Millions of workers believe they are bound by non-binding contracts
thespeakernewsjournal.com
thespeakernewsjournal.com
A while back, the startup I worked at was acquired by a large company known for its aggressive legal department. Everyone had to sign an agreement, including both intellectual property and non-compete clauses, or be fired. One guy actually did refuse, and was fired. A few years later, I left that big company to work for another startup. I was concerned about that non-compete, so I did a bit of checking and found that it was NOT A CONTRACT as far as the law was concerned. You see, a contract by definition requires consideration on both sides. The relevant courts had repeatedly found that an offer of initial employment counted as consideration, but an offer of continued employment did not. Thus, what I had signed was not a contract. Legally, it wasn't a non-binding or unenforceable contract. It was a non-entity. A piece of paper with some irrelevant squiggles on it.
I've heard that other ex-employees (and their lawyers and the courts) reaching the same conclusion is the reason that the big company in question adopted a policy of technically firing everyone from any startup they acquired, and then re-hiring them immediately under the same terms. The sole effect was to turn that continued employment into initial employment, non-consideration into consideration, validating the rest of the contract. It's now standard practice throughout the industry.
If you're ever told "sign this or be fired", even if there is consideration (ex: a severance) w/o being given the chance to have a lawyer review it, there's a strong chance it will be thrown out.
Hmm, interesting. I know of a recent case in New York State where one company acquired another, but selectively retained its employees. The acquiring company thought that it was simply not hiring everyone, rather than firing anyone. One of those people sued for unemployment, and the court found that the acquiring company did in fact have to pay unemployment for the employees it "did not hire".
That isn't necessary. The old company could legally just cease to exist, with its assets transferred over to another entity.
As with all things legal, this depends on the jurisdiction (in this case, meaning the state since we're talking about US law). The general rule in most states is that continued employment is not sufficient consideration, but in Illinois it currently is; California doesn't allow non-competes for non-owner/non-highly-compensated employees, so it's a moot point in CA. [https://www.bna.com/continued-employment-sufficient-b5798208...]
I can't imagine any judge accepting this... but I can imagine it backfiring badly, adding bad faith into the interpretation.
Do you know if that's been tested in court? Seems like such an obvious violation of the spirit of the law that it wouldn't (one hopes) hold up in appeal.
I signed it ‘Juul E. Nissen’ (the equivalent of S. Anta Claus’)
Nobody bothered to verify the signature. I wonder how that would have held up in court.
Seems a bit odd to expect a business partner to "verify your signature". How could they do that anyway? Compare it to previous documents? You could have changed your signature.
Not saying they should get away with draconian agreements, but the "right" thing to do would be to not sign it.
Im curious how this would actually go, considering it must have happened before.
I'm also curious about what has happened when people tried this before.
Did they ask you to sign this contract after you had accepted their offer, or after you had already started working for them? Or was it provided as part of the job offer? Did you receive any additional compensation (consideration) for signing this contract?
(Their) problem in court would have been that such contracts are not enforceable in my jurisdiction; however, my colleagues and I would rather not start off the new business relationship by dragging them to court, so we duly signed (of sorts).
there is a trick under UCC, which is technical, but totally enforceable in court that does something similar.
no, I'm not going to mention it.
Some people sign contracts, and then do not fulfill the terms, betting that the other party will not take them to court.
I was once asked to sign a non-compete when my employer was going out of business. I had to sign it to get the severance package. It was quite broadly worded, and could have been interpreted as preventing me from doing any software development for a period of two years. I did sign, because who was ever going to enforce it?
I could swear that the SCOTUS had a similar case and decided that continued employment did count as consideration.
Interesting. Couldn't you construct a similar argument against the "we've updated our ToS! You can accept it or leave our service and lose access to all your documents/games/devices/friends/etc" malpractice? Or is that a different legal basis?
