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New York may ban noncompete employment agreements and Wall Street is not happy
- mirzap 3y agoNon-compete contracts should be banned unless the employee is compensated for the non-compete period. Period.
- genocidicbunny 3y agoThe employee should be over-compensated. If you were making $200k pre-tax at the job, the non-compete agreement should at a minimum require you to be paid $200k post-tax.
- switch007 3y agoYup. Put your money where your mouth is If that person was so valuable, had so much knowledge, had so many contacts etc…prove it in the only way business owners really understand
- ffgjgf1 3y agoI’m sure there are some people who wouldn’t mind 6+ months on 80% (or so) of pay during which they are are free to do whatever else they want
- zaptheimpaler 3y agoGod bless Lina Khan our based monopoly busting, employee supporting FTC queen.
- nxm 3y agoShe has not been very successful at it judging by her record
- delfinom 3y agoThe FTC isn't the org with much power over employee rights. That's the DoL.
- latency-guy2 3y agoIt's not uncommon for various government orgs to overstep beyond their stated mission, goals, or purpose. Khan seems like the kind of person to abuse their power indeed.
- Lev1a 3y ago> Wall Street isn't happy that employees will have more freedom in their choice of employer "In other news, water continues to be wet."
- plagiarist 3y agoNeeds to be national policy. Non-competes compensated at full pay or they are illegal. Let's get mandatory binding arbitration as well.
- anticensor 3y agoMandatory binding arbitration is a real thing in Turkey, used for certain types of civil disputes.
- quickthrower2 3y agoWall street should be half happy half sad. It is a wall street company poaching off another wall street company.
- chiefalchemist 3y agoTrue. But the way The System works isn't WS v WS, it's WS v Everyone Else. WS doesn't want to waste time and energy hurting themselves. They know better. They behave more like starlings. No conspiracy per se, just mutual interests that align strategy, tactics, direction, etc. https://youtu.be/V4f_1_r80RY?si=e-niFwrb-QeE4oDU https://youtu.be/V4f_1_r80RY?si=e-niFwrb-QeE4oDU
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- hulitu 3y ago> New York may ban noncompete employment agreements and Wall Street is not happy I though capitalism (Wall Street) was about competition. /s
- eru 3y agoIt's about voluntary contracts, too.
- neilwilson 3y agoIt can only be voluntary if everybody has an alternative job to go to. While firms only hire if there is a profit to be made, and people have to earn to eat the 'no deal' stand off isn't an option.
- eru 3y agoUnemployment is near record lows in the US.
- Paul-Craft 3y agoAgreements between parties of vastly unequal power and alternatives are not voluntary.
- cj 3y agoIf they aren't voluntarily, they wouldn't be enforceable in court. What you're trying to say is there's limited alternatives. (The most obvious alternative is to not take the job)
- Paul-Craft 3y agoNo. What I'm saying is "take a job with a non-compete or starve" is not a situation in which a worker can make a voluntary choice, "enforceable in court" be damned. Not to mention, such agreements are often not stated up front as part of the job description.
- fkarg 3y agoNon-competes shouldn't be a thing for most employees.
- eru 3y agoUnemployment in eg the US is fairly low. So you can pick companies which have less stringent non-competes (or non at all).
- marcus0x62 3y agoOr we could not allow unconscionable contract terms.
- AlchemistCamp 3y agoWhen I go back to the US, I pick states by which have limited non-competes.
- eru 3y agoThat's a fair point. Competition between states to attract people (and business) is good.
- SenAnder 3y agoLimiting yourself to voting with your wallet/feet, while corporations use every trick in the book, is like trying to win at chess using only pawns.
- neilwilson 3y agoJobs on offer are fewer than number of unemployed. Therefore jobs are scarce. Only when there is a vast surplus of jobs will competition do the work. Until then you need regulation.
- sophacles 3y agoAnd regulators that dont cite "low unemployment" when they raise interest rates.
