This is a big deal! Non-competes are a major factor in the finance sector. In tech circles, this mainly impacts HFT firms and prop shops employing software people.
There's a well-trodden path in NYC from HFT/Prop #1 -> Big Tech, for duration of a non-compete -> HFT/Prop #2, that can be shortened by one node.
Yes this is great but the way non-competes are enforced for many in the industry this won't have a huge impact because of the way deferred compensation is structured. Most people when they leave are bound to two separate forms of non-competes.
The first is what is being invalidated here, which is a contractual non-compete. The second is a non-compete clause that is a function of your deferred compensation. Here the firm pays a portion of your bonus into the fund that vests over time. Often times a condition of the vesting is that you can leave, but if you do anything competitive for a 1-2 year period following the end of employment with the firm, that deferred comp will be clawed back. For most people this is the most important. It is common for a new fund to offer the employee a make-whole agreement where they will transfer your marked to market deferred comp into the new fund knowing that your prior employer will zero out your deferred comp. This will now in theory allow employees to switch employers that are competitive and start immediately with zero downside as long as the new employer makes the employee's deferred comp whole.
Where this is the worst is for new entrepreneurs leaving these funds that want to start on their own. Even if their contractual NC is no longer valid, there is not a new employer to make their deferred comp whole. Also even in CA where NC's are in theory non-enforceable, I know multiple people whose new employers did not want to test the water with very litigious firms and had people sit out the full NC. Also what this does not address is non-association clauses which are just as restrictive and non-competitive.
Lastly NC structures in this industry change every year and vary significantly across firms so you can't paint with too broad of a brunsh. But all in all I love this change. There is a lot of passion and talent that is forced to sit idle because of NC's.
> The second is a non-compete clause that is a function of your deferred compensation.
Over the decades, I've learned that deferred compensation is such a double-edged sword that I no longer take it into consideration at all when I'm considering a job.
My primary compensation has to be satisfactory assuming I'll never get a dime beyond that. If I end up getting deferred income, gravy! But if I don't, I'm still fairly compensated -- so no loss.
This is a GREAT point, but hard to do in practice when deferred can be several multiples of base. I know many people who internalize large sign on bonuses and deferred comp as though they already earned the income. They are psychologically unable to accept writing this amount of money off, and force themselves to stick in situations that are at times not healthy or at least sub-optimal. Often times this is called life, and you deal with it because it is putting food on the table and providing above and beyond for your family. However a lot of times it would be better to just find something that makes you happier which is easier if you don't factor in deferred comp when thinking through personal finances.
So let's say you strip it down to the bare minimum. If an employer said I will pay you X times your a salary to not start a competitor for 2 years, should that be legal?
> I will pay you X times your a salary to not start a competitor for 2 years, should that be legal?
What about joining an existing competitor? How is "competitor" defined? Is it competition if someone left Apple's iWork team to join Microsoft's Office team? Or just left Apple to join Microsoft even if it's in a non-competing, or even a team that's actually beneficial to Apple's bottom-line (e.g. Azure, as iCloud runs on Azure+AWS+GCP)?
...these difficulties in nailing down "competition" is what leads to overly broad and ultimately unconscionable noncompete agreements.
Ultimately I wouldn't trust an employer to define it for me - so if I were in that position I'd tell them I'd treat a noncompete as a gardening-leave clause and require 200% my final TC for the same time period (so 4x my salary for 2 years) - if my ability to compete with the company is really worth that much then they'll gladly have no problems paying it - and if they don't, then they're clearly a company that wants to exert undue interference (i.e. punishment?) on former employees for no good reason and I'd interview somewhere else.
Nah. Any society probably suffers when people are legally limited in doing something they're trained to do.
On a philosophical level, I'm not sure it's good to allow people to sign away any kind of freedom, including the economic liberty to start your own company. Competition is also very important for capitalism to work for people who don't own capital...
Why not? If they want to buy your time & experience, and don't even require you to show up in the office but just do nothing - what's wrong with that? If the competitor wanted, they could counter with X+2 times and win.
Why would society want to prevent the employee from freely entering into such an agreement? I don’t see sufficient upside to warrant the restraint on freedom that making this illegal would impose.
“You’re allowed the pursuit of happiness, but not in this particular way.”
I mean money is money and its all a negotiation tactic.
For example I've never had deferred comp til my previous firm.
Every time I moved I asked for a signing bonus and they told me to get out.
This time I mention "Well I have some deferred comp I'd be foregoing".. verbally give them a number, and now they are offering me a sign on bonus, cash, in first paycheck 33% above what I was losing in deferred.
Hilariously they didn't even ask for documentation..
Another place sounded like they were going to to through the documentation on prevFirm deferral and put me in some form of deferred comp equivalent with a worse vesting schedule, but again, money I have never had anyone offer me before.
This: <<the way deferred compensation is structured>>
A tiny fraction of the industry qualifies for "deferred compensation". I guess about 1-2%. It is wildly overstated in the media. A huge number of people work their entire career on Wall Street as software developers and are 100% cash comp. Even if "deferred comp", it is RSUs, not cash. And the RSUs are no strings attached -- no clawback -- because the average Joe Blow has no chance to commit any real financial crime from their seat.
It's even worse - you aren't allowed to work with anyone that you previously worked with for the duration of the clause.
