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Comment by NotSammyHagar | Hacker News Reader

This reads like more than standard restrictions. I hate those like everyone, they are just intended to chill complaints in my opinion with enough question to scare average people without legal expertise (like me, like most devs), just like non-competes used to seemingly primarily be used to discourage looking at other jobs, separate from whether it was enforceable - note the recent FTC decision to end non-competes.

About 5 months ago I had a chance to join a company, their company had what looked like an extreme non-compete to me, you couldn't work for any company for the next two years after leaving if they had been a customer of that company.

I pointed out to them that I wouldn't have been able to join their company if my previous job had that non-compete clause, it seemed excessive. Eventually I was in meetings with a lawyer at the company who told me it's probably not enforceable, don't worry about it, and the FTC is about to end non-competes. I said great, strike it from the contract and I'll sign it right now. He said I can't do that, no one off contracts. So then I said I'm not working there.

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I have worked for multiple startups (Malwarebytes, Vicarious, Rad AI, Explosion AI, Aptible, Kenna Security). Not once have I seen an exit agreement that stated they would steal back my vested equity if I didn't sign. This is definitely not "standard restrictions".

Anytime someone tried to get me to sign a terrible contract, they always said “This is just standard stuff.”

Same. And in the same breath they also added “this is never used anyway, it’s just the template”. But “no it can’t be removed from the contract”

I always respond with "if it's never enforced, then you'll be fine with me taking it out"

Then I strike the offending passage out on both copies of the contract, sign and hand it back to them.

Your move.

¯\_(ツ)_/¯

Do you really do this, and is striking out a line of a contract binding?

Yes, I really do this. Have done since I started working.

At one of my first jobs as a student employee they offered me a salary X. In the contract there was some lower number Y. When I pointed this out, they said "X includes the bonus. It's not in the contract but we've never not paid it". OK, if this is really guaranteed, you can make that the salary and put it in writing. They did, my salary was X and that year was the first time they didn't pay the optional bonus. Didn't affect me, because I had my salary X.

IANAL and I don't know how binding this is. I'd think it's crucial for it to be in both copies of the contract, otherwise you could have just crossed it out after the fact, which would of course not be legally binding at all and probably fraud (?)

In practice, it doesn't really come up, because the legal department will produce a modified contract or start negotiating the point. The key is that the ball is now in their court. You've done your part, are ready and rearin' to go, and they are the ones holding things up and being difficult, for something that according to them isn't important.

UPDATE:

I think it's important to note that I am also perfectly fine with a verbal agreement.

A working relationship depends on mutual trust, so a contract is there for putting in a drawer and never looking at it again...and conversely if you are looking at it again after signing, both the trust and the working relationship are most likely over.

But it has to be consistent: if you insist on a binding written agreement, then I will make sure what is written is acceptable to me. You don't get to pick and choose.

For one job I also crossed some stuff out, founder was cool with it because he mostly got it from a template. Having actual paper is great for that. At a later job, they insisted on Docusign, which was basically I get an immutable image in a browser to 'electronically sign' with no modifications. It had a section that amounted to a non-compete agreement that I didn't like, but their lawyers didn't really answer me on whether such a thing could be enforced or not given that the company was headquartered in California even though I'd be working out of Washington. I took that as a sign that they probably wouldn't go Amazon on me, at least.

I’m the kind of person for whom it would be hard to say it directly. You’re awesome.

Verbal agreement has lots of risks.

First you’re offering up a lot of trust to people you might have just started working with.

Or, they could be very trustworthy and just remember things differently. And of course people come and go in companies all the time they just might not be there.

At least if you do a verbal agreement follow it up with an email confirming the details.

Why not? A labor contract is a 2-ways street. If the company doesn't like the new version, they will not sign it and not hire you.

Exactly. And just like I have to be fine with not getting the job if my conditions are not acceptable to them, they have to be fine with not getting me if their conditions are not acceptable to me.

Considering the considerable effort that has gone into this by the time you are negotiating a contract, letting it fail over something that "is not important" and "is never enforced" would be very stupid of them.

So if they are unwilling to budge, that either means they were lying all along and the thing that's "never enforced" and is "not important" actually is very important to them and definitely will be enforced, or that they are a company that will enforce arbitrary and pointless rules on employees as long as they think they can.

Neither of which is a great advertisement for the company as an employer.

> So if they are unwilling to budge, that either means they were lying all along and the thing that's "never enforced" and is "not important" actually is very important to them and definitely will be enforced, or that they are a company that will enforce arbitrary and pointless rules on employees as long as they think they can.

