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Tell HN: Beware confidentiality agreements that act as lifetime non competes

138•throwarayes•5h ago
Just a note of warning from personal experience.

Companies don’t really need non-competes anymore. Some companies take an extremely broad interpretation of IP confidentiality, where they consider doing any work in the industry during your lifetime an inevitable confidentiality violation. They argue it would be impossible for you to work elsewhere in this industry during your entire career without violating confidentiality with the technical and business instincts you bring to that domain. It doesn’t require conscious violation on your part (they argue).

So beware and read your employment agreement carefully.

More here https://www.promarket.org/2024/02/08/confidentiality-agreements-can-act-like-noncompetes/

And this is the insane legal doctrine behind this

https://en.m.wikipedia.org/wiki/Inevitable_disclosure

Comments

transactional•5h ago
...but are they enforceable?
throwarayes•5h ago
So far it seems maybe?, but according to the article some courts and agencies are pushing back. Well the FTC was at least in 2023.

California bans anything that is effectively a non compete.

codingdave•4h ago
I didn't see any references in the article you linked to any cases where it had been enforced. I see a lot of commentary that validates the concern, and a listing of half a dozen states where they are being struck down.

So the callout to be wary of them is totally legit... but it doesn't look like they are going to be enforceable when such things go through the courts.

throwarayes•4h ago
Yeah the warning is: you may, like me, find a litigious paranoid former employer who freaks out at everything :-/

I’d rather not carry the cost of learning it’s not enforceable.

epolanski•3h ago
Well since OP's giving that warning he might've been impacted and could tell us more.
ryandrake•3h ago
Technically, maybe, but effectively, nobody is going to be able to withstand BigCorp's 100 lawyers whose mission is to bury you in legal fees if you push back. By the time that you confirm these things are unenforceable, you've spent your life savings on $millions in legal fees, and possibly gone into crippling debt. In the legal system, might (wealth + lawyer quantity) makes right.
eirikbakke•2h ago
As I recall from John Akula's Corporate Law class, judges in the US tend to be sympathetic to the following argument:

"Defendant has never worked in any other industry. He has three kids. He's gotta work."

(That's for regular employees--it's a different issue with founders who may have significant equity stake and such.)

cyberax•2h ago
The "bury in litigation" is overstated. Since it's the _company_ that is going to sue you, there's a limited amount of shenanigans they can do.

The worst is that they can delay the case for years, leaving you in a legal limbo. Or go after your employer, involving them in the discovery process.

gopher_space•1h ago
It sounds like moving to California for a year would be way cheaper.
jauntywundrkind•2h ago
To riff Keynes,

Enforcement can maintain litigation longer than you can maintain solvency.

prerok•2h ago
IANAL and I don't know about other countries, but in EU (definitely the country I live in and am pretty sure it goes for the rest as well) any non-compete agreement after two years is void by law.

You are required to hold confidential stuff for life, like business contracts, but you can use your know-how, if it does not violate any patents, in a competing company as you see fit. This knowledge is a part of you and cannot hold you against employment. Even if you do decide within those two years to employ yourself in competing company, this can be held back by your original company only if they give you X% of your pay at them (X can be 80, or as low as 50, as my friends inform me).

kirubakaran•3h ago
It's funny how states like Washington are notorious for enforceable non-competes, to be "business friendly".

Meanwhile California bans non-competes, and its GDP is 4th largest in the world if it were a country!

"incumbent friendly" vs "startup friendly"

llm_nerd•2h ago
I'm pro-California and anti-noncompetes, but I'm not sure if this evidence demonstrates much. The banning of non-competes in California is a very recent thing, and if we're doing a correlation thing, California saw the vast bulk of its growth when non-competes were in effect.
haxton•2h ago
California has banned non competes since 1872. You might be thinking about non solicits which was 2024 also reaffirming the ban on non competes
loaph•2h ago
It’s not a recent thing. Search for 1872 here, https://www.purduegloballawschool.edu/blog/news/california-n...

Some form of a ban on noncompete enforcement in CA has existed since then.

It has long been codified in CA business code 16600, https://leginfo.legislature.ca.gov/faces/codes_displaySectio...

karthikb•1h ago
The Traitorous Eight would only have been possible in California, not Washington, because of the position on noncompetes.
ghaff•16m ago
On the other hand, moving between (and founding) minicomputer companies was a thing for a long time in spite of Massachusetts being fairly non-compete clause friendly until very recently. And arguably, current laws enacted against some fairly strenuous tech company opposition force companies to put some skin in the game but are still a pretty raw deal for employees who can't afford to sit on the bench for 50% of their former base. (Which is what I think relatively recent legislation calls for.)