I worked at an NYC based hedge fund until April 2022, and am not allowed to work with anyone that I've worked with at the fund until April 2024, regardless of when they left. This applies even if we don't work on anything competitive to the fund, or even related to finance.
Does this apply to working with them in, say, a lobbyist's office? In certain, narrow circumstances I think this would conflict with various laws governing the right to free association and petition. And if you were both elected/appointed to office in the same legislative or executive body I presume the sovereign political interest would trump this clause.
Non-compete (and non-association) clauses aren't government regulation, it's agreements you make when accepting the job. Your first amendment rights aren't infringed by work dress codes either. You aren't at risk of criminal penalty, just whatever civil penalty is specified in the contract.
Not that that means they're necessarily okay, it's just unrelated.
This is why I wasn't citing the first amendment. It is not the only such law that exists. Even if it was I wouldn't have cited it because of the US Constitution's contracts clause. Some contract terms are unenforceable though, at least under certain circumstances. I just wonder how these things balance out in edge cases.
I don't know about the law of the United States, but here in New Zealand a contract purporting to interfere with the right of a citizen to stand for election to Parliament would be void as contrary to public policy (Peters v Collinge [1993] 2 NZLR 554), and there are various common law precedents on similar matters going all the way back to 1785. I would guess that a contract that purported to bind one of the parties not to vote in an election would be void in the United States, right? And probably one requiring the person not to stand for election too. Whether that extends all the way to a contract preventing someone from working in a politics-adjacent area like lobbying is questionable, of course, but it's worth bearing in mind...
Yeah, these are crazy.
I had a 3 month non compete (paid, it's great if you time it in summer).
BUT also a 5 year non-solicitation clause. The language is strict such that even if I & coworkerX move elsewhere, if I solicit coworkerX in that 5 year loopback they threaten to go after me.
So are these agreements legal in the sense that they'd stand up in court? No not really.. but you don't want to risk it.
All firms in the industry enforce similar clauses and defacto respect each others, such as to keep the facade up.
I had a firm make me a very generous offer and ask if I could get my PAID non-compete waived at old fund.
I asked - well you are asking me to ask to get my 3 months paid time off waived, can you offer me something in return.. like you'll pay me for 1 month and I'll start 2 months earlier?
They said absolutely not, they don't want to be seen as soliciting me to violate my contract with old fund.
You cannot work with a former colleague for an explicit duration in an economic capacity for a fixed period of time. This may or may not be dependent on the nature of the work being conscidered competitive (I have seen both). I have only seen these clauses referenced in deferred comp, not contractual non-competes.
Your analysis is not likely correct. The bill appears to be aimed quite generally at restrictive covenants, outlawing any contract restraining a covered individual's employment.
This would void any agreement predicating the terms and conditions of deferred compensation on employment restraints.
It would also likely defeat any gardening schemes since contracts could no longer prohibit a covered individual from practicing their profession.
(I am not an expert on NY Law and it is possible that I am wrong and this bill isn't really intended to cover finance or tech professionals making solid money.)
> Also even in CA where NC's are in theory non-enforceable, I know multiple people whose new employers did not want to test the water with very litigious firms and had people sit out the full NC.
It's a known effect that not working can take a physical toll on some people (i.e. the mortality effect of retirement - https://www.nber.org/bah/2018no1/mortality-effects-retiremen... ). I'm sure no one would ever do it, but I wonder if an employee would win if they sued both the old and new employer as co-conspirators to violate California's non-compete prohibition, citing the not-working health toll as their standing to sue.
It comes up durring hiring processes. Pretty common to have someone ask, "Have you entered into any legal agreement that would prohibit you from working with us or have any conflict of interest? If so please explain."
It is not lying if the question is "Have you entered into any legal agreement that would prohibit..." when in California that agreement is void. That means there is nothing that would prohibit you.
For anyone who hasn't signed an employment contract in California, it'll have the boilerplate noncompete they use everywhere but it will also have an addendum page that says basically "the noncompete back on page x doesn't apply to you so ignore it".
i’ve never heard of the second form of non-compete. how would the former employer even know? how is that legal? any amount of compensation that is finalised upon leaving the company (e.g. RSUs) should be yours to own, period. that’s akin to saying they can legally demand your paycheques back because they didnt like the company you went to.
In this arrangement you don’t yet own the deferred compensation when you leave the company. It does not belong to you. Instead your contract with the company might say “we will set aside an amount of money (which isn’t yet yours) and portion it out to you for 1-2 years after you leave, conditional on you not joining a competing firm in that period. If you join a competing firm, we will stop paying you.” Alternatively, the company will just pay you your full salary (plus maybe a fraction of what you used to get in bonus) for this period.
Essentially you’re being paid an income not to work for the competition. Most people take this deal as it tends to be pretty good — think several hundred thousand dollars for you to take an extended holiday or work on personal projects.
If you do take a competing offer during the non-compete period, the company might also use legal action against you, which is another story entirely and one whose threat most people would prefer to avoid.
New York is also the financial hub of the country. Removing non-competes creates a culture where employees can readily jump ship from their companies and form their startups w/o recourse. Not sure if that Silicon Valley culture makes sense in the financial sector.
