VCs should stop abusing nondisparagement and nondisclosure agreements | Hacker News Reader

VCs should stop abusing nondisparagement and nondisclosure agreements

bloomberg.com

158 pointspetethomas54 comments

Let's acknowledge "nondisparagement" clauses for what they are: one party's intent to intimidate another. They are a coercive tactic not unlike those deployed by dictatorships or cults: designed to invoke fearfulness and repression of facts or truth.

The courts are very reluctant to hear any of it from contract-smacking plaintiffs going after people they claim "disparaged" them. The whole basis of our judicial system in the US was designed around citizens' rights to criticize overbearing institutions (like the monarchy of Great Britain when a lot of people decided to ship out) freely and without fear of repression by the institutions being criticized. Hence the extensive First Amendment protections that came soon thereafter.

Google, that great beacon of transparency, was accused in a lawsuit of using a broad confidentiality measure that prevents employees from ever talking about their work at Google—or, hilariously, from so much as writing a novel about a Silicon Valley tech company without company approval.

This is disconcerting. The bigger a company gets, the more it needs to rely upon a set of public values rather than fine-print legalese. Employees should be encouraged to challenge the upholding of values at every front... even publicly, if necessary, if that company diverges from what it says it's all about.

NDA's have a solid use for preventing exposure of sensitive IP or technical infrastructure knowledge. Outside of that, they should be banned completely. In general we ought to be demanding a lot more transparency from both our public and privately owned institutions, especially once they've grown to the size of Google, Facebook, etc.

NDAs - to the extent they have a solid use - should be written up in law (including case law) such that you don't have to sign them. It should be obvious that I don't go to my companies competitor with our source code (and copyright law prohibits that already). Can I go to our competitor and recreate from scratch our algorithms in their product, what about modify their algorithms that do the same things as ours - at some point you have to draw a line of yes/no.

A little off topic, I know, but Google must be freaking out about 'The Circle' with Tom Hanks and Emma Watson:

http://www.businessinsider.com/trailer-for-the-circle-starri...

Not really. I went and saw that movie, it was hilariously dopey. It was about on the level of an anti-drug PSA, but for "working at a technology company". I bet in the coming years it will become a tradition among Google employees to get drunk and watch it while snarking at the screen MST3K-style.

I'd much rather see an end to "non compete" agreements. I should have a right to get another job, and my previous employer should have no more rights extended over me after our employment agreement is finished.

California and federal laws say that you do, and that they don't.

Which federal laws do you mean? Contract law is a state thing.

You have what you want now. They are explicitly illegal in California, and difficult to enforce in other states.

> They are explicitly illegal in California

Sadly not, they are only void, you can sue if the business tries to enforce it (Edwards v. Arthur Andersen LLP) but I'm pretty sure that's it.

In Cali, non-compete are not worth the paper they're printed on, all non-compete agreements (in or out of state) are void unless they apply to one of the statutory exemption of the BPC[0]:

* selling the goodwill of a business (as part of or independently from the business itself) (16601)

* dissolution of or disassociation from a partnership (16602)

* dissolution of an LLC (16602.5)

They're not a legal tool, they're a tool of fear. Sadly they are only void not illegal, which they should be.

Of course that assumes the case is heard in California, which may not be the case (see Google hiring Kai-Fu Lee in 2005)

[0] https://leginfo.legislature.ca.gov/faces/codes_displayText.x...

> Of course that assumes the case is heard in California,

It assumes California law is applied, which is not the same thing as the case being heard in California, though the two are loosely correlated.

Amazon/Twitch recently bought Curse last year. In the Amazon HR orientation/on-boarding meeting in the Curse Alabama office someone bluntly asked, "Why are you forcing this unfair non-compete contract on us and not the Curse Irvine office?" After a moment of awkward silence in the meeting room the Amazon HR representative answered, "Because it's legal to enforce it here."

The Amazon non-compete contract has some very broad terminology that could be stretched in a court of law.

