
Ask YC: agressive non-compete/non-solicitation agreement - andreyf
I'm about to sign on to a NYC-based startup on Monday, and this part of the non-compete agreement they sent me raises a flag:<p><pre><code>  Covenant Not to Compete: The Employee agrees that for a period of twenty-four (24) months following termination
  of the Employee’s employment with the Company for any reason, the Employee will not, directly or indirectly, own,
  manage, control or participate in the ownership, management or control of, or be employed or engaged by or
  otherwise affiliated or associated as a consultant, independent contractor or otherwise with any other corporation,
  partnership, proprietorship, firm, association, or other business entity that is engaged *in any manner in the 
  Business of the Company in any market (including the Internet market)* located in the United States as well as
  outside the United States in which the Company markets any of its products or services.
</code></pre>
Am I right interpreting this as saying that I can't work for internet related companies if I leave the company? Is this unenforceable boilerplate legalese that I shouldn't worry about, or something to discuss?<p>Another provision which bothers me is one that says I won't (for 24 months) "Employ, assist in employing, recruit or otherwise associate in business with any present, former or future employee". Is this something that's worth challenging?<p>I don't fully understand some of the other concepts in the agreement - things like definitions of "Reasonableness" and "Toll Period", which seem to be based on particular cases or laws - what is a good place to read up on this?
======
micks56
I am a law student, not a lawyer, so this isn't perfect advice.

Non-competes basically contain three elements:

1\. Scope - what you can work on. This non-compete says anything that NYC
company does.

2\. Duration - this one says 24 months

3\. Location - this one says anywhere.

Regarding #1, the court will likely hold that this is reasonable. A non-
compete can keep you from working on what you know.

Regarding #2, 24 months is on the long side of acceptable duration. It isn't
completely unreasonable, but it is long.

Regarding #3, this is a tough one. As a law student I have not dealt with
internet non-competes. It makes sense to limit competition in a geographic
area. For example, an agreement where a barber cannot open a competing
barbershop next door is considered reasonable by the courts. But location
doesn't apply easily to the internet. Where the business is matters less.

To research more, try to go to a law library. Go to the 'Hornbook' series.
They are summaries of law across the United States. They are not actually law.
You will need to see what rule actually applies to your jurisdiction. There
are many Hornbooks (ones on contracts, torts, property, etc). You will have to
look at the table of contents and index to see which one you need.

Second, in the law library, take a look at American Jurisprudence. It is
similar to the hornbook. You will most likely need a law librarian's help with
that one.

You can send me an email with more questions on reasonableness and toll if you
want. My email is in my profile. I can answer questions much better if I can
read the whole agreement and I know the background on the business.

~~~
andreyf
_My email is in my profile_

That part isn't visible publicly - could you put it in the "about me" section,
please?

Thanks for the advice. The company is an "e-commerce portal", which rates
products based on their environmental friendliness. What worries me, in
particular, is that I "[may not work on anything] engaged in any manner in the
Business of the Company in any market (including the Internet market)".

Edit: apparently, things that are capitalized like "Business" is here are
defined elsewhere in the document.