- ajb 3y agoAfter noncompetes, they should go after non-solicitation. Entire teams that work well together should be able to defect from shitty employers. It kind of happens anyway but on the quiet, inefficiently - I'd love to see a job website where you can list an entire team.
- cj 3y agoNon-solicits also include not soliciting customers. Which is particularly relevant at consultancies where the product is a service. If you join a consultancy group, and 2 months later quit with the client roster... is it really OK to poach all their clients to start your own consultancy? All of these contracts are time limited, FWIW. E.g. non-solicitation doesn't mean you can never work your your colleagues again. It protects against someone leaving and then immediately poaching all employees within 12 months. After 12 months you're welcome to poach as much as you'd like. Edit: Furthermore, non-solicits don't ban your colleagues from quitting with you, as long as you're not directly asking them to quit. If they make the decision independently without being lobbied by a former employee, it's not in violation of non-solicit.
- izacus 3y ago> If you join a consultancy group, and 2 months later quit with the client roster... is it really OK to poach all their clients to start your own consultancy? Yes. It's called free market competition and it's great for the society and economy. NYC bankers should be first in line to understand that.
- cj 3y agoWhat you’re advocating for is normalizing the stealing of company IP. The way you solicit clients from a prior company is downloading the client list, exporting to a personal drive, quitting, then using the list to poach. I’m fine if that’s your intention, but let your employer know upfront that you won’t protect confidential company data.
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- mzi 3y agoIn Sweden all non-compete clauses that has been challenged by a court has been thrown out. Unless they have been backed by compensation. Too few cases has been tried to establish a floor for this compensation, but numbers thrown around indicate that you should be prepared to pay around 60-80% of the salary during the non-compete period.
- paulgb 3y agoOn Wall Street it is typical to get full salary for the non-compete period, but in some cases that may be a modest fraction of total compensation including bonus/other incentives.
- 23B1 3y agoI'm always happy to sign a noncompete – and add a line about how the company will pay my full rate for the duration.
- causi 3y agoNon-competes should, at minimum, be banned for anyone not making in the top 10% of salaries.
- tzs 3y agoWashington does something like that. Non-competes can be valid but the employee has to be making $100k/year or more in 2020 dollars. Also, if the employee is laid off then it is not enforceable unless the company pays the ex-employee during the term of the non-compete the difference between what they had been paying them and whatever the employee earns in whatever non-competing jobs they take during that time. For consultants as opposed to employees to be enforceable the contractor has to be earning $250k (again in 2020 dollars). The law also has something to say about employers that don't want to let employees have other jobs, or do contracting, or do self-employment. Employers can only prohibit that if the employee is making at least twice minimum wage, unless that other work could cause safety issues or interfere with the reasonable and normal scheduling expectations of the employer.
- F-W-M 3y agoNon-competes can work out if the rules actually favor the workers. I had one while working for a HFT in Germany and would sign it again.
- qwerty456127 3y agoI've heard about a good compromise option existing in a country in Europe: noncompete agreements are not banned completely but are limited to last just half a year after the employee leaves the company. It can also last much longer in case the employer agrees to keep paying half the salary to the former employee.
- tpm 3y agoDon't know about that but a compromise option always exists when the two parties are willing to compromise. E.g. in our country noncompetes are outlawed but if your company is willing to pay for your gardening leave for a year, then you might be willing not to compete with them for that time. Happened to my boss (at 100% salary).
- dudul 3y agoSounds like a terrible compromise to me. Why do I need to spend 6 months without pay and then more time with only 50%?
- qwerty456127 3y agoBecause I would never want to jump straight into a new job anyway, a good sabbatical seems a great idea if you can afford it (leaving an engineering/management job suggests you probably can). Being totally free from a job and still getting 50% of the salary for free also sounds like a dream - just move to a cheaper place and enjoy the life.