I'm against non-competes except in narrow cases. But a lot of people probably give the general inability to enforce non-competes in California too much credit for CA tech success in spite of one story in particular.

thedufer•2h ago
I'm not sure what conclusions you think we should draw from that. California's advantage over Washington is primarily one of size - Washington's GDP per capita is actually about 3% higher than California's. The most generous interpretation I can think of is that you're crediting the non-compete difference for California's far larger population, which is tenuous at best.
kirubakaran•1h ago
Shockley -> Fairchild -> Intel, AMD couldn't have happened with non-compete. So Silicon Valley couldn't have happened in Washington.

https://en.wikipedia.org/wiki/Traitorous_eight

Per capita isn't a good measure here, as Washington's weather helps lower the denominator (I say this as a former Seattle resident)

coderatlarge•1h ago
WA is busy losing its way on taxation vs value provided for taxes paid and reporting burden. so imo these IP issues are almost second order effects at this point. i personally expect a continued exodus over some of the latest tax hikes for example taxing cap gains beyond a certain amount at an additional 7%. as if niit was not bad enough. if residents could at least see some value from these added taxes maybe it could be something. also the estste tax there kicks in quickly and has hidden gotchas even for people who no longer live there.
OutOfHere•3h ago
What exactly should one be on the lookout for? Practically every company has an IP confidentiality agreement.
Traubenfuchs•3h ago
Yeah, good luck being the odd one out who wants special individualized contract. This might work for unicorn value level employees that are poached from one FANG to another but not for the average Joe.
OutOfHere•2h ago
I never said I want an individualized contract, but I reserve the right to reject the offer, and I have, when the contract is unreasonable. What I want to know is when exactly to reject it wrt the confidentiality agreement.
mapmap•57m ago
In my experience, as a normal non-unicorn employee at a large corp, I was able to have my contract modified. It required advice from an employment law lawyer that cost a few hundred dollars and a couple emails with the company’s general counsel.

You can change these contracts. Hiring people is difficult and once the company has made that decision they don’t want to lose you over a contract clause.

OtomotO•8m ago
I had every single one of all my contracts (as employee and one-nerd-business) adapted in minor or major ways.

I am good at what I do, but no unicorn and not FANG "level".

But then again, I don't live in the US

kragen•4m ago
As an average Joe, I was able to negotiate employment contract changes every place I worked in the tech industry in California in the early 02000s. I don't remember having been faced with contract clauses that I felt needed alteration as an entry-level tech employee in the 01990s.
dboreham•2h ago
ianal but: don't perform personal work while you are employed by an employer in the same industry. Or at least make it like you didn't do that to any observer.
kragen•3m ago
You may have misunderstood the topic, which, I'll remind you, is confidentiality agreements that act as lifetime non-competes, which means for the rest of your life after you are employed by an employer in the same industry, not while you are employed by an employer in the same industry.
btilly•2h ago
This is a state level thing. As is whether IP produced outside of your job, on your own equipment, is yours.

I moved from New York to California a bit over 20 years ago in large part because I personally encountered this (the IP ownership bit), and preferred to live under California's rules.

It is worthwhile to read https://www.paulgraham.com/america.html. Point 7 talks about how easy it is for regulations to accidentally squash startups. I believe that the fact that California makes neither mistake causes us squash fewer startups. It is not sufficient to have made Silicon Valley a startup hub, but it was likely necessary.

throwarayes•2h ago
It also depends on the laws governing your contract, not just where you live.
xhrpost•2h ago
Just looking this up but appears NY finally caught up here in 2023 https://newyork.public.law/laws/n.y._labor_law_section_203-f
btilly•1h ago
Thanks for the correction.

It was only 20 years too late to help me.

arnonejoe•27m ago
I usually add this at the end of the agreement and if they wont go for it, I move on:

This agreement shall not apply to any inventions, conceptions, discoveries, improvements, and original works of authorship that [my name] developed entirely on their own time without using [the employer](s) equipment, supplies, facilities, trade secret information, or anything not based on or received from [the employer].

matsemann•2h ago
So happy my union managed to ban broad non-competes in my country ~8 years ago. Now it needs to be very specific if they want to enforce it (not just "development work in the same industry" which most contracts had back when I graduated), only applicable for maximum a year, and they have to pay your salary for the time they stop you working somewhere else.
stego-tech•2h ago
Have an employment attorney always look over said agreements before signing. A local acquaintance who did work for an MSP had said MSP try such a ploy, only for the employment attorney to sue and get it thrown out as unreasonable and unenforceable.

