[detroitcoder]

Yes this is great but the way non-competes are enforced for many in the industry this won't have a huge impact because of the way deferred compensation is structured. Most people when they leave are bound to two separate forms of non-competes.

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 Even if their contractual NC is no longer valid, there is not a new employer to make their deferred comp whole.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.

[JohnFen]

> The second is a non-compete clause that is a function of your deferred compensation.

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.

[detroitcoder]

This is a GREAT point, but hard to do in practice when deferred can be several multiples of base. I know many people who internalize large sign on bonuses and deferred comp as though they already earned the income. They are psychologically unable to accept writing this amount of money off, and force themselves to stick in situations that are at times not healthy or at least sub-optimal. Often times this is called life, and you deal with it because it is putting food on the table and providing above and beyond for your family. However a lot of times it would be better to just find something that makes you happier which is easier if you don't factor in deferred comp when thinking through personal finances.

[s1artibartfast]

So let's say you strip it down to the bare minimum. If an employer said I will pay you X times your a salary to not start a competitor for 2 years, should that be legal?

[DaiPlusPlus]

> I will pay you X times your a salary to not start a competitor for 2 years, should that be legal?

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.

[dfxm12]

Nah. Any society probably suffers when people are legally limited in doing something they're trained to do.

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...

[smsm42]

Why not? If they want to buy your time & experience, and don't even require you to show up in the office but just do nothing - what's wrong with that? If the competitor wanted, they could counter with X+2 times and win.

[throwway120385]

Depending on how it's written they can bar you from performing your skillset and experience, leading to atrophy.

[p1necone]

On a personal level, sounds like a great deal. On a societal level, sounds like it's going to have a negative effect on the industry as a whole.

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.

[sokoloff]

Why would society want to prevent the employee from freely entering into such an agreement? I don’t see sufficient upside to warrant the restraint on freedom that making this illegal would impose.

“You’re allowed the pursuit of happiness, but not in this particular way.”

[ARandomerDude]

As long as X >= 2, I personally wouldn’t have a problem with it.

[steveBK123]

I mean money is money and its all a negotiation tactic.

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.

[throwaway2037]

This: <<the way deferred compensation is structured>>

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.

[hamandcheese]

> Also what this does not address is non-association clauses which are just as restrictive and non-competitive.

I've never heard of a non-association clause, could you explain it? Is this the same as a non-solicitation clause?

[jonluca]

It's even worse - you aren't allowed to work with anyone that you previously worked with for the duration of the 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.

[anonymouskimmer]

> 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.

[delecti]

Non-compete (and non-association) clauses aren't government regulation, it's agreements you make when accepting the job. Your first amendment rights aren't infringed by work dress codes either. You aren't at risk of criminal penalty, just whatever civil penalty is specified in the contract.

Not that that means they're necessarily okay, it's just unrelated.

[anonymouskimmer]

This is why I wasn't citing the first amendment. It is not the only such law that exists. Even if it was I wouldn't have cited it because of the US Constitution's contracts clause. Some contract terms are unenforceable though, at least under certain circumstances. I just wonder how these things balance out in edge cases.

[memefrog]

I don't know about the law of the United States, but here in New Zealand a contract purporting to interfere with the right of a citizen to stand for election to Parliament would be void as contrary to public policy (Peters v Collinge [1993] 2 NZLR 554), and there are various common law precedents on similar matters going all the way back to 1785. I would guess that a contract that purported to bind one of the parties not to vote in an election would be void in the United States, right? And probably one requiring the person not to stand for election too. Whether that extends all the way to a contract preventing someone from working in a politics-adjacent area like lobbying is questionable, of course, but it's worth bearing in mind...

[Spooky23]

It probably makes it worse as you need to disclose that you are a lobbyist and often who you meet with.

[steveBK123]

Yeah, these are crazy. I had a 3 month non compete (paid, it's great if you time it in summer).

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.

[ortusdux]

Do you have to quit if your new employer hires someone from your previous workplace?

[detroitcoder]

You cannot work with a former colleague for an explicit duration in an economic capacity for a fixed period of time. This may or may not be dependent on the nature of the work being conscidered competitive (I have seen both). I have only seen these clauses referenced in deferred comp, not contractual non-competes.

[erosenbe0]

Your analysis is not likely correct. The bill appears to be aimed quite generally at restrictive covenants, outlawing any contract restraining a covered individual's employment.

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.)

[anonymouskimmer]

> 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.

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.

[JohnFen]

> 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.

How did those new employers learn about the noncompete?

[detroitcoder]

It comes up durring hiring processes. Pretty common to have someone ask, "Have you entered into any legal agreement that would prohibit you from working with us or have any conflict of interest? If so please explain."

[JohnFen]

Sure, but if you're in a place where noncompetes are not enforceable, the honest answer to that question is "no" even if you did sign one.

[ghaff]

Lying is not a great place to start off with a new employer.

[jjav]

It is not lying if the question is "Have you entered into any legal agreement that would prohibit..." when in California that agreement is void. That means there is nothing that would prohibit you.

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".

[JohnFen]

But it's not lying, even a little.

[anonymouskimmer]

The GP comment made this statement, not mine.

[JohnFen]

Oops, sorry

[anonymouskimmer]

Turned out to be okay. I enjoyed reading the back and forth. :)

[kanbara]

i’ve never heard of the second form of non-compete. how would the former employer even know? how is that legal? any amount of compensation that is finalised upon leaving the company (e.g. RSUs) should be yours to own, period. that’s akin to saying they can legally demand your paycheques back because they didnt like the company you went to.

totally insane— america needs more labour rights.

[hollowcelery]

In this arrangement you don’t yet own the deferred compensation when you leave the company. It does not belong to you. Instead your contract with the company might say “we will set aside an amount of money (which isn’t yet yours) and portion it out to you for 1-2 years after you leave, conditional on you not joining a competing firm in that period. If you join a competing firm, we will stop paying you.” Alternatively, the company will just pay you your full salary (plus maybe a fraction of what you used to get in bonus) for this period.

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.

[HWR_14]

In the UK and other places this is also common. They are just agreeing to pay you for another couple of years to not work for a competitor.