3 Clauses Employers Miss Out On When Creating Employment Contracts!

Josh ChristopherJosh Christopher
Last updated on:
February 3, 2022
Published on:
November 9, 2021

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Contracts can be difficult to create from a legal standpoint if you are not a lawyer and if you don’t have access to legal content. 

There are 3 crucial terms a lot of employers don’t always include when creating employment contracts that are vital in protecting your business:

  1. Intellectual Property (IP)
  2. Confidential Information
  3. Data Protection

Intellectual Property

Intellectual property is an idea, information, or knowledge about the business. Intellectual Property is often critical to a company’s value and competitive edge and therefore needs to be protected from the inside and out.

For example, Coca-Cola’s recipe is valuable IP that needs to be kept away from existing and potential competitors. Coca-Cola used a trademark to protect their IP from their employees so no one can find out the recipe and release it. If they patented the recipe it would only be protected for 20 years and would then be public which is not what Coke wanted to do. By trademarking it, the recipe will never be disclosed. However, for extra protection, it is crucial that Coca-Cola include IP clauses in their employment contracts to ensure that those employees do not leave and create their own ‘Koka-Kola’ with the original Coca-Cola recipe. By having these terms in place, if anyone was to ever take the idea, product or information and exploit it, they then can sue, elsewise there would be no ground to their claim. 

Another core component of a business’ IP is the IP generated by employees, especially when they are building on top of your original ideas. When starting your business, you want to make sure your ideas are protected! It is crucial that you are open and transparent with your employees about your ideas and what you are trying to achieve to ensure they can help your business expand. However, to protect your idea as your own, it is crucial that you include an IP clause in your employment contract to ensure that those ideas remain your own! 

Confidential Information 

Confidential information is about protecting 1) your business and 2) information held by your business and its clients. If an employee leaves, they will have all your clients’ private information. To ensure that they do not use this information it is crucial that you include a confidential information clause. Failing to have this in place can result in breach of GDPR requirements, a bad business reputation and ultimately a failed business. 

To ensure that your confidentiality clauses are active, employers must make sure they have security processes in place when holding clients data as well as clearing processes and access processes for employees when they leave. 

Curious about automated data extraction from documents?

Data Protection 

Data Protection, included in GDPR, plays a huge part in protecting employers because if there is a GDPR breach then the employer will be protected and not have to pay a huge fine, especially if the employee did not do their due diligence. 

As an employer, you will have to make sure there is security in place to protect personal data, and if the data is breached there needs to be a process in place for recovering/compensating for this. 

A few years ago I heard of a business that had a sales department that operated globally. With the GDPR regulations changing, every country had a slightly different variation. With this, the business was doing business-to-business sales from the UK into Germany. However, you cannot call someone cold or without them knowing you unless you go via their reception or ‘gatekeeper’. In this case, the salesperson did this and breached GDPR and the company was being sued. However, because the employer had included data protection clauses in their employment contracts, it was the salesperson’s responsibility to do their due diligence on this and was deemed as a “rogue employee”. This is a perfect reason why employers should have Data Protection terms in their contracts.

Overall, having these 3 terms in place will not only protect the employees but also protect the business from the employees taking clients, product information, and any other important information about the business. If this information were to be leaked, competitors may make decisions based on that data to their benefit or projects currently in the process may be affected, ultimately causing a huge financial loss. 

To ensure that your employment contracts contain these three clauses to protect you, your business, your clients and your employees, it is important that you carefully source your employment contract templates. If you would like to put the confidence back into your contracting, read our page on how to create an employment contract on Legislate or sign up today! 

About Legislate

Legislate is an early stage legal technology startup which allows large landlords, letting agents and small businesses to easily create, sign and manage contracts that are prudent and fair. Legislate’s platform is built on its patented knowledge graph which streamlines the contracting process and aggregates contract statistics to quickly unlock valuable insights. Legislate’s team marries technical and legal expertise to create a painless, smart contracting experience for its users. Legislate is backed by Parkwalk Advisors, Perivoli Innovations and angel investors.

The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.

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