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New York may ban noncompete employment agreements and Wall Street is not happy

fortune.com

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Re: New York may ban noncompete employment agreements and Wall Street is not happy

#111

Post by cj »

lordnacho wrote: post #81
cj wrote: post #29

Earlier quoted context omitted.

Non-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…

> 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. For me that doesn't change anything. You should be allowed to tell your customer to come with you to a new business, the next da…

Say you join a startup. They get some early traction and they have 5 customers paying $5m/yr for a technology platform. Let’s say it took $20m in R&D and marketing to get the product built and to land those 5 multi-million dollar accounts.

Without a non-compete and without a strong IP clause, a handful of employees could very easily steal the IP and steal the client list, start a new company, offer the same product for half the price, and convince the 5 clients to come over to the new “half price” company. Putting the original company out of business. The new company employees are excited because they stuck it to the man by burying their prior employer. Fast forward 2 years, and the same stunt is pulled against the new company, and the cycle continues.

What happened was the stealing of IP and customers that cost $20m to acquire, but because you stole it you didnt have to pay that $20m in R&D and can offer the price for half off to get clients (whose contact and details have been stolen from the prior employer) to follow you to the next company.

Assuming you think this scenario is ethically wrong (maybe you don’t?), can you explain the type of contract the original company should have with their employees to disincentivize this scenario? If everything is left unchecked, there’s huge incentive and easy pathway to screw over employers for short-term gain.

Hell, if we take it to the extreme and get rid of NDAs, what’s stopping a random call center employee from selling a company’s client roster to the highest bidder?

Free market, yes. Unquestionably free market with no regulation, not going to work.

Re: New York may ban noncompete employment agreements and Wall Street is not happy

#112

Post by acdha »

cj wrote: post #111
lordnacho wrote: post #81

Earlier quoted context omitted.

> 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. For me that doesn't change anything. You should be allowed to tell your customer to come with you to a new business, the next da…

Say you join a startup. They get some early traction and they have 5 customers paying $5m/yr for a technology platform. Let’s say it took $20m in R&D and marketing to get the product built and to land those 5 multi-million dollar accounts. Without a non-compete and without a strong IP clause, a handful of employees could very easily steal the IP and steal the client list, start a new company, offer the same product f…

> Without a non-compete and without a strong IP clause, a handful of employees could very easily steal the IP and steal the client list, start a new company, offer the same product for half the price, and convince the 5 clients to come over to the new “half price” company.

How would it be “the same product” without taking actual IP like source code or trade secrets for manufacturing? No company where the value is solely in a particular concept is going to last very long because a competitor can do the same thing. If you’ve discovered some novel physical process, chemical compound, or created a useful gene sequence, it’s unlikely that you could remember everything but what you want are patents.

Re: New York may ban noncompete employment agreements and Wall Street is not happy

#113

Post by cj »

lordnacho wrote: post #86
cj wrote: post #57

Earlier quoted context omitted.

What 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.

This is an invented crime, meant to protect the incumbents. If I'm a waiter in a restaurant there should be nothing to stop me telling the customers that I'm going to a better restaurant and they should come and try it. Will the boss be annoyed? Yes. Should he be allowed to stop me? No. In the real world there is no salesman who thinks of the clients as belonging to the company. They all know that sales relationships…

FWIW, I agree with the scenarios and examples using workers making minimum wage. Waitresses, etc.

On HN we’re talking about tech employees who make 5-10x the median US salary.

We can have stricter rules and stricter contracts for the 5% top paid employees. Obviously a waitress shouldn’t be sued for talking about another restaurant with a customer.

Re: New York may ban noncompete employment agreements and Wall Street is not happy

#114

Post by appplication »

bradleyjg wrote: post #101
GuB-42 wrote: post #78

The 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 be…

This 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.

Where do you see this issue in tech? Certainly not CA.

Re: New York may ban noncompete employment agreements and Wall Street is not happy

#115

Post by Spivak »

bradleyjg wrote: post #101
GuB-42 wrote: post #78

The 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 be…

This 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.

Surely anyone looking at such a system from the outside sees the economic inefficiency for nebulous gain. Why not do away with it and let them start right away?

Re: New York may ban noncompete employment agreements and Wall Street is not happy

#116

Post by [deleted] »

amadeuspagel wrote: post #73
vgatherps wrote: post #26

Quant 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 tw…

Isn't the same true for SV companies, and aren't they doing fine without noncompetes?

[deleted]

Re: New York may ban noncompete employment agreements and Wall Street is not happy

#117

Post by cj »

felipelemos wrote: post #110
cj wrote: post #105

Earlier quoted context omitted.

> Which part of this is "IP"? I should have said conditional customer data. (Client lists, phone numbers, email addresses - basically whatever you can export out of Salesforce) In order to poach your old company’s customers, you’ll need confidential data from your prior employer, assuming that your employer doesn’t publish their client roster publicly. The debate is being dragged from poaching customers to how IP pro…

My email is not your confidential data. My phone number is not your confidential data. If your company can only exist by blocking other companies from competition with your customer, then your company should not exist in first place.

We’re talking about an insider who has insider knowledge about accounts and maybe also a personal relationship that they were paid to develop with a client.

Also, it’s a 100% fact that companies consider client rosters confidential. It’s fun to say no one can claim my name or phone number as confidential data… but that’s not how things work.

Re: New York may ban noncompete employment agreements and Wall Street is not happy

#118

Post by bradleyjg »

appplication wrote: post #114
bradleyjg wrote: post #101

Earlier quoted context omitted.

This 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.

Where do you see this issue in tech? Certainly not CA.

NY, the subject of the article.

Re: New York may ban noncompete employment agreements and Wall Street is not happy

#119

Post by JoeAltmaier »

GuB-42 wrote: post #78

The 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 be…

Good idea to ban them, then. No issue remains.

Re: New York may ban noncompete employment agreements and Wall Street is not happy

#120

Post by wslh »

GuB-42 wrote: post #78

The 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 be…

NCCs are very well explained in [1] and USA has differences by states.

[1] https://en.wikipedia.org/wiki/Non-compete_clause

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