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Ask HN: Non-compete agreement advice?
47 points by arenaninja on Nov 22, 2014 | hide | past | favorite | 40 comments
Hi HN! I'm close to culminating my job search after almost four months. I'm looking at increased dev responsibility without people management with a significant pay increase (+22.8%) magnified by a lower cost of living here in Texas. Going through my paperwork, it's all straightforward; I thought the NDA was reasonable, but I'm having issues agreeing with the NCA. It's lengthy (48months, aka 4 years) and I feel very loosely worded (not to mention one sided). The thing is, very few companies seem to be out here, and I'm afraid of bringing this up since I may lose out on a rather significant pay raise. I'm thinking of asking for a more specific one (reduce it to the branch of the company that I work with, instead of every facet such as ecommerce/healthcare/whatever else is in the pipeline) and reduced time (24 months). Any advice?


You might just ask an attorney to look it over. Seriously it would likely be a good $150-300 investment. I know in Florida where I am, non-competes are very frowned upon in the legal system if they are too broad, overly prohibitive or for more than 2 years (in general). The key is an employer cannot prevent you from working in your field of expertise, and they cannot prevent you from using your knowledge to help others, except that they can hold you accountable not to disclose or utilize company specific knowledge. That is sometimes hard to define, but usually is the secret sauce that makes something unique. Also, this changes the higher up in the company management you go too, execs are treated different than say a developer would be.

I had a company want me to sign a non-compete that said I wouldn't take any job where I would work with GPS, geographical systems, or location aware systems for a period of 4 years anywhere in the United States (this was a Florida Company). This was a firm involved with financial software for the lending industry. I just told them that 1, it is way to broad and I can't sign it, and 2, btw it isn't going to pass muster here in Florida because it is too prohibitive and way too broad not to mention too long. I had a good relationship with the company (and owner) so I felt comfortable telling them what I felt from having been involved in non-compete structure with my last company. What I did agree to is saying for a period of 12 months leaving their job I would not help any other financial software services firm develop a geographical based algorithm. I think in the end we settled on 18 months, but it worked out.

Not being an attorney, I did go ask an attorney and paid for an hour of guidance and I did the negotiation to keep it non-confrontational. In fact, they never knew I talked to an attorney. Best couple hundred bucks I spent as I made good money on that contract.


Two basic strategies apply:

(1) Sign the ridiculous agreement, knowing it is completely unenforceable, and plan to completely ignore it when you leave. If you consider this strategy, you MUST consult with a lawyer to confirm that it is unenforceable, and you MUST be willing to pay a lawyer after you leave to deal with the nasty letter they may send you and your next employer. Ask the lawyer how much that might cost, and build it into your compensation expectations. Also, be aware that even if you know it is unenforceable, the nasty letter may scare your next employer into revoking your offer, so be prepared to be upfront about your situation with the next employer, and consequently to expect it to take longer to find the next job. Build that into your compensation expectations for this job as well.

(2) Negotiate an agreement you're actually willing to follow to the letter. Personally, I wouldn't agree to anything that doesn't compensate me for time sitting out, and I wouldn't care much what the restrictions are during the time period. I would be looking for at least 75% of total comp for periods up to 3 months, 100% of total comp for periods up to 6 months, and 120% of total comp for periods longer than 6 months.

IMO option 2 is the far better choice, if at all possible. Two factors would make me consider option 1. If the company is a large or inflexible organization, where you can't negotiate with a person who actually has the power to change the agreement, option 2 might not be realistic. Second, you should try to find out if the company actually has a habit of sending nasty letters to people who leave. If they actually do that, then I would guess they already know that it's unenforceable, but don't care because it's still an effective way of bullying people. I would take this as evidence that they would not be amenable to negotiating the non-compete, and go with option 1.


>Also, be aware that even if you know it is unenforceable, the nasty letter may scare your next employer

I am curious about this part. Why would the next employer even care, given that they are not party to any agreement made between the individual and their previous employer?


