Ask YC: agressive non-compete/non-solicitation agreement

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.

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.

Ok I updated it.

ty :)

(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.

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.

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).

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.

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

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.

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?

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.

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.

You haven't read too many then.

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

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

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.

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?

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.

According to this site, California non-competes may not be enforceable at all:

http://labor-employment-law.lawyers.com/employment-contracts...

Would you like stock options with that?

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.

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.

:-)

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.

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