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.
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 Even if their contractual NC is no longer valid, there is not a new employer to make their deferred comp whole.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.
I've never heard of a non-association clause, could you explain it? Is this the same as a non-solicitation 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.
Not that that means they're necessarily okay, it's just unrelated.
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.
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.
How did those new employers learn about the noncompete?
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".
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.
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.
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...
I don't think it's a good idea to allow things like this. You're just giving big incumbent companies another way to spend money to stifle competition.
“You’re allowed the pursuit of happiness, but not in this particular way.”
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.
totally insane— america needs more labour rights.
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.
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.
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.)
> 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.
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’m 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.
https://www.nytimes.com/2014/10/15/upshot/when-the-guy-makin...
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.
You are describing a minuscule world that comprises an insignificant amount of American workers.
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.
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.
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.
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.
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.
"When you signed on, in good faith, you agreed to a 6 month paid notice period."
And of course it didn't included any bonus, which is typically the larger portion of total comp in these situations.
The proposed law will ban mandatory non competes, even if they are paid.
Now you've a 18 month notice period. You're paid salary, bonus etc.
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.