You sign it if you want the job. You disagree with it: there is no negotiation. I have always refused to sign non-competes and wrote this post about it:
https://penguindreams.org/blog/why-i-dont-sign-non-competes/
Usually it hasn't been a problem, but this past year I had to walk away from two jobs because they wouldn't adjust the contracts. I'm a skilled worker though, and I have that ability due to my line of work. The average labourer does not.
Even if these contracts are not enforceable, if a company sees that you have a previous employer that is a competitor and knows they make workers sign those contracts, they are less likely to hire you because they don't want to get into a court case.
California prohibits non-compete clauses in their contracts and nullifies the enforceability of non-competes from other states for workers who take jobs in California. The Federal government needs to go the same route. No employer has a right to your loyalty after you leave a company, unless they're willing to be like Germany where they pay your wages during the period of the non-compete.
There are silicon swamps, silicon deserts, silicon mountain, Route 1, and so on. And then there's SV. IMO non-compete unenforceability is the valley's secret sauce.
I'm not sure I'd recommend that as a deliberate strategy, but it worked out OK for me that time.
I do admit that were I in an even remotely close position to changing the law around this it would probably disproportionally affect workers, some penalty would need to be levied against the infringing party, but where would that end?
I get that you are trying to solve the knowingly-unenforceable contract situation, but there is a lot of collateral damage with your proposal.
If not, how is this different from the case where a previously unenforceable clause becomes enforceable?
If you punished lawyers for making good faith attempts at following the law, all you'll do is encourage lawyers to resort to ever nefarious means to avoid punishment.
This serves two purposes:
1. Reduce the degree to which fine print can hurt the party signing it in unexpected ways.
2. Make complicated contracts have a real cost in terms of making transactions more annoying. This gives businesses an incentive not to use them.
[0] The Wells Fargo fraudulently issued credit lines, for example, were protected a bit because most of the victims had existing arbitration agreements. Those should have been unenforceable because (a) they were not directly related to the fraudulent accounts and (b) Wells Fargo customers should not be able to waive their rights. Instead, CA passed a silly after-the-fact law that says, more or less, that banks cannot enforce arbitration agreements against their customers when fraud is invonved.
Also the courts fundamentally consider arbitration to be the solution to the power imbalance problem. Its much less expensive and quicker for both parties. HN has the opposite impression of them, but that is the reason they are being pushed so hard.
The flip side is you can't go to court - but alas you couldn't afford to anyways.
The problem is being pressured to commit to arbitration long before you know what the implications will be. Thus, I think it should not be permitted for anyone to make that decision in advance of the specific dispute.
The main problem today is companies can commit “small” torts under $1,000 and it’s not worth it for individuals to complain seperately.
Really? I'm hold a promissory note in a company that is in default. Unfortunately, I made a rookie mistake and agreed to an arbitration clause in the note. Suing the company in a real court would be quite inexpensive. Filing an arbitration claim is quite a few times as expensive. Even if I filed and won an arbitration case, I would then, drumroll please, need to sue in a real court in order to obtain an actual enforceable judgment.
So I'm rather unconvinced.
Is it kind of telling that the only case when free representation must be provided by the state when someone is indigent is criminal law or am I a victim of a long workday?
Public defenders for criminal law is something massively broken to the extent that we have innocent people going to prison every day. It is a system to be disgusted at, not attempt to replicate.
Lawyers are thus incentivized to be careful about what they put in.
It would be a good aid to finding decent companies. I've noticed that the companies that have ridiculous "fuck you" contracts tend to be as awful as their contracts tend to imply. "company xyz claims 100% of your IP" is a completely objective measure you can judge them on.
Shining a light on it will probably help put an end to it too.
So rather than trashing the whole contract because of a change in the law parties can agree in advance to keep the old contract in place and ignore the invalidated bits.
Otherwise, companies might be forced to fire employees and vendors and then re-hire them each time employment law or contract law changes.
Also, contracts are not particularly binding.
https://en.m.wikipedia.org/wiki/Unenforceable
More generally, contracts can have moral weight (by the lights of the signing parties) even if the state declines to enforce it in court.
