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.
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.
OpenAI is different: they don’t grant options, but “Units” that are more like RSUs.
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.
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).
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.
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 ;-)
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.
Joke aside - I'm saying "it must" the same way someone might say "surely".
I'm not surprised that they're rapidly backpedaling.
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.
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.
Never negotiated on exit.
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.
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.
Never seen anything that says money or equity you've already earned could be clawed back.
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.
> Comp clawbacks are quite common in finance
Yeah, my use of "quite common" is probably bad there. Perhaps "quite common amongst top execs in finance".
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.
In tech I’ve never even heard a rumor of something like this.
https://www.ftc.gov/news-events/news/press-releases/2024/04/...
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...
Then I strike the offending passage out on both copies of the contract, sign and hand it back to them.
Your move.
¯\_(ツ)_/¯
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.
Most of the time is basically just FUD, to coerce people into following the rule-that-is-never-enforced
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.
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.
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.
(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.")
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.
Fuck, I’m old.
> 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.
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.
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. .
I suppose there's probably a bunch of legalese to prevent that though...
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.
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.
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.
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.
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.
My best friend is a lawyer, so heck knows how difficult that test can be -- he passed it. ;-)
And you don't get the meal, either.
- The Wretched of the Earth, Frantz Fanon
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
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."
And standard doesn't mean shit... Every regime in the history of mankind had standards!
> 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.
"...But there's a problem with those apologies from company leadership. Company documents obtained by Vox with signatures from Altman and Kwon complicate their claim that the clawback provisions were something they hadn’t known about..."
"...and that our PR firm wasn't good enough to squash the story."
They will follow the standard corporate 'disaster recovery' - say something to make it look like they're addressing it, then do nothing and just wait for it to fall out of the news cycle.
First of all, it beggars belief that this whole thing could be the work of HR people or lawyers or something, operating under their own initiative. The only way I could believe that is if they deliberately set up a firewall to let people be bad cops while giving the C-suite plausible deniability. Which is no excuse.
But...you don't think they'd have heard about it from at least one departing employee, attempting to appeal the onerous terms of their separation to the highest authority in the company?
In other words, I'm pretty sure the Ed Dillingers are already in charge, not Walter Gibbs garage-tinkerers. [0]
That's like P.Diddy saying I'm sorry.
That's damage control for being caught doing something bad ... again.
> if any former employee who signed one of those old agreements is worried about it, they can contact me and we'll fix that too. very sorry about this.
[1] The keywords are promissory estoppel. I'm not a lawyer but this looks at least like a borderline case worth worrying about.
However the fact that the corporate leadership could even make those threats to soon-departing employees indicates that something is already broken or missing in the status quo.
don't contact OpenAI legal, which leaves an unsavory paper trail
contact me directly, so we can talk privately on the phone and I can give you a little $$$ to shut you up
Looks like they’re doing that.
Unless and until that's what they say, looks like they’re not doing that.
No doubt, openai is as vacuous as their product is effect. GIGO.
Think I'll be staying away from "AI" for a while longer.
> Altman’s initial statement was criticized for doing too little to make things right for former employees, but in an emailed statement, OpenAI told me that “we are identifying and reaching out to former employees who signed a standard exit agreement to make it clear that OpenAI has not and will not cancel their vested equity and releases them from nondisparagement obligations” — which goes much further toward fixing their mistake.
1. Get cash infusion from microsoft
2. Do microsoft playbook of 'oh I didn't mean to be shady we will correct' when caught.
3. In the meantime there are uncaught cases as well as the general hand waving away of repeated bad behavior.
4. What sama did would get him banned from some -fetish- circles, if that says something about how his version of 'EA' deals with consent concerns.
Even if that's true (and I'm not saying it is, or it isn't, I don't think anyone on the outside knows enough to say for sure), is it because they genuinely agree they did something egregiously wrong and they will really change their behavior in the future? Or is it just because they got caught this time so they have to fix this particular mistake, but they'll keep on using similar tactics whenever they think they can get away with it?
The impact of such uncertainty on our confidence in their stewardship of AI is left as an exercise for the reader.
The documents show this really was not a mistake and "I didn't know what the legal documents I signed meant, which specifically had a weird clause that standard agreements don't" isn't much of a defence either. The whole thing is just one more point in favor of how duplicitous the whole org is, there are many more.
Well, no:
> We're removing nondisparagement clauses from our standard departure paperwork, and we're releasing former employees from existing nondisparagement obligations unless the nondisparagement provision was mutual. We'll communicate this message to former employees.
So the former successfully blackmailed employees, stay blackmailed.
The article makes it clear that it wasn't a mistake at all. It's a lie. They were playing hardball, and when it became public they switched to PR crisis management to try and save their "image", or what's left of it.
They're not the good guys. I'd say they're more of a caricature of bad guys, since they get caught every time. Something between a classic Bond villain and Wile E. Coyote.
It's really easy to make people whole for this, so whether that happens or not is the difference between the apologies being real or just them just backpedaling because employees got upset.
Edit: Looks like they're doing the right thing here:
> Altman’s initial statement was criticized for doing too little to make things right for former employees, but in an emailed statement, OpenAI told me that “we are identifying and reaching out to former employees who signed a standard exit agreement to make it clear that OpenAI has not and will not cancel their vested equity and releases them from nondisparagement obligations” — which goes much further toward fixing their mistake.