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

[throwarayes]

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-agreeme...

And this is the insane legal doctrine behind this

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

[tianqi]

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.

[marcosdumay]

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.

[Buttons840]

Speaking of China:

The free movement of workers is important to having an efficient economy. The US could do a lot better here; we have bad safety nets, non-competes, "trade-secrets".

When workers move freely and spread trade-secrets, this results in all companies performing better, on average. This is good for everyone except the lazy owners who would lose money to those who perform better.

While the US worries about limiting the free movement of workers, non-competes, and "trade-secrets", China is going to build approximately a billion homes and factories.

If we take the "free" out of "free market", then we're just a market, and far from the most efficient one.

[schmichael]

Oregon at least makes it 50% IIRC. Anything less than 100% seems useless though. Usually when taking a new job in the same industry you expect a pay bump, so even a 100% rate is likely leaving money on the table.

[aforwardslash]

In Portugal is generically the same - non-compete clauses require the payment of a monthly compensation for the duration of the non-compete clause; If non-compete clause exists, but no specific compensation is specified in the contract, the employee may demand the full salary during the specified period (I know at least one case).

[nswest23]

I guess corporations don't write the laws in China?

[coderatlarge]

can you choose to refuse these payments to avoid the responsibility?

[jjallen]

Then the employee is only making 30% and presumably not working elsewhere or that would defeat the purpose. So how is this a good approach? I would get 80% or more but don’t see how this is effective.

[neximo64]

That actually sounds bad, since after the payments end you can basically speak about IP and its as if you're encouraged to do so after payments stop.

[v5v3]

That's a terrible law.

30% of your total monthly income as it was, when you are likely leaving for more money at a competitor or to start your own company...

[onion2k]

Imagine if Tesla had been able to stop Andrej Karpathy working at Open AI just by spending 1/3 of what his salary was when he was on Autopilot. That sounds like a terrible idea.

[hmottestad]

Would be very interested to read more about that. Do you have a link?

[timoth3y]

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...

[cam_l]

Australia is straight up banning non competes for anyone earning under $175k, for this reason.

They are also tightening up the contract law around non competes to reduce the impact of the scare tactics employers have been using to bind low level employees with unenforceable, but still litigable, contract terms.

And scare tactics are really all they are (in this country), because even before they do this the courts have a track record in this country of looking very dimly on overly broad or restrictive non compete 'agreements'.

[aforwardslash]

Not only in the US; without going into too much detail, many countries in south America and Africa have strong business connections with the US, and it is quite common to see the ever-abusive dumb dumb US contract templates being used in those countries, even when local law differs significantly. Usually, the posture is "we can do whatever you want and you keep your mouth shut, or else we'll sue you for everything". I loathe organizations with these kind of contracts.

[KomoD]

Is it more common in certain industries?

[kirubakaran]

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"

[thedufer]

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.

[coderatlarge]

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.

[treve]

One is friendly to existing wealth and the other to innovation and disruption I suppose.

[claw-el]

Or maybe it is the inverse. The different states enforcement plan depends on the types of companies they have?

[vessenes]

Washington's non-compete laws are pretty mild these days, although it is true that it's not California.

I'm also not sure where you heard that Washington is "business friendly." B&O Tax, labor laws, Seattle city politics and the institution of income tax have all driven significant exodus from WA elsewhere over the last ten years.

But, Biden admin + WA laws in 2020 and 2024 make it a relatively low employee load for non-competes, as far as I know. Duration limited to 18 months, auto canceled if an employee is laid off, $120k-$300k income floor under which they are not enforced, details must be offered before job offer made (including a verbal job offer), no venue shifting regardless of location of employer, new employers are granted presumptive standing to sue on behalf of a new hire, agreement only allowed against current customers of the company, not enforceable when selling equity of up to 1% of a company to competitors of the company..

These are not your father's east-coast non-compete agreements! Combined with broad federal support that a non-compete cannot stop you from earning your living, e.g. banning a doctor from working for a competing healthcare system is likely no-go on its own.