- dudul 3y agoBut that's not what you described. You talked about a 6 months non compete, and then potentially longer in exchange for 50% salary. Not everybody wants/can move to a cheaper place. Finally, as mentioned in any messages here, engineers are not the ones suffering the most from unfair non-compete. It's retail/restauration workers and more "vulnerable" demographics. Your "compromise" comes out as completely disconnected from reality.
- Drakim 3y ago
- walidthedream 3y agoNew Yorks leads the pack as usual. If you want to understand why continental European salaries are mostly low , don’t only look at the social security cost, but also at the labor law which is a middle aged indentured servitude heritage wrapped with worker rights bullshit : in France, 3 months notice period, up to 8 month of trial period, non competes with ridiculous comp. are very common for startups and Mid Sized businesses, same as non sollicitation, exclusivity clauses (generally all in a combo). Plus you get shunned if you job leave your master too quickly (ie less than 1 or 2 years depending on sector). And if you get fired be prepared for the Wild West of reference checking (nothing that can legally protect you from an ex bully who wants you to pay the price of daring leaving), loosing full health cover, and so on.
- ResearchCode 3y agoDoes French law mandate trial periods or 3 month notice periods? You can usually negotiate those away. Reference checks or trial period but you should really not require both, that's an employer problem. Europe pays lower than the US but pays better than other regions. There are many countries with low pay and poor labor rights. We should try to have high pay and better labor rights.
- dudul 3y agoYes the 3 months notice is legally enforced in France with a few cases where it can be waived - including both the employee ans employer agreeing to skip it. Note that this notice goes both ways: when an employee resigns or is let go.
- hsbauauvhabzb 3y agoWhat’s a New York noncompete look like? In australia as far as I can tell it discusses associated entities - I can’t go and work for my employers major client directly if I was involved with that client during my tenure, but if I’ve had no association, I think I can. There’s also caveats around ‘right to earn a living’ if your skillset or specialty limits you to people associated with your employer, but as far as I can tell you can go and work for a competing company to your former employer, assuming the competitor was not your employers client.
- epc 3y agoI’ve been under two. One prohibited working with any existing clients for a calendar year after my termination date. A second prohibited working in a similar role in the US for a year. Both applied to employment and not other actions one might do such as shorting the former employer’s stock.
- vgatherps 3y agoQuant firms at least are one of the few places where noncompetes can make sense. It's an extremely IP sensitive industry with stupendously high pay where the employee is going to someone probably competing very directly with you, for the same/similar opportunities. Actual code + NDAs banning literal reimplementations of stuff aren't that valuable, the knowledge and ideas will stay in the head of the employees. The two main issues I have with them are that firms tend to give them to just about everybody (instead of just to folks working very directly with real IP), and they only pay base salary, not something closer to actual total compensation (often multiples of the base pay). Having said that, the quant firm is relatively unimportant and not a good reason to prevent a total noncompete law. It's probably better to just ban them then try and make allowances that aren't full of loopholes.
- gmerc 3y agoWhy does it make sense. Pay employees for their work and they’ll stick around.
- chiefalchemist 3y agoTo your point, it's ironic that firms who push a free market ethos don't actually want to compete. Instead, they want a thumb on the scale that tilts the advantages in their direction. Welcome to Crony Capitalism (which should not be confused with traditional capitalism).
- js8 3y agoThe absence of "traditional capitalism" from history makes it really hard not to confuse it with "crony capitalism". Perhaps you mean liberalism, as an ideology of capitalism.
- chiefalchemist 3y agoPerhaps. But, for example, we didn't always have The Fed. We didn't always have WS. We didn't always have "too big to fail". We didn't always have taxpayer financed bailouts. We didn't always have a top heavy (Fed) government (that has more influence than it has common economic sense). At yet all those entities verbally champion "free markets" and "capitalism being a superior economic paradigm", Etc. Minds get lulled into the repetition of the words and stop checking the action. Reminders to turn on your BS detectors add some balance. Not much, but some. Fwiw, I'm speaking freely and in broad strokes. If liberalism would be a better word then sure, whatever helps cut through the BS. Thanks.