> There's a well-trodden path in NYC from HFT/Prop #1 -> Big Tech, for duration of a non-compete -> HFT/Prop #2, that can be shortened by one node.
I've seen some folks do HFT/Prop #1 -> HFT/Prop #2 in London/Singapore.
In finance though, don’t people usually get a cushy 6 month paid “gardening leave” when they switch? So I’m not sure how much non-competes help if employees are already being offered contracts and $$$ to not compete. This law won’t make “gardening leave” any cushier?
>In finance though, don’t people usually get a cushy 6 month paid “gardening leave” when they switch?
Getting paid your salary for a couple of months (three is more common than six, in my experience) when most of your earnings might typically be in bonuses is less cushy than you might think.
At least in NYC - the non-competes that I know of are for way longer than a couple months. Most of the guys I know with non-competes are at least six months with many being a year or two... They're not getting paid peanuts either. They're still getting very good paychecks.
That sounds like it applies to a miniscule amount of workers, while many more workers are forced to sign non-competes but get no special treatment (or cash) from their employer for bearing that burden.
Not really. It's widely understood that NY won't enforce a non-compete if its not paid. It's very common in the hedge fund world to get paid your salary for a year to do nothing, even for junior developers. It depends on if the company really wants to hold you out or not. They will release you from the non-compete if they don't want to pay.
On the other hand, in the hedge fund world, bonuses are a big part of comp but generally only base pay is paid out, so in reality you might be say 150K to 250K while your comp in expectation is much, much higher. For a junior dev maybe your bonus is .3x to .6x base but for someone senior, your bonus might be 1x to 5x base or more depending on where you sit in the organization. Therefore sitting out still costs you a lot of money.
I am not a lawyer but it strikes me that such a threat (of action which the employer is not legally entitled to take) would probably violate a law or two. This wouldn't help the employee unless they went to court or the NLRB with it, but if some employee eventually did the court/NLRB may require things from the employer to prevent such incidents in the future.
I don’t think Walmart cashiers are saddled with non compete. You might have a good point here, but you will fail to get it across if you frame it in such ludicrous, obviously false way.
This article is just NYTimes grasping at straws, trying to conjure a narrative that’s completely foreign to 99.999% low wage workers.
Non-compete clauses are not “concerningly common”, these are in fact so rare that NYT couldn’t even point out to a single example of non-compete actually affecting low-wage workers: their leading example of Jimmy Johns is not something that ever been enforced, and I seriously doubt that any worker there is even aware of this clause in the contract (low wage workers don’t read these anyway).
This is data from a longitudinal survey of which the respondents were 32-38 years old when in the 2017/2018 survey.
Scroll down to Table 1 and Chart 2 and it looks as though non-compete agreements affect about 1 in 11 people who make approximately minimum wage (presuming these self-reports are accurate), and increase in frequency from there.
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Non-competes for job creators can indirectly impact low-wage workers by preventing a job-providing business from opening in their area.
And while trickle-down economics isn't that powerful of a force, it does exist. When non-competes suppress higher-level wages this has a knock-on effect on lower wages, and a side-effect of reducing the discretionary income the higher wage people can spend into the lower-wage economy.
Finance uniquely has little in the way of IP protection. There are strong incentives to keep a former team member out of the market for a year if they have your secret sauce.
As I understand it, yes, but being <some long duration> "out of the game" is a large opportunity cost if your intent is to go right back into finance. So the gardening leave is often not the best decision, career-wise, unless you're planning to exit finance altogether.
IMO, it's healthier for the overall industry/market if talent can move more freely. As one example, it makes it much more challenging for toxic cultures to persist in their current form, if the Sword of Damocles (NCA) isn't hanging above the off-ramp.
Garden leave probably won't be a thing anymore. The main reason it existed was to prevent lawsuits related to non-competes and loss of income. Basically they didn't want the non-competes challenged.
Now that that doesn't matter, they may just not offer it at all.
Or it might go the other way, where they offer you a year of salary and bonus to keep you away from competitors.
You are wrong, the proposed law bans both paid and unpaid non-competes. The point of gardening leave is that it’s mandatory and not voluntary. Making it voluntary defeats the purpose because anyone who wants their career to keep progressing is going to turn it down even if you offer to pay them.
>If enacted, the provisions of S6748 would prevent employers from entering into or maintaining non-competition agreements with workers, including independent contractors, absent a “good faith basis” to believe that a non-compete agreement is enforceable. The bill does not expand upon what constitutes a “good faith basis.”
"When you signed on, in good faith, you agreed to a 6 month paid notice period."
It depends. I personally once saw an offer where 'gardening leave' was only included if the employer chose to let you go, i.e. not if you chose to leave. And it wasn't for 6 months, IIRC it was at least a year.
And of course it didn't included any bonus, which is typically the larger portion of total comp in these situations.
The point of gardening leave is that it is mandatory, not voluntary. People are not going to choose to put their career on pause when they could be working, even if you pay them.
The proposed law will ban mandatory non competes, even if they are paid.
The proposed law bans voluntary non-competes as well as mandatory. It states that employers may not even accept such covenants. It is an absolute ban on employment restraints.
If everybody knows it’s the deal, which is apparently the case in NY finance, it’s a non issue.
In fact not having a gardening leave might be more suspicious, as it means you’re so useless and out of the loop your previous employer doesn’t think there’s anything you could be carrying over.
