The two main issues I have with them are that firms tend to give them to just about everybody (instead of just to folks working very directly with real IP), and they only pay base salary, not something closer to actual total compensation (often multiples of the base pay).
Having said that, the quant firm is relatively unimportant and not a good reason to prevent a total noncompete law. It's probably better to just ban them then try and make allowances that aren't full of loopholes.
Welcome to Crony Capitalism (which should not be confused with traditional capitalism).
So the solution is that employees should only be able to work for one employer in their career? I wouldn't disagree with this argument if the noncompete came with a payout in the tens of millions of dollars.
Perhaps you mean liberalism, as an ideology of capitalism.
Some places won’t compensate for the noncompete at all, others won’t compensate if the person works at a non-competitor. Some have a mix, eg up to a year of (paid) garden leave followed by up to a year of (unpaid) noncompete. If someone does leave one firm for another, there is often some negotiation, eg maybe the hiring firm agrees not to have the person work on certain things for some amount of time (potentially longer than the noncompete) and in return they can get them sooner.
So one solution is to allow noncompetes so long as employees are fairly compensated. It seems hard to discuss improving the rules around fairness there if you’re a politician because quant firm employees are not very sympathetic – it looks bad to say they are mistreated when they make many times more than lots of other professionals, even though by allowing that mistreatment you’re effectively giving the money to their even-better-off bosses instead.
Yes, I very definitely made this anything remotely resembling this argument in my post.
Regardless, it would be a beyond-amazing deal for most employees if they got lifetime yearly TC from a quant firm only on the condition that they didn't work for a competitor. Mindblowingly, shockingly, amazing.
It sounds so profoundly anti-capitalist - if the knowledge of certain strategy is so important, the employee should be retained by paying them more and giving them better perks instead of enforced labor contract.
This is not true in trading. If I go take my strategy/forecast and go to a competitor, I can just outright take the same opportunities that the other desk was taking (to a fairly good approximation). There's no real branding/network effect - it's a pure quality of execution business.
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 and intimidate ex-employees.
It absolutely has to be something like this at a bare minimum. The whole "We pay full base" argument is nonsense when the TC is multiples of base.
In this specific industry tough one could argue that impeding progress is a good thing for the wider society.
But I think it is slightly silly reading your statements knowing that the individuals in that hyper specific industry are top earners already and educated to know what they are signing up for.
How do you establish what the person would have gotten paid?
What makes you suggest that? If I understand correctly after you leave one of the quant firms you end up having to spend X months not working in the industry getting base pay. Which seems like a very reasonable deal.
Wouldn’t it make a whole lot more sense considering what kind of business they are in?
Some would use that money and time to start a competing company :)
At yet all those entities verbally champion "free markets" and "capitalism being a superior economic paradigm", Etc. Minds get lulled into the repetition of the words and stop checking the action. Reminders to turn on your BS detectors add some balance. Not much, but some.
Fwiw, I'm speaking freely and in broad strokes. If liberalism would be a better word then sure, whatever helps cut through the BS. Thanks.
Furthermore the industry attracts the sort of people who are never satisfied with what they got, and are always looking for more.
Not that I'm advocating for non-competes, just saying that you can't address the concerns non-competes are attempting to address by "paying employees well".
You obviously shouldn't be able to walk off with a model but especially with hindsight I could bang out some models I've worked on very quickly as long as the infrastructure was amenable
There's definitely an argument here that those companies deserve to be out-competed then.
I'm not saying to ban any of these practices, but the legal system doesn't have to guarantee the feasibility of companies.
I guess there’s a weak argument to make for the HF part of HFTs
Only if you have an extremely vague and poorly defined definition of "capitalist", which I don't blame you, most people are ignorant, and we live in a society that prefers to throw out opinions like they're reality.
Cry me a river. If knowledge of some particular employees worth so much to the quant firms, then they should pay them not to leave accordingly.
But, yes, that's the thing with gardening leave. There are certainly some people who would be fine with taking a year off at significantly reduced pay--but not the majority.
What I am saying, if you really want this "traditional capitalism", which never really existed, you need some mechanism of how to avoid rich getting richer and becoming cronies (as they always did). I don't think you have an idea what such a mechanism should be.
Letting capitalism dictate what math is public and private is pretty fucking draconian
So many stories, start with thr traitorous 8
The proposal is just to ask firms to put money where their mouths are.
They should pay him 500k just because he knows a secret? even if he's making just 50k to the company?
Now they don't have 6-24m non-competes anymore, but 6-24m notice periods. You're paid full salary (incl bonus) but you don't work ("gardening leave") and obviously can't work for a competitor (because you can have a non-compete while you're employed).
Otherwise, the biggest firms (e.g. Millenium, Citadel) could simply "buy out" any already-successful researcher, offering them more money (either in terms of % of profit, or - more importantly as it scales with size (for many strategies) - offering more capital to trade with.
That's just employment, so its effectively the status quo in places with a ban on noncompetes. You can absolutely hire someone as an employee, when their only job duty is not to compete with you. You can even contract such employment for a set term. The problem, of course, is that employers want noncompensated noncompetes and at-will, no-set-term employment.