Never, EVER sign a contract without reading it first, and having your lawyer review it.

iLoveOncall•2h ago
> your lawyer

That presupposes that people have a lawyer, and one specialized in employment law at that, which is highly unlikely to be the case for 99% of the population.

throwaway173738•1h ago
Sometimes general employment law is not enough and you need someone who specializes in executive contracts for upper management.
stego-tech•36m ago
A good employment law lawyer is A) not at all hard to find in major metros, B) charges reasonable rates for quick turnaround times, and C) is something more people need to have on their side in general, rather than elevating them as some snooty thing only the elite have.

This whole “bUt WhO hAs A lAwYeR” nonsense I’m being blasted with in my comments is exactly why these sorts of contracts, grifts, and scams are allowed to exist and succeed.

Know your rights, get a lawyer, and then share that knowledge with others. It’s Organizing 101 stuff.

TrackerFF•2h ago
I understand that your advice is in good faith - but if we touch grass for a second, only the tiniest fraction of even professional workers have a lawyer at hand. And one that specializes in contract law? Even less.
mapmap•1h ago
It’s not that difficult to have legal help with your contract. Call your local bar association and ask for an employment law specialist. It will likely cost a couple hundred for them to review your contract.
stego-tech•39m ago
I understand that your advice is in good faith - but if we touch grass for a second, we can easily find recommendations for employment law attorneys who work at very reasonable rates with fast (sub-1wk) turnaround times.

Because that’s how I found mine. $200 later, and I had total confidence in what I was signing and a lawyer on my side if things went pear-shaped in the future.

exe34•2h ago
> They argue it would be impossible for you to work elsewhere in this industry during your entire career without violating confidentiality with the technical and business instincts you bring to that domain

In that case you need to ask for a lifetime worth of salary, including growth from being in position to be put in escrow before you sign the dotted line. Otherwise they can hire you and fire you immediately and you'd never be able to work in your field that you spent years/decades training for.

lazide•2h ago
Realistically, most places ban ‘unconscionable’ contract clauses, either explicitly or by making them unenforceable.

At least in theory, any judge that saw clauses like that should throw it out for that reason alone in those jurisdictions.

duskwuff•1h ago
Precisely. And, at least in the US, any contract which makes it impossible for a worker to take a new job in their field is extremely likely to be found unconscionable. It doesn't matter whether the contract is cast as a non-compete or as a NDA; if its effect is to say "you must work for us, or not at all", it's unlikely to hold up.
ghaff•3m ago
Maybe. I've known companies in the IT industry that took a very hard line on non-competes. Whether they won in court, I don't know. But I've know people who took a year off rather than involving the lawyers. Small pretty well-defined segment of the industry and a couple of the big players apparently did take it seriously. (Never worked for either.)
ivan_gammel•2h ago
If I understand it right, those NDAs work as non-competes if “confidential” is defined as restricted just on the basis of some relationship to the business, which is pretty weird attack of legalese on common sense. Let’s say I used some relatively simple chain of thought to derive X about my job at Z. The fact that Z uses or does X is probably confidential, and that’s ok. This would be how I understood a broad definition. But what kind of reasoning would conclude that X is confidential per se, preventing me to use or do X elsewhere, effectively making doing my job impossible? It just doesn’t make sense.
gwbas1c•2h ago
I once declined a job offer because the non-compete made no sense. (It was many pages, claimed that I would be paid during the non-compete period, and impossible to read.) I basically concluded that they (the company) had a lawyer that was basically wanking off.
senkora•1h ago
In finance, it is common to be paid your base wage during your non-compete. Or at least that is how mine worked.
paxys•1h ago
Yup, garden leave.
dylan604•35m ago
That seems like something ripe for being gamed. How do they protect from someone just quitting and continuing to get paid?
thw09j9m•9m ago
They're not obligated to enforce the non-compete. If you don't have any sensitive information to take to a competitor, they might not give you any garden leave.

OTOH, I've seen non-competes as long as 2.5 years from places like Citadel.

secondcoming•2h ago
A few years ago an American company that approached me (UK based) about a job opportunity insisted I sign an NDA before I could interview with them. I refused and they couldn't understand why so they even put me in contact with one of their lawyers. I still refused, and they eventually relented, but I could never understand why I'd need to sign an NDA to attend a job interview. There's literally no benefit to me in doing so.

