Dear HN:<p>I am running into a situation where I am being forced out of the company I co-founded. I have not signed any Non-Compete agreements in the past, and I don't want to sign it as it will severely limit my ability to work in the future.<p>The only piece of legal document we have signed so far is a non-binding MoU that states if I want to claim a director seat, I need to sign a non-compete. Since that document was never entered into a formal agreement, and I no longer seek the director seat, I feel no longer obligated to sign away my rights.<p>It'd be great if someone can give me some advice on this matter before I escalate to the lawyers. I'm turning to HN for help because I feel this might be a pretty common issue with the audience here.<p>Thanks in advance for your advice!
I'd ask an attorney to review the MoU and any corporate formation documents. As well as which state you are in and any obligations you may have if you remain in an equity position over a certain amount.<p>Overall though, from what I know and IANAL, you are not obligated to sign any documents on the way out. However, there could be ramifications like the forfeiture of your equity (if that was in the original agreement etc). So that's why I suggest letting an attorney review all the documents. My bet though is if you didn't have all the standard non-compete etc up front then they don't exist and you are probably safe to walk away without signing it, losing the board seat of course.<p>Good luck.
If you live in California, non-competes are not allowed under section 16600 of the Business and Professions code. They could file a lawsuit, but it would be thrown out by the California courts. Lawyers have a term for this tactic: "in terrorem". It is used against persons not familiar with the law.
In all likelihood you'll be crossing paths with these folks again at some time. So, be professional.<p>If you don't like the non-compete because it is too all encompassing then counter with something more narrow in scope.<p>However, if you don't like the non-compete because you were forced out and you have an axe to grind, then own that and separate your personal feelings from the business. With your newfound clarity re-examine the situation and you may realize the non-compete isn't a big deal after all. Are you really planning on starting your own startup to compete directly with them?
Do you want anything from them? Equity, severance, back pay, health care for 18 months (i mean besides cobra). If so, this is your chance to negotiate something. All the advice about a attorney, i agree with.
> Could company force departing co-founder to sign non-compete?<p>Probably not, though the answer will depend on the law of the specific jurisdiction that governs your relationship. They could offer something in exchange for signing a non-compete, but if you haven't previously agreed in a legal-binding way to a non-compete, and or made a binding agreement pledging to do so in the future, then even if the conditions apply in which a non-compete would be valid and enforceable in your jurisdiction, there doesn't seem any way that they could legally compel you to sign it or legally withhold anything to which you are already entitled if you do not.<p>But if you are being forced out of a company you cofounded, you probably should talk to a lawyer familiar with the law of your jurisdiction about the whole situation (not just the non-compete aspects.) And if they are attempting to withhold things that belong to you unless you sign a non-compete, then you <i>really</i> need to talk to a lawyer, because the issue then becomes "can I compel them to honor my existing rights, and, if so, how" more than "can they force me to sign a non-compete".