Maybe the next employer doesn't have a full time lawyer or doesn't think it's worth the hassle. Or they don't want to hire someone who is going to have to quit in a month because they decide the contract is enforceable.

For what it's worth, I have seen it play out in the exact opposite way. I was working at a company that took great pride in having the best engineering talent and also happened to have a very good (very expensive) in-house counsel. We hired a crop of engineers away from another company and subsequently got a nastygram from the previous company about hiring the guys. If anything, it convinced the management that they made the right decision to hire the guys, and they put the in-house counsel to work shredding the previous company's legal arguments. It was pretty fun to watch.


Interfering with a contract is a tort. If my company hires you, and you have a non-compete, the previous employer can sue my company. It doesn't matter if the contract is legal or not, my company will have to pony up to defend the lawsuit. http://www.legalmatch.com/law-library/article/wrongful-or-to...


Although in that case, if the NCA was unenforceable, a lawyer might also have fun reversing that principle and claiming tortious interference with the business relationship between the employee and the new employer/prospective employer by the former employer...


One of my favorite employment law blogs - "Screw You Guys, I'm Going Home" (written by a lawyer) - has a number of articles on NCAs:

http://employeeatty.blogspot.com/search/label/noncompete%20a...

Reading this will give you a good idea of how complex these issues they are, how much the law varies from state to state, etc. - all good reasons to follow the advice of all the others in this thread who have recommended consulting a lawyer (who specializes in Texas employment law).


Everyone already suggested getting a lawyer -- follow that advice. Pick a lawyer specializing in non-competes specifically in your area. They will be able to advise you on reasonableness of the proposed terms and what you could likely negotiate them down to.

Like everything else -- and you already know that -- non-compete terms are negotiable. Your plan is pretty good. Tell them you don't have a problem with the non-compete, but you're uncomfortable with how broad the terms are. Ask to reduce the term (ask for 12 months, they'll likely agree on 24), geographic area (e.g. your specific metro area instead of all of United States), and specific area of application (e.g. "web development for internal oil&gas applications" instead of "programming"). Worst thing that would happen is that they'll tell you to take it or leave it.


In my experience, that amazing deal where you could never do better, usually isn't quite as unique as you think it is. There are always exceptions.

So of course talk to a lawyer, and of course be willing to negotiate, if minor negotiations kill the offer, there's probably a bigger problem.

But also just think through the most likely scenario, and then the worst case scenario. Could they hire you, and fire you 1 day later and you wouldn't be able to work for 4 years? There's a (I think Yiddish) expression: plan for the worst, because the best will take care of itself.


Don't sign it.

Period.

Feel free to sign a Non Disclosure agreement, but simply do not sign a Non Compete.

If you feel like you should sign one, talk with a lawyer first. Sometimes they're broadly written so that it's impossible to find work in your field. You may not see how broadly it's actually written until you take it to a Lawyer.

If signing a non-compete is not-negotiable (a warning sign about the company), then you should have your lawyer draft a narrow one that protects you and offer it instead.


I respectfully disagree with this advice. But I don't have any evidence, anecdotal or otherwise, to back up my opinion.

Have you (or anyone else here) had direct experience in this area? Anyone had a job offer rescinded because you refused to sign the contract as-is? Anyone successfully tried to negotiate a non-compete?

When I went to my first job out of college, I was somewhat disturbed by the somewhat vague NCA that was part of the contract. I felt like its vagueness (it did not define what a "competitor" was) worked in my favor, and its duration was just a year. I talked with the HR person who said "oh, we don't really enforce those unless you're at the executive level anyway", and by observation this appears to be true. We even had an executive VP leave to be CEO of a startup which has become a direct competitor, and if there was legal action involved they kept it quiet, since by all accounts he left on good terms.

Sorry for the rambling and possibly unhelpful story, but tl;dr is that I feel like "don't sign it" is not good advice.


You are giving out appalling advice.

Do not sign things that you do not wish to abide by, no matter what HR says about it being a standard thing that is unlikely to be enforced.

