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Why I Don't Sign Non-Competes

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Re: Why I Don't Sign Non-Competes

#141

Post by mrchicity »

Non-competes are fine so long as:

-You are in a role with high search/discovery costs but low replication costs: A quant developing predictive signals, a salesperson or attorney building a client base, a researcher improving Google's machine learning techniques, a chemical engineer at a petroleum company improving their processes, a pharmaceutical researcher, a chef trying new dishes hoping to find a hot new idea.

-Your work can't easily be protected by a patent. If you're developing brake pads or some other consumer product, the company should protect itself with a patent instead since competitors will just buy the product in the open market and reverse engineer it. However, even for these cases, knowledge of ideas that failed is a valuable roadmap for a competitor.

-The non-compete is specific and targeted to direct competitive behavior. For example a law partner should be blocked from taking his book of business to another big law firm for a period, but working as a judge or government official should be permitted.

-If unpaid, the period should be short. For a year or more, there should be significant compensation to enforce. The primary purpose should be protecting the company, not trapping employees or lowering compensation. For retention, bonuses and deferred compensation should be used instead.

If used fairly, non-competes are good for both the employer and employee. Businesses that share ideas openly, with mutual trust among employees, tend to perform better. People in R&D all work very hard, and eventually each should generate results, but some people are just lucky and discover great ideas sooner. If all your lucky guys/gals walk out the door immediately, the company can't invest as much in R&D.

And NDA/confidentiality contracts can only do so much. In obvious cases like a salesperson downloading his client list and profit numbers, or an engineer putting the source tree or product designs on a USB stick, it's a slam dunk case. But you can't vacuum someone's head. Someone who created a system at one company will likely create a similar system elsewhere. It's hard to make the case that a different system with some similar ideas, thought processes, or architecture is a direct copy.

Re: Why I Don't Sign Non-Competes

#142

Post by jobigoud »

joezydeco wrote: post #5

So recently I came across an Invention Disclosure agreement that a company wanted me to sign. The phrasing of this kind of threw me off: "I will promptly communicate to the Company each and every invention, discovery or item of intellectual property made or conceived by me, either as an individual or jointly with others, during my period of employment, and I agree that any such invention, discovery or item of intelle…

The one-year is for the disclosure of the idea/discovery.

So what this says is that they have IP on inventions you made while employed, even if you only disclose that invention after having left.

It does not say anything about inventions made after you left.

Re: Why I Don't Sign Non-Competes

#143

Post by eeZah7Ux »

lambda_lover wrote: post #38
wemdyjreichert wrote: post #10

How can I politely say "no way" while still getting the job?

In my experience the problem is that these clauses are traditionally presented to you by a non-technical employee typically from HR, and (in my anecdotal experience) these employees usually try to dismiss your concerns with a "oh it's just a formality" or "all companies make you sign this sort of thing!"... so if you're not important enough to talk to someone higher up, you might just get your offer revoked if you tr…

Those are all tricks. They put pressure on the candidate to sign ASAP.

If the candidate accepts the contract as it is the company wins.

If the bargains around clauses it's still OK and having many clauses to drop makes it look like the company is being flexible.

Always push back!

Re: Why I Don't Sign Non-Competes

#144

Post by hinkley »

biztos wrote: post #109
stupidcar wrote: post #17

Earlier quoted context omitted.

Holy shit. That is way, WAY crazier than a non-compete. That is saying you can't work at all for a year after your employment terminates, because anything you produce during that time is presumed to have actually been created during your previous employment, and so belongs to your ex-employer. Even if you go and work for a non-competing company in a completely different field, and invent something totally unrelated t…

In Germany that clause would mean they'd have to pay you your full salary for as long as they prevented you from working for someone else. So it'd be a one-year vacation whenever your employment ended, but probably not much use for your career.

Spend the year taking classes, learning new programming languages and tools. There are ways to make it work for you.

Re: Why I Don't Sign Non-Competes

#145

Post by matwood »

codingdave wrote: post #139
joezydeco wrote: post #5

So recently I came across an Invention Disclosure agreement that a company wanted me to sign. The phrasing of this kind of threw me off: "I will promptly communicate to the Company each and every invention, discovery or item of intellectual property made or conceived by me, either as an individual or jointly with others, during my period of employment, and I agree that any such invention, discovery or item of intelle…

> What do you think? When my last company got bought, they tried to throw that in for existing employees, but it was a 3 year time period. I refused. They said my job depended on signing. I know I could pursue a number of legal arguments as to why that wasn't valid, but I went with my own standard advice to not work with bullies, and I quit.

I worked at a company once that was bought and tried the same thing. I told them I needed a large compensation component to sign, and I never heard anything else about it. This was big company buying big company though, so it was probably boiler plate stuff.

Re: Why I Don't Sign Non-Competes

#146

Post by biztos »

jglauche wrote: post #105

One of the NDAs someone wanted me to sign had a phrase like "I will not share or use anything that I learned working on this project". Not limited to the client's project or anything. Whenever I work on something, I learn something. Be it a minor thing. How would I ever met that contract on my side? I can't forget what I just learned. My policy is that I charge about 33% extra if they don't trust me not disclosing se…

> I charge about 33% extra

Has that ever come up for you in real life, with the client paying you the 33% extra and you accepting such a wide-ranging NDA/noncompete?

