Ask YC: Client Presses Charges (an update)

It's now been a week since (http://news.ycombinator.com/item?id=263646) one of my developers was threatened with legal action from a client regarding a deposit they made for him to put together a site. The client has officially pressed charges after our boy resigned, and decided to move back up north and refocus his life. Needless to say, internally there's lots of concern and we're deciding to lease out our programmers if someone requests services from them. Meaning, if our developers end up working for their own client, that client will be billed at our company rate, under company standards and policies to protect such a thing from ever happening again. In addition to this, the client must meet with me personally and sign an agreement of indemnity which will secure the company if they client is dissatisfied. The last thing we want is to stifle these guy's skills and force them to work on only one thing all the time, even though I know some of you will think it's just a bad idea to let our developers work on outside projects anyway. Regarding our boy, Jim. We're giving him access to our legal resources to combat this, after taking a look at the paper work he initiated the client doesn't appear to have a case and Jim is expected to pull through with flying colors. I posted this primarily as a little alert to new founders and people getting into the game: Keep every little bit of paper work you get, understand the legality behind starting a business, even if it's a simple web shop being developed by someone else. And for Christ's sake, if you're a business person with no know-how in technology, be prepared to pay the developer you hire more than you think they'll need. Any suggestions that you guys want to throw out here, I'm sure Jim will appreciate the encouragement and advice on dealing with the matter.