If you do not agree with something in a contract you should always cross it off the contract and have the amendment countersigned by the other party.

Employment contracts are between two parties, they are not one party dictating terms to another and any employer who thinks they are is not worth giving your time to anyway.


And speaking of HR, it's good to always remember: HR works for the company's management, not for the employees. They routinely do things that are not in employees' best interests.


If they aren't going to enforce it, then you should gleefully say, "Great! No need to sign it then."


I didn't sign one.

I escalated it through management, HR, executives, all the way to the parent company's chief legal officer. Every person told me the same things "It isn't enforceable" or "It's only for executives not for regular engineers". My usual response was, if it isn't enforceable or applicable to me then I won't sign it.

The end result was that I ended up on a temporary contract until it got sorted (~6 months), and now the standard employment contract no longer includes a non-compete clause.

If the company wants to hire you, they will negotiate. If it is a nonsense clause and everyone knows it is nonsense they have no reason to not change it.


> "oh, we don't really enforce those unless you're at the executive level anyway"

They don't trust that you won't 'stab them in the back' - sign a written agreement.

You feel queasy about how it might limit your career if you have to quit/are fired - "Oh just take our word for it that we won't actually use it against you".

Yes, totally symmetrical and fair. /s


I personally wouldn't sign a non-compete unless it gave me my full salary for the entire period I couldn't work. If that causes the deal to fall through then so be it. A 22.8% pay raise isn't worth four years of forced unemployment. In my opinion it's not worth any.


Consult with a lawyer. Amend the contract to protect both your interests with reasonable terms. Your potential employer will not look at it negatively.

Don't just "sign it" because the NCA might not be "enforceable". You could still find yourself out of pocket for legal fee's protecting yourself from an injunction in the future.


My advice is the advice I give to everyone with a legal question: get a lawyer.

Laws vary from place to place, sometimes very widely. Only a lawyer in your jurisdiction is trained, qualified and knowledgeable enough to answer your particular questions.

I mean it. Get a lawyer and find out what your position is before you do anything. The only people on the internet who give out legal advice to strangers are not lawyers. Why? Because lawyers on the internet will tell you to go see a lawyer.


The best and smartest thing to do is talk to your lawyer (not theirs).

Laws regarding the validity of "Non-Compete Agreements" varies state by state, so if you don't talk to your friendly neighborhood local lawyer (with a specialty in employment law), then you'll most likely be following bad advice.


A 4 year non-compete is 10% of your working career. That doesn't sound like a good plan unless they are offering you the moon on a stick as compensation.


Contracts are not a matter of take-it-or-leave-it, they can be changed and amended before signing. As long as you can back up your reasoning, and are fair to them, a reasonable employer should be ok with changing it. If they're not, you may want to reconsider working there, because companies that are overly concerned with having the legal balance tipped way in their favor over their employees tend to be kind of hellish to work for eventually.


Ask yourself a few simple questions.

Do You want to start a company in a similar field in the next 4 years?

If you loose this job will you be looking in a similar or same field?

Lastly it's quite possible this Non-Compete agreement could lock you out of finding a new job for the next 4 years.

P.S. Don't listen to anyone who tells you they are unenforceable; that isn't the point. You have to hire a Lawyer to defend yourself and that costs money; and only if you win can you recoup that cost.


Tell them you can't sign it as it puts you out of a job for four years, which is ludicrous, and if they want your skills and experience they have to drop it.

It's that simple.

--edit-- Ask them if they are proposing to pay your full salary for that 4 year period!


> Ask them if they are proposing to pay your full salary for that 4 year period!

Plus more for the four year experience gap (if you can't really do anything else related to your old job).


You need to talk to a lawyer who specializes in Texas employment law ASAP. Do not sign anything that you do not fully understand the implications of, even if your reading of the non-compete agreement and Texas's Covenants Not to Compete Act makes you think the agreement is completely unenforceable.

While you're talking to the lawyer, don't forget to ask if the non-compete agreement is still in effect in the event you're "involuntarily separated" (sacked, with or without cause) from the company. The answer may greatly influence your decision.