It's not usually a deal breaker because of how common it is, but it does matter. You are going to be disadvantaged against someone who can start sooner. I fully support this legislation. Non-competes are anti-competitive, period.
This doesn't seem like as big of an issue as you make it sound from my anecdotal experience. The finance guys I know in NYC don't have this issue? It's such a common part of the work that hiring people this far out in advance is quite common...
Garden leave and notice periods are, to some degree, a coordination issue. "You have to give us and we have to give you three months notification of termination of employment" works (mostly) fine when everyone does it and they know it's just the way things are. It's harder when you're that problem candidate who can't start for three months when that isn't the norm.
That is completely normal. College hires are either returning interns from the previous summer or else mostly recruited in the fall to start after they graduate in the summer, so almost all new grad hiring takes place 6-12 months out anyway.
Focusing narrowly on New York City (proper) and State -- ignoring New Jersey and Connecticut: For all software developers employed by (a) HFT/prop shop or (b) major ibanks (Morgan Stanley, Citigroup, BAML, etc.), what is the ratio? I guess it is (a) 1% vs (b) 99%.
I do not agree with this phrase: <<major factor in the finance sector>>
In reality, most software devs work under an ibank contract that looks like:
(a) x months of notice is required before leaving your job. The firm may optionally grant you gardening leave -- don't come to office, but we pay you, and you cannot take another job.
(b) You cannot hire away teammates for one year.
There are no rules about why type of firm you can work for after leaving. To me, this is not a traditional "non-compete" contract. Also, before anyone gets too jumpy on HN, this type of contract has existed on Wall Street for more than 15 years. It is tried and tested in the courts.
The rules may be different for managing directors, but they are (at max) 2-5% of the population.
I don't know if the finance sector would consider this a big problem, but if it turned out to be a big problem, wouldn't they just be able to bypass it by opening up specific offices in, say, NJ or CT? A ton of firms are already located in CT.
Not to take away from that but I feel like the cases of them being enforced against, like, hairdressers and sandwich shop employees who can by no stretch of the imagination be said to have valuable proprietary information (and aren't earning that much in the first place) is much more egregious.
What will actually happen is NY will become less attractive to HFT/Prop firms and people jumping in and out of these firms will see lower sign-on bonuses
> the second bill, S6748, would, among other things, prohibit employers from entering into or maintaining non-compete agreements with workers, absent a “good faith basis” to believe a non-compete agreement is enforceable.
There should be a more general law about this. Drafting any contract without a good faith belief that it's provisions would be valid if tested by a court should be illegal.
Companies have the good faith belief that employees would be so outgunned in a legal fight that most of the time they won't even challenge invalid clauses.
Hence the need for a law. Something along the lines of:
* Anyone who was given a contract with a provision that the drafter knew was unenforceable can sue.
* If they win, they get, punitive damages, actual damages, and lawyer's fees.
* It is not necessary to alledge any damages, or even that the provision in question was ever relevant.
Do this, and there will be law firms looking and advertising for clients. For cases as obvious as the typical non-compete the law would be so clear that lawyers would have no issue working on contingency.
Employers can drive up litigation costs all they want. Plenty of law firms can handle it, and are already used to it; and at thd end of the process, the employer would just pay the cost.
It would be especially valuable if there was also a government registry of known unenforceable provisions that employers are assumed by the law to be aware of. This would cut off arguments regarding "knowledge"/
I would also include provisions in the law to force employers to inform explicitly every other person who signed the contract that the clause is not valid.
> It would be especially valuable if there was also a government registry of known unenforceable provisions that employers are assumed by the law to be aware of.
Hah, there's exactly that in Poland wrt. consumer protection - "klauzule niedozwolone"
yes, because the average person is so outgunned[1] by corporate lawyers and their deep pockets which means they can risk it, the law is effectively whatever you can scare someone into believing.
[1]: it's absurd that "gunned" is even a thing, talk about a complete lack of justice when you think about it.
This needs to be passed in the remaining 49 states ASAP. When moving over to my current gig, my previous employer forced me to sit out for 6 months. Their agreement was so broad that it pertained to anywhere where there was phone or email in the world. Also applied to any customers, partners, or competitors so basically I couldn’t work in tech at all (since they are a major reseller and everybody procures something from them).
Are there a lot of issues with non-competes? I've def heard stories, but it's usually related to poaching scenarios where a contractor gets hired by the company that they are contracting with.
That said, I also know that multiple states basically have mechanisms to prevent a non-complete from preventing work. For example, if I'm a mechanic, a non-complete can't keep me from being a mechanic and making a living because a former employer claims that every repair shop is a competitor.
(disclosure: I submitted comments to the FTC advocating for their rule making against non competes; personal opinion: its important this is codified at both federal and state levels to inhibit rollbacks in the future based on SCOTUS decisions around executive branch authority, consider them lines of defense and policy ratchets)
The whole problem was due to the abuse towards “low skill” workers. Stuff like if you get a job at Subway, you can’t go and work at another deli shop within a certain radius of the former employer.
The point of this change is to protect these people, which is totally sensible
Non-competes are also problematic for highly-compensated tech workers. The phenomenon of NCA'ing low-compenation workers is also horrible, of course, but not the whole problem.