People pushing unenforceable contracts are exerting some immoral power into other people, expecting them to comply due to those others' morality.
It says something about the moral assessments of the people forming the political system (plus something about non-moral political factors), but that doesn't mean that the parties signing the contract don't find the clause moral by their own lights. (And likewise, if you're a moral objectivist, the clause can continue to be moral even as the political system is making a moral mistake.)
Don't sign stuff if you don't agree with it. It is a risk -- and potentially a very big risk. Even if you happen to win your argument, if the case goes to court, you are on the hook for a large pile of cash. And there is no guarantee that the process will be quick. Your opposition can play any number of underhanded tricks to drag the whole thing out as long as possible, knowing that you can't pay for a lawyer forever. Even if you are able to get get that money back eventually, you may be in for some incredibly rough times in the interim.
When I've had to (because I needed the job), I've signed inventions agreements, non-compete clauses, etc. An inventions agreement basically means that I'll be using your company as a staging point while I look for a non-crappy job. I'll be out of there as soon as I find something better. A non-compete means that you have to pay me for my time. If you have a 1 year non-compete, and I intend to work for you for 3 years, then I want 33% more money than I would ask for someone without a non-compete agreement. I will then use that time to write free software (and, if you can believe it, I literally did that once).
But usually you have a lot more leverage when you are hired than most people think. It's expensive to hire people -- maybe not so bad for juniors, but once you've got 10 years or so under your belt it's a major investment in time, money and energy to hire you. If the legal department cock it up, then they will have hell to pay from the other departments.
Negotiate your contract! I can't stress that enough. Again, there will be times in your life where you have to take what you can get, but weigh your options and make the decision that's good for you. Most of the time, though, this won't be your only opportunity for a job, whereas this is the only opportunity they have to hire you. Use that fact to your advantage.
If the guy next to you is making 1.x times your salary and you think he’s dead weight, time to discuss it with your boss or move on. You have to be your own advocate, and you’re actively hindering others from being their own advocates if you keep to that anti-union, salary secrecy bullshit.
It is abuse of the law, to intimidate, restrict, and silence. Abuse of the law should be and is grounds for disbarment.
Having a degree and passing a test does not give you the right to work. No more so than all the degreed people who are "under-employed".
The law holds lawyers to standards. Unfortunately, the current administration of the law severely curtails actually enforcing those.
P.S. U.S. perspective, although I expect this is not restricted to the U.S.
Some of the workers most affected by this sort of tactic are those that have the least understanding of the contracts' enforceability. Feels like there should be some kind of recourse for this kind of thing.
The only real solution is to outlaw even the utterance of such terms, to be enforced by the Feds. Compare, for example, how a clause like "only Caucasians will be considered for this position" would be treated.
I'd recommend anyone who encounters a Non-disparagement clause (in this case strictly in a employment agreement) in a contract walk away from said contract.
I am not a lawyer this is not legal advice.
Now I understand a contract that says some things should be kept confidential. But say what if your employer commits a crime and you contract says you are not allowed to talk about it?
If I remember right, that case is explicitly covered under whistleblower laws.
And I'm with you - I've never been shy with my viewpoints and refuse to start now. There's no way I'd sign a non-disparagement.
In fact, it would be interesting to compile a list of companies that do. It would increase both job-market efficiency and help rectify a bit of consumer informational asymmetry. (If I know former employees are gagged, I'm going to discount company claims on the assumption that they wanted the gags for a reason.)
Wouldn’t it be fairer if the party with all the power, and who dictates the content of the contract, must convince a judge that it’s enforceable before a defendant has to lift a finger or shell out money?
Currently contracts seem to be nothing more than one-sided weapons that powerful companies use to get vulnerable people to do things that they otherwise wouldn’t and can’t afford to fight. Let’s not pretend that more than a small fraction of employees out there actually get to meaningfully alter the contracts under which they work.
It's a bit like marriage you have to pay a bit for it but having someone support you and fight with you is worth the commitment. Unite!
I have successfully asked for some clauses to be removed from the contract.
