Ask HN: Opinions on Non-Compete Agreements in Small Startups?

[jimmy2020]

Hey everyone, I'm curious to hear your thoughts on signing non-compete agreements in small startups, especially when the contract doesn't include equity and is limited to just one year, while the non-compete agreement's duration is about 16 months. What's your take on this situation?

[JohnFen]

My policy is that I don't sign a noncompete for anyone. They serve no legitimate purpose. In at least a few US states, they aren't even legal. If you're in one of those, then it's a bit of a nonissue.

[jimmy2020]

I am outside the US, and they told me this is the common practice for startups now, and to be honest, I don't feel comfortable signing it.

[JohnFen]

I gave my daughter this advice about contracts in general that may apply to you: if you aren't comfortable with it, don't sign it. Do explain to the other party why you're uncomfortable with it, though. The point of discomfort may be negotiable. If it's not, then don't sign it anyway.

Is the startup requiring the noncompete just because that's what everyone else does? Often, when a company is requiring a noncompete, what they're actually trying to do is to prevent the use of proprietary information by competitors. If that's the case with this one, then maybe they'd be willing to use a nondisclosure rather than a noncompete.

These are just the thoughts I go through when I'm faced with one of these things. You are a different person with different needs, of course.

The solid advice I have for you is to talk to an attorney with experience in employment matters if at all possible to get his take on what that particular agreement means for you, and to think about the whole thing very carefully. For instance, if you'll be locked out of sorts of businesses that aren't of much interest to you anyway, a noncompete with this startup might not be big a deal.

Going to work for a startup is already taking a gamble in the first place. Being locked out of similar businesses should you leave can be a big ask of someone who's already taking a risk.

[jimmy2020]

Thank you!

[version_five]

I was asked to sign one once, I said no, and it turned out the startup had just got some standard contracts from someone and was using them because they had them, not because of some specific concern so they had no problem changing them to something mutually acceptable. Any company that won't do this is not worth working with.

[jimmy2020]

The original document initially mentioned the 'software industry' and I indicated that by signing it, I would be legally agreeing not to work in the software industry at all. They mentioned they would provide a more specific definition, but I still found it unusual. I understand signing an NDA, but a non-compete agreement feels more like giving them the right to sue me if they choose to.

[JohnFen]

> The original document initially mentioned the 'software industry' and I indicated that by signing it, I would be legally agreeing not to work in the software industry at all.

If that's the clause, then 100% don't sign it. I've never heard of a noncompete that locks you out of an entire industry before. More typically, a noncompete restricts you from working at companies that directly compete with the company hiring you.

Personally, that they'd even ask for something that extreme, even if it can be negotiated to be less onerous, would put me off of working for them. I'd take it as a sign that they're a bad company to work for.

[al2o3cr]

If they don't want you working in the software industry for 16 months, then there's a simple and straightforward solution: they should pay you. Look up "garden leave" for more about the practice.

[jimmy2020]

Excellent point. Thank you.

[elamje]

It’s fine. Just make sure the scope is as narrow as possible. At my company, I signed one. But, before I did that I found 5 other companies that I would want to work at someday that are tangential to us and ran them by the founders for clearance.