Yeah most of the stuff that is ostensibly the purpose of classic non compete agreements is well handled by NDAs and explicit agreements not to poach clients/workers, if I understand things? It's still okay to block the use of secret information or professional contacts from your former company.
From a free market perspective, it's burdensome to make someone with experience in a sector stop working in that sector, even if that's what their career is about.
Yep, had a non-compete working at an isp in Hawaii. It felt really scummy to sign that on my first day because I knew it would make it difficult to work in the tech sector when most other companies are within a very small radius and are all "competitors".
I did see one guy leave after 6 months and go directly back to his old job at a competitor and the CEO just grumbled about it and did nothing. It was kinda badass.
The reality was courts in NY generally would never enforce a non-compete for a Subway like case. Courts do weigh the "equivalent exchange" and what the non-compete is "protecting". They were more problematic in any other higher paying field.
The first proposed bill bans all non-competes while the second proposed bill basically codifies non-competes are legal only if there's "good-faith" aka equivalent exchange. Which usually means payoff or enormous salary.
This is what highly paid white collar workers on Hacker News like to parrot but it's sensationalist at best. Even in this article where the evidence points to low wage workers having the lowest percentage of NCA's runs with the click bait headline.
Regardless, no Subway worker ever GAF about a NCA. They walked right across the street to Jimmy John's and were hired on the spot. And even if Subway had a NCA in place - which I doubt most of the major chains do - Subway doesn't GAF either. The only time anyone would care is maybe if a manager opened another deli across the street and took all the info from their suppliers with them.
Easier to keep the employees around with the threat of legally enforced unemployment without the safety net than changing the business or working conditions or pay to something worth sticking around for.
There was a particularly high profile case of a high-level Microsoft engineer who left for Google, and Ballmer literally threw chairs across the room and had the guy sued.
Microsoft lost.
Nobody hears about these stories when they stakes are lower.
Never mind the issue of tech worker poaching and whatever secret agreements the companies made, the real issue here is Ballmer’s terrifying spasm of violence. He ought to have been removed from the building and barred from the property, and his employment terminated. That type of outburst is never ok because it forces everyone to wonder at what point he might assault someone.
I don’t care how many billions of dollars are at stake, none of it is worth getting hurt over, and throwing chairs around demonstrates that he has lost that perspective.
Ballmer being CEO of Microsoft for 14 years (and making himself $100B in the process) should be part of business school case studies for corporate mismanagement. He had no ability for the job, no technological understanding or vision, really no reason to be at the company at all other than being friends with Bill Gates in college. Microsoft as a company (along with its stock price) was stagnant throughout his tenure, and has grown 15x since Nadella took over.
The stock market is a poor measurement of how a company is doing. During Ballmer’s tenure, revenues tripled and profits doubled.
There is no reasonable analysis that Nadella did anything to cause the present value of all future cash flows to be 15x - how stock values should be evaluated.
To be fair it wasn’t his office that shielded him from consequences, it was his wealth. It’s not like a poor person who founded their own LLC would be coddled by the legal system.
Someone "close to the source" once told me that he would pace about meetings rotating a baseball bat like a baton. The chair doesn't seem like the biggest problem here!
It's a tool for intimidating workers. Non-competes may make a worker afraid to leave a job for fear of being unable to work in their industry. It may also make a worker afraid to take specific positions for fear of retaliation by a former employer.
The key is, non-competes can accomplish these things even if they're not legally defensible. Your average worker doesn't have the legal knowledge to know if a given non-compete is actually likely to hold up, and will often assume that they signed a legally valid contract. Most workers can't afford to go to court, so the threat of a lawsuit can be used to bully them into submission.
In the financial industry there’s a norm that traders, and other high profile workers, will have gardening leave between jobs. The old company will pay the ex-employee for a few months to do nothing. This way when he starts at the new company and inside knowledge he gleaned is out of date. The new company knows that this is the deal and is okay with a start date after gardening leave.
This is the civilized version of a non-compete developed by New York Bankers. Oh so nice and caring California tech companies use the ruthless version. Since they now have offices in NY we need to change the law to force them to behave.
Some stores prevent retail workers going to work for a competing store. That's completely bananas - you can't work as a checkout clerk at Krogers if you worked at Safeway?
If a retail worker is key to your business such that it requires a non-complete, your business model is broken or you're abusing non-competes.
What would constitute "a lot"? The last few years I've seen an increase in the tech industry of non-competes being required for less senior roles, plus reports of using non-competes in low-wage industries to try to freeze workers from leaving jobs. [1]
They're also over-broad and selectively enforced. I was considering a job last year that had a non-compete and wasn't eager to sign it because if you read it broadly it would've been hard for me to take a job that wasn't with a "competitor." Which was 1) over-broad and 2) bogus because the harm that would've been done to me was far outsized to any harm I could've done taking a job with any competitor.
I wasn't going to be such a strategic employee that me going to Company B would have hurt Company A in any real way (nor would I have been compensated at that level...), but I was expected to sign a non-compete and be severely restricted in my next job options -- or roll the dice and hope if I took a job with Company B later on that it wouldn't be considered "a competitor" or that the employer would care.
And that's the other problem - I was told by several people "eh, that's not enforced" but it was not something they were willing to forego, either. I don't sign agreements with the intent I'm not going to live up to them. It's not reasonable to have that kind of uncertainty, either.