A better world is one where this doesn't...yanno...happen at all, yeah?
He' what's wrong with America, BTW.
If you don’t want this to happen in your own life, then don’t sign such contracts. Leave other people to their own business. You are not their parent.
A large chunk of the workforce does not. They depend on the paycheck, need to feed people that depend on them and in their case, the employer holds all the cards. They more or less must sign. Even if they have another option lined up, for them it’s probably the choice between bad or worse terms.
It's just basic supply and demand. A job that anyone can do is going to have a larger labor supply than a job that few people can do. Employer demand is also a factor. Right now truck drivers are getting very lucrative offers because demand is so high, despite the relatively low skill level. Also risk factors, especially risk of death, can drive compensation sharply higher. For example working on live natural gas pipelines or deep sea welding isn't particularly high skill, but the compensation is huge because it has a tendency to lead to death.
If those people don't want their kids in this situation maybe they should try being not poor. You feel me?
Hold a gun to someone's head and act like they have a free choice when they decide to do what you demand of them.
And I care far, far, far more about the employees, than I do the employers.
As it stands, the employee, barring fairly singular instances (and, I note, I am one and I have hired them, I understand where the line goes), has no power.
They have a Hobson's choice not merely with one employer but with all of them.
You describe a senior and socially competent tech worker's delight. Some of us have empathy for those who are not. "Oh, but more people with no market power can 'negotiate'" is not a net benefit for people even if it was a beneficial situation for me.
"In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread."
Anecdotally, I know someone who had a non-compete clause in their hiring contract to work as the desk attendant at a hotel, in California none the less. This is basically a minimum wage job in a state where non-competes are illegal statewide.
Sure, my friend could have asked for it to be removed, but that would mean delaying the hiring process and extra work for the hiring manager who now has to go through the legal team to make any changes to the contract. When there are 20 other equally qualified candidates, why would the hotel waste their time? It makes more sense for the hotel to just find someone else who is willing to sign the illegal contract.
Non-competes in that situation are empty threats to keep workers who don't know any better from quitting.
They should be banned to protect workers from the off chance that somebody decides to follow through.
Explicit, not implicit.
It's kind of fucked up though that putting something obviously unenforceable in a hiring contract isn't being punished. Either the worker ignores it, knowing there's nothing the company can do, or they take it seriously and are afraid to quit to go to a competitor. It's pretty much no lose for the company though.
In addition, the majority of employers have (either by coincidence or agreement) landed on a similar set of crappy and unreasonable contracts. For the vast number of employees out there, it's either submit to the contract or remain unemployed.
Software is a rare exception, not the rule. Even then, people like me who have enough savings to live for over a year without a paid job (looking after a parent with Alzheimer’s in my case) are a tiny minority.
Lets not pretend like every deal not made at gunpoint was some how made by parties of equal power.
Although I must admit, it's not correct to compare human life with a corporate entity's existence.
"Contracts only happen by mutual consent."
That's not true in the least. When your alternative is to starve, one cannot really call that "mutual consent".
Not a lawyer though, so happy to hear the flaws in this.
There are so many good reasons to not outlaw severability, whereas outlawing it is a poor solution to one specific problem.
Sounds like a feature, not a bug. Contracts have to be simple. If you can't do the transaction with a simple contract, you have to find a different method to carry out what ever is desired to be done.
Let businesses with hundreds of staff attorneys do whatever they want to each other. But keep them from beating up a guy who just wants to collect a paycheck or buy a simple service.
I write a contract with you: you will deliver me a "widget" in 6 months, at which point I deliver you $300,000. This contract is negotiated in good faith - we both at the time believe it is a good deal (this is important, as lack of good faith is a different issue). It turns out that after 6 months I don't need the widget like I thought I did, and fortunately for me there is a clause that I now discover is illegal. Now you have a widget neither of us want, and are don't have money to show for your last 6 months making it.
There is no law preventing parties from negotiating in good faith either. If circumstances change, people usually adapt.