It seems to me that you'd be taking on a risk much greater than 33% of your earnings on the project, though I suppose the risk of actual "enforcement" of the letter of the agreement is not very high.

Re: Why I Don't Sign Non-Competes

#147

Post by vinceguidry »

bluGill wrote: post #121
commandlinefan wrote: post #104

Earlier quoted context omitted.

Although I agree with you - no client/employer is worth that kind of baggage - I was sort of surprised, after four months of unemployment when my last company shut down abruptly (no warning, no severance), just how many things seem negotiable when you're starting to worry about unemployment running out.

Fortunately when that is your only offer and you don't have a job you can tell the court you signed that under duress. Which is to say courts will not look favorably on the whole thing. Courts tend look unfavorably on any agreement that doens't allow you to earn a living doing what you know how to do. As such non-competes as bad as they are are very hard to actually enforce in court. The threat of going to court thou…

The problem with noncompetes isn't that you'll get dragged into court over them, it's that old employer makes a call to new employer and you get shown the door.

Now you have to sue somebody to get your rights upheld.

Re: Why I Don't Sign Non-Competes

#148

Post by jaclaz »

joezydeco wrote: post #5

So recently I came across an Invention Disclosure agreement that a company wanted me to sign. The phrasing of this kind of threw me off: "I will promptly communicate to the Company each and every invention, discovery or item of intellectual property made or conceived by me, either as an individual or jointly with others, during my period of employment, and I agree that any such invention, discovery or item of intelle…

>and I agree that any such invention, discovery or item of intellectual property which I may disclose to anyone within one (1) year after the termination of my employment shall be presumed to have been made during my period of employment hereunder and shall become the sole property of the Company."

IANAL, but I read it differently from most other people, the accent is IMHO on the "disclose to anyone within one (1) year after the termination", even if you conceived the invention during the time you were employed, as long as you don't communicate it to anyone for 1 year after termination, you are fine.

Still - as I see it - the point of debate is more generally about the implied 24/7, there is a difference IMHO between something you invented (and developed) during working hours (and possibly utilizing the hardware/tools/resources of the company) and what one can invent (and develop) after hours, during weekends and holidays, etc., unless your pay is so high that it can be assumed to compensate for all your time.

Even then it seems more similar to slavery than anything else.

Re: Why I Don't Sign Non-Competes

#149

Post by ghaff »

yborg wrote: post #124
zekevermillion wrote: post #102

Earlier quoted context omitted.

This language is very common in IP assignment agreements (often bundled together with restrictive covenants where enforceable). I don't love noncompetes, but assuming you plan to work in the tech industry with proprietary software or hard tech, you will have to get comfortable agreeing to provisions such as this. The purpose of the clause is risk allocation. If the employer has a dispute with you after termination, i…

This thing seems stupid to me. Am I required to disclose such a restriction from a previous employer? I say no, since it's common in the industry and a prospective employer would be expected to either ask for disclosure or know it may exist. So now my inventions (assigned to my new employer by a similar boilerplate clause) are in violation of the previous agreement and if a legal dispute arises, they will now sue my…

I have never been asked about IP assignment (and haven't really been in a situation where it would come up). But I've actually been asked about non-competes. (By a small firm which would have absolutely walked away if I had one.)

Re: Why I Don't Sign Non-Competes

#150

Post by chadash »

rgbrenner wrote: post #119
chadash wrote: post #62

I see a lot of stories/comments about not signing non-compete agreements on HN, so I want to throw in my own 2 cents. Many times, companies have standard paperwork that they want you to sign and they don't want to deal with the hassle of hiring someone who won't sign the forms that their lawyers already drafted. Making modifications means that they have to call up their lawyer (who charges $300+/hour), have a convers…

This is terrible advice. I'm happy to hear you've never been sued or had a contract used against you... I have had a contract I've signed used against me (although it wasn't an NCA)... and on that day, you're going to have a terrible time. People who say they ask for the moon and never plan to collect are liars. They paid someone to draft that contract with that language. That cost real money. Why would they do that,…

A) A lot of companies go to their lawyers and say, "hey, can you give me some standard forms to have employees fill out". Non-compete clauses (for better or worse, and I think for worse) have become a part of that standard contract. Generally, the more standardized your paperwork is, the less you pay lawyers.

B) I fully agree with you that you should never trust someone who says that they don't plan to collect on a contract. Peoples' intentions often change once money is involved. But for a typical software engineer (pretty common on this forum), your skills typically transfer to many non-competitors anyway. If you work for Spotify[1] and have a non-compete, sure, you should fully assume that the non-compete will be enforced if you jump ship for Pandora. But I'd venture to guess that most Spotify employees don't move on to direct competitors anyway, but rather to software engineering roles at companies that do unrelated things.

C) Like anything else, it's a calculated risk. When I talked to my lawyer, he said that many people just ignore non-competes and don't have any issues, but that some people have painful legal battles over them. So before signing one, ponder the following: Are you likely to want to leave to a competitor of the company that wants you to sign a non-compete? Do you think you will want to start your own company that competes? Are you going to be employable among non-competitors? For many people this is a non-issue.

[1] I'm just using Spotify as an example. I have no idea what their employment paperwork looks like.

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