Most of the time is basically just FUD, to coerce people into following the rule-that-is-never-enforced

It's always "not enforced" or "just a template" right up until they decide they need to pressure you into something and then they will have no problem referencing those items.

Do not sign a contract unless you are willing to entirely submit to everything in it that is legally binding.

Also be careful with extremely vague contracts. My employment contract was basically "You will do whatever we need you to do" and surprise surprise, unpaid overtime is expected.

I've seen legal departments redlining drafts of a contract repeatedly until an agreement had been reached. The final contract still contained the red lines.

(EU perspective) it is binding. you just add both parties' initials/signature on the margin of each line that was changed.

Usually it’s binding, because it’s presumed both parties signed after the changes.

However it can be disputed, and a company could argue about the timing or details.

That’s why you’re often asked to initial changes, makes it clear that both parties have agreed to the modifications.

IANAL but I've seen strikes throughout contracts, and then an initial+date from both parties. Weird how in 2024 an initial that's so easily forgeable can be legally binding

A verbal contract, which has no record at all, can also be legally binding.

I guess like all laws it depends on jurisdiction, and more importantly, if you can convince the judge/magistrate that the contract did or did not happen

Yeah, but the law still sets the default baseline for he judge / jury / whatever. In the Nordic countries (at least Sweden) -- as techno-modern and bureaucratic as they may be -- that still includes verbal agreements.

(The handshake is probably not a legal requirement, though I suppose it could be taken into consideration as evidence -- "You even shook hands on it, so you must have realised that what you had just discussed were atually the terms you were agreeing to.")

I would guess that the initial is not the important thing, but that the strike is present on both copies of the contract.

Don't forget to initial the crossed-out section and draw a passive aggressive happy face!

By that downplaying the significance of a contract's terms and persuading to sign it without fully understanding the implications. If this were only the beginning of my career, meaning my first serious company, I would sign the contract.

“This is just standard stuff” belongs in a category of phrases like “this is perfectly legal”.

...you can trust me with it"

I’ve heard of some pretty aggressive non-competes in finance, but AFAIU (never worked in Connecticut myself), it’s both the carrot and the stick: you get both paid and a stiff contract if you leave with proprietary alpha between the ears.

In tech I’ve never even heard a rumor of something like this.

It’s got a term - “garden leave” and yeah it was prevalent in finance. I say “was” because I think some states are changing laws wrt/ non-competes and this calling this practice into question.

No, you're confusing stuff.

First of all, taking any code with you is theft, and you go to jail, like this poor Goldman Sachs programmer [1]. This will happen even if the code has no alpha.

However, noone can prevent you from taking knowledge (i.e. your memories), so reimplementing alpha elsewhere is fine. Of course, the best alpha is that which cannot simply be replicated, e.g. it depends on proprietary datasets, proprietary hardware (e.g. fast links between exchanges), access to cheap capital, etc.

What hedge funds used to do, is give you lengthy non-competes. 6months for junior staff, 1-2y for traders, 3y+ in case of Renaissance Technologies.

In the US, that's now illegal and un-enforceable. So what hedge funds do now, is lengthy garden(ing) leaves. This means you still work for the company, you still earn a salary, and in some (many? all?) cases also the bonus. But you don't go to the office, you can't access any code, you don't see any trades. The company "moves on" (developes/refines its alpha, including your alpha - alpha you created) and you don't.

These lengthy garden leaves replaced non-competes, so they're now 1y+. AFAIK they are enforceable, just as non-competes while being employed always have been.

[1] https://nypost.com/2018/10/23/ex-goldman-programmer-sentence...

The federal government banned non competes last month:

https://www.ftc.gov/news-events/news/press-releases/2024/04/...

I think this still leaves garden leave on the table. The thing that can no longer happen is an employer ending it's relationship with an employee and preventing them from continuing their career after the fact. Garden leave was in fact one of the least bad outcomes of a non-compete as I understand it.

I don't recall where I saw it, but I believe the FTC clarified and said that garden-leave type arrangements aren't covered under their ban.

Comp clawbacks are quite common in finance, at least contractually. It's rare for it to go ahead, but it happens. It isn't some especially weird thing.

Comp clawbacks in exit agreements, that weren't part of the employment agreement?

I've seen equity clawbacks in employment agreements. Specifically, some of the contracts I've signed have said that if I'm fired for cause (and were a bit more specific, like financial fraud or something) then I'd lose my vested equity. That isn't uncommon, but its not typically used to silence people and is part of the agreement they review and approve of before becoming an employee. It's not a surprise that they learn about as they try to leave.