- HlessClaudesman 3y agoUnited States may ban slave ownership and slave owners not happy.
- manicennui 3y agoDon't worry, we'll still allow you to use prisoners as slaves, and we'll make lots of bullshit laws to imprison people.
- j-bos 3y agoWould this law apply to a conpany headquartered in NY but incorporated in Delaware? Assuming the employee lives in a third state?
- greenyoda 3y agoUsually, the legal rights of an employee are based on the location (city, state or country) that the employee is located in. (For example, if you're an Idaho company with employees in New York City, you need to pay those NYC employees at least the NYC minimum wage of $15/hr.)
- vachina 3y agoSorry if this is a stupid question, how does a noncompete gets enforced anyway? Unless you’re a person legally required to make public your job, I don’t see how any private entities can trace your work history.
- mangosteenjuice 3y agoBusiness owners and managers talk. I've heard of unofficial (and very illegal) blacklisting being a thing in NYC in the past, for multiple industries. Collusion between employers to ensure that non-competes are enforced sounds very plausible, given that it is legal. I think that the existence of a non-compete may also be a liability for the new employer, and it's not solely a practice meant to remind labor of what their place is.
- jawns 3y agoCompanies and government agencies routinely hire PIs to follow people receiving disability benefits to gather evidence that might indicate they're not as disabled as they attest. You can bet that if they're willing to track people over disability checks, they're going to use those same tools to enforce non-competes.
- drivebycomment 3y agoLawsuit is common. https://www.washingtonpost.com/business/2023/03/10/noncompete-agreements-ftc/ https://www.washingtonpost.com/business/2023/03/10/noncompet...
- ghaff 3y agoAt a senior enough level it's public knowledge. A lot of sub-industries are also "where everyone knows your name" places. I used to be an IT industry analyst (a couple of the large firms in which were known--at least at the time--for being pretty hard-core on non-competes) and pretty much everyone knew what firms other people in their space worked for. You could never have gone to a different firm and had your prior employer not know.
- currymj 3y agoi'll post one of my favorite related facts about noncompetes. Famously, California bans them, but this was not an intentional policy choice for the sake of entrepreneurship. It was done in the 19th century and almost by accident. David Dudley Field II was a jurist who drafted a code of laws which was adopted by New York state. After this, motivated by his study of English common law, he made an updated code of laws which included a provision banning noncompete agreements. This model code was not accepted by New York, and just floated around for a while, until it happened to be on hand when California was becoming a state, with nobody thinking much about noncompete agreements. North Dakota also adopted the Field Code and also bans noncompetes. https://www.restrictivecovenantreport.com/2013/01/north-dakota-non-compete-law-shares-history-with-california/ https://www.restrictivecovenantreport.com/2013/01/north-dako...
- jalapenos 3y agoHappy accident
- jmyeet 3y agoHere's my stance on noncompetes: I'm fine with them as long as the employee is compensated sufficiently. Wall Street firms will often have 12 month noncompetes but you get paid for that year. Details matter however. Like you might be paying for health insurance (COBRA). You won't be getting any bonus. Any bonus money in the fund gets removed and put into treasuries, which in some years may have a better performance so that's a mixed bag. If Wall Street wants noncompetes, the employee should get paid 1.5 times the annual average total compensation they had for the previous 2, 3, 4 or 5 years, whichever is best for the employee.
- mortehu 3y ago> the employee should get paid 1.5 times the annual average total compensation they had for the previous 2, 3, 4 or 5 years, whichever is best for the employee. Wouldn't everyone quit after having two unusually good years back to back?
- jmyeet 3y agoThe company can choose not to enforce the noncompete and thus be off the hook. I see this as an "all or nothing" type thing. When the employee quits, the company decides to enforce or not. If they enforce, they're on the hook for the entire noncompete period. No deciding after a month not to continue enforcement.
