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There are other ways in which the papers you sign might not be as binding as you think. Story time. A while back, the startup I worked at was acquired by a lar

There are other ways in which the papers you sign might not be as binding as you think. Story time. A while back, the startup I worked at was acquired by a large company known for its aggressive legal department. Everyone had to sign an agreement, including both intellectual property and non-compete clauses, or be fired. One guy actually did refuse, and was fired. A few years later, I left that big company to work for another startup. I was concerned about that non-compete, so I did a bit of checking and found that it was NOT A CONTRACT as far as the law was concerned. You see, a contract by definition requires consideration on both sides. The relevant courts had repeatedly found that an offer of initial employment counted as consideration, but an offer of continued employment did not. Thus, what I had signed was not a contract. Legally, it wasn't a non-binding or unenforceable contract. It was a non-entity. A piece of paper with some irrelevant squiggles on it. I've heard that other ex-employees (and their lawyers and the courts) reaching the same conclusion is the reason that the big company in question adopted a policy of technically firing everyone from any startup they acquired, and then re-hiring them immediately under the same terms. The sole effect was to turn that continued employment into initial employment, non-consideration into consideration, validating the rest of the contract. It's now standard practice throughout the industry.

clubm8 8y ago
Another big red flag is being told to sign immediately. If you're ever told "sign this or be fired", even if there is consideration (ex: a severance) w/o being given the chance to have a lawyer review it, there's a strong chance it will be thrown out.
emddudley 8y ago
> adopted a policy of technically firing everyone from any startup they acquired, and then re-hiring them immediately under the same terms Hmm, interesting. I know of a recent case in New York State where one company acquired another, but selectively retained its employees. The acquiring company thought that it was simply not hiring everyone, rather than firing anyone. One of those people sued for unemployment, and the court found that the acquiring company did in fact have to pay unemployment for the employees it "did not hire".
- ikeboy 8y ago
  Well the old company fired them, and the old company is now owned by the new company then.
  - paxys 8y ago
    > and the old company is now owned by the new company That isn't necessary. The old company could legally just cease to exist, with its assets transferred over to another entity.
    - deleted 8y ago
      [deleted]
    - wool_gather 8y ago
      Liabilities also transfer.
      - randallsquared 8y ago
        If they're bundled somehow, sure. Otherwise, the owners of the old company could choose to retain those liabilities and sell only the assets, could they not?
        mbillie1 8y ago
        Then the old company would still have fired them.
        yardie 8y ago
        The sale is not complete until debts and liabilities are settled. So either way, unemployment was going to be paid.
BonesJustice 8y ago
Sounds like a company to avoid. Name them and shame them.
tobylane 8y ago
That sounds like a loophole that courts outside the US will soon start to not accept. Though, the recent House of Fraser 'sale' was more of a transfer of worthwhile assets only, excluding employees, which is the same loophole you describe.
- consp 8y ago
  In most of Europe (except for the UK as far as I know) you always take the responsibility for employment from the acquired to the acquiring party. In some cases it is even enforceable in companies acquired due to bankruptcy. The 'fire everyone and rehire under shitty contracts' does not apply. Though I have heard of cases where it was tried.
  - tobylane 8y ago
    Business sales in the UK are usually 'as a going concern' where the new owner takes the responsibility. House of Fraser was specifically bought differently, making it notable.
gamblor956 8y ago
I was concerned about that non-compete, so I did a bit of checking and found that it was NOT A CONTRACT as far as the law was concerned. You see, a contract by definition requires consideration on both sides. The relevant courts had repeatedly found that an offer of initial employment counted as consideration, but an offer of continued employment did not. As with all things legal, this depends on the jurisdiction (in this case, meaning the state since we're talking about US law). The general rule in most states is that continued employment is not sufficient consideration, but in Illinois it currently is; California doesn't allow non-competes for non-owner/non-highly-compensated employees, so it's a moot point in CA. [https://www.bna.com/continued-employment-sufficient-b57982088875/ https://www.bna.com/continued-employment-sufficient-b5798208...]
marcosdumay 8y ago
> firing everyone from any startup they acquired, and then re-hiring them immediately under the same terms I can't imagine any judge accepting this... but I can imagine it backfiring badly, adding bad faith into the interpretation.
- weliketocode 8y ago
  It's still a lot of effort (time & $) for an individual to do any sort of legal defense.
- notacoward 8y ago