Non-competes have their place - I can see, say, Netflix putting in place a NC with a head of programming or major cloud providers having non-competes for very senior execs who have extensive information about strategy, budget, customer lists, etc. But lower-rung employees who don't even have their own budget or any material knowledge about the operations of the business? That's stupid.
I've had to sign many of them. The only one that would have definitely been enforced was not tech-related and very narrow in scope (don't open competition within 10 miles).
But every tech-related one amounted to, "you're not allowed to work if you sign this". I didn't have any "issues" with them, in the sense that nobody ever tried to enforce one, but it's still a load of BS that we shouldn't need to deal with.
Non-compete agreements for employees are a farce, IMHO.
Cases where companies actually take someone to court are almost certainly not very common and tend to involve high-level people (or employers with a real grudge).
But having worked for a very small company for a number of years, we wouldn't touch anyone with a remotely relevant non-compete. As far as our business office was concerned, no one was basically worth any risk of litigation and legal bills.
That said, I have known companies that were apparently known for enforcing non-competes and departing employees who wanted to put out their own shingle for competing services would sit "on the beach" for a year before doing so.
The most common use of noncompetes is just to discourage an employee from quitting their job. "Oh, you want to go for for unrelated firm X? Actually, legal says they're a competitor, because we're a huge conglomerate. So, you can't take that job. Sorry."
In this situation, the company doesn't actually care about the competition at all. The noncompete is just another tool in their toolbox to discourage you from quitting.
> Are there a lot of issues with non-competes? I've def heard stories, but it's usually related to poaching scenarios where a contractor gets hired by the company that they are contracting with.
There's no issue unless the state is into stifling innovation. Want to create a Silicon Valley? You have to allow for employees to jump ship and form startups w/o repercussion.
I understand that he's still being paid by Fox News at the moment (and will continue to do so until 2025), so it's more a conflict-of-interest clause. Dunno the details of his contract, but I assume that completely canning him is more expensive than just taking his show off the air, but breaching his contract by doing a show on his own probably shields them from that.
My understanding is that Fox is continuing to pay Calson so that he can’t compete. I know in my state that’s a requirement once let go, else non competes are not binding.
FWIW, to add to the joy, non-competes have been officially banned in Ontario since Oct 25, 2021 (but rejected by the courts for a long time before that. I suspect they're not enforceable in other provinces; but officially not allowed in Ontario.)
So that means for all employees in the greater Toronto area. (And Toronto is 4th biggest city in North America just after Chicago).
The textbook I read to study for my provincial Engineering Law and Ethics exam had a section on non-competes. It straight up said the vast majority of non-competes are not enforceable but warned that the more specific the circumstances described by the non-compete the greater the chance that a court would enforce it.
The example they used for something that would most likely be enforced was a geologist working for company A doing a mining survey in a area under a 6 month non-compete cause would definitely not legally be allowed to take a job for company B to do a survey in the same area until the non-compete expired.
I had a recent job offer that included a rather restrictive non-compete. They were actually really good about just dropping it when I pointed out that it's not permissible under Ontario law.
It feels good that there's positive progress in this direction.
Most non-competes are banned in the third largest city in North America too. Seems like with NYC on board most major employment centers will be covered.
It's not entirely clear what happens if a company is NOT located in NY, yet hires a person remotely and that person lives in the state of NY. Does this law apply for as long as 1 entity in the relationship (ie, employer vs employee) is located in NY, or is the statute invalidated completely if both parties are not in NY?
you can follow the laws of the state you physically work in, and no employer in a different state can do anything to you regarding a different state's law
It is crazy how much stuff Hochul gets away with. And she gets all this credit as a super progressive, pro consumer governor... She is somehow scandal free. Republicans in NY really messed up by nominating a DeSantis style politician in NY. They passed up a massive opportunity for a republican governor since so many dems didn't like Hochul.
Would a Republican pass any right to repair bill? A watered down bill is better than nothing. So it's weird that you would suggest a Republican would be better for this issue.
I think having valid competition might make Hochul a more competent governor and accountability/eyes on her. The idea of an "easy" election never sits well with me unless it is a great incumbent.
If it's an easy election it's the republicans fault. Anti-abortion, attacking gays, lying about election fraud, etc. All she has to do is be a candidate from the opposing party.
i think you are intentionally misreading or limiting alternative paths. i am not nitpicking changes to bills because there are issues with entire bills proposed for example.
And the alternative isn't republicans. stagnating dem party in NY is the alternative to a flourishing one.
It is odd to me that Hochul is under much less scrutiny than Cuomo (even before the nursing scandal). And we all can agree that Cuomo needed it. The possibility of Republicans doesn't mean Hochul shouldn't get that scrutiny as well.
I guess my country regulates this pretty well - employer is forced to pay at least half of the salary for the duration of non-compete and on top of that the onus is on the employer to prove that an ex-employee is engaging in "direct competition" if they are going to sue for damages. Which, I tend to believe, captures the purpose of non-compete agreements quite well.
Even if it passes it will need to be tested in the courts (possibly in multiple states). There was an interesting case in Ireland (I know, not U.S.) recently where non-compete should not be enforceable. Interestingly enough the company still tried their stance in the court but alas failed. This was between Ryanair and Mr. Bellow (ex COO) who left for a competitor EasyJet.
