New York may ban noncompete employment agreements and Wall Street is not happy • Hacker News Board

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

#351

Post by master_crab » Sat, Nov 18, 2023, 11:03 PM UTC

bumby wrote: post #347

master_crab wrote: post #343

Earlier quoted context omitted.

> 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 commit…

I wasn’t making any point. Just that that the initial patent example isn’t a good one to use.

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

#352

Post by lowbloodsugar » Sat, Nov 18, 2023, 11:03 PM UTC

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…

Transfer of intellectual property is already illegal. If a quant was aware of something amazing they could try to transfer it anyway - just without taking the employment. Yeah, it’s illegal. So non competes are about the person and the skills the person brings. And fuck that.

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

#353

Post by Thuggery » Sat, Nov 18, 2023, 11:08 PM UTC

eru wrote: post #7

hulitu wrote: post #5

> New York may ban noncompete employment agreements and Wall Street is not happy I though capitalism (Wall Street) was about competition. /s

It's about voluntary contracts, too.

Why would you need violent state enforcement of voluntary contracts?

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

#354

Post by dan-robertson » Sat, Nov 18, 2023, 11:16 PM UTC

amelius wrote: post #95

dan-robertson wrote: post #52

Earlier quoted context omitted.

It’s reasonably normal to be more like garden-leave where the employee is paid some high percentage of their base salary for some amount of time when they may not compete. This can still be very expensive for employees who will often have bonuses that are a large multiple of their base and so going down to base for the duration of the garden-leave. Some places won’t compensate for the noncompete at all, others won’t…

> It’s reasonably normal to be more like garden-leave where the employee is paid some high percentage of their base salary for some amount of time when they may not compete. Some would use that money and time to start a competing company :)

If you’ve been successful enough at a quant firm that you want to try to set up your own firm, it’s not one year of base pay from garden leave that’s going to be providing your start-up capital.

But also, setting up a competitor is definitely violating noncompete. If you look at how actual firms started (basically all of them start from people leaving other firms) the founders waited out noncompetes. It would be a waste of money and potentially scare off investors by risking getting massively sued.

The things people normally do are like:

- go travelling, especially to places less well suited to short trips. Hard for people with partners who don’t want to stop working for a year or two.

- learn/train for something. Eg maybe requires a bunch of courses or maybe just a lot of time and effort.

- some combination of the above, eg mountaineering requires a certain amount of training/fitness as well as long trips

- some kind of civic/vocational thing where you’re applying professional skills from work but not IP, eg taking a more active role as a charity trustee

- spending more time with kids/other family

- working for some non-competitor like Google for a year.

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

#355

Post by LeifCarrotson » Sat, Nov 18, 2023, 11:31 PM UTC

hadlock wrote: post #350

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…

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 comp…

I totally agree that if an employee adds $10M or $1M to the bottom line and you're paying him $100k, that's under compensation.

But there's a categorical difference between that situation and when an employee or dozens of employees who may be a break even or negative impact on profits have knowledge of a trade secret researched by a team of their predecessors that makes the company $100M.

I'm all about fair compensation and worker's rights, but a business shouldn't have to pay all those people $100M salaries.

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

#356

Post by usefulcat » Sat, Nov 18, 2023, 11:47 PM UTC

hadlock wrote: post #350

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…

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 comp…

Merely having knowledge of a profitable trading strategy is not at all the same as having invented it, or even being capable of doing so.

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

#357

Post by therealdrag0 » Sat, Nov 18, 2023, 11:59 PM UTC

cortesoft wrote: post #318

thedufer wrote: post #190

Earlier quoted context omitted.

The argument against this is that a company spends millions of dollars in research to learn something valuable, and anyone who didn't spend that money can trivially outbid for the employee that knows the results, since they can pay the employee some significant portion of the cost of the research that they didn't have to do and still come out ahead. I'm not sure I entirely buy this, but it's a lot more nuanced than "…

Then maybe the conclusion is don't spend millions to research that type of thing.

What type of thing? This applies to anything. We need to pay close attention to maintaining rules to foster research and innovation.

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

#358

Post by therealdrag0 » Sun, Nov 19, 2023, 12:02 AM UTC

bumby wrote: post #319

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…

Importantly, even if noncompetes aren't enforced, trade secrets can still be grounds for litigation against a former employee. They can't just go from one employer to another and take all the secret sauce recipes with them.

Based on what? I honestly don’t know and most comments seem to be assuming that’s not the case.

And also in some ventures it might be pretty hard to litigate when everything is done behind closed doors. How would you know if a rival trading firm is using an algorithm influenced by yours or not?

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

#359

Post by [deleted] » Sun, Nov 19, 2023, 12:09 AM UTC

master_crab wrote: post #351

bumby wrote: post #347

Earlier quoted context omitted.

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 commit…

I wasn’t making any point. Just that that the initial patent example isn’t a good one to use.

[deleted]

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

#360

Post by bumby » Sun, Nov 19, 2023, 12:28 AM UTC

hadlock wrote: post #350

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…

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 comp…

The short answer is "inevitable disclosure doctrine" that prevents you from working for a competitor if it's inevitable that you will disclose trade secrets. It's a sticky wicket for engineers.

However, this might be confusing different issues. My comment was specific to using NDAs/non-competes to protect trade secrets. This is different from merely using them to prevent poaching by competitors. In cases were there isn't inevitable disclosure, I think it's much less likely that a non-compete would be enforced in court.