It must have been part of the original employment document package, that the equity was cancellable. In the details of the equity grant, or similar, somewhere.

According to the Vox article, it's much more complicated legally. It's not part of each employee's contract that allows this, it's part of the articles of incorporation of the for-profit part of OpenAI.

Must it?

Not clear what you mean.

Do you mean it is generic to do that in contracts? (Been a while since I was offered equity.)

Or do you mean that even OpenAI would not try it without having set it up in the original contract? Because I hate to be the guy with the square brackets ;-)

If it wasn't in the original contracts for the equity, they wouldn't be able to claw back. Fairly obviously, the mechanism can't be in the exit agreement because you didn't sign that yet.

Normally a company has to give you new "consideration" (which is the legal term for something of value) for you to want to sign an exit agreement - otherwise you can just not bother to sign. Usually this is extra compensation. In this case they are saying that they won't exercise some clause in an existing agreement that allows them to claw back.

Per the Vox article, it's not directly in the contract you sign for the equity, it's basically part of the definition of the equity itself (the articles of incorporation of the for-profit company) that OpenAI remains in full control of the equity in this way.

It must.

Joke aside - I'm saying "it must" the same way someone might say "surely".

Wise. Stops people saying "and don't call me Shirley!"

Don’t call me Shirley.

What is the structure of those compensations, and the mechanism for the clawbacks? Equity is taxed when it becomes the full, unrestricted property of the employee, so depending on the structure these threatened clawbacks could have either (1) been very illegal [essentially theft], or (2) could have had drastic and very bad tax consequences for all employees, current and former.

I'm not surprised that they're rapidly backpedaling.

> taxed when it becomes the full, unrestricted property of the employee

I guess these agreements mean that the property isn't full unrestricted property of the employee... and therefore income tax isn't payable when they vest.

The tax isn't avoided - it would just be paid when you sell the shares instead - which for most people would be a worse deal because you'll probably sell them at a higher price than the vest price.

> which for most people would be a worse deal

It's a worse deal in retrospect for a successfull company. But there and then it's not very attractive to pay an up-front tax on something that you can sell at an unknown price in the relatively far future.

Not sure how they deal with the tax. Ping John Stumpf (former Wells CEO) and ask, he probably has time on his hands and scar tissue and can explain it.

   > Comp clawbacks are quite common in finance

Common? Absolutely not. It might be common for a tiny fraction of investment bank staff who are considered (1) material risk takers, (2) revenue generators, or (3) senior management.

Can you find any specific examples? I've only seen that apply to severance agreements where you're being paid some additional sum for that non-disparagement clause.

Never seen anything that says money or equity you've already earned could be clawed back.

I negotiated a starting bonus with my employer and signed a contract that I would need to pay it back if I quit within a year.

Wells Fargo clawed back from the CEO (and a couple others if I remember) over the fake account scandals.

Right, but would that have been achieved with a clause open-ended enough to allow this additional paperwork on exit?

Or would that have been an "if you break the law" thing?

Seems unlikely that OpenAI are legally in the clear here with nice clear precedent. Why? Because they are backflipping to deny it's something they'd ever do.

I think they are backpedaling rapidly to avoid major discontent among their workers. By the definition of their stock as laid out in their articles of incorporation, they have the right to reduce any former employee's stock to 0, or to prevent them from ever selling it, which is basically the same thing. This makes their stock offers to employees much less valuable than the appear at face value, so their current and future employees may very well start demanding actual dollars instead.

> Comp clawbacks are quite common in finance, at least contractually

Never negotiated on exit.

I don't think it was negotiated on exit. It was threatened on exit. The ability to do it was almost certainly already in place.

> The ability to do it was almost certainly already in place

Why? OpenAI is a shitshow. Their legal structure is a mess. Yanking vested equity on the basis of a post-purchase agreement signed under duress sounds closer to securities fraud than anything thought out.

I'm not saying it was thought out, I'm saying it was in place. My understanding is that the shareholders agreement had something which enabled the canceling of the shares (not sure if it was all shares, shares granted to employees, or what). I have not seen the document, so you may be right, but that's my understanding.

> the shareholders agreement had something which enabled the canceling of the shares

OpenAI doesn't have shares per se, since they're not a corporation but some newfangled chimeric entity. Given the man who signed the documents allegedly didn't read them, I'm not sure why one would believe everything else is buttoned up.

If its not negotiated on exit why are they requesting additional documents to be signed when leaving? Clearly nothing like this was agreed at the start of employment.