Finally, as is mentioned elsewhere in the comments here, do not sign anything because random HR person says whatever you're signing is never really enforced. HR does not work for you, and "but so-and-so in HR said..." is not a strong defense against your signature on a contract. If the non-compete is never enforced, then the company should have no problem with you not signing it.


4 years is too long. 12 months is the most I've ever signed. 18 months is the most I've ever heard of (a major tech company).


My advice is to ignore comments that don't explicitly mention Texas. How enforcable a non-compete is locale specific. A quick Google search for something like "Texas non compete enforceable" indicates that they are partially enforcable, where-as in California they basically are not, and in Massachusetts the current situation is murky due to the recently passed non-compete reform bill.

If you need specifics, and don't care to spend a few days reading up on the current situation in Texas with regards to non-compete law, then talk to someone, whos job it is to know specifics on non-compete law (commonly called lawyers).


Obviously everyone saying check with a lawyer is right.

In addition, if you do decide to enter into a non-compete, keep in mind that merely guaranteeing to pay your existing salary throughout any enforced period of unemployment is not sufficient compensation.

Firstly, if you were leaving by your own choice, it would presumably be for a better position elsewhere, so if you're locked out of that they need to compensate you for your likely increase in remuneration.

Secondly, if you have significant time out of the industry in any technical field, that will probably have an effect on your employability when you get back into the job market later, and the longer the absence the greater the damage. This needs to be compensated as well.

It seems unlikely that most employers will be willing to offer you a reasonable figure on this basis, say 150% of your highest compensation level during your time with them, for a four-year period after you leave. That should tell you everything you need to know about whether you should sign a four-year NCA.


> very few companies seem to be out here

Are you able to move? There isn't exactly a shortage of dev jobs if you can relocate, and in places where the shortage is on the labor pool size (like the SF bay area), you shouldn't have trouble finding a company that will help you with the move. The cost of living is higher, but you can almost certainly compensate for that by taking a higher paying job.

Just putting that out there; it doesn't seem like there's much reason for an engineer to feel constrained by a lack of job opportunities in today's climate.


One comment... If the non-compete is unreasonable (as this one is) it is likely unenforceable. It's worth digging a bit on the reputation of the company. If the company is known for going after people who leave, it's worth not joining independent of the time period. If they don't go after people, then don't worry.


If they don't go after people now, they might change their approach later. If they truly don't intend to enforce it then they shouldn't need you to sign it.


It's a judgment call, but if you have a fear that "This might be the type that will go after me" then that's enough to stay away.


I really don't think it is a judgment call. Even if you are absolutely 100% confident that you can perfectly predict the behavior of the people in charge of the company (because you own their soul, or something), what's to say the company is going to stay in the same hands forever?

If you don't like the terms, don't sign. If they don't intend to enforce then they shouldn't require you to sign. If they require you to sign then that means they might enforce it.


Ask a lawyer if in doubt. Fwiw though, non-competes are often written in such a way that they're unenforceable in court, on grounds that they're too broad (you can't find work) or one-sided (no compensation).


For factoidal reference, in Sweden NCA's are pretty toothless as the company has to prove to a court that you've directly competed with them after contract termination (i.e. stolen their existing clients).


My attorney once told me that NCAs are very hard to enforce because it's essentially illegal for a company or anyone to prevent you from working for a living is the way he put it to me. My attorney also said that if an NCA becomes a legal matter in court, the authors of NCAs are typically more in the hot seat because because they drafted the agreement to begin with. INAL but as I understand it from my attorney, the author of legal agreements is the party that typically in the "hot seat" to explain themselves in court. Perhaps a layer can chime in and fill in the gaps.


You don't need a lawyer to know that 4 years is too long and that the terms are unpalatable.


#1 Get real legal advice. That said...

Everything I've read says they are not enforceable. They cannot keep you from working and any company that tries to enforce them cough cough amazon loses more than it's worth as all the top talent is dissuaded from ever working there.


Lawyer.




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