Comment by alexdoesstuff
2 years ago
Presumably, this violates MSFT's investment agreement with OpenAI. Any reasonably competent counsel would add "no-poach" protection for a strategic investor investing in a startup, and this is as clear a case of poaching as there is.
Negotiation is always a two way street. I’m a startup founder. Your investors, when they invest, will send you some documents on key provisions (e.g. pro rata rights) and you and they will go back and forth on what is acceptable. You, as a founder, will not have the ability to unilaterally turn down all requests. Especially in early funding rounds.
True. Being a founder myself, I've experienced the back and forth of investment negotiations.
We are though taking about OpenAI, by that time probably one of the five most valuable startups in the world.
Isn't no poach illegal?
Not this sort, as far as I'm aware. The variety where you collude with competitors can be under some legal systems.
The point is to discourage market distortion. Some jurisdictions also make employee contract conditions of a similar nature illegal too, as they interfere with personal freedoms.
A lot of business deals though specifically include clauses to prevent one partner from poaching the other's staff, as otherwise one side could do what appears to be happening here: Unilaterally taking over the entire business.
The current situation probably falls under Force Majeure, though. If most of these people go to Google or Amazon, Microsoft may not be able to deliver the products they depend(ed) on OpenAI for.
Also, in most jurisdictions, no poaching agreements are unenforcable if the employees themselves initiate the transfer. Signing that letter about leaving if Sam is not coming back probably qualifies as a resignation notice.
On top of this, most other AI leaders have already stated that they want OpenAI employees to come to them.
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Federally, there is precedent that collaborative projects can be an exception to the general federal prohibition of no poach agreements. Whether that would work on California law (IIRC, the federal prohibition is an application of antitrust law, the California one is a labor protection), and whether the other aspects of the Microsoft-OpenAI agreement would fit in the exception, I don't know.
Yeah, and the California code applies to employees in California, which at least most OAI employees are, so it should be irrelevant that MSFT is in Washington.
Given the relationship between the two, and the context of the matter, I don't expect no-poach agreements to hold much weight here.
Yes. And particularly in California.
I'm not sure why you are being downvoted, maybe because they aren't illegal in California, but in California, afaict, according to California Business and Professions Code Section 16600, the same code that prevents non-competes, such contracts would be considered void.
This isn't poaching in this case.
One could argue that the board by demolishing the company in one fell swoop effectively relieved Microsoft of some of their contractual obligations.
One could argue that by doing something it is legally allowed to do, the board has not relieved Microsoft of anything.
No matter how smart or dumb that move was.
Most contracts also have a clause that a breach of one part does not invalidate the remainder. There are elements that typically out live the end of a contract as well, often the poaching and non-compete clause
One could argue that firing the Loopt founder guy who was an at-will employee isn't a material event invalidating a contract unless the contract specifies exactly that.
Really? I'm a lawyer, and I can't even see an argument of how firing a CEO would affect investment agreements at all unless Microsoft specifically conditioned their investment on Altman remaining CEO forever.