Ask HN: Could company force departing co-founder to sign non-compete?

#1

Post by iag » Mon, Apr 20, 2015, 2:09 PM UTC

Dear HN:

I am running into a situation where I am being forced out of the company I co-founded. I have not signed any Non-Compete agreements in the past, and I don't want to sign it as it will severely limit my ability to work in the future.

The only piece of legal document we have signed so far is a non-binding MoU that states if I want to claim a director seat, I need to sign a non-compete. Since that document was never entered into a formal agreement, and I no longer seek the director seat, I feel no longer obligated to sign away my rights.

It'd be great if someone can give me some advice on this matter before I escalate to the lawyers. I'm turning to HN for help because I feel this might be a pretty common issue with the audience here.

Thanks in advance for your advice!

Re: Ask HN: Could company force departing co-founder to sign non-compete?

#2

Post by noir_lord » Mon, Apr 20, 2015, 2:39 PM UTC

No.

They can offer you an incentive to sign one (bag of cash etc) but they can't make you sign a legal contract.

Re: Ask HN: Could company force departing co-founder to sign non-compete?

#3

Post by davismwfl » Mon, Apr 20, 2015, 2:43 PM UTC

I'd ask an attorney to review the MoU and any corporate formation documents. As well as which state you are in and any obligations you may have if you remain in an equity position over a certain amount.

Overall though, from what I know and IANAL, you are not obligated to sign any documents on the way out. However, there could be ramifications like the forfeiture of your equity (if that was in the original agreement etc). So that's why I suggest letting an attorney review all the documents. My bet though is if you didn't have all the standard non-compete etc up front then they don't exist and you are probably safe to walk away without signing it, losing the board seat of course.

Good luck.

Re: Ask HN: Could company force departing co-founder to sign non-compete?

#4

Post by gesman » Mon, Apr 20, 2015, 2:45 PM UTC

Unless they have other reasons to blackmail you into signing - then not.

Re: Ask HN: Could company force departing co-founder to sign non-compete?

#5

Post by iag » Mon, Apr 20, 2015, 2:51 PM UTC

davismwfl wrote: post #3

I'd ask an attorney to review the MoU and any corporate formation documents. As well as which state you are in and any obligations you may have if you remain in an equity position over a certain amount. Overall though, from what I know and IANAL, you are not obligated to sign any documents on the way out. However, there could be ramifications like the forfeiture of your equity (if that was in the original agreement e…

The parent company is based out of HK, but the operating company is based in Philippines.

My co-founder threatened to sue me in the US as I am a US citizen.

Funny enough, if I recall correctly, my home state California has one of the weakest non-compete law.

Re: Ask HN: Could company force departing co-founder to sign non-compete?

#6

Post by iag » Mon, Apr 20, 2015, 2:52 PM UTC

gesman wrote: post #4

Unless they have other reasons to blackmail you into signing - then not.

They are withholding my investment into the company, and my equity. They are also threatening to sue me in the US even though this is a non-US company.

I think they are bluffing, but I just want to double check.

Re: Ask HN: Could company force departing co-founder to sign non-compete?

#7

Post by [deleted] » Mon, Apr 20, 2015, 2:59 PM UTC

iag wrote: post #6

gesman wrote: post #4

Unless they have other reasons to blackmail you into signing - then not.

They are withholding my investment into the company, and my equity. They are also threatening to sue me in the US even though this is a non-US company. I think they are bluffing, but I just want to double check.

[deleted]

Re: Ask HN: Could company force departing co-founder to sign non-compete?

#8

Post by EpicEng » Mon, Apr 20, 2015, 3:04 PM UTC

iag wrote: post #6

gesman wrote: post #4

Unless they have other reasons to blackmail you into signing - then not.

They are withholding my investment into the company, and my equity. They are also threatening to sue me in the US even though this is a non-US company. I think they are bluffing, but I just want to double check.

If they're threatening a lawsuit, it's probably time to get a lawyer.

Re: Ask HN: Could company force departing co-founder to sign non-compete?

#9

Post by dman » Mon, Apr 20, 2015, 3:05 PM UTC

Talk to a lawyer.

Re: Ask HN: Could company force departing co-founder to sign non-compete?

#10

Post by hwstar » Mon, Apr 20, 2015, 3:09 PM UTC

If you live in California, non-competes are not allowed under section 16600 of the Business and Professions code. They could file a lawsuit, but it would be thrown out by the California courts. Lawyers have a term for this tactic: "in terrorem". It is used against persons not familiar with the law.