The abuse of power will not just suddenly stop. You will see your contracts polluted with non enforceable non competes for times to come. It probably scares people of.
The main reason selective non-compete clauses are important, is preventing industrial espionage on intangible assets... and customer lead-data exfiltration.
In business, idealism will not be rewarded in the long-term.
People intuitively understand this fact, if they were ever stung by a bad partnership deal or outright scam.
The core issue was the scope of these terms became far too broad in 50 years.
The sun always shines even when our faces are turned, =)
Where I live (outside the US) non-competes are only valid if a company pays full compensation (and they take bonus into consideration) for the time it requires the non-compete to be valid, otherwise any court would nullify it.
Most companies do not pay for the period of time that a non-compete is in effect. What you're describing is somewhat different. Typically that's known as garden leave, and essentially you're treated as a current employee for the period of time, but you're not allowed to work. Which means that you'll likely have the 6 months of free pay. I'd definitely review your contract and the terms.
Well if you want to be technically correct, EU regulations are binding and must be implemented to the letter by all member countries without excuse or deviation. EU directives are the ones that have some leeway with local laws. Both are legislation though so might as well call them laws.
That is not correct, the way mandatory gardening leave typically works is that you are no longer an employee but you still get paid. Depending on local laws you can force someone to not compete but you cannot force someone to be an employee, that is slavery and not allowed under the law.
New York courts had basically already mooted unpaid noncompetes before this (except for executives). The ones in finance are paid, and often paid pretty well.
Garden leave is a different beast and seems fair, you and the employer each get something, non competes on the other hand do not usually offer anything to the employee.
Many garden leaves as a condition of having a non-compete aren't a great deal though. I think the fairly recent Massachusetts law is 50% pay--and that may be of just base pay. It might be a good deal if you want to travel in your twenties. It may not be such a great deal if you have a mortgage to pay and family to support and you're basically pressing pause on your career.
It does make the company put skin in the game but if they decide to enforce anyway, it's better than nothing but hardly a panacea.
You still lose as you won't get raises, bonuses or promotions. You may lose extra-legals like company cars, insurance (?), long term savings-matching. Even then your cost of living will probably increase due to not working.
Yea, the bonus point is interesting, especially in finance where bonuses can be > 100% of base. You can't insist on firms paying last years bonus, or else people would just quit and get a non compete if they had an insane year. But paying only base also seems a bit unfair.
A thought I had was you'd have to pay whatever their new offer is paying. The argument is that if you want to prevent someone from working, you should have to pay them their worth - which, in the case of someone resigning with a competing offer - has just been priced by the hiring market!
Paying the wage of the new offer leads to bad incentives w.r.t. nepotism. It also discourages starting your own small business where you tend to pay yourself a small wage.
It is at many HFT firms, including mine. You will be paid your base salary for some number of months to not work at a competitor, even if you don't have a signed offer for a competitor and just want to sit around
> It is at many HFT firms, including mine. You will be paid your base salary for some number of months to not work at a competitor, even if you don't have a signed offer for a competitor and just want to sit around
That's called "garden leave" and it's completely different from non-compete agreements as discussed by this bill.
A garden leave is a form of compensated non-compete. The entire point is that you’re paying a former employee to not compete (in this case to literally not work).
Garden leave is just a (usually?) legal (or at least contractual) requirement associated with non-compete agreements in some jurisdictions. Unsurprisingly, it was originally a British term, although it meant something different.
> "Garden leave" wasn't a common term when I was in HFT in NYC. It was just called a "non-compete" (possibly confusingly).
The terms are used somewhat interchangeably in colloquial use, because (at least as of now) the distinction isn't meaningful for most people. The point is that garden leave isn't targeted by this bill.
The first bill outlaws all non-competes and garden leave would fall under it. The most they could do is offer it as a form of severance where you get to sit on your butt for 6 months conditionally.
The second bill would allow for garden leave aka compensated non-competes. It just codifies the "don't try any non-compensated/good faith aspect".
I don't think that is true, or at least I have not seen that anywhere. My understanding is this bill removes any kind of non-competes. It was already basically unenforcible to have an unpaid non-compete in New York (through common law)
If companies actually paid employees not to compete they would be able to keep them. Correct me if I'm wrong, but--at least where I live--non-competes lack legal authority (even before they were outlawed) because most companies don't provide compensation for limiting an ex-employee's ability to make a living in their field in the future.
So, it's conceivable that an ex-employee could receive 6 months severance in trade for a non-compete of that length, but I doubt it's very popular.
> If companies actually paid employees not to compete they would be able to keep them
Why is this true? If someone is making $200k and leaving to make $350k, an employer may well be able to afford the $100k for 6 months to prevent them from immediately handing over IP, but not be able to match the $350k their new employer is offering.
> So, it's conceivable that an ex-employee could receive 6 months severance in trade for a non-compete of that length, but I doubt it's very popular.
It's quite popular in finance. Also, it's not a one time severance, its paid as a standard paycheck. A firm might "release" someone from their non compete while it is still active (basically saying it's no longer active and we are no longer paying you).
> Why is this true? If someone is making $200k and leaving to make $350k, an employer may well be able to afford the $100k for 6 months to prevent them from immediately handing over IP, but not be able to match the $350k their new employer is offering.
