at your current job. Such agreements state that any intellectual property you develop during working hours, while on company property, and/or while using company resources is automatically assigned to the company you are currently working for. Depending on how broadly those categories are construed, intellectual property you’ve developed for your startup while working in your current job might actually belong to your employer, which could prohibit you from starting your company altogether. Similarly, post-employment restrictive covenants such as NDAs and non-competes can delay or restrict your ability to start your new company. NDAs can prohibit you from taking any IP or know-how from your current employer to your new company, so make sure that you aren’t taking any algorithms, software, manuals, etc. from your current employer with you to start your new company, even if they would be supremely helpful. Non-competes can delay you from starting your venture. First, make sure that your employment agreement doesn’t prohibit you from “moonlighting” — if it does, working on getting your new company ready to start may constitute moonlighting and would be a violation of your agreement. When you do leave, you may be prohibited by a non-compete agreement from starting your company if it competes with your current employer, by being in the same or similar industries. Of course, non-competes must be limited according to positional and industry scope, geography, and time — non-competes that are too broad are either invalid or must be reformed by a court to be more limited. Assuming that you are bound by an applicable, valid non-compete, you may likely be unable to launch your company for the duration of the non-compete. Also worth noting is whether your non-compete has non-solicitation and no-hire provisions; the former prohibits the solicitation or retaining of the company’s clients, while the latter prohibits the hiring of the company’s employees. Finally, as a piece of career advice, it is always preferable to ensure that you are leaving your job on good terms, both from a legal and professional standpoint. Not only is it best to leave with your company’s blessing and understanding that you are not violating any of their legal rights, but you should also make sure that you burn no bridges on your way out as well. Your former supervisors and colleagues can be an important resource for advice, feedback, and mentorship; scorning them can turn them into your new company’s biggest enemies.

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