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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

#341

Post by bumby »

bdowling wrote: post #276
matwood wrote: post #71

Earlier quoted context omitted.

Non-competes have only ever made sense where the employee is compensated for signing. Codifying this change would immediately make companies stop with blanket non-competes, and only have them on key people. While not impossible, non-competes without compensation are already hard to enforce as judges don't look kindly on preventing people from earning a living. The problem is the asymmetry of power let companies bully…

If judges start to throw out non-compete agreements that don’t have separate compensation (apart from usually salary/experience), then you will just see companies explicitly write their contracts such that that X dollars are explicitly for the non-compete agreement. At least in some industries, however, there is a consumer protection/public policy argument against non-compete agreements, where: (1) there is no legiti…

Some states create salary thresholds. For example, Illinois law states they won't enforce non-competes for anyone making less that $75k or non-solicitation for anyone below $45k. However, companies are still protected by non-disclosure agreements for important trade secrets.

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

#342

Post by [deleted] »

bumby wrote: post #336
master_crab wrote: post #326

Earlier quoted context omitted.

That’s not a very good example. A patent is available to read specifically because the discoverer has entered an agreement with the government to share the relevant information in return for exclusive use for a set period of time. If they had not patented whatever it is they had, anyone could replicate the information/item in question with no penalty.

> anyone could replicate the information/item in question with no penalty Sure, I suppose someone could develop/copy something in parallel with no knowledge. But that's not really the case in the discussion here as it comes to former employees. If you worked for Company A which uses a proprietary algorithm for trading and somehow created the same for Company B later, would you really expect a jury to think the two ar…

[deleted]

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

#343

Post by master_crab »

bumby wrote: post #336
master_crab wrote: post #326

Earlier quoted context omitted.

That’s not a very good example. A patent is available to read specifically because the discoverer has entered an agreement with the government to share the relevant information in return for exclusive use for a set period of time. If they had not patented whatever it is they had, anyone could replicate the information/item in question with no penalty.

> anyone could replicate the information/item in question with no penalty Sure, I suppose someone could develop/copy something in parallel with no knowledge. But that's not really the case in the discussion here as it comes to former employees. If you worked for Company A which uses a proprietary algorithm for trading and somehow created the same for Company B later, would you really expect a jury to think the two ar…

> Sure, I suppose someone could develop/copy something in parallel with no knowledge.

I mean that’s a tad disingenuous as to how it worked before patents. Patents were meant to dissuade others from copying inventions for a certain set period. It was much rarer to see independent development of the same technology (not that it didn’t happen).

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

#344

Post by olliej »

I 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.

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

#345

Post by olliej »

bumby wrote: post #340
caskstrength wrote: post #337

Earlier quoted context omitted.

Right, and you don't need a non-compete to go after former employee stealing your IP.

Non-competes and NDAs are literally the mechanisms that companies try to protect their trade secrets. Patents, copyrights, etc cover publically disclosed IP. The OP was about how non-competes make sense in an IP-intensive field, like quant finance. The reason is that these contracts help protect the IP by explicitly stating their case. Your comment goes against the very foundation of IP law: creating reasonably fair…

No, NDAs are the tool to stop your employees leaking information. Non competes are the tools you use to avoid paying market price for your employee.

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

#346

Post by GuB-42 »

savanaly wrote: post #235
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…

Assuming they didn't hide the noncompete clause from the employee, and assuming there's not a binding minimum wage in effect, the necessary compensation is already going to be included. Unless you believe the employee is engaging in charity work on the behalf of the employer! What's the point of a law requiring it? Unless it's an addition to a minimum wage law and only in effect for those being paid the minimum wage.…

In this case, compensation is not a wage, it is to be paid after the employee has left the company but is still bound by the noncompete.

Also the employer may have the option of not activating the noncompete clause when the employee leaves the company, meaning the employee is free and no compensation is due.

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

#347

Post by bumby »

master_crab wrote: post #343
bumby wrote: post #336

Earlier quoted context omitted.

> anyone could replicate the information/item in question with no penalty Sure, I suppose someone could develop/copy something in parallel with no knowledge. But that's not really the case in the discussion here as it comes to former employees. If you worked for Company A which uses a proprietary algorithm for trading and somehow created the same for Company B later, would you really expect a jury to think the two ar…

> Sure, I suppose someone could develop/copy something in parallel with no knowledge. I mean that’s a tad disingenuous as to how it worked before patents. Patents were meant to dissuade others from copying inventions for a certain set period. It was much rarer to see independent development of the same technology (not that it didn’t happen).

We agree that it's a rare edge case. That's why the rationale of IP protection works. Before patents, important knowledge was lost because people didn't want to divulge it because they had no IP protection. Back then, everything was a trade/state secret.

I guess I'm not seeing the point made. If you agree it wasn't developed in parallel, you copied it from your previous employer. If it was their IP, you likely committed a civil wrong, and they can sue you. I can only see your point if you don't believe IP exists.

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

#348

Post by mydogcanpurr »

habosa wrote: post #202
donatj wrote: post #155

Sometimes 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,…

Lawyers will attempt to put the most advantageous terms possible in any contract they write. It’s just what they do. It’s not malice or incompetence. It’s training.

>It’s not malice or incompetence. It’s training.

Am I really supposed to believe that corporate lawyers don't have personal agency? You can defend it however you want, but ultimately I believe that people are responsible for their actions.

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

#349

Post by bumby »

olliej wrote: post #345
bumby wrote: post #340

Earlier quoted context omitted.

Non-competes and NDAs are literally the mechanisms that companies try to protect their trade secrets. Patents, copyrights, etc cover publically disclosed IP. The OP was about how non-competes make sense in an IP-intensive field, like quant finance. The reason is that these contracts help protect the IP by explicitly stating their case. Your comment goes against the very foundation of IP law: creating reasonably fair…

No, NDAs are the tool to stop your employees leaking information. Non competes are the tools you use to avoid paying market price for your employee.

It depends. Some jurisdictions blur the lines between NDAs and non-competes. For example, in many areas NDAs can also prevent you from working for a competitor due to "inevitable disclosure."

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

#350

Post by hadlock »

bumby wrote: post #340
caskstrength wrote: post #337

Earlier quoted context omitted.

Right, and you don't need a non-compete to go after former employee stealing your IP.

Non-competes and NDAs are literally the mechanisms that companies try to protect their trade secrets. Patents, copyrights, etc cover publically disclosed IP. The OP was about how non-competes make sense in an IP-intensive field, like quant finance. The reason is that these contracts help protect the IP by explicitly stating their case. Your comment goes against the very foundation of IP law: creating reasonably fair…

If you are making $10 million a year based on an employee's personal contribution to the company, and paying them $135,000, they are likely underpaid, and another company might gladly pay them $250,000 to add $10mm to their bottom line. But the non compete holds them in the job paying less. Their value to the company clearly allows them to pay $250k to that employee, but it's the non-compete that is allowing the company to profit an additional $120k. There's no case for non-compete beyond "excessive profit margins".
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