On NDA’s and vague Non-Compete Agreements as a Junior Employee
This is a crosspost from my blog. You can find the original post here.
When I was working at a small software company in the Midwest as a junior developer, I was asked to sign an NDA / Non-Compete agreement. It was an amended agreement to the one I had signed upon first starting my employment. During the process of signing the first agreement, I had signed it without asking any questions — because I simply hadn’t known any better.
At the time of the second agreement, the company had been dealing with some IP infringement issues, so it was logical and understandable that they would ask their employees to sign an updated agreement.
However, upon reading this agreement, I had felt a bit uncomfortable with the rather vague nature it presented.
A redacted version of the agreement is shown below — as you can see, by being as vague as possible in terms of definitions of any of the terms…giving a full advantage to the company. In particular, Section 6, the Non-Compete section, is troublingly vague — “Direct competition” is an incredibly nebulous term. In particular, it the agreement purports to cover several different industries…all of which cover an extremely broad range of activities.
After reading the agreement, I met with the COO of the company to express my concerns and ask questions intended for clarifying the scope of the document.
During this process I was given verbal assurances that the Company would only seek to enforce it if went to work for any of the company’s direct competitors — even though this was not spelled out in the agreement.
I still felt uncomfortable with this, but in the end, I ended up signing the agreement for the rather simple reason of…I needed to keep my job.
Roughly a year after I had left employment with this particular company, I was in another process of job searching, and was interviewing with a startup that was in one of the fields listed in Section 6, the Non-Competition section.
I decided to ask a lawyer to review the agreement, to be on the safe side, and because I was curious as to whether or not the agreement would even be enforceable. In addition to their own law practice, the lawyer I talked with also had experience working with startups in the Venture Capital industry.
After I sent over the NDA for them to review, they responded with this assessment:
This NDA would not be enforceable, as there is no clear scope on the limitation of enforceability. That does not mean that they may not try to enforce it, but this would not stand under Ohio law (assuming that is the law governing this doc). This is clearly a form off the internet and the person copy and pasting it together clearly had no idea what they were doing.
I couldn’t help but laugh upon reading this…simply put, it had been more or less my gut reaction, as well.
So, a few lessons from this experience:
1) It’s normal to feel pressure to sign these types of agreements…as I had mentioned, I signed it out of the very normal fear of not wanting to lose my job in the event that I refused to sign it.
2) That being said, do not be afraid to ask questions regarding NDA’s / Non-Compete Agreements.
2) If possible (especially in regards to a full-time position), have a lawyer review the agreement!
3) Be willing to say no to signing an agreement that’s either too restrictive, or makes you feel uncomfortable.
4) If you’re an employer, and you absolutely feel the need to have your employees sign an NDA / Non — Compete, be sure to actually take the time to hire a lawyer to write it for you, rather than trying to cobble it together yourself.
In closing, I want to clarify one thing — this isn’t to say that all NDA’s are bad — far from it. There is definitely a time and place for them. However, a well-written NDA will be clear in it’s scope and enforceability. Just always be sure you read something before you sign it!