AI Professionals: Special Contract Concerns

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A. Periodically, Market Demand for Certain Expertise grows Exponentially.

1. New and Different Business Opportunities give rise to Extraordinary Employment Opportunities. It happens time and again. In the relatively recent past we’ve seen this happen with dot-com entities, cryptocurrency, blockchain tech, sustainable energy, supply chain logistics, cloud computing and augmented reality. In each instance, we’ve seen great demand to hire those with relevant expertise. In most cases, employment opportunities subside when the relevant industry in question, itself, matures. Some say “Artificial Intelligence (or “AI”) will be different.”

Will the burgeoning field of AI be different? Only time will tell, but (i) the torrential flow of investment capital into both AI start-up’s and mega-cap tech firms, and (ii) the intense desire by investors to be viewed as “Early-Entry AI Participants,” both suggest that AI will be an area of intense business activity – and, thus, heightened employment opportunity – for the foreseeable future.

2. In our practice we see a “Gold-Rush”–Like Frenzy to Hire AI Expertise. It is confirmed daily by conversations with recruiters, hedge fund Hiring Managers, job postings, and investor capital flows. And, too, it is confirmed by the number of requests for interviews received by our AI clients. The demand for AI experience and expertise is nothing less than intense. However, the supply of those with AI expertise is limited. Thus, market forces are such that those with AI expertise now have particular negotiation leverage.

B. Those with AI Expertise Must Take Special Care in Their Contract Matters.

3. The nature of AI – a rather new, unique and claimed to be universally applicable use of technology – dictates that Employers can be expected to insist on significant control over the Intellectual Property ‘fruits’ of their AI investments. AI is commonly defined as “using computers to do things that traditionally require human intelligence.” And, too, AI can be used to process large amounts of data in ways that humans cannot. The goal for AI is to be able to do things like recognize patterns, make decisions, and judge like humans. Thus AI “ideas,” products and applications are commonly the subject of intense discussion. Hence, we see unusually broad definitions of protected proprietary information and other elements of Intellectual Property.

4. Likewise, crucial to employers during periods such as this is their keeping effective control of those who come up with the ideas, applications and other development of those ideas, that is, their “Human Resources.” Issues related to AI employment such as (a) non-compete provisions, (b) non-solicitation provisions, (c) so-called Prior Works and Company Works, (d) auto-operative Powers of Attorney, and (e) departure consequences are of greater importance than in most other fields, and thus need to be identified, analyzed and negotiated to an unusual degree of clarity.

5. It’s wonderful to have leverage; it’s even better to know how to make effective use of that leverage. While those with AI Expertise have significant negotiating leverage, almost none have negotiation experience, and even fewer attorneys have equivalent experience negotiating the special contractual concerns of those with AI expertise.

Almost every day we explain to clients: “You and your life partners are adept at counting numbers of dollars. It is our role in contract negotiation to (i) identify, (ii) assess and (iii) mitigate matters of risk, that is, how certain words and phrases may make the dollars easy to lose.” Said a bit differently, “Risk in this context is measured by degrees of potential loss of rewards.”