Is OpenAI a finance company? I guess that would explain a lot.

Would it though? Presumably a finance company's claw back clause is there to protect it from you taking its trade secrets with you to its competitors, not from you tweeting "looks trashy lol" in response to a product launch of theirs, or you mentioning to a friend that your old boss was kind of a dick.

They pay like one.

Finance has bigger cash and deferred cash (bonus) in their packages. OpenAI still puts a lot of the pay in restricted equity.

IANAL but isn’t it illegal to execute something in the event of a document not being signed?

I expect not... provided it's a thing you could do anyway (and it isn't extortion or something).

You could claim you gave someone a contract and they didn’t sign it, so now they owe u a million bucks

I think you missed my proviso.

If you can do X in the first place, I don't think there's any general rule that you can't condition X on someone not signing a contract.

I’ve seen that for a well-known large tech company, and I wasn’t even employed in the US, making those seem stranger. Friends and former colleagues pushed back against that (very publicly and for obvious reasons in one case) and didn’t get to keep their vested options: they had to exercise what they had before leaving.

There was one thing that I cared about (anti-competitive behavior, things could technically be illegal, but what counts is policy so it really depends on what the local authority wants to enforce), so I asked a lawyer, and they said: No way this agreement prevents you from answering that kind of questioning.

A 90 days exercise window is standard (and there are tax implications as well in play).

OpenAI is different: they don’t grant options, but “Units” that are more like RSUs.

Don’t those come with bad tax implications then? The point of options is to give ownership without immediate financial burden for the employee.

It depends on the details.

Often RSUs in non public companies come with a double trigger: you need both the vest to happen and a liquidity to happen for the actual delivery of those, so no tax implications until a liquidity event (afaik. But don’t take tax advice from randos on the internet).

You pay normal tax on them when you sell after holding for 1 year, but an increased tax if you sell within that year.

That’s not completely accurate.

In the US, equity given as compensation for work could be taxed as wages, or, under certain circumstances, as capital gains.

The one year is for some capital gains to get considered long term gains, which may be taxed at a lower marginal rate than regular wages.

In other words, if you are granted equity as compensation, go talk at length to a tax professional to get an understanding of the taxation of it.

The closest thing I've heard of is having to sign anti-disparagement clauses as part of severance when laid off; still pretty shitty, but taking back already vested equity would be on another level.

My understanding is that its an explicit condition of the equity grant, not something technically first revealed at exit (which would probably be illegal), but probably under the expectation that no one is carefully studying the terms of the agreement that would be required at exit when they are accepting compensation terms that i nclude equity.

I work in ad tech and have had to sign this when laid off.

How is malwarebytes a startup? They were a thing when I was a baby!

GP:

> I have worked for multiple startups (Malwarebytes...

Note the "have worked" and the rather long list of places they've worked. If that list is in chronological order (sure didn't look alphabetical), Malwarebytes doesn't have to be a startup now for it to have been one when GP worked there.

Well that’s depressing. I was 27 years old when Mawarebytes was released.

Fuck, I’m old.

People on this site have been working in this industry longer than you. Some longer than you have been alive, it sounds like.

You take my statement far too literally. I thought it came out in the late 90's. Turns out, it was 2006. I was in middle school at the time.

I worked pre-ipo Uber with TK as CEO and they were bro-af and had nothing like this.

> He said I can't do that, no one off contracts.

There was still potential to engage there:

  "That's alright, as you said it's not enforceable anyway just remove it from everyone's
   contract.  It'll just be the new version of the contract for everyone."

Doubt it would have made any difference though, as the lawyer was super likely bullshitting.

This is one of those magical times where having your own counsel is worth the upfront cost.

You did the right thing here.

> I was in meetings with a lawyer at the company who told me it's probably not enforceable, don't worry about it

Life rule: if the party you're negotiating a contact with says anything like "don't worry about that, it's not enforceable" or "it's just boilerplate, we never enforce that" but refuses to strike it from the contract then run, don't walk, away from table. Whoever you're dealing with is not operating in good faith.

You did well: there is never a rule against one-off contract. I can assure you the CEO has a one-off contract, and that lawyer has a one-off contract, at the very least :D

Those are great points. I didn't think about it at the time. Since they were pushing me hard to sign a contract that for once literally blocked most of the companies in the cs speciality area I mostly have worked in, it gave me enough courage to say no. Barely ;-)

Yeah, totally legit. Don't worry about it, it's not enforceable anyways. What, remove it from the contract? God no! Oh, I mean sorry, no one off contracts.