- GuB-42 3y agoThe article doesn't address what I think is the most important aspect of noncompete agreements: compensation. In France, and I believe in many other places as well, you can't have a noncompete without proper compensation. Compensation is relative to how it will affect the former employee career, it is usually less than a full wage, but it can be that if it makes finding a new job particularly difficult. There have been a trend at one time of bullshit noncompete clauses that were too broad and didn't come with compensation, these are not enforceable. If they tried to sue the employee (they don't), they would be laughed off by the judge.
- bradleyjg 3y agoThis is a problem in the tech industry but not on Wall Street. The norm there is paid time off between jobs (“gardening leave”). Everyone knows it is part of the system and that a mid level or senior hire can’t start right away. They also buy out still vesting bonuses and the like. It’s quite a civilized system and I think the law ought to leave it alone, while addressing abusive ones like we have in tech.
- appplication 3y agoWhere do you see this issue in tech? Certainly not CA.
- bradleyjg 3y agoNY, the subject of the article.
- potatolicious 3y agoNY, WA, other tech hubs in the US that aren’t California. That said garden leave is not all sunshine and roses like OP describes. It’s common on Wall Street but a huge part of your normal compensation is performance bonuses - and typically garden leaves only cover base salary. A typical garden leave doesn’t come close to full income replacement for the period. But it’s better than nothing - which is the status quo in tech. FWIW American courts also tend to frown on non competes that do not compensate for forced unemployment and have generally sided with the worker. This is (yet another) way that employers deprive employees of their rights by using the expense of litigation against them. This is also why we need regulation around this - you should not have to fight this in court to have your basic rights asserted.
- anon291 3y agoDon't sign anything when leaving a company and never accept compensation. No contract, even non competes, is valid without consideration.
- donatj 3y agoSometimes I feel like corporations do things just because their lawyers are cargo culting and adding clauses because everyone else does rather than some logical reason. My sister worked at Subway and had to sign a noncompete that she wouldn’t work at another sandwich shop for three years. Are they really afraid she’s going to steal their secrets of placing meat on bread? The more cynical will certainly assume malice, that the company did this to keep you from leaving. It particularly at the time it was not hard at all to find new fast food workers, and I am a firm believer in Hanlon’s Razor and never assume malice when incompetence will do. I genuinely think the explanation could just be Subway’s lawyers were like “everyone else is doing noncompetes”.
- malux85 3y agoIs there a version of Hanlons Razor but instead of incompetence, it’s money? I’m a firm believer in that. The clause was probably put in there so the lawyers could bill more hours. I can easily imagine a legal firm noticing a drop in billable hours so they start reaching out to existing clients, throwing in a bit of fear, saying everyone is putting non-competes in their agreements you should too. Boom, all clients get billed extra that month, I wouldn’t call this incompetence, but greed
- nonethewiser 3y ago> Is there a version of Hanlons Razor but instead of incompetence, it’s money? For businesses, which aim to make money, isnt that simply competence? Or greed when taken to an extreme. Basically “companies will act in their best interest.”
- malux85 3y agoNo, that's too reductive - the behaviour is not solely explained by a unidimensional scalar like competence because there are actions that a greedy unethical competent company would take that another non-greedy ethical company would not take - so theres more dimensions than just competence.
- j45 3y agoNon-competes have always been interesting: "We are hiring you because you already know how to swing a hammer in our industry, but you may not use a hammer for any other company who may also have hired you for knowing how to swing a hammer"
- caddemon 3y agoThey make sense where there are specific internal secrets, it's not just about IC skillset necessarily. But it's true they're definitely overused.
- j45 3y agoFor sure trade secrets are important. What one company may consider a trade secret and whether it is can be another thing altogether. Customer lists or sales processes for example definitely can fall under the proprietary category.
