24 replies
1d2h
This reminds me of something that happened at a former employer. After I had been employed there for a couple of years, someone in HR or Legal noticed that the programmers had never signed any "our code belongs to the company" agreement. So they asked us to sign a paper to that effect, and gave us each a check for $20. My thought was that I always assumed the company owned this code, but if they were going to pay for it, then $20 was waaaay too little. Anyway I took the $20, signed the paper, and got back to work. But it always gave me a chuckle.
Here's what I suspect happened:
Any contract requires consideration. Without it, it's not a valid contract. It doesn't require fair consideration, so a clause giving e.g. $1 is typical for many contracts. They were nice and bumped it up to $20.
I suspect your work DID belong to the company already, under work-for-hire doctrine, but an explicit contract avoids that ambiguity. Ambiguity can be bad and super-expensive, whether during litigation or even something like an audit. If someone is buying a company, investing, making a major loan, that's the kind thing which comes up in due diligence and can be annoying.
So I don't think they were paying you for the code, so much as trying to come into compliance. Very likely, this was triggered by some similar audit for some deal they were trying to make.
"Any contract requires consideration"
I am not a lawyer and I don't understand this phrase. But many legal systems require that a contract is at arm's length.
If you are assigning me some rights or an entire piece of IP, I must provide you with some consideration (monetary compensation) for that to be a valid contract. You cannot simply “gift” it to me.
So I would, as part of the contract, hand over $1 or $20 to establish that I have skin in the game and have paid for this contract be valid. The consideration could be stock and other things, but it can’t be null.
At arm's length mean, it must be an adequate amount. For example, I can sell a 10 Million dollar home in most jurisdictions to you for 1 USD. While this contract may be valid, it may create tax liabilities because the tax authorities will say this was not a sale, this was a gift.
As a counter example: In many jurisdictions, a work contract that specifically request lots of overtime or forbids working for a competitor in the future would require a significant extra payment and not 1 USD. 1 USD would not be considered at arm's length.
Sure, agreed. That is not the case that is being referred to here, where someone was assigning over IP that they had built while employed by the company but without an explicit agreement about who owns that IP. In this case, $1 or $20 would have been completely fine, as it was consideration for past IP. The work had already been paid for (salary, benefits, etc).
https://en.wikipedia.org/wiki/Peppercorn_(law)
The comment was US-specific. Similar doctrines are found though in Canadian, British, and continental European (though not so much in Scandinavian systems which often do allow totally one-sided contracts in the idea that promises are binding but with other limiting factors).
The idea in systems which have this rule is that contracts are exchanges of promises and there must be an exchange in order to be valid.
Consideration is generally money (but more generally and dangerously something actually received in exchange for giving away something else in the contract.) It can't be a binding contract if there is no exchange such as merely signing away the code.
You think the $20 was consideration, and yet you think they were not paying for the code? Aren't these the same thing?
If the corporation had some ambiguity in their favor, I expect they would call it "value" and ask for as much as they could get to remove it. But if the ambiguity is in favor of an employee or client, let's remove it for a token $20. Ugly society this one is.
$20 consideration for reducing legal ambiguity around code they already own. Even if it's almost guaranteed to roll in favor of the employer, simply having to litigate it is enormously expensive. Such litigation would be detrimental to everyone but the lawyers, but that won't stop people from thinking they have a case.
I'm with you, companies will always look out for their own interests, but when clarification minimizes logistical waste, it's possible to benefit everyone.
"Bulls do not win bullfights. People do. People do not win people fights. Lawyers do." -- Norman Augustine, "Augustine's Laws" 1985.
Salary in this case would serve as the consideration for the work they perform, but lawyers love making things as explicit as possible (understandably).
You already get salary though. They can't just keep adding contracts and terms and say it's covered by previous payments.
They already paid you for the code, so it's already theirs, they are just making it explicitly stated. If you don't sign it, they end your employment. And the odds of them willing to lose employment over this and trying to claim the company's code as their own and that getting to court is near non-existent. But again as I said, lawyers like to make it explicit.
Watch out for "work-for-hire doctrine" erm... assumptions.
Last time I looked work-for-hire law only takes effect if there is explicit mention of the term "work-for-hire" in the contract, otherwise it's not "work-for-hire". And I have never seen a contract actually mention "work-for-hire".
Do current employment contracts state "work-for-hire"?
Ohhh, I was wrong. Seems there are two categories where work made for hire applies. One is specifically for work made by an employee (with some constraints / definitions on that) for work made within their scope of employment. The other category requires explicit mention of "work for hire".
So that a conventional employee is covered, but a contractor / consultant with a separate business probably isn't.
This is also why companies will reward employees filing a patent application with a silver dollar. It's a nice token of appreciation but also fulfills the contract aspect of assigning rights.
Honestly if a contract only offers 1$ as compensation for many hours worth of work then that's pretty much admitting the consideration is inadequate.
That's exactly it. The $20 is not an assessed value of the code; it's to establish consideration. $1 would have been legal. It's legal to make asymmetric contracts that benefit one party more than the other, just not contracts that are completely one-sided. They probably did $20 just so it wouldn't seem quite as insulting.
Anytime you see stories of "[insert name of rich CEO or politician] takes salary of only $1", that's why. They can't work literally for free, or the rest of the contract becomes nonbinding.
Interesting. I worked for a company that got bought by another company. Pretty much everyone was a salaried employee with a standard employment contract. There was no formal rehire process, but at some point the new company did the same thing as OP's company, saying that anything we produce at work or with work resources belongs to the company. But with an added "no moonlighting" clause.
We did not get any consideration, cash, or gift cards. Instead we were told that if we didn't sign the new company's mandatory agreements, our employment status could be up for review.
This is because it's a contract oddity - if they told you to sign it but offered nothing; you could challenge it in court, and the courts have often said a "one-sided contract" is not valid (e.g., you give me copyright I give you nothing).
The $20 is "due consideration" - just like how some deals involve selling an item for a dollar.
there is a term "gracious consideration" often used where i am. rough translation is: "pretty please" [batting eyelashes]
My friends and I contracted to a company in 2004 to build a text message system. The company decided they didn't want to pay us the last month's bill. They'd spent all their money buying a custom Harley as a prize for the customers and now had nothing left.
We met with their CEO+CFO+lawyers and our lawyers. They were adamant they wouldn't pay the last payment. We pulled out our contract and showed they didn't own any of their code because there was no IP transfer in there. They said "We need a minute." We left the room, came back in and there was a check for the outstanding balance in the middle of the table.
For the most part, US contracts are not valid without consideration. Basically, all parties involved must receive something of value.
https://www.nolo.com/legal-encyclopedia/consideration-every-...
Any contract request that includes a small cash payout should merit extra scrutiny.