[llm_nerd]

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.

[tgsovlerkhgsel]

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".

[BobbyTables2]

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.

[voidfunc]

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.

[dimitry12]

What are the keywords for finding a lawyer who can advise on non-competes?

Asking because it turned out nearly impossible to find a local lawyer to advise on a dispute couple months ago - with 9 out of 10 telling me they only do divorces or real estate or immigration. I was literally calling one by one from a list based on what I believe were relevant search criteria on State Bar website.

[PaulHoule]

I had a non-compete cause in a contract, I wound up in a dispute over unemployment insurance and the contract came up, the judge told me that the non-complete cause didn't make any sense at all but that's because it was poorly written.

[matsemann]

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.

[spigottoday]

What about health insurance?

[secondcoming]

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.

[lanyard-textile]

If you’re an employee under NDA, and your company considers almost everything about your work to be confidential, you can’t effectively paint a detailed picture for the role.

The NDA gives them some protection to answer your questions openly and transparently.

[dakiol]

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]

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??

[epolanski]

The fact that something isn't enforceable does not mean it won't be a giant headache to prove it in a court in a foreign country.

[luke5441]

Having probably signed such a contract, how do I find out if it is enforcable? Probably talk to a lawyer, but how do you find one that gives you a straight, but correct, answer to such a complex topic. For me it is even more complex since I'm a fake employee (contractor) in another country working for a US company.

The answer to those questions might be really unsatisfying in practice, since it breaks down to a cost calculation by the sueing company (if the company leadership is rational). So in case you get sued you have to fight defensively and bleed them enough so they give up or something.

[bartvk]

There's option 3, and that's: don't say anything, strike some passages and sign it.

Whether that's a good idea, that depends on the circumstances but I'm just noting it as an option.

[gwbas1c]

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]

In finance, it is common to be paid your base wage during your non-compete. Or at least that is how mine worked.

[exe34]

> 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]

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.

[sim7c00]

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]

> 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.

[almosthere]

New definition for the word Irony:

AI companies protecting their IP.

[bitwize]

In common law jurisdictions, there's a term of art in law -- "unconscionable". It's when a contract is so egregiously one-sided that no reasonable person would agree to it, and it could be ruled unenforceable.

It's not reasonable to expect an employee to build up a body of expertise in a field, and then agree to be bound never to work in that field again after leaving your current job. IANAL, but confidentiality agreements that act like lifetime noncompetes are good candidates for being found unconscionable, even absent an explicit anti-noncompete statute in your jurisdiction. (Other clauses you may rightly consider unfair, I don't know about.)

Making things worse for the companies implementing such contracts is the fact that things change so fast now that they are unable to substantially benefit from such a contract. The contract is purely a CYA move.

If you have agreed to lifetime noncompete terms, you may wish to speak to an employment attorney about how enforceable the contract actually is in your area.

[anticensor]

Civil law jurisdictions also have protections against one-sided contracts.

[btilly]

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.

[xhrpost]

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

[arnonejoe]

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].

[SoftTalker]

Agree it varies by state. My only first-hand experience was in a relatively conservative "red" state over 20 years ago. I paid for an hour of legal advice and the lawyer said that in general non-competes cannot be so broad that they prevent you from working in your profession or skill.

[throwarayes]

It also depends on the laws governing your contract, not just where you live.

[hk1337]

Is there any precedent for this yet? This sounds like some overeager lawyers talking out of their ass hoping you don’t call them out for it? It sounds like it’s for a very specific situation that really doesn’t apply to most people.

[ivan_gammel]

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.

[wbl]

IANAL but as I was told by some who are:

They can say that all they want, but that isn't what the statutes or case law about trade secrets says. in California state courts take a very dim view of this sort of overreach.

[fc417fc802]

That is exactly what I'm wondering about. At least a few states have severely limited noncompetes and even outright banned them in specific contexts. I have to wonder if a nondisclosure twisted for use as a noncompete would survive the courts in one of those states.