At least in some industries, however, there is a consumer protection/public policy argument against non-compete agreements, where: (1) there is no legitimate property interest to protect (e.g., the “trade secrets” held by the companies aren’t trade secrets at all because every company in the industry knows them), and (2) it is bad for consumers/against public policy to allow companies to use non-compete agreements to stifle competition where there is no legitimate property interest to protect.
Like, why would you quite and semi-retire for 1-2 years when you can keep working for like 5 years and actually retire?
(I'm just LARPing, I have been out of the industry for a few years by now...)
And back to my previous point about The Fed, etc. We're told that those are "for the greater good" (words) but - and to your point - the rich are not only getting riche (actions),the rate of that wealth transfer (to the top) is accelerating.
We can call it whatever you want. And I'm not saying I want anything. I was simply pointing out that the majority of those - at the top of the financial food chain (e.g., WS) - who advocate for "free markets" are full of shit. They're lying. So maybe to make you happy we shoukd just say: Less Bullshit Capitalism? Will that satisify you??
And if the market colludes to handcuff vendors (to the benefit of the hiring companies) how is that being competitive?
Employment is already at will, and that is mutual to both parties. Why should one side be allowed to purposely disadvantage the other side? How is that being competitive?
What bugs me is that somehow society lionizes people in the money industries over those doing equivalent service jobs like gardening, lawyering, much less more important ones like garbage collection.
E.g. I had 3m garden leave (paid, no bonus) and 3m non-compete (unpaid).
Maybe it should not be IP sensitive. It would be the interest of public to bring more competition to the quant landscape and make their profit margins lower through the competition.
There should be exemptions for non competes when it's the company firing or laying off the employee. When a company decides to do that, they need to be willing to bear the consequences of their decision.
In practice, trade secrets are protected by other mechanisms. Patents are one of them because, by definition, patents are public knowledge so they are no longer secret.
As a corollary, you may read a patent and now have the knowledge of a product. But you don't have the same legal right to create and sell that product. That right is protected by the patent owner.
I am no expert here but my understanding is that the case law around this is much more well trodden in patent land than it is for noncompetes
If they had not patented whatever it is they had, anyone could replicate the information/item in question with no penalty.
If it did not provide value to tell the employee the secret then it follows that company would/should not tell the employee the secret.
I know this will not resonate with some, but on some level I do not really subscribe to the idea of intellectual property. My personal belief is that the brain is more like a radio receiver. The ideas are floating out there for anyone to pull down. The more sensitive among us are able better able to hear what is there and report it back to the rest of us. To claim ownership of an idea is to me like claiming ownership of the note A or the pythagorean theorem. Of course there should be some rewards for introducing novel ideas to the world but to me the real reward is the creative experience of bringing something into the world that was previously unknown.
In an ideal world, I do not think that hedge funds (or most fintech) would even exist. It sort of offends me that we would waste our civic resources legally enforcing ip rights. But I also understand that my position is far from universal.
You have to be a saint or already have everything you could ever dream of
If it's truly patented (different from a trade secret), you can't produce it, even if your invention is slightly different. For example, if I hold a patent on a "car" and you make a "car with a radio," you still can't produce it because it infringes on my patent. You can't make your product without covering the totality of my claim. That's why people try to make patent claims as broad as possible.
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 are unrelated? As stated above, the threshold is "more likely than not" that your work for Company B is related to knowing the trade secrets of Company A. If you had never worked for Company A, maybe, but again that's not the case here because a noncompete would never enter the picture.
Likewise, trade secrets are a mechanism to help foster better (and fairer) commercial practices under the guise that society will benefit. It's a pragmatic take rather than an idealistic one.
This particular suggestion breaks down fast when you have multiple employees that need to collaborate. If you have a million dollar strategy, you can pay half a million to an employee as a retention bonus. But you can't pay half a million each to 8 employees.
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."
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).
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.
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.
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.
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?
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.
A patent is an example that shows why that is a bad principle. The point of a patent is to share knowledge, but it also gives claims of ownership (for a period) to only a specific party. So obviously "knowledge of a product/process" isn't the discriminator. The important portion of a patent that distinguishes what is owned is literally called its "claims." My point is that whether or not you have knowledge does not lay claim to ownership, contrary to u/akira2501's question/point.
But, maybe to your point, just because it's illegal doesn't mean it's easy to litigate. Much of the legal system is specifically to avoid litigation. Apropos to this discussion, even if a contract isn't enforceable, it only has to be perceived as having teeth to give it value. It's like when a baby elephant is tied to a stake and it grows to an adult still thinking that stake prevents it from leaving. All it takes is for an employee to think a non-compete has merit to keep them in place.
In fact, this already exists. https://en.wikipedia.org/wiki/Garden_leave
It really should be required of all noncompetes.
And after only a month their sign-on would be subject to claw back.
You seem to be similar to naive communists, who, in the face of communism turning totalitarian, tried to "save" the idea of planned economy (for instance) by claiming that totality isn't what they wanted. Ignoring the fact that the totality was put up to prevent bad behavior of people and companies, to which the planned economy led to.
Similarly, here you complain about natural consequences of laissez-faire capitalism, without admitting that the latter is the cause.
I am not saying that good ideas in capitalism (or communism) are unsalvageable. But then you need to detail the mechanism of how to prevent the natural