And it only gets worse as the conglomerate grows. Due to my own history with Amazon as a Seller Support phone monkey, I probably couldn't get employ at Twitch or Curse, despite my resume in the games industry. Let alone something completely different at Woot, or Whole Foods, or the Washington Post. And that's not even getting in to a non-compete area specifically, just general employment as it relates to a child company and the mothership.

OK. Sure. Unenforceable in California.

Now what about the other 49 states? My buddy in Pennsylvania couldn't get a job at the Apple Store because of a non compete with Best Buy.

This extends beyond the bubble of the bay area and even tech. It's a problem in virtually any industry, anywhere.

IANAL, but I doubt your friend's non-compete with Best Buy was enforceable, unless of course he was dealing with trade secrets or managing long term sales relationships.

I imagine the idea of a ordinary floor rep dealing with trade secrets would raise some eyebrows at court.

http://www.beckreedriden.com/wp-content/uploads/2017/03/nonc...

I also doubt an ordinary floor rep has the ability to press a case like that to court. Lawyers aren't free.

Would Best Buy really sue an ordinary floor rep, though?

To intimidate all the other employees? I'd believe it. Companies do act similarly when they go after individuals or mom and pop stores for trademark infrigement

Trademark infringement is a little different, because a company has to protect its mark to avoid losing it.

They'd probably just write a threatening letter, and that would be enough for the Apple Store to fire the friend. Unless you're high enough in the food chain, a company would rather drop you than deal with the potential trouble (even if the threat is completely bogus).

It's a company with $40bn revenue, you better believe they have a fleet of lawyers on retainer, they've got little reason to not make use of those lawyers.

I'm kind of picturing a B2B sales person maybe? I really can't see a company the size of Best Buy going to that length for a regular floor rep. Maybe a service tech? Even then that seems a stretch.

Nope. He was a regular floor guy who sometimes worked in the Geek Squad department. He was pursuing an opportunity at Apple because the pay was better. When Apple learned he was currently employed at Best Buy, they basically ceased communications citing the non compete with Best Buy. The situation was probably complicated by Apple's mini Apple Store installments inside of Best Buy at the time, which I hear were sometimes staffed by Apple employees, not people on Best Buy's clock.

Still, in the end, he missed out on working at a different store with more pay, because of non compete agreements and two mega corporations throwing their weight around.

That is utterly horrifying.

> Now what about the other 49 states?

According to the wiki,

* almost entirely void in California, Montana, North Dakota, and Oklahoma

* since mid-2015, forbidden for tech businesses in Hawaii (Act 158, tech businesses being defined as "a trade or business that derives the majority of its gross income from the sale or license of products or services resulting from its software development or information technology development, or both" but excluding "standard practice" of broadcast and telco)

* limited to 1 year for those entered into in Utah after May 2016

For the rest, it seems at best they're generally subject to "reasonableness" criteria but chances are you'll have to fight it in court, or may lose employment because the new employer does not want to take the risk barring a release. That looks to be the case in Pennsylvania.

Let's not let Hawaii and Utah off the hook.

It's great that software businesses are excluded from noncompete clauses in Hawaii, but it's still a problem when the local Jimmy John's can prevent its employees from working at Subway. Arguably it's worse in a place like Hawaii than in the continental US, because some noncompete are distance-limited, which becomes a problem when the state is nothing more than an island chain.

Utah's one year limit is only acceptable in my mind if they require the company enforcing such agreement to pay the former employee for the time they can't work. Otherwise, a megacorp like Google can probably block one's employment in just about every technology-related field.

> Let's not let Hawaii and Utah off the hook.

True, they're somewhat less bad than the others but they're by no means good.

> Arguably it's worse in a place like Hawaii than in the continental US, because some noncompete are distance-limited, which becomes a problem when the state is nothing more than an island chain.

In fact it's exactly the reasoning they used for the tech exemption.

> Utah's one year limit is only acceptable in my mind if they require the company enforcing such agreement to pay the former employee for the time they can't work.

True, the Utah bill does not require compensation for the duration of the agreement only that it can not exceed one year and employer liability (arbitration costs, attorney and court costs and actual damages) if an employee sues and the non-compete is found unenforceable.

> In fact it's exactly the reasoning they used for the tech exemption.

