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Stowaways on your startup escape path

03 Jan

This is a response to Daniel Tenner‘s post A startup escape path. The basic conclusion of the article is that, rather than simply jumping off the cliff, potential entrepreneurs should plan their exit from corporate life. Overlap what you’re doing with what you want to be doing until you have an idea that you can hit the road running with. This is sound advice but neglects to mention a major problem: your employment contract.

A standard employment contract will say, very explicitly, that everything you do, whether in office hours or not, remains the sole intellectual property of your employer.

This is all-encompassing. The idea for a novel you had whilst on holiday, the new tennis technique you discovered one evening, the great iPad game that just ‘came to you’ in the shower. Whilst your employment contract is in force, these are all owned by your employer.

So, if you’re going to attempt this escape path you have two choices:

1. Tell your employer

Talk with your immediate boss and tell him/her what you’re doing. Assuming they don’t have a problem with your activities ask them to send you an official email or signed letter. This should say that they are aware you’re doing X, that it has no bearing on your ability to perform your duties and that the company lays no claims to it. This is your protection so make sure you are honest about what you’re doing.

The down-side to this is that you’ve now waved a flag with “I’m planning to leave” written on it. If you do, eventually, jump off the cliff then no harm has been done. However, if you decide to stay then you may have blotted your copybook.

2. Don’t tell your employer

You wouldn’t dream of asking our employer if it was OK to play in a band on the weekend so why should you tell them about any startup ideas? If you’re working on this in your spare time then it should be none of their business (literally!). The upside of this is if you decide that entrepreneurship isn’t for you; you can just carry on with your current job and no one is any the wiser. The big problems come if you take your escape path.

At any point in the future your employer can lay claim to the startup you’ve built. If they can show that you started your company / idea / product whilst they employed you then it’s pretty much game over. They may be entitled to, potentially, all the equity in your company plus payment of any profits generated by the company over the years. There are some shades of grey though. If you can evidence that your employer knew what you were doing then any judge would question why they waited until all the work had been done before filing a claim.

Conclusions

This is a very awkward situation and, unfortunately, current UK employee contracts stifle innovation. Your employer is in a strong position to disrupt your innovations in any number of ways if you, quite sensibly, test the wind before jumping off the cliff. If you’re an entrepreneur then I’d love to hear how you dealt with this situation. Please use the comments to tell me your experiences.

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1 Comment

Posted by on January 3, 2012 in Startups

 

Tags: , ,

One response to “Stowaways on your startup escape path

  1. M

    January 17, 2012 at 10:05 am

    I fell into exactly this trap a few years back. I was naively unaware of said clause in my employment contract whilst working on a side project completely unrelated to the company I was working for. I was subsequently threatened but not sued – my lawyer said that in order to sue for damages, they must prove material damage has been done to the business, which thankfully was near impossible since my side project was in an unrelated area of business.

    My advice would be: When you start a new job, *make sure to read your employment contract thoroughly*! I have known a number of people who have successfully challenged this clause and made sure it was removed before starting a new job.

     

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