7 ms·

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 peop

by gen220 3y ago

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.

choppaface 3y ago
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?
- standardUser 3y ago
  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.
  - frankc 3y ago
    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.
    - masklinn 3y ago
      > It's widely understood that NY won't enforce a non-compete if its not paid. I’m sure the Walmart cashier with a non-compete hanging around their neck is much appeased by this.
      - JumpCrisscross 3y ago
        > sure the Walmart cashier with a non-compete hanging around their neck is much appeased by this You describe an enforcement, not legal issue. Even with this legislation, the manager can still verbally threaten the employee.
        anonymouskimmer 3y ago
        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.
      - xyzzyz 3y ago
        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.
        duskwuff 3y ago
        I don't know about Walmart cashiers, but non-competes are concerningly common for entry-level positions like sandwich chefs or delivery drivers: https://www.nytimes.com/2014/10/15/upshot/when-the-guy-making-your-sandwich-has-a-noncompete-clause.html https://www.nytimes.com/2014/10/15/upshot/when-the-guy-makin...
        xyzzyz 3y ago
        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).
- NovemberWhiskey 3y ago
  >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.
  - bradlys 3y ago
    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.
    - jen20 3y ago
      Sure, but it still doesn't cover total compensation.
    - teaearlgraycold 3y ago
      I know someone that got a HFT non-compete for $300k over 9 months with only a few years of experience.
      - steveBK123 3y ago
        DREAM
  - ng12 3y ago
    Typically your new firm will cover your missed bonus.
- gen220 3y ago
  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.
- johnnyb9 3y ago
  In theory it sounds great, but try interviewing with companies and see their reaction when you tell them you can't start for > 6 months.
  - bradlys 3y ago
    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...
    - ghaff 3y ago
      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.
  - masklinn 3y ago
    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.
    - frankc 3y ago
      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.
  - esoterica 3y ago
    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.
- JumpCrisscross 3y ago
  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.
- jedberg 3y ago
  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.
  - RC_ITR 3y ago
    The incentives are "we will give you your full salary for 6 months, you have to work for only us, but we have no expectations of you." Non-competes are "even if we don't keep paying you, you can't work for a competitor" Nothing about the gardening leave incentives have changed.
    - esoterica 3y ago
      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.
      - RC_ITR 3y ago
        >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."
- usefulcat 3y ago
  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.
- esoterica 3y ago
  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.
  - erosenbe0 3y ago
    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.
detroitcoder 3y ago
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.
- hamandcheese 3y ago
  > Also what this does not address is non-association clauses which are just as restrictive and non-competitive. I've never heard of a non-association clause, could you explain it? Is this the same as a non-solicitation clause?
  - detroitcoder 3y ago
    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.
tomp 3y ago
Nah, HFTs have moved on a while back. Now you've a 18 month notice period. You're paid salary, bonus etc.
- roflyear 3y ago
  I can't imagine it's a mutual notice period?? that's the only type of notice req. that I'm aware of.
TrackerFF 3y ago
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.
nocsi 3y ago
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.
throwaway2037 3y ago
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.
emodendroket 3y ago
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.
nly 3y ago
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

by gen220 3y ago

choppaface 3y ago

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?

standardUser 3y ago
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.
- frankc 3y ago
  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.
  - masklinn 3y ago
    > It's widely understood that NY won't enforce a non-compete if its not paid. I’m sure the Walmart cashier with a non-compete hanging around their neck is much appeased by this.
    - JumpCrisscross 3y ago
      > sure the Walmart cashier with a non-compete hanging around their neck is much appeased by this You describe an enforcement, not legal issue. Even with this legislation, the manager can still verbally threaten the employee.
      - anonymouskimmer 3y ago
        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.
    - xyzzyz 3y ago
      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.
      - duskwuff 3y ago
        I don't know about Walmart cashiers, but non-competes are concerningly common for entry-level positions like sandwich chefs or delivery drivers: https://www.nytimes.com/2014/10/15/upshot/when-the-guy-making-your-sandwich-has-a-noncompete-clause.html https://www.nytimes.com/2014/10/15/upshot/when-the-guy-makin...
        xyzzyz 3y ago
        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).
NovemberWhiskey 3y ago
>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.
- bradlys 3y ago
  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.
  - jen20 3y ago
    Sure, but it still doesn't cover total compensation.
  - teaearlgraycold 3y ago
    I know someone that got a HFT non-compete for $300k over 9 months with only a few years of experience.
    - steveBK123 3y ago
      DREAM
- ng12 3y ago
  Typically your new firm will cover your missed bonus.
gen220 3y ago
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.
johnnyb9 3y ago
In theory it sounds great, but try interviewing with companies and see their reaction when you tell them you can't start for > 6 months.
- bradlys 3y ago
  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...
  - ghaff 3y ago
    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.
- masklinn 3y ago
  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.
  - frankc 3y ago
    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.
- esoterica 3y ago
  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.
JumpCrisscross 3y ago
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.
jedberg 3y ago
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.
- RC_ITR 3y ago
  The incentives are "we will give you your full salary for 6 months, you have to work for only us, but we have no expectations of you." Non-competes are "even if we don't keep paying you, you can't work for a competitor" Nothing about the gardening leave incentives have changed.
  - esoterica 3y ago
    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.
    - RC_ITR 3y ago
      >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."
usefulcat 3y ago
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.
esoterica 3y ago
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.
- erosenbe0 3y ago
  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.

detroitcoder 3y ago

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.

hamandcheese 3y ago
> Also what this does not address is non-association clauses which are just as restrictive and non-competitive. I've never heard of a non-association clause, could you explain it? Is this the same as a non-solicitation clause?
- detroitcoder 3y ago
  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.

tomp 3y ago

Nah, HFTs have moved on a while back. Now you've a 18 month notice period. You're paid salary, bonus etc.

roflyear 3y ago
I can't imagine it's a mutual notice period?? that's the only type of notice req. that I'm aware of.

TrackerFF 3y ago

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.

nocsi 3y ago

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.

throwaway2037 3y ago

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.

emodendroket 3y ago

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.

nly 3y ago

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