How does the same reasoning not apply to sandwich shops and nail salons? I would think it would apply even more so to those types of businesses, simply because the employees are paid so much less that relocating could easily prove prohibitive.

Does anyone have some examples of a company successfully using an NC contract? Aside of the examples listed above where they are legitimate, I mean a regular-Joe type worker who transitioned from one company to another and was successfully sued for breach of NC.

Here's a story about a journalist who was hurt by a non compete:

https://bol.bna.com/how-a-legal-journalist-got-fired-for-a-n...

It's relevant but not really what I was looking for, I mean one that actually went to court.

I do find it somewhat sad though that a company with the resources of Reuters wouldn't be willing to go to bat for an employee. Seems like employees are so interchangeable these days that businesses can openly not give a fuck about them, just can the ones who present mild legal issues and move on to the next ones.

Here's a recent example

https://www.geekwire.com/2017/amazon-sues-former-aws-vp-non-...

I personally lost a job in NYC post signed offer because counsel at the new company felt that, since both companies were in adtech (though in different verticals), the new company infringed the non-compete. And it apparently wasn't worth the fight.

edit: the lawsuit was later dropped

https://www.geekwire.com/2017/amazon-resolves-contentious-no...

I doubt amazon refunded the probably $5k+ Gene Farrell spent in the meantime though.

This isn't solely a Silicon Valley thing. An NYC startup I worked for for six months 15 years ago required me to sign a nondisparagement agreement when I realized that the company was going nowhere (the carrot was that I kept the signing bonus they lured me with).

I didn't catch that there was no time period specified.

Every year I receive a terse letter from their law firm reminding me of my obligations under the non–disparagement clause.

I think you are in violation of your terms! You can't even admit you have signed this.

Probably. Still find it surprising that they continue to be in business, perhaps all of their revenue is seizures from past employees (they have no notable products nor service nor revenue).

Yes, when you visit Google on business, don't sign their visitor NDA. They still let you in; they just give you a badge that identifies you as not having signed the NDA. If someone at Google is insistent, meet off-site. There are good restaurants on Castro St. in Mountain View.

When I left my last company I was offered $30,000 for my silence. Most people in important positions were offered money as they exited.

I left the money on the table. It was very very hard for me to do - because I am a saver. But I could not agree to the nondisparagement terms.

In my last acquisition, as a regular employee, I had to sign a very extensive non-disparagement. I actually provoked a fight because, if I were to obey the letter of the contract, it banned criticizing the acquirer in any way. Before rewriting, I couldn't even offer critical feedback to my new boss.

Ha ha this is Silicon Valley where in effect NDAs are advisory at best. I attend conferences where I see people (non-execs!) from competing companies having lunch.

I'm pretty sure McClure's activities were well known by his peers, who simply couldn't be bothered taking action

Not sure what NDA's which deals with trade secrets have to do with legal compromise agreements which is what the article appear to be about.

Obviously written by a well meaning Journalist with no knowledge of HR/IR issues.

The argument is about SV Behaving Badly, and covers the sexual harassment by VCs, and Apple and other companies being obsessive about IP, and big companies being mean/unfair to employees. The NDA is thrown into the general meme-salad as a type of garnish.

The article also mentions non-disparagement agreements -- maybe it's including them under NDAs?

Yes but they are very different things which was my point

Do VCs actually agree to sign NDA on early startup terms?

They are referring to NDAs that the VCs send to others (employees, etc.)

Why would Silicon Valley want to be decent?

True. Lack of decency is not only a Silicon Valley problem. It happens in all places and all industries. It's just that the McClure harassment shit went viral these days and everybody is talking about it...

Not sure why you got downvoted as this is sadly very true

Because this doesn't excuse silicon valley.

Exactly, why downvote?

It would appear that appearing to be indecent is bad for business. One way to appear to be decent is to actually be decent. As always, it's about the bottom line.

Being indecent is sometimes even better for business.

Have I just ignored it until now or has the quality of bloomberg diminished so much? It's the second time I read a total worthless article from them just today.

Reply on news.ycombinator.com