C. These 10 primary Contract Issues require particular “Legal TLC” when representing Employees with AI Expertise: 

    1. Precision as to the Identity of the Actual Employer: Some employers establish a new entity (LLC, Partnership, Inc., etc.) for a new business venture, with little or no assets or cash flow. Thus, your designated “employer” may be unable to honor its contractual commitments.
    2. Decretal / Contextual Clauses: “Background” or “Whereas” clauses provide context for the hiring. While these clauses, commonly one-sided, are not binding, they do affect interpretation of the binding provisions, most importantly future restrictions.
    3. Specificity as to Role, Responsibilities and Resources: Without these three “R’s” clearly set forth, there is no effective agreement on the position’s acceptability.
    4. Employer Discretion to Adjust Base Salary: This “discretion” is a significant risk to the relation, and suggests an absence of commitment to the employee. After the Employer receives the IP, initial setup and control over other “Works,” the tendency is to let the employee go.
    5. Clarity as to Performance-Based Bonuses: Here, too, we often find poor definition and vague calculation, and, too, hidden “eligibility” requirements.
    6. Minimum Guaranteed Compensation: An important element of both Reward and Risk limitation, often subject to Employer discretion, is the curtailment of poor definition and vague calculation. 
    7. Rights in and to so-Called “Prior Works” and “Company Works”: As noted above, Employer-provided agreements commonly provide for Employer’s ownership of AI from the past, AI from the relation, and AI produced even later.
    8. Event Bonuses: What happens when an AI-Related Business Unit, its IP assets, or equity is sold? This is an area of particular discussion, debate and, at times, ire.
    9. Safeguards and Specificity in “Cause” and “Good Reason” Provisions: Most frequently, these clauses pose grave risk to Employee’s interests, yet their applications – and consequences – are subject to “sole discretion” of the Employer.
    10. Differing Consequences for the Six Different Departure Events: What happens in event of (i) Termination without Cause, (ii) Termination for Cause, (iii) Resignation without Good Reason, (iv) Resignation with Good Reason, (v) Disability or (vi) Death, are of untold great significance to the Employee and her/his family. 

This list is far from all-inclusive, as each employee, employer, business and circumstance are unique. But in our experience, these ten contractual issues are where the most AI-derived significant potential rewards are found, and thus the most significant risks lie. Again, though, every person with AI expertise and opportunity is distinct and unique.

D. Consultations Prior to Initial Employment Discussions are Encouraged.

To their detriment, many clients come to us only after engaging in initial discussions of terms of AI employment with internal or external recruiters, Hiring Managers, or even principals. Regardless of who, when and how initial contacts and expressions of interest arise, we suggest that “The prepared mind is an unparalleled asset.” The value of knowing what you’re doing in employment discussions cannot be overstated.

As I often counsel clients, “Want a good life? Just do good things.” It really does work. And, as a good deed to friends in AI, you might want to pass this article on to anyone you know in this circumstance. You and they will be glad you did.

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In Summary . . .

Those with expertise in the field of Artificial Intelligence have both unique opportunity and significant degree of leverage in employment negotiations. At the same time, they have an obligation to themselves and those they care for, to engage in negotiations carefully. The ten contract issues identified above are the most common to arise in this context, each of which carry a significant degree of risk, especially with regard to (a) the control and protection of AI-related Intellectual Property, (b) the varied ways they may lose promised compensation, and (c) risk of limitation or loss of their career mobility. We are available to assist.

Upcoming Newsletters – Coming Soon . . .

    1. Bankruptcy and Employment Contracts – What Happens?
    2. Observed Wrongdoing at Work? – What to Do
    3. Workplace Dispute? – HR is Not Your “Protector”

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Best, Al Sklover


SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation and navigation of work and career issues requires that you think “outside the box,” and both build value and avoid risks at every point in your career. We strive to help you understand what is commonly before you – traps and pitfalls, included – and to avoid the likely bumps in the road. The “rewards” and the “risks” available to AI employment are both quite significant.

Always be proactive. Always be creative. Always be persistent. Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about.

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Please Note: This Email Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.

Sklover Working Wisdom™ is a trademarked newsletter publication of Alan L. Sklover, of Sklover & Company, LLC, a law firm dedicated to the counsel and representation of employees in matters of their employment, compensation and severance. Nothing expressed in this material constitutes legal advice. Please note that Mr. Sklover is admitted to practice in the State of New York, only. When assisting clients in other jurisdictions, he retains the assistance of local counsel and/or obtains permission of local Courts to appear. Results obtained by some clients have no bearing on results obtained by other clients. Copying, use and/or reproduction of this material in any form or media without prior written permission is strictly prohibited. All rights reserved. For further information, contact Sklover & Company, LLC, 45 Rockefeller Plaza, Suite 2000, New York, New York 10111 (212) 757-5000.

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