January 13, 2022

Square One 2e1uaddressing an interesting Utah peculiarity

This post is part of a series, Square One.

I’ve just published a first update to the second edition of the Square One forms for hiring employees and contractors in the United States. All the changes are in the confidentiality and intellectual property terms, specifically to address an interesting peculiarity of Utah state law that Sean Hogle of Redline dug up: Utah has a statute that not only keeps terms from assigning ownership of intellectual property rights workers create on their own, but also prohibits licensing those rights to the company.

Here’s subsection (1) of Utah code 34-39-3, part of the state’s Employment Inventions Act:

An employment agreement between an employee and his employer is not enforceable against the employee to the extent that the agreement requires the employee to assign or license, or to offer to assign or license, to the employer any right or intellectual property in or to an invention that is:

(a) created by the employee entirely on his own time; and

(b) not an employment invention.

“Employment Invention” is defined in 34-39-2.

The second edition of Square One already dealt with these kinds of laws as they affect intellectual property assignments. If state law applied to the worker prevents assignment of rights, they license them instead. That language remains in the new update.

The update adds a parallel fall-through to its license grant. If the worker is subject to state law that prevents licensing, as in Utah, a carve-out exempts those rights from the grant. They aren’t assigned and they aren’t licensed, either.

We ended up bumping into this entertaining one of those legal screwball questions that afflict us from time to time: Is it possible to dance around the state statutes preventing assignment, like the one in California, by having workers give exclusive licenses instead?

In practice, a license to a company that says you can’t license to anyone else—an exclusive license—functions a lot like an assignment. But in legal terms, assignments and licenses are fundamentally disparate types. A big part of being a license is not being an assignment, and vice versa.

In discussion, the intuitive sense of the deal companies and workers actually expect and want to agree to seems to come down to two points:

The state statutes usually do a passably good job of defining a term or otherwise drawing a line for “on work time” and “with work stuff”. They don’t really address rights that come about elsewhere, such as before the working relationship and before the company moves into a new line of business, but end up in company business because a worker chooses to use or reuse them on the job. What’s more, while a lot of these statutes crib pretty overtly from California’s law, they vary in terminology. There’s no obvious way to express the two points above in the terms of any particular state law, much less all of them at once, plus any new or amended ones states might come up with later.

To my thinking, that means we’re stuck addressing the existence and effects of these statutes head-on, by acknowledging they exist and, where possible, citing them. Then we can use use conditional language with reference to them to keep assignments and license grants from overstepping. If such a law applies and it covers some intellectual property, then that intellectual property isn’t covered. We’re not exactly incorporating these laws by reference. We’re referencing their effects, as applied and if applicable, not their terms.

This hurts, because it’s the exact opposite of taking on the legal complexity for readers. Our goal with Square One is to understand and translate as many rules as we can into everyday language. When workers without legal chops try to read and understand these terms, best case, they end up looking at the state statute that applies to them. State statute drafters, as a rule, show a lot less concern for the earnest reader-everyman than Square One does.

Intellectual property isn’t the only area where we’ve got stuck like this. For another example, there’s a term in the catch-all Fairness section that addresses another peculiarity:

If the company employs you, California law governs these terms, and [the Confidentiality section] is read to restrict your ability to disclosure information related to conditions in the workplace, then nothing in these terms prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.

California recently passed a new law, SB-331, that keeps confidentiality terms like Square One’s from suppressing reports of harassment and other workplace misconduct. Talking about SB-331 with other lawyers, we nearly always end up ending on the same tense chord: Good idea, but God is this going to be a mess when a bunch of other states crib this way of writing the rule, with their own niggling variations. Especially since the California law literally spells out language you need to paste into your contract:

A nondisparagement or other contractual provision that restricts an employee’s ability to disclose information related to conditions in the workplace shall include, in substantial form, the following language: “Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.”

The magic jargon “in substantial form” means we won’t get kicked out of Eden for trifling word changes or missed punctuation. Square One’s confidentiality terms use “these terms” instead of “this agreement”, and that’s what we use in this mandated language. But “in substantial form” means at the very least that you start with copy-and-paste and touch avoid fiddling. The language isn’t suggested. It’s required.

The Cali mandated language could have been a lot worse. Longer. Wordier. Stuffier. But we could end up with fifty of these things in any form that wants to “just work”, no matter which state the worker’s in. Too many of these would be its own kind of eye-watering bad.

Such is having fifty-plus jurisdictions regulate work within their borders. A form that works countrywide is a very handy thing to have. But in the absence of federal-level regulation that overrides state laws on the matter—called “preemption” in the jargon—part of its job is abstracting over numerous variations that can’t be safely recast in terse, approachable terms.

An Ask: If you like the idea of standardized, readable, versioned legal forms for hiring in the US of A, the most important thing Square One needs right now is reads and comments from savvy lawyers. Employment lawyers specialized in these issues, but general business lawyers inevitably have a lot to offer, too. Here are the Word copies lawyers like to chew on:

I’m kyle@kemitchell.com, now and always.

Your thoughts and feedback are always welcome by e-mail.

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