SINGAPORE: Recent revelations about an unfair exit clause at Lazada have drawn attention to similar issues at another company, OpenAI, the parent company of ChatGPT.
Both companies are scrutinised for contract clauses that significantly impact their former employees’ futures.
OpenAI’s equity clawback provision
The Times of India reported that ChatGPT’s parent company has come under fire for a controversial “employee exit rule” that threatened to revoke vested equity from departing employees who refused to sign non-disclosure agreements (NDAs).
This provision, which came to light through a report by Vox, required exiting employees to sign NDAs or risk losing all vested equity earned during their tenure, which could be worth millions.
Sam Altman, CEO of OpenAI, apologised for the provision, noting that the company had never enforced this clause.
On X, he wrote, “We have never clawed back anyone’s vested equity, nor will we do that if people do not sign a separation agreement (or don’t agree to a non-disparagement agreement). Vested equity is vested equity, full stop.”
in regards to recent stuff about how openai handles equity:
we have never clawed back anyone’s vested equity, nor will we do that if people do not sign a separation agreement (or don’t agree to a non-disparagement agreement). vested equity is vested equity, full stop.
there was…
— Sam Altman (@sama) May 18, 2024
His post continued: “… there was a provision about potential equity cancellation in our previous exit docs; although we never clawed anything back, it should never have been something we had in any documents or communication.
This is on me and one of the few times i’ve been genuinely embarrassed running openai; i did not know this was happening and i should have.”
He also said he would address concerns on the matter, stating:
“… the team was already in the process of fixing the standard exit paperwork over the past month or so. if any former employee who signed one of those old agreements is worried about it, they can contact me and we’ll fix that too.
very sorry about this.”
Despite Altman’s assurances, the provision has caused significant distress among former employees.
Daniel Kokotajlo, a former OpenAI employee, shared that his refusal to sign an NDA led to a loss of equity amounting to “about 85 percent of my family’s net worth at least.”
The controversies at OpenAI and Lazada highlight a growing concern over restrictive clauses in employment contracts. Both companies have faced criticism for clauses that unfairly limit their former employees’ future opportunities.
Lazada’s non-compete clause controversy
Lazada, on the other hand, faced backlash early this year after some laid-off employees exposed the company’s extensive non-competition clauses.
These clauses restrict employees from joining direct competitors like Shopee and a wide range of companies in related sectors, including Grab, TikTok, NTUC FairPrice, Giant, Amazon, and various logistics firms.
This broad restriction severely limits job opportunities for those affected.
Timothy, a former Lazada employee, highlighted the dilemma faced by many. He had accepted a lower salary in exchange for restricted stock units (RSUs) valued in six figures intended to vest over four years.
However, he was laid off during the holiday season, and now he must choose between finding new employment and forfeiting his vested shares.
Lazada’s suggestion to wait for a potential initial public offering for share redemption has not alleviated the frustration, as the company is not yet profitable, and the value of the shares has dropped.
The Food, Drinks & Allied Workers Union (FDAWU) criticised Lazada for not informing them about the latest layoffs.
In response, Lazada apologised and committed to working with the union to secure additional benefits for the affected employees.
Experts have also questioned the fairness of such broad non-competition clauses, with one HR expert calling them “unethical” and detrimental to the employees’ ability to find new work.
Labour chief Ng Chee Meng posted an update on Facebook on Tuesday, May 21, stating:
“I am pleased to share that the FDAWU – Food, Drinks and Allied Workers Union (FDAWU) in Singapore is closing matters with affected eligible union members who were ex Lazada employees in Singapore.
Over the past few months, the team has worked tirelessly behind the scenes to support affected eligible members.
They have engaged directly with affected members, gathered and verified all necessary information, and determined the optimal distribution approach to the union’s members.
The FDAWU has gone above and beyond to champion the interests of its members during this period,” he added. /TISG
Read related: Criticism against Lazada mounts as extensive non-compete clause curtails axed workers’ job prospects
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