I'd be surprised if anyone fell for that. "Oh, thanks, opposing counsel, I totally trust you to represent my interests over your employer's!"

Well, you can be surprised. It's surprisingly common, in my experience, to believe people who pretend they are on your side. One interesting and typical case that is documented through countless online videos is police interrogations, where the interrogator is usually an expert in making it seem he (or she) is on your side, despite how obvious it should be that they're not. "Can I get you a meal?", friendly tone, various manipulations and before you know it you've said things that can and will be used against you whether you are guilty or not.

And you don't get the meal, either.

> We can also mention the case of psychiatrists running the "Presence francaise" groups who, appointed to examine the prisoner, started off boasting they were great friends with the defense lawyer and claiming both of them (the lawyer and the psychiatrist) would get the prisoner out. All the prisoners examined by this method were guillotined. These psychiatrists boasted in front of us of this neat method of overcoming "resistance."

- The Wretched of the Earth, Frantz Fanon

I read some of the pages before and after that footnote. Highly disturbing, to say the least.

Attorneys are like any other profession. The average attorney is just like the average person, except he passed a difficult test.

Exceptions require sign off and thinking. The optimal answer is go with the flow. In an employment situation, these sorts of terms require regulatory intervention or litigation to make them go away, so it’s a good bet that most employees will take no action.

> The average attorney is just like the average person, except he passed a difficult test.

My best friend is a lawyer, so heck knows how difficult that test can be -- he passed it. ;-)

If it's non-enforceable, but you signed it, wouldn't that make the contract void?

I suppose there's probably a bunch of legalese to prevent that though...

Probably not enforceable != enforceable. Are you worth suing or does everyone sign? Are your state laws and jurisprudence going to back you up?

If you are ever going to sign an employee agreement that binds you, consult with an employment attorney first. I did this with a past noncompete and it was the best few hundred I ever spent: my attorney talked with me for an hour about the particulars of my noncompete, pointed out areas to negotiate, and sent back redlines to make the contract more equitable.

The single best professional decision I ever made was to get a business degree. The degree itself wasn’t worth a damn, but the network was invaluable. I have very close friends who are the exact kind of attorney who you would expect to have an undergraduate business degree. They’re greedy, combative people who absolutely relish these sorts of opportunities. And as a bonus, they are MY greedy, combative people who relish these sorts of opportunities.

They’re great partners when confronted with this kind of contract. And fundamentally, if my adversary/future employer retains counsel, I should too. Why be at a disadvantage when it’s so easy to pay money and be at even?

There are some areas my ethics don’t mesh with, but at the end of the day this is my work and I do it for pay. And when I look at results, lawyers are the best investment I have ever made.

The legalese to handle that is one of the standard boilerplate clauses: https://en.m.wikipedia.org/wiki/Severability

At most it would just make that part of the contract void. Almost all contracts with stuff like this would have a “severability” clause which states like if one part of the contract is invalid, the rest is still valid.

But even without that, judges have huge amounts of leeway to “create” an ex post facto contract and say “heres the version if that contract you would have agreed to, this is now the contract you signed”. A sort of “fixed” version of the contract.

> At most it would just make that part of the contract void. Almost all contracts with stuff like this would have a “severability” clause which states like if one part of the contract is invalid, the rest is still valid.

Severability clauses themselves are not necessarily valid; whether provisions can be severed and how without voiding the contract is itself a legal question that depends on the specific terms and circumstances.

There is usually a severability clause that basically says if a clause is illegal it voids that clause not the whole contract… this is pretty standard practice.

I think I've seen that in every contract I've ever signed.

No one off contracts. lol. What nonsense. Then why did bother to have a meeting? You handled that one like a boss.

> Then why did bother to have a meeting?

Because lawyers are in the business of managing risk, and knowing what OC was unhappy about was very much relevant to knowing if he presented a risk.

yup.

companies say that all the time.

another way they do it is to say, it is company policy, sorry, we can't help it.

thereby trying to avoid individual responsibility for the iniquity they are about to perpetrate on you. .

"If it's company policy, then how can't you help it, when you're the company?"

Not standard where I come from.

And standard doesn't mean shit... Every regime in the history of mankind had standards!

Non-competes like this are often not enforceable, but it depends on the jurisdiction.

That lawyer was probably lying, bro, since he could not keep his money where his mouth was.

> This reads like more than standard restrictions.

It reads like omertà.

I wonder if I'll still get downvoted for saying this. A lot can change in 24 hours.

Edit: haha :-P

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