At the time I was working for a competitor and I figured they could use the fact that I interviewed with them to argue that I - either intentionally or unintentionally - gained proprietary knowledge of their product and my current employer gained from it.

tgsovlerkhgsel•2h ago
OTOH, beware letting yourself be intimidated by scary looking but unenforcable clauses that are all over contracts. In doubt, spend a bit of money on a lawyer to figure out what your real situation is.

I know of several cases where lawyers said "don't bother arguing with them about clause X, just sign it and ignore it".

voidfunc•31m ago
This is pretty much the advice every lawyer has given me in the past. The likelihood of it coming up is very low. Sometimes it's good to not be special.
ghaff•9m ago
The one time I had to sign a non-compete--because my company was acquired--I just signed it because it was quite specific and I wasn't going to be an exec of a storage company anytime soon. Probably didn't matter much because I left a few months later anyway.
BobbyTables2•20m ago
I suspect our primary school upbringing of “follow the rules” holds a lot of people back.

Seems like a lot of successful people in business know exactly how far they can step over the line without suffering serious consequences.

dakiol•2h ago
In some countries that's illegal. So when presented with a contract that contains such claims, I have 2 options:

1) ask them to remove it... and so I risk not getting the job

2) don't say anything, and sign it

If I'm really interested in the job, I'll go for option 2 because I know they cannot enforce such claims, so I'll be fine.

coderatlarge•57m ago
i personally consider bad legal clauses in employment contracts a seriously negative sign about the employer. if they’re trying to pull that sort of thing at hiring, what are they going to try to do later when you’re fully committed?? is executive leadership simply unaware or do they condone that sort of thing??
mystified5016•40m ago
Well, yes. That's how we do business in the USA. It's literally unavoidable unless you can afford to spend a year or three declining offers until you find a unicorn with a sane contract.

Approximately all businesses explictly try to exploit workers to the full extent of the law. That's what capitalism is and it's how we've structured our society.

epolanski•27m ago
The fact that something isn't enforceable does not mean it won't be a giant headache to prove it.
sim7c00•1h ago
sounds crazy. in my country, adding anything that prevents you from finding work in the future to a contract is kind of invalid.

you do get non competes etc., but it never holds up in court as you can easily prove it prevents you from finding jobs.

i wish for you in your legislation there might be a similar law, otherwise these things are really evil. i mean, its like prison in some fields niche enough, and those are exactly the fields prone to such overly protective clauses

anilakar•1h ago
> adding anything that prevents you from finding work in the future to a contract is kind of invalid.

Here it's six months top, and it only applies to management and specialists with critical domain knowledge - and this also has to be reflected in their wage.

tianqi•1h ago
I think the Chinese law is effective in this regard: in order to maintain any non-competition agreement, the company must continue to pay you a monthly compensation amount equal to 30% of your total monthly income when you were at the company. Whenever the payment stops, the non-competition agreement is automatically void.
coderatlarge•1h ago
can you choose to refuse these payments to avoid the responsibility?
whiplash451•48m ago
I’ve seen this is France and UK but it lasts only a few months and no you can’t refuse the payment - but the company can refuse to pay and set you free.
hmottestad•51m ago
Would be very interested to read more about that. Do you have a link?
marcosdumay•48m ago
Or the Brazilian law, that requires 100% compensation, and puts the onus on the company to prove that the non-compete is necessary before it can be enforced.

If you ever see one of those contracts here, it's usually usually for a very reasonable situation and a well paid position.

almosthere•1h ago
New definition for the word Irony:

AI companies protecting their IP.

sgt101•1h ago
Has anyone been caught by this? As in sued or prevented from working?
viapivov•1h ago
Like.. has anyone been sued for the violation of the non compete?
timoth3y•24m ago
Non-competes (including stealth non-competes like the OP mentioned) are being abused by US employers seeking leverage over their employees.

In fact, 12% of hourly workers earning $20 or less had to sign non-competes. These workers do not have access to corporate secrets. It simply reduces their power to negotiate with their employer.

https://www.minneapolisfed.org/article/2021/non-compete-cont...

josephcsible•5m ago
I wish "inevitable disclosure" were totally turned on its head. If I were in charge, proving inevitable disclosure would happen would result in nullifying the NDA instead.

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Tell HN: Beware confidentiality agreements that act as lifetime non competes

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