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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

#141

Post by sgift »

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.

> It’s quite a civilized system and I think the law ought to leave it alone, (..)

Or codify it. Imho the better alternative. One should never assume that companies won't try to change the system to the detriment of the employee if they see a chance.

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

#142

Post by sgift »

cj wrote: post #29
ajb wrote: post #9

After 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.

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…

> 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, of course. Neither the employees nor the clients are the property of the consultancy. Maybe next time they provide a better service so employees and/or customers don't see a reason to go to a competitor.

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

#143

Post by lordnacho »

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…

If the company is making something of actual value, it will be hard to replicate. Just as you can't recreate that McDonald's taste just because you worked there, most businesses have some sort of intrinsic IP that you can't steal. There will always be some risk that a team could leave and fail to recreate the thing elsewhere. In my line of business this happens all the time (quant trading). People think they know why their strat works and when they transplant it, it mysteriously doesn't work.

The solution to this is to compensate people so that they don't take the chance and leave. "I'm already making X here, why would I want to risk that?". This naturally distributes wealth a bit more evenly between the workers and the owners.

You also need to think about your scenario. If the employees are able to make the same thing at half the price to the customer, that is a HUGE gain for the customer. If another breakout crew does the same, that's half the gain again. The customer wins, but it can't go on forever, at some point it's not worth the breakout risk.

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

#144

Post by thsksbd »

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.

Its a terrible system.

If we assume that the financial sector is good for society, then a productive element of it is idling causing inefficiencies leading to higher fees.

If the assumption is incorrect, then the financial sector is not a productive part of the economy. In this case the worker's vacation is irrelevant since it's just a manifestation of the parasitical nature of it.

Either way normal people are paying for this civilized system's largesse.

The truth is somewhere in between. The role of the financial sector is to match capital with projects needing capital needs. Since the 80s (?) this is an insignificantly small portion of modern finance - most of it is parasitical sloshing of funds around to either gather fees or launder money.

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

#145

Post by jmyeet »

mortehu wrote: post #123
jmyeet wrote: post #77

Here'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 s…

> 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?

The 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.

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

#146

Post by bradleyjg »

sgift wrote: post #141
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.

> It’s quite a civilized system and I think the law ought to leave it alone, (..) Or codify it. Imho the better alternative. One should never assume that companies won't try to change the system to the detriment of the employee if they see a chance.

One thing I think is great about the finance industry is that the CEOs don’t pretend that humanity is split into two subspecies: executives and peons.

At other companies CEOs secure themselves giant equity packages to “retain the best talent and align shareholder interests” and then think they can motivate rank and file employees with t-shirts, “the mission,” and shoutouts during all hands.

In finance, CEOs acknowledge that everyone is there for the same reason—executives and regular employees alike. The numbers are definitely smaller but bonuses are bonuses and not employee of the month mugs.

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

#147

Post by bluecalm »

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…

Your argument works with IP alone and without client lists. You very much want to put a company's client list in the same bag as IP but it just doesn't belong. Protecting one (arguably) allows people to invest in developing something that is easy to copy when it already exists. Protecting the other is just anti-competitive practice and should be banned.

>>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

"You can't use our IP if you leave, feel free to go to the clients and offer them your own product".

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

#149

Post by sgift »

bradleyjg wrote: post #146
sgift wrote: post #141

Earlier quoted context omitted.

> It’s quite a civilized system and I think the law ought to leave it alone, (..) Or codify it. Imho the better alternative. One should never assume that companies won't try to change the system to the detriment of the employee if they see a chance.

One thing I think is great about the finance industry is that the CEOs don’t pretend that humanity is split into two subspecies: executives and peons. At other companies CEOs secure themselves giant equity packages to “retain the best talent and align shareholder interests” and then think they can motivate rank and file employees with t-shirts, “the mission,” and shoutouts during all hands. In finance, CEOs acknowled…

To be honest, I find this really refreshing in a - to me - weird way, cause at least no one lies to themselves or the other. It reminds me of what people say about Oracle, that it only has one goal: To make money. No bullshit about mission or whatever. Why are we at Oracle? To make money. The end.

Maybe if more companies and their executives were so open with what they want (and maybe I'm cynical, but imho it is the only thing at least 99% of them want) things would be better.

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

#150

Post by karaterobot »

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.

From my perspective it sounds civilized, but a friend of mine who sat out most of quarantine on gardening leave said he found it hard to support his family. You get your base salary, but not your bonuses, which are the majority of your pay in that industry. And since you can't get another job for the duration (or he couldn't, at any rate) it got a bit tougher than I would have assumed.
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