Sorry, I worded that poorly. I meant companies could keep the ability to impose non-competes if they originally compensated employees who were let go.
I know it gets muddled when it comes to employees moving around for increased pay, but non-competes aren't supposed to be a mechanism for holding down salaries. They're only intended to protect vital corporate secrets that, if they were released, would be so costly to the company that they'd risk bankruptcy. The value of those secrets would likely be enough that many competitors would be hesitant to hire those employees because they might fear opening themselves up to future litigation for patent infringement or IP or whatnot.
The fact that many HR
departments apply them to every single rank and file employee and don't explicitly define what constitutes a direct competitor or what explicit activities/information are protected by the NC is why they're a pretty useless legal tool in most circumstances.
And there are a ton of other reasons people change companies as well.
>an employer may well be able to afford the $100k for 6 months to prevent them from immediately handing over IP
Presumably there are other restrictions to just handing over IP but at least some of the reasoning for non-competes is that you can't really restrict the transfer of a lot of know-how even if they don't share corporate strategy decks.
This is not going to be a popular take , but this will hurt employment or comp of medical fellows & residents, who expect to go into private practices.
In summary, established SMB independent practices will offer fewer w2s to freshly minted MDs. Expect established doctors to require buying into a practice's equity, meaning the odd new MD with funds to buy in will do so (but will take less comp vs w2 salaried) ; while the majority of those without funds to buy in (due to a pile of student loans), will end up as W2 ...but for hospital groups.
Why ? Existing doctor-owners will be concerned with paying for the risk of training new doctors who can then take the existing practice's foot traffic with themselves across the street on a whim. Why Paying? The new w2 doctor is a loss leader a period of time, which varies across specialties. They are slower, don't know how to use new EMR, etc
So yes, i'm for competition, but expect that hospitals will benefit tremendously from this new restriction in NYS. And healthcare costs will rise accordingly.
If they don't want that to happen they can simply pay deferred compensation like non competes work in every other nation instead of holding them hostage through medical debt service.
I think that's what should happen, but what do you do in a situation where you have 2 market segments paying differently?
Most HFT firms pay deferred comp. There's almost no industry alternative offering to pay pay-as-you-go compensation to a trader.
Even if all private practices decided to go with deferred comp, hospitals would just seem all the more attractive with pay-as-you go comp. Hospitals will never be scared of an individual doctor leaving them to compete. Its actually already illegal - existing regulation requires existing hospitals to *approve* of new hospitals being built - yes, this is wild.
This is how it works for small vs. large business in ANY skilled/professional field, whether we're talking lawyers, accountants, engineers, whatever. If you want employees to stay, then incentivize them accordingly. If that means that junior MDs make low W2 and then that ramps up as they gain experience, that seems reasonable to me! Anything else is fundamentally not fair.
An alternative to banning them outright would be to mandate that the employee is compensated at something like 80%+ of annual pay for the agreement's duration for it to remain valid. So if McDonald's thinks their burger technology is that valuable they can pay to keep it under wraps for a while.
That is an interesting idea, but I can guarantee employers would fine ways around that very quickly. For example, maybe the law stipulates that employees must be compensated for 80% of salary, so employers start paying mostly in benefits and equity. Or we specify 80% of total compensation, and they find a way to say healthcare is worth nothing and grossly underestimate the initial value of equity. There's always a way. Banning it outright doesn't even guarantee it will work, because cartels will agree not to hire each other's recently departed employees.
Working Families is the real progressive party in NY since the Dems are largely corporatists and a organizationally rotting party. Our previous Emperor Cuomo actively went out of his way to suppress the party since they threatened both the DNC and his manipulate to play the 2 party standoff game for his own benefit.
I wouldn't be surprised with Cuomo out of the picture that the WF party continues to increase in size.
> The basic idea of corporatism is that the society and economy of a country should be organized into major interest groups (sometimes called corporations) and representatives of those interest groups settle any problems through negotiation and joint agreement. In contrast to a market economy which operates through competition a corporate economic works through collective bargaining.
Ah yea, great point. I thought the original comment was implying something negative about them. WFP is great and I do really hope they can continue gaining size.
> Bill No. S6748 is generally aimed at preventing the establishment of monopolies, monopsonies, and restraints of trade.
> If enacted, the provisions of S6748 would prevent employers from entering into or maintaining non-competition agreements with workers, including independent contractors, absent a “good faith basis” to believe that a non-compete agreement is enforceable. The bill does not expand upon what constitutes a “good faith basis.” The legislation would also define “non-compete agreement” broadly to include any “de facto” agreement that “has the effect of prohibiting [covered individuals] from seeking or accepting employment[,]” such as overbroad non-disclosure agreements and training-repayment obligations. Employers would also be required to rescind unenforceable non-compete agreements with both current and former workers, and they would be required to provide notice to each worker that an agreement is no longer in effect. If enacted, the law would take effect immediately.
GDP growth comes from productivity, non-competes are very bad for productivity, they add friction across the economy. People say its one of the reasons CA has done so well economically.
There's a well-trodden path in NYC from HFT/Prop #1 -> Big Tech, for duration of a non-compete -> HFT/Prop #2, that can be shortened by one node.