That totally hits the issue on the head. They're not negotiated contracts. They're one sided hammers.
Perhaps the solution is to give workers the right to have employment-related contracts reviewed and negotiated by an attorney of their choosing at the employer’s expense.
With actual costs attached, employers would suddenly have an incentive to keep their contracts as short and simple as possible, reserving the more onerous clauses for only the most senior positions.
Contracts for most positions would need to be kept short, reasonable, and comprehensible such that candidates don’t feel the need to exercise their right to attorney review.
This is one of the key reasons that unions are helpful to workers: each one of them doesn't have to go through this on their own. One expert does it for all of them.
I can just imagine it now: Oh, we want to hire you but it looks like the next available turn for contract reviews is 1 month from now. Sorry, looks like you'll have to sit around without making any money in the meantime.
A judge's time is generally quite expensive, and handling the massive load of contracts would likely require appointing a lot more judges.
What if both parties are fine with a contract? Why should they be forced to get the government involved? And if both parties decide to re-negotiate a contract, do we need to go through the whole government approval process again?
I agree that there are issues with some employment contracts, but you are making some incredibly broad generalizations focused on a few bad actors without taking into consideration the broader consequences.
This would encourage shorter and simpler contracts, making things easier for both the parties and any involved judge.
> What if both parties are fine with a contract? Why should they be forced to get the government involved? And if both parties decide to re-negotiate a contract, do we need to go through the whole government approval process again?
Because, as the GP mentioned, it is not an agreement between equals.
A straightforward way to address this could be through standardized contracts/clauses for mass markets. In the world of software understanding is not free, and the world of ambiguous natural language legalese is clearly even worse! In a market big enough to have many parallel participants, each clause of an agreement should be selected from a standardized bag such that online reading can readily explain your rights and responsibilities.
For the most part, this is already somewhat done through state "employment law", "landlord-tenant law", and the like. But then we get the OP situation, as well as contracts that actually attempt to countermand the law - I recently had the pleasure of reading a lease that was essentially an anti-tenant screed.
From the other direction, it also would be nice to voluntarily be able to give up a currently "standardized right" - say I don't need hot water in my apartment for savings of $100/mo. Assuming it was truly consensual and not just setting up a race to the bottom - percentages quotas or the like could address this.
That said, it would not surprise me in the least if people felt bound by such contracts because they are at an extreme disadvantage when it comes to litigation. I did not see the call for better unions at the end (I may have missed it) or legislation that would provide a financial defense for people improperly accused of violating an unenforcable contract (something like an Anti-SLAPP law[1] for working contracts)
[1] http://www.casp.net/california-anti-slapp-first-amendment-la...
It's intimidation.
Usually if there's a noncompete case, there is also a trade secret misappropriation claim at the same time. So unfortunately there is little chance that a complaint based on overly broad noncompete would just be dismissed as a matter of law in NY, regardless of how stupid the thing is.
International Business Machines Corp. v. Papermaster
https://en.wikipedia.org/wiki/International_Business_Machine...
[1] For example, if I sell you my business and agree to sign a non-compete that I won't then turn around immediately and compete with you, these non-compete agreements will generally be upheld.
[2] In most states, courts have latitude to decide on what counts as "unreasonable". For example, a non-compete for a janitor at a Fortune 500 company probably won't be upheld. An executive's non-compete at the same company probably will be. But there's a lot of gray area in-between.
This is as an employee of course.
#include <stdcontract> #include <boost-clause>
int main() { specialCase = "we fire you for any reason whatsoever and eat your baby"; return 0; }
And then it's much more clear? More directly, can we have libraries of contracts, i.e. convert spaghetti legal code into properly factored legal programs?
Or are we doomed to copy and pasted, IOCC winning EULAs that say that you can only use Apple if you don't nuke stuff.
Dude I just want to program a thingy, without reading 1000 pages of "WE OWN YOUR SOUL", trying to figure out which percentages of my soul may or may not be enforceably eatable.
Fuck off.