I'm also skeptical how enforceable this theory is in general. Have there been any noteworthy cases of employees getting screwed over that rested on it?

[gadders]

"Unconscionability is a doctrine in contract law that describes terms that are so extremely unjust, or overwhelmingly one-sided in favor of the party who has the superior bargaining power, that they are contrary to good conscience. Typically, an unconscionable contract is held to be unenforceable because no reasonable or informed person would otherwise agree to it. The perpetrator of the conduct is not allowed to benefit, because the consideration offered is lacking, or is so obviously inadequate, that to enforce the contract would be unfair to the party seeking to escape the contract."

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

[josephcsible]

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.

[amatecha]

Right, as in "I literally cannot comply with this"? Makes sense.

[throwaway2037]

Hot take: Sign these agreements without worry. When you change employers in the future, make no public announcements about it -- don't post anything on social media, including LinkedIn. Do your best not to transfer any IP between employers. You will be fine.

Finally: Yes, I think these agreements should be illegal. I recently signed a new employment contract that requires me not to disparage my new employer... forever. Literally: There is no end date. I could be an old man in a squeaky rocking chair that says something bad about my (then) former employer, and they have the right to sue me for breaking a non-disparagement agreement. I laughed to myself when I signed that contract.

[OutOfHere]

What exactly should one be on the lookout for? Practically every company has an IP confidentiality agreement.

[Traubenfuchs]

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.

[dboreham]

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.

[b800h]

That's the terrible Wikipedia article. It says nothing at all about juridictions in which it's considered a valid legal principle. I notice that someone seems to have just flagged it "unclear".

[ww520]

Not just employment contracts, some companies require NDA just for interviews.

[airocker]

IF you go to an interview, and nothing was divulged to you, this NDA does not mean anything. But if youwork at a competitor, and you get an interviewer tell you things that the company does not want to divulge, company has some protection. Not all laws and processes are bad.

[throwaway2037]

    > some companies require NDA just for interviews

Like who? And what dummy signs these NDAs?

[francisdavey]

To chime in on how English law approaches this (and perhaps amplify some of the good points already made): the common law position is that any restraint of trade is contrary to public policy and so should not be enforced unless some exception can be shown.

Post employment restrictions fall under the doctrine of restraint of trade - which explains why we use "gardening leave". While you are employed you and your employer have a relationship which includes a duty of loyalty by you to your employer. They have duties such as a duty to pay you for your work. By default they should also be offering you work, so a specific "gardening leave" clause is required to keep you at home, bound by restrictive covenants but without work and being paid.

After employment, it is much harder to make restrictions that will bite. Typically an employer must show there is some legitimate interest they are protecting and that it is reasonable to do so.

Hence: non-solicitation of clients tends to be easier to justify, though only if an employee actually had some kind of relationship with or knowledge of those clients. Whereas a non-compete is much harder to justify. It is also harder to make reasonable, hence time/space/sectoral limitations.

Looking at confidentiality: the default established in the amusingly named Faccenda Chicken v Fowler (Mr Fowler was a frozen chicken sales lead). It is that you are bound by the usual duties of confidentiality that arise when anyone has confidential information but that you cannot be prevented from using information gained while working that is part of your normal skill acquired as part of the job unless that is so secret as to amount to a "trade secret".

In this case, Mr Fowler knew where to sell chicken (from having done so). While this was confidential, he was able to use that information (not being a trade secret) in setting up a competing frozen chicken sale network.

The core idea is that you can't stop someone plying their normal trade.

That's the default. Obviously if you sign an agreement that imposes post-contract confidentiality obligations it can go further than Faccenda Chicken, but if it went too far, it would also be vulnerable to the rule against restraint of trade.

In short:this sort of "you cannot work in the industry" idea is very unlikely to work in England and Wales (and I suspect the rest of the UK - though I am strictly only an English lawyer).

