[bumby]

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 commercial opportunities. If I can extort you because you hired me and I learned your secrets, I think that pushes the scales beyond "reasonable."

[hadlock]

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".

[usefulcat]

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.

[bumby]

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.

[LeifCarrotson]

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.

[bobthepanda]

You can certainly pay them the duration of the noncompete at their prevailing wage.

In fact, this already exists. https://en.wikipedia.org/wiki/Garden_leave

It really should be required of all noncompetes.

[olliej]

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.

[bumby]

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."

[caskstrength]

You are arguing with straw man since no one in this thread argued to bad NDAs. To me personally NDA seems to be a reasonable concept while NCA is just a wage depression tool.

[bumby]

The parent comment of the one I replied to was specifically referencing IP as a use case for NCA. You allude to “knowledge” of IP warranting higher pay. Besides, elsewhere it’s discussed how NDAs can act as de facto NCAs due to the inevitable disclose doctrine.

[caskstrength]

> Besides, elsewhere it’s discussed how NDAs can act as de facto NCAs due to the inevitable disclose doctrine.

And that is much better case than NCA since it would only apply in specific narrow cases and wouldn't prevent a McDonalds employee from working in fast food industry for a year, for example.

[bumby]

I don’t disagree, but considering HN is mostly tech-focused for the purposes of this discussion it’s can be a distinction without a difference. Note how the original thrust of this sub-thread is about tech-heavy IP being grounds for preventing employment with a competitor. Also elsewhere I’ve mentioned how some jurisdictions provide caveats, like refusing to enforce NCAs when an employee earns less than a certain threshold (eg $75k). That covers most of your McDonalds employees while still holding true to the intent of NCAs as it comes to IP heavy industries. Well-crafted laws don’t throw out the baby with the bath water

[caskstrength]

> I don’t disagree, but considering HN is mostly tech-focused for the purposes of this discussion it’s can be a distinction without a difference.

I disagree. Big tech companies often force employees to sign very broad non-competes ("You can't go to a company that competes with us in any market") which in case of such companies covers almost everything (which tech company doesn't compete with Amazon in some way?). Granted, as far as I know big tech rarely enforces non-competes in case of regular ICs, but I would still prefer NCAs to be unenforceable and let the quant firms argue in courts regarding inevitable disclosure for some specific narrow cases where it is applicable.

> Also elsewhere I’ve mentioned how some jurisdictions provide caveats, like refusing to enforce NCAs when an employee earns less than a certain threshold (eg $75k).

I don't see why salary makes a difference here. Some random FAANG IC also shouldn't be forced to sign a NCA.

> Well-crafted laws don’t throw out the baby with the bath water

What baby? SV "baby" seems to be doing just fine in Cali with unenforceable non-competes.

[bumby]

What you’ve highlighted is that you’re having a different discussion than the OP. That post specifically said there are use cases where NCAs protect IP. You highlighting when they are used elsewhere doesn’t negate that point. And there are significant cases on the news where an employee steals trade secrets and takes them to a competitor (see Levandowski among others). It comes across like you have an axe to grind rather than making a thoughtful point.