Year 2000 Employers:

June 26, 1997

BR Year 2000 Employers: Some Do's and Don'ts By James C. Fontana Contributing Writer Companies embroiled in the year 2000 problem are undoubtedly thinking about the legal implications of not having their systems date-compliant by the end of the millennium. One myth is that the problem will not affect the business community until near the end of the century. Nothing could be further from the truth, especially when it come

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Year 2000 Employers:

Some Do's and Don'ts

By James C. Fontana
Contributing Writer

Companies embroiled in the year 2000 problem are undoubtedly thinking about the legal implications of not having their systems date-compliant by the end of the millennium. One myth is that the problem will not affect the business community until near the end of the century. Nothing could be further from the truth, especially when it comes to employment relations.

Technology companies especially realize that one of the hottest commodities in the year 2000 arena is not the computers or the creative software solutions, but the army of in-demand yet hard-to-find programmers with COBOL and legacy system experience who are naming a hefty price for their expertise in scouring the reams of source code to fix the incomplete date commands.

Those looking to cure their own internal year 2000 deficiencies or devise remediation plans for external marketing purposes need to carefully plan how they staff these efforts for three important reasons. First, when personnel are in high demand (some estimate a 30 percent shortage in available COBOL programmers alone), the employer will want to keep its work force intact but will likely sacrifice bargaining leverage regarding such employment terms as job security, benefits and especially compensation. Indeed, year 2000 programmer base annual salaries are being advertised between $130,000 to $150,000, and many qualified programmers are also seeking (and getting) lucrative bonuses, stock options, extended employment and handsome severance packages.

Second, high-demand year 2000 personnel in technology-oriented markets are apt to move from company to company seeking even higher compensation for their services, and in doing so may try to take with them valuable technical know-how.

Third, with a potential $60 billion year 2000 remediation market, some companies will attempt to "raid" their competitors and drain them of valuable personnel. The bottom line is that companies with a year 2000 need will want to hold on to their qualified programmers, while companies without such personnel will most certainly seek to hire them away.

To address these concerns, employers should carefully craft employment agreements that will safeguard the continued employment of year 2000 programmers and other essential personnel.

If you are going to pay a fortune for these programmers, it is better to fully define the work requirements and reduce the employment relationship to a written document. Besides, these employees in many cases will not agree to the typical at-will employment relationship but instead will insist on a definite employment term with job security that is assured in a written agreement.

Additionally, the employment agreement should contain appropriate (and reasonable) non-compete clauses (also known as covenants not to compete) to safeguard the company's competitive position should the employee decide to seek a job with another company engaged in similar year 2000 activities. Such a clause prevents the employee from competing unfairly with the employer after the employee leaves, and protects against other companies attempting to "steal away" employees.

A typical non-compete clause provides generally that, during the employment period and for a certain time after the employment ends, the employee will not engage in activities that compete with the employer. As applied to the year 2000 market, this clause may foreclose the employee from seeking opportunities to provide year 2000 solutions for other firms.

Yet, not all noncompete agreements pass legal muster. Such clauses are generally disfavored by the courts, and will be upheld only where they are reasonable as to the scope of the restriction (unreasonably prohibiting all employment versus only those activities that directly compete with specific opportunities generated by the former employer), the area to which the restriction applies (local versus nationwide) and the length of time of the restriction (two years may be reasonable while five years will likely be considered unreasonable). This is no easy legal test, and many employers risk having their noncompete clauses, and perhaps the entire employment agreement, rendered invalid.

Equally important to the year 2000 employer is language in the employment contract specifying that the employee, upon leaving the company, agrees not to solicit any remaining employees. Much of the employee raiding stems from former employees who join new firms and recommend that their former compatriots follow. Courts will likely enforce contract clauses against solicitation of employees by a former employee, and employers using such clauses are less at risk than with the traditional noncompete clauses.

Finally, and at a bare minimum, the year 2000 employer should insert in its employment agreements (for all its employees) appropriate language to prevent the employee from using the employer's confidential and proprietary information. This clause will typically provide that, during and after the employment term, the employee will not use or disclose any information obtained while employed with the company. This would certainly include valuable plans and approaches to the company's year 2000 remediation process as well as other trade secrets. By using the clause, the employee will be legally restrained from unfairly using such information whether in future employment or in any other context.

James C. Fontana is vice president and assistant general counsel of Wang Government Services Inc. in McLean, Va. He can be reached at james.fontana@wang.com.

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