That said: there is still value in reading your contract of employment carefully and making sure that you are happy with it.

[kelnos]

So tired of this garbage. I think non-competes (and the legal concept of inevitable disclosure) should just be banned completely. Sure, some things (like taking customer lists when you leave a company) are messed up and should be barred, but companies should just be required to accept the fact that their employees will take some "proprietary" knowledge/information with them to their next job.

I don't even think that non-competes should be allowed for higher level employees/executives. Everyone deserves the right to change jobs whenever they want to.

[sircastor]

> Sure, some things (like taking customer lists when you leave a company) are messed up and should be barred

Is it messed up? If you're a salesperson, and you've built the relationships with these customers is their loyalty to you, or to the company that you worked for? I had a personal trainer for a little while and he took all his clients to a new gym when he decided to contract with a different gym.

I don't know the answer to this. But it doesn't seem as clear cut to me.

[ungreased0675]

Non-competes should be illegal. If someone is so valuable that them leaving for a competitor would severely damage the business, then pay them more. Do their laundry. Hire someone to drive them around. Give them a personal chef. Etc.

[BrandoElFollito]

Of course this depends on the country. This is a non-issue in France for instance where this topic is strictly regulated and heavily leaning towards the employee.

[getcrunk]

I thought a few states maybe California or New York effectively made non compete not enforceable

[sgt101]

Has anyone been caught by this? As in sued or prevented from working?

[v5v3]

What happend to you?

[didntknowyou]

most country's employment law would hold up against NDA/non-competes if they do try to sue

[tptacek]

For what it's worth, a noncompete that makes it effectively impossible for you to apply your profession anywhere for your entire career is unlikely to be enforceable in any state in the country.

Companies that are serious about noncompetes for professionals (rather than hourly shift workers) generally do garden leave. I'd take a noncompete for a garden leave company seriously, and would maybe roll my eyes at a broad noncompete from a random tech firm.

(Don't sign anything you're not comfortable with.)

[awaymazdacx5]

once you're - in you're in. we found we were bound like rats.

[neuroelectron]

Too bad. I routinely reapply the exact same business logic across competitors. I even have proprietary source code collections I use for reference. If you don't like it, write your own software. Business methods are literally unpatentable.

If you're not copying internal wikis, and poaching customers what are you even doing?

[viapivov]

Like.. has anyone been sued for the violation of the non compete?

[transactional]

...but are they enforceable?

[prerok]

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).

[jauntywundrkind]

To riff Keynes,

Enforcement can maintain litigation longer than you can maintain solvency.

[throwarayes]

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.

[stego-tech]

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]

> 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.

[TrackerFF]

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.

[chaosprint]

isn't this illegal?

I mean even patent has 20-year limit

[airocker]

So if you are against this, you are okay with Coca Cola’s secret to be divulged by any employee to any competitor? If you cannot let companies maintain trade secrets, you may as well close them down.

[sircastor]

This implies that any employee at Coca Cola knows and has access to the secret formula, which is of course, not true. And even if it were true, there's a substantial difference between a specific, limited piece of information (such as the recipe for Coca Cola) and broad concepts about operating in an industry.

I work in the Robotics industry. While the algorithm for our path planning would be a trade secret, how path planning is pursued is not. It's a fundamental concept in robotics. To extend the metaphor, it would be as if my company thought that any robotics work that involved path planning would violate their IP, because I did path planning work with them. It's nuanced to be sure, but some companies are very aggressive as to prevent you from having mobility in your career. Sometimes in a genuine effort to protect their IP, but also sometimes to reduce your negotiating power or punish you.

[airocker]

There is a difference between trade secrets and non compete. If you can compete with the company without using trade secrets, like make a drink that people like without using Coca Cola secret, it is fine.

[93po]

as far as i can tell there are a million sodas that are extremely close to coca cola and coca cola is still doing just fine

[airocker]

why downvote this? I have gone through this route and can vouch this is for a good cause, this conversation may mislead people into believing stealing is okay.