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I am in the EU and I recently got a job offer for a remote role from a games developing startup. The contract however is full of very high financial penalties(tens of thousands of euros) on several breaches (of confidentiality or non competition f.e.). It also says that I will be liable to the full amount of any damage caused by gross negligence. Is this a common practice? I have worked on big corporations and I have never faced such clauses. Can this be a scam of any kind?

Please note the role is not for a manager/director level but rather for a base software developer level. Also any breach leads to the same huge penalty no matter its severity.

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  • There is a clause in my contract that if I loose the keys for the company doors then I have to pay for the replacement and several hundred keys are needed.
    – Solar Mike
    Dec 7, 2022 at 16:01
  • The minor one I have is that if I lose my badge I need to pay $5 for a new one. Obviously, that's different than a potential several thousand dollar penalty. Dec 7, 2022 at 16:03
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    Note that you are probably already liable for acts of gross/wilful negligence. Dec 12, 2022 at 12:33
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    @CapBarracudas I mean, even without the clause, you are probably already liable (when you accept the contract). Dec 12, 2022 at 12:36
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    @CapBarracudas Since you're signing a document in which you agree to be liable for massive penalties of breach, you really, really should find a local (!) employment lawyer to do a due diligence on a contract. You seriously should not sign a document that can end up with you having serious legal problems because you've signed something that you didn't have to by law. (Most labor/corporate lawyers I've worked with made a serious point that most of their most painful cases ended up from people blindly signing things without due diligence.)
    – Mavrik
    Dec 15, 2022 at 22:06

6 Answers 6

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You're talking about a small programming company, and it is common for small programming companies to be weird. They are often highly reflective of a single founder, who almost invariably has their own oddities and hangups, which can mark the company in extreme ways. I've never heard of a company with massive financial penalties explicitly stated for such things, but I've taken jobs at a number of small programming companies, and something like that wouldn't be outside of the (very large) envelope of behavior I might expect from such a place.

So... if you check through, and there's nothing there that they can catch you on as long as you're doing due diligence, then it's probably not a scam. Given the potential liability, you'll probably want to put in a bit more effort making sure that this is a real company, and that the people you're talking to really work for it. I would suggest that you take this as a warning flag, but not a deal-killer.

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This is pretty common. Most contracts/job offers don't go into the specifics of many thousands of euros/dollars/rupees/whatever in penalties. It's standard to indicate that the company reserves the right to pursue compensation for negligence or fraud that results in the loss of its intellectual property.

Most of the time this is just the company indemnifying themselves from risk. Every now and then a company may attempt to set up their employees to take a fall in the event of some calamity. I'd recommend seeking legal advice if you're concerned about its language.

I have turned down job offers in the past simply because the tone in the offer was threatening or overbearing. In most cases, this kind of clause in a contract or offer letter is pretty standard. That will be different depending on which specific locality the offer is being made. In general, I would accept this as standard in the EU.

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    Fraud, perhaps, but not mere negligence. I've seen countless contracts over the years, and never anything like these penalties.
    – Steve
    Dec 7, 2022 at 17:11
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    @Steve: I've experienced a number of major corporations that have language similar to this in the employment agreement (not the offer) that indicates aggressive protection of IP. YMMV ¯_(ツ)_/¯ Dec 7, 2022 at 19:59
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    This absolutely is not common in employment contracts (and is also questionably enforceable). OP: Have the contract checked by a local lawyer, those few 100EUR will repay themselves by avoiding painful legal fights.
    – Mavrik
    Dec 15, 2022 at 21:59
  • @Mavrik - This has been a part of every employment contract I've seen at the professional level (US and EU). In the US it's absolutely enforceable. I know there are elements of it that are enforceable in the EU as I've seen a company pursue an individual over sharing IP inappropriately. Dec 15, 2022 at 22:02
  • @JoelEtherton "you" are not the whole world so what only yourself have seen does not define "common". Also, ESPECIALLY because those terms are enforceable they're problematic and the OP needs to find a professional who won't tell him to just blindly sign everything and make himself liable for penalties.
    – Mavrik
    Dec 16, 2022 at 9:35
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The best answer you're going to get to this question, short of actually challenging it in a courtroom in your jurisdiction, is going to be the one you get from legal counsel with expertise in labor law and tech industry norms that you have paid for and given as much context as you can to inform their answer.

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  • If someone offers a job contract, and I need legal counsel to examine that job contract in order to sign it, then they can keep their job contract. Why on earth would I sign something like that?
    – gnasher729
    Dec 12, 2022 at 17:33
  • I said best answer, not a practical one. I'm a big ole hypocrite, I paid a lawyer to look at one of these contracts once and I generalize from that conversation to all the other big scary contracts that have gotten shoved at me as part of a hiring process. But the strictly correct thing to do is pay a lawyer every time; if it's worth the money to sign the contract, it's worth the money to pay a lawyer to tell you not to sign this contract in favor of another one down the line. Dec 12, 2022 at 18:02
  • @gnasher729 unless you youself are a lawyer, it's utterly strange to say something like you did - most people aren't experts in employment and corporate law and can't reason about every nuance of contract paragraphs and worker obligations they establish. Asking a lawyer to double check and explain what's normal for a given industry and region is a massively good investment for something so important.
    – Mavrik
    Dec 15, 2022 at 22:02
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You didn't say which country exactly you want to work in, but it seems to me that most of these clauses are in fact things which are already protected by law. At least here in Germany. Employees are already liable for gross negligence and major breaches of confidentiality. So additional clauses in the work contract are probably pointless. And when they exist, then a lawyer might even argue that this agreement in the contract actually puts a limit on how much the company can demand in these cases, so those clauses might actually work in your favor if the actual damage is larger. But that depends on how these are phrased and on the exact legal situation in your country.

With non-compete clauses, you usually need to read the fine-print. What's really common is that you must not directly compete with the employer (offer the same services to the same target audience) and that the employer gets copyright on everything you create while you are on the clock. Those are standard and harmless. However, if the non-compete goes beyond that, for example making money in ways that don't affect the employer or if they are supposed to stay in force even after the work-contract was terminated, or if they insist on getting copyright on things you create in your spare time, then that's a red flag.

And it's probably unenforceable. But when the employer believes it is enforceable, then a court ruling which says otherwise can be annoying and expensive to get.

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I do my job, and mistakes can happen. If it causes damages to your company, and you don't like it, take out insurance. Or I might do something criminal that causes damages to your company (obviously I wouldn't); in that case you call the police, take me to court, whatever is needed.

Can you see how in neither case there needs to be anything in the contract about financial penalties? Nor can I. So if you want this in a contract that I'm supposed to sign, put your contract into a place where decent people wouldn't look for it.

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I worked for such a company. It was a small R&D company where everything was "top secret". In my experience, there could be at least two sides to this:

First, the clients could be pressuring the company to somehow prove that there are strict policies in place. As meaningless as this is, it is quite common in some industries.

Secondly, due to the nature of the work, the company could be providing grounds for fast professional growth. Employees would quickly become much more valuable, to the company and of course to the market. However, some companies are reluctant to match this and try to keep their house in order with very strict policies. I have seen policies that basically state, it would not be possible to do the same line of work for X amount of years, etc.

The legality of these could be debated, but I hope this could give you an insight into the minds of some companies and executives.

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