Kumbaya is no substitute for a good employment agreement

The folks at 37 Signals, an iconic small software company, are asking themselves whether they should just do away with employment contracts. It’s great that they’re reexamining basic assumptions, but this particular move could be dangerous.

Sure, overreaching employment agreements can be obnoxious. But the we’re-all-friends-at-our-company attitude vanishes pretty quickly when an employee gets fired “unjustly.”

An employer that doesn’t have some basic ground rules, set out in writing and signed on the dotted line by its employees, is just asking to be dragged into court by a creative lawyer claiming that the fired employee was wrongfully terminated, retaliated against, etc.

And as most people know, the way the judicial system is set up, once you get dragged into court it can be damned difficult to get out without spending a lot of calendar time, management time, and money.

A tech company, especially, should make sure its employees have agreed that the company will own their work-related innovations. If there’s even a shred of doubt, a fired employee’s lawyer will almost certainly try to make hay out of that fact. The company’s board of directors and major investors are unlikely to look fondly on management for having allowed the uncertainty to arise.

Here as in so many other areas, a few well-chosen words can be cheap litigation insurance.