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.
Never seen anything that says money or equity you've already earned could be clawed back.
Never negotiated on exit.
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.
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 ;-)
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.
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.
> Comp clawbacks are quite common in finance
OpenAI is different: they don’t grant options, but “Units” that are more like RSUs.
In tech I’ve never even heard a rumor of something like this.
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.
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.
https://www.ftc.gov/news-events/news/press-releases/2024/04/...
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.
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.
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.
Then I strike the offending passage out on both copies of the contract, sign and hand it back to them.
Your move.
¯\_(ツ)_/¯
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.
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
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...
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.
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).
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.
(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.")
> 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.
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.
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.