- xyzelement 3y agoIt shouldn’t be a black and white thing. Someone below mentioned a story of Subway (the sandwich chain) giving non competes. That seems wrong. On the flip side, a gender fund giving non competes to folks who see their strategies seems totally par for the course. Somehow the law should prevent one but not the other. And I say that as someone who has a hedge fund non compete and was laid off and subject to that non compete for two years.
- Dowwie 3y agoEvidently, Obama campaigned on promises to protect low-wage earners from employer exploitation using non-competes. Politicians seem to be more in favor of advancing non-compete protections only for this demographic. Some good articles about non-compete politics in America and the de-fanging of the FTC federal initiative: https://news.bloomberglaw.com/daily-labor-report/ftcs-noncompete-ban-mirrors-state-proposals-before-scaling-back https://news.bloomberglaw.com/daily-labor-report/ftcs-noncom... https://www.bloomberglaw.com/external/document/X3B1QI9O000000/employment-professional-perspective-ftc-moves-against-non-compet https://www.bloomberglaw.com/external/document/X3B1QI9O00000... https://news.bloomberglaw.com/antitrust/ftc-expected-to-vote-in-2024-on-rule-to-ban-noncompete-clauses https://news.bloomberglaw.com/antitrust/ftc-expected-to-vote...
- zopa 3y agoNon-compete clauses are already extremely difficult to enforce. They're traditionally disfavored under common law; get one before a judge and it will frequently be struck out, or at minimum, sharply limited in scope. But it's not about winning an injunction or damages for the employers that use non-competes, it's about using the threat of a lawsuit to keep workers nice and biddable. So the bill is well worth doing, just people stop writing unenforceable bs into contracts.
- anonymouskimmer 3y agoEven better would be if employment law violations carried with them 3x+ punitive awards instead of just being made whole (while also being required to minimize damages by, e.g., getting another job). If this existed employers would be much more well behaved, if only because of the number of lawyers who would suddenly be willing to take on lawsuits without retainer.
- pierat 3y agoGOOD! Noncompetes without a proper wage commensurate of the position is just slavery. And after the US civil war, a whole lot of slaveowners were also really upset in losting their slaves... But even they got reparations for losing "property".
- projektfu 3y agoI think states should regulate the employee relationship a little more than they do. There should be standard contracts and the idea that a job listing is for a standard contract. If they offer you a job, it's for that contract. If they want to deviate, they either have to state up front what the additional terms are and compensation for them, or negotiate it after the offer is accepted. Contracts are not fair if people can't start from an equal footing.
- toasted-subs 3y agoIn California you cant legally enforce non-competes but the companies seem to do it illegally behind the scenes. Kind of behavior seems like it should result in government intervention.
- phendrenad2 3y ago> companies seem to do it illegally behind the scenes How? Collusion between companies? Threatening lawsuits against the employee or the new company?
- toasted-subs 3y agoI get bullied by recruiters for applying to jobs if I already have one. Especially if I try to get contract positions. Large tech companies trying to turn the world into their farm. No thanks, I think that's disgusting and makes me feel like all of the employees don't deserve the positions they have.
- sumthingsumthng 3y agoThis was one of the most satisfying headlines of the year. I hope the whole world will ban noncompete employment agreements. I always felt about them like I feel about WallHackers(.exe) in Counter Strike.
- cooper_ganglia 3y agoNoncompete clauses seem like they should be illegal on a fundamental level. Regulate industry, not it’s laborers.
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- olliej 3y agoI have no problem with non-competes as long as the company is willing to buy out the non-compete period, e.g. the maximum of current total compensation or competing offer comp, plus say a 100% premium to cover opportunity cost. You might say "that makes non-competes unusable" to which I say, it means you'd only use them if you really thought it mattered, rather than as a tool for wage suppression.
- user3939382 3y agoDon’t worry there’ll be carve outs for all the players that own the government. This will end up mostly affecting SMBs.