  IANAL, but a lot probably depends on exactly how it's done. Was the previous contract, and all consideration attached to it, truly severed at some point? Was there a period, however brief, when the employee was cut off from company facilities and equipment? Was there an explicit offer/acceptance of the new employment, conducted as other offers customarily are at that company? Were any arrangements regarding things like benefit carryovers the same as those available to others, not specially made up for the acquisition case? Were any promises made as part of the acquisition itself regarding retention or compensation? I can easily imagine that one set of answers might lead a judge to believe the firing/rehiring was legitimate, and another set of answers leading them to believe otherwise. Law follows its own rules, not common sense.
smogcutter 8y ago
> I've heard that other ex-employees (and their lawyers and the courts) reaching the same conclusion is the reason that the big company in question adopted a policy of technically firing everyone from any startup they acquired, and then re-hiring them immediately under the same terms. The sole effect was to turn that continued employment into initial employment, non-consideration into consideration, validating the rest of the contract. Do you know if that's been tested in court? Seems like such an obvious violation of the spirit of the law that it wouldn't (one hopes) hold up in appeal.
- delinka 8y ago
  You quoted “...and the courts” so I think commenter answered your question.
  - usmannk 8y ago
    No. That is referring to the courts reaching the conclusion that the offer of continued employment is not consideration. It does not refer to the courts' (or lawyers') opinions on BigCo's workaround.
lb1lf 8y ago
-A former employer nagged me into signing a rather draconian agreement - basically, anything and everything I came up with, be it within their business area or outside it, be it on my time off or whatever, while I was employed by them or for a period of 12 months after I had left them, belonged to them. I signed it ‘Juul E. Nissen’ (the equivalent of S. Anta Claus’) Nobody bothered to verify the signature. I wonder how that would have held up in court.
- brokenmachine 8y ago
  Could that be considered fraud? They should be able to take at face value that a document that you signed is actually your signature. Seems a bit odd to expect a business partner to "verify your signature". How could they do that anyway? Compare it to previous documents? You could have changed your signature. Not saying they should get away with draconian agreements, but the "right" thing to do would be to not sign it.
  - komali2 8y ago
    He could claim he didn't sign it, but I doubt he'd get away with it because the next question would be "why did they take the contract from you, with this signature on it, and the file it under your name, with this signature on it? If you didn't sign and give them this contract, why did you not question why they employed you without (from your perspective) having turned in a signed employment contract?"
    - awakeasleep 8y ago
      No, thats not the right tree to bark up. No one can testify about why someone else did something- that is the "objection! speculation" that you hear. Im curious how this would actually go, considering it must have happened before.
      - brokenmachine 8y ago
        They can ask you why you would sign it with an alternate signature if you were not intending to honor the contract however. I expect the judge would do everything in his power to rule against you in that case. I'm also curious about what has happened when people tried this before.
ams6110 8y ago
The other thing is that any contract is only enforceable in court. Even if everything is perfectly within the normal parameters of a contract, only a court can actually enforce it. Some people sign contracts, and then do not fulfill the terms, betting that the other party will not take them to court. I was once asked to sign a non-compete when my employer was going out of business. I had to sign it to get the severance package. It was quite broadly worded, and could have been interpreted as preventing me from doing any software development for a period of two years. I did sign, because who was ever going to enforce it?
- notacoward 8y ago
  Sounds like a risky strategy TBH. On the one hand, you saved the trouble/expense of going to court right then and there to get the severance package. On the other hand, going out of business doesn't always mean there's no successor with standing to sue on their behalf, and the kind of people who pick up shuttered companies' assets at pennies on the dollar are often exactly the kind of people who might engage in a little legal greymail.
s73v3r_ 8y ago
"The relevant courts had repeatedly found that an offer of initial employment counted as consideration, but an offer of continued employment did not. " I could swear that the SCOTUS had a similar case and decided that continued employment did count as consideration.
- notacoward 8y ago
  As gamblor956 has also pointed out, it's very jurisdiction- and time-dependent. This was Massachusetts in 1999. It might well have changed here since then, and/or always been different other places. If I were in a similar situation again, I'd have a lawyer check things out all over again to account for such differences.
everdev 8y ago
Instead of firing/hiring to create consideration, why not just attach a $1k bonus to the non-compete? I'm sure after spending millions on an acquisition they could have a few thousand more set aside to give themselves a good first impression.
xg15 8y ago
> The relevant courts had repeatedly found that an offer of initial employment counted as consideration, but an offer of continued employment did not. Interesting. Couldn't you construct a similar argument against the "we've updated our ToS! You can accept it or leave our service and lose access to all your documents/games/devices/friends/etc" malpractice? Or is that a different legal basis?