~~~
micks56
Ok I updated it.

~~~
andreyf
ty :)

------
gojomo
(1) Don't trust a internet discussion thread for reliable legal advice. Talk
to a lawyer, even at a university or public-service law clinic, if you need
the real info for your jurisdiction(s). So take anything here, including the
below, with a grain of salt.

(2) Here in California, I have been given the impression California law
prevents most non-compete clauses from being enforceable, on the theory
everyone has a right to earn a living using their acquired (and often market-
specific) skills. I have heard NY law is similar.

------
webwright
Before you get a lawyer, have you tried telling them you don't like the
clause? You're about the partner up with these people for (hopefully) many
years. Start on the right foot and have a frank discussion with them and
politely ask them to remove it from the agreement.

It's kind of a stupid clause, but it's likely their because they hired a
lawyer and a lawyer is going to hand them boilerplate stuff that protects
their clients... Not necessarily what's fair/normal.

------
rplevy
Just curious, has anyone here ever been in a situation where a company tried
to enforce an NDA/non-compete on them? How common is the actual enforcement of
these things? My guess would be that most companies would only consider this
worthwhile if they think the ex-employee or contractor is doing something that
would harm them (which of course could be a false accusation). I suppose if
someone was really unprofessional they could use that power just to punish
someone for leaving them, or to hang the threat of retaliation over their head
to prevent them from leaving (but that seems like it must be illegal, or
should be if it isn't).

------
menloparkbum
Noncompetes are unenforceable in California. In New York they are enforceable.
This particular agreement would not hold up, but that won't prevent you from
ending up in court. It isn't boilerplate, either, it is particularly
egregious.

------
i8msft
I was recently asked to sign a non-compete by a New Jersey based company that
stated I couldn't go work for or have a financial interest in, "any company
that does product demonstrations".

That's a quote from the contract and it's not a joke. Taken at face value I
wouldn't be able to work for pretty much any high tech company. I hired a
lawyer who got this bone headed clause along with a couple of other pieces of
junk tossed out. Cost $1000 in fees, but I sleep good knowing I can leave and
go work for who ever I fancy anytime.

GET A LAWYER.

All the best

------
johnm
That is completely unreasonable. It's also of very dubious legality.

If they are giving this sort of crap, you might want to take a pause to think
about whether or not you really want to work with them.

If you still want to try working with them, feel free to rewrite the agreement
with wording that you think is reasonable. If they don't like it, that will
tell you something important, IMHO.

Note that some people will sign these sorts of outrageous contracts on the
belief that, since it's not likely to be pursued even for the clauses that are
enforceable, they'll just ignore it. Personally, I think that's dishonest and
disingenuous.

Also, think about what this sort of clause hanging over your head is going to
look like to your next (potential) job/funding-source/etc.? Whether it's
enforceable or not, this kind of thing can throw a monkey wrench into your
future endeavors and how you are perceived by them.

IANAL. Get competent legal counsel.

------
elad
Since it's a start-up, it's most likely that their lawyers just drafted this
up for them, and the founders don't really know any better. Lawyers tend to be
overly cautious this way, but entrepreneurs usually realize that running a
business takes some risk. If they really want to hire you, it's likely that
they'll be willing to change the terms. If they're not, then this is what
should raise the red flag for you...

In any case, if the contract doesn't feel right to you (as it should) and
regardless of whether it's enforceable or not, don't sign. Why put yourself in
a position where you are likely to have legal issues in the future?

------
olefoo
Get a lawyer to read it for you. Also, negotiate; the contract they gave you
to sign is an offer, make a counteroffer.

Do be prepared to walk away from an agreement that makes you uncomfortable, if
someone wants to put you into a position where you effectively can't leave the
job without suing them; that's a bad sign.

But definitely get a lawyer; if you don't have the right background to
understand what the contract is saying, then don't sign it until someone who
does can explain it to your satisfaction.

------
dfranke
That's the most outrageous non-compete I've ever read, and yes, you interpret
it correctly. Don't even consider signing that. The bit about associating with
other employees is more standard. I'd argue over that part too but it wouldn't
be a deal-killer.

~~~
ScottWhigham
You haven't read too many then.

------
bluelu
Just ask them to remove those clauses you are feeling uncomfortable with. You
don't need a lawyer for this.

------
immad
I was told non-competes are 1 year and not enforceable in California. But
definitely check before you believe me :)

~~~
RyanGWU82
A blanket statement like "non-compete agreements last 1 year" isn't really
accurate -- they can often be shorter or longer than that. Additionally, the
California legal status is irrelevant for this poster, as he's in New York.

~~~
xirium
If he signs a 24 month non-compete in New York and then takes a competing job
in California within this period, is it legal? If he takes a similar job in
Europe, is it legal? Can it be enforced?

~~~
andreyf
There is another clause covering that:

    
    
      15. Governing Law, Jurisdiction and Waiver of Venue. This Agreement shall be
      governed by, construed and enforced in accordance with the laws of the State of New York
      regardless of the fact that any of the parties hereto may be or may become a resident of a
      different county, state, or jurisdiction, and without regard to New York choice of law rules.

------
adrianwaj
Would you like stock options with that?

~~~
adrianwaj
I mean that any firm worried about you competing like that should aim to
retain you as best as they can, and providing stock options is a conventional
route in doing so. It also dissuades you from competing during and after
employment, and to stay 'on-side.'

I was in a similar position to you but did not ultimately take the job. In my
case, I already had a similar site going to the potential employer so could
actually compete without too much effort. The employer was prepared to give
equity only after 6 months work.

------
gaius
I would be fine with this... Provided they agreed to go on paying my salary
for the 2 years in which I was unable to work.

~~~
johnm
:-)

However, if they've put this sort of crap into their employment agreement, I
will bet dollars to donuts that they also have very onerous IP ownership
clauses as well. I.e., be careful that they will probably claim to own
everything that you do whether it's directly for work or not.

~~~
ScottWhigham
I'd say that this is 100% correct. Be wary.

