Demystifying Fractional Work
Aug 23, 2022
We often hear these objections to fractional software development:
"What about issues with other employers' non-competes or intellectual property agreements?"
"Does my employment agreement allow me to do fractional work?"
"Which companies do not enforce non-compete agreements?"
"Which states enforce non-compete laws?"
While this could be an issue, let's dive into the details and see how Fraction navigates issues around Non-Competes and Intellectual Property on behalf of clients.
First, a few definitions:
Non-compete agreement: Non-compete agreements are contracts between an employer and an employee that prohibit the employee from competing with the business directly or indirectly for a specific duration of time after their employment has ended. (Cornell Law)
Intellectual Property (IP): Intellectual property refers to any product or creation of the human intellect (e.g. inventions, literary and artistic works, designs, etc.) that the law protects from unauthorized use by others. Types of IP include Patents, Trademarks, Copyrights, Trade Secrets, and Digital Assets. (Cornell Law)
Fractional software development: At Fraction, we distinguish long-term, part-time positions as fractional, and different in kind from project-based assignments or “gig” work. Just like full-time roles, fractional roles are open-ended in nature and don’t have a defined end date or completion. (Fraction)
Intellectual Property (IP) Considerations in fractional Software Development Contracts:
Any client working with a fractional developer has a baseline expectation that they will own all work and IP generated by developers during an engagement. When a client engages with a consulting company or independent contractor, the agreement typically has a section assigning all work product and IP to the client. But a risk arises if the consultant is an employee of another organization that claims ownership of employee IP or work product (regardless of whether it was done on company time or equipment).
Non-Compete Considerations in fractional Developer Engagements:
Clients also want to know that their work with a consultant doesn't violate any non-compete agreements that the consultant may have signed with other employers. Non-compete agreements typically bar employees from working for other companies within the employer's industry or a defined geography - but how this is defined can be crucial. Broad contracts can define this to be the entire country (or world) and virtually any employer, while narrow non-competes list an explicit set of competitors.
What's the Verdict?
With respect to both IP and non-competes, Fraction typically sees three different types of employment agreements:
Flexible Employment Agreements: these enable employees to work (and own or assign IP) so long as the employee is not utilizing company time or resources (eg computers).
Manageable Employment Agreements: these enable employees to work and create IP so long as their outside work is in a different industry vertical, and does not overlap in any way with the employer's business.
Strict Employment Agreements: restrictive agreements attempt to claim ownership of all IP and work product, and attempt to ban any outside employment.
The first two types of contracts are actually quite manageable - Fraction allows developers in Flexible Employment Agreements to work for any employer, and uses an industry silo process to ensure that developers in Manageable Employment Agreements can be matched effectively. While employees in Strict Employment Agreements generally cannot be matched, there are notable exceptions.
California, Oklahoma, and North Dakota ban non-compete agreements, simplifying the issue in those states. Beck Reed & Riden LLP, a law firm, recently revised its chart of non-compete laws across the US.
In addition, Microsoft recently announced that is ending the use of non-compete agreements below the Partner (senior management) level - freeing most of its employees in a manner analogous to its California employees.
The Bottom Line
While non-compete and IP assignment clauses can pose obstacles, in practice at Fraction we've found that it has posed little issue in finding qualified senior developer talent for clients. With a huge pool of senior developers with senior talent looking to take on fractional work, we can undertake the due diligence to make fractional work part of the future for all companies.
*Disclaimer: This post was prepared by Fraction for informational purposes only and is not legal advice. Online readers should not act upon this information without seeking professional counsel.