clubm8 8y ago

Another big red flag is being told to sign immediately. If you're ever told "sign this or be fired", even if there is consideration (ex: a severance) w/o being given the chance to have a lawyer review it, there's a strong chance it will be thrown out.

emddudley 8y ago

> adopted a policy of technically firing everyone from any startup they acquired, and then re-hiring them immediately under the same terms Hmm, interesting. I know of a recent case in New York State where one company acquired another, but selectively retained its employees. The acquiring company thought that it was simply not hiring everyone, rather than firing anyone. One of those people sued for unemployment, and the court found that the acquiring company did in fact have to pay unemployment for the employees it "did not hire".

ikeboy 8y ago
Well the old company fired them, and the old company is now owned by the new company then.
- paxys 8y ago
  > and the old company is now owned by the new company That isn't necessary. The old company could legally just cease to exist, with its assets transferred over to another entity.
  - deleted 8y ago
    [deleted]
  - wool_gather 8y ago
    Liabilities also transfer.
    - randallsquared 8y ago
      If they're bundled somehow, sure. Otherwise, the owners of the old company could choose to retain those liabilities and sell only the assets, could they not?
      - mbillie1 8y ago
        Then the old company would still have fired them.
      - yardie 8y ago
        The sale is not complete until debts and liabilities are settled. So either way, unemployment was going to be paid.

BonesJustice 8y ago

Sounds like a company to avoid. Name them and shame them.

tobylane 8y ago

That sounds like a loophole that courts outside the US will soon start to not accept. Though, the recent House of Fraser 'sale' was more of a transfer of worthwhile assets only, excluding employees, which is the same loophole you describe.

consp 8y ago
In most of Europe (except for the UK as far as I know) you always take the responsibility for employment from the acquired to the acquiring party. In some cases it is even enforceable in companies acquired due to bankruptcy. The 'fire everyone and rehire under shitty contracts' does not apply. Though I have heard of cases where it was tried.
- tobylane 8y ago
  Business sales in the UK are usually 'as a going concern' where the new owner takes the responsibility. House of Fraser was specifically bought differently, making it notable.

gamblor956 8y ago

I was concerned about that non-compete, so I did a bit of checking and found that it was NOT A CONTRACT as far as the law was concerned. You see, a contract by definition requires consideration on both sides. The relevant courts had repeatedly found that an offer of initial employment counted as consideration, but an offer of continued employment did not. As with all things legal, this depends on the jurisdiction (in this case, meaning the state since we're talking about US law). The general rule in most states is that continued employment is not sufficient consideration, but in Illinois it currently is; California doesn't allow non-competes for non-owner/non-highly-compensated employees, so it's a moot point in CA. [https://www.bna.com/continued-employment-sufficient-b57982088875/ https://www.bna.com/continued-employment-sufficient-b5798208...]

marcosdumay 8y ago

> firing everyone from any startup they acquired, and then re-hiring them immediately under the same terms I can't imagine any judge accepting this... but I can imagine it backfiring badly, adding bad faith into the interpretation.

weliketocode 8y ago
It's still a lot of effort (time & $) for an individual to do any sort of legal defense.
notacoward 8y ago
IANAL, but a lot probably depends on exactly how it's done. Was the previous contract, and all consideration attached to it, truly severed at some point? Was there a period, however brief, when the employee was cut off from company facilities and equipment? Was there an explicit offer/acceptance of the new employment, conducted as other offers customarily are at that company? Were any arrangements regarding things like benefit carryovers the same as those available to others, not specially made up for the acquisition case? Were any promises made as part of the acquisition itself regarding retention or compensation? I can easily imagine that one set of answers might lead a judge to believe the firing/rehiring was legitimate, and another set of answers leading them to believe otherwise. Law follows its own rules, not common sense.

smogcutter 8y ago

> I've heard that other ex-employees (and their lawyers and the courts) reaching the same conclusion is the reason that the big company in question adopted a policy of technically firing everyone from any startup they acquired, and then re-hiring them immediately under the same terms. The sole effect was to turn that continued employment into initial employment, non-consideration into consideration, validating the rest of the contract. Do you know if that's been tested in court? Seems like such an obvious violation of the spirit of the law that it wouldn't (one hopes) hold up in appeal.

delinka 8y ago
You quoted “...and the courts” so I think commenter answered your question.
- usmannk 8y ago
  No. That is referring to the courts reaching the conclusion that the offer of continued employment is not consideration. It does not refer to the courts' (or lawyers') opinions on BigCo's workaround.

lb1lf 8y ago

-A former employer nagged me into signing a rather draconian agreement - basically, anything and everything I came up with, be it within their business area or outside it, be it on my time off or whatever, while I was employed by them or for a period of 12 months after I had left them, belonged to them. I signed it ‘Juul E. Nissen’ (the equivalent of S. Anta Claus’) Nobody bothered to verify the signature. I wonder how that would have held up in court.

brokenmachine 8y ago
Could that be considered fraud? They should be able to take at face value that a document that you signed is actually your signature. Seems a bit odd to expect a business partner to "verify your signature". How could they do that anyway? Compare it to previous documents? You could have changed your signature. Not saying they should get away with draconian agreements, but the "right" thing to do would be to not sign it.
- komali2 8y ago
  He could claim he didn't sign it, but I doubt he'd get away with it because the next question would be "why did they take the contract from you, with this signature on it, and the file it under your name, with this signature on it? If you didn't sign and give them this contract, why did you not question why they employed you without (from your perspective) having turned in a signed employment contract?"
  - awakeasleep 8y ago
    No, thats not the right tree to bark up. No one can testify about why someone else did something- that is the "objection! speculation" that you hear. Im curious how this would actually go, considering it must have happened before.
    - brokenmachine 8y ago
      They can ask you why you would sign it with an alternate signature if you were not intending to honor the contract however. I expect the judge would do everything in his power to rule against you in that case. I'm also curious about what has happened when people tried this before.

ams6110 8y ago

The other thing is that any contract is only enforceable in court. Even if everything is perfectly within the normal parameters of a contract, only a court can actually enforce it. Some people sign contracts, and then do not fulfill the terms, betting that the other party will not take them to court. I was once asked to sign a non-compete when my employer was going out of business. I had to sign it to get the severance package. It was quite broadly worded, and could have been interpreted as preventing me from doing any software development for a period of two years. I did sign, because who was ever going to enforce it?

notacoward 8y ago
Sounds like a risky strategy TBH. On the one hand, you saved the trouble/expense of going to court right then and there to get the severance package. On the other hand, going out of business doesn't always mean there's no successor with standing to sue on their behalf, and the kind of people who pick up shuttered companies' assets at pennies on the dollar are often exactly the kind of people who might engage in a little legal greymail.

s73v3r_ 8y ago

"The relevant courts had repeatedly found that an offer of initial employment counted as consideration, but an offer of continued employment did not. " I could swear that the SCOTUS had a similar case and decided that continued employment did count as consideration.

notacoward 8y ago
As gamblor956 has also pointed out, it's very jurisdiction- and time-dependent. This was Massachusetts in 1999. It might well have changed here since then, and/or always been different other places. If I were in a similar situation again, I'd have a lawyer check things out all over again to account for such differences.

everdev 8y ago

Instead of firing/hiring to create consideration, why not just attach a $1k bonus to the non-compete? I'm sure after spending millions on an acquisition they could have a few thousand more set aside to give themselves a good first impression.

xg15 8y ago

> The relevant courts had repeatedly found that an offer of initial employment counted as consideration, but an offer of continued employment did not. Interesting. Couldn't you construct a similar argument against the "we've updated our ToS! You can accept it or leave our service and lose access to all your documents/games/devices/friends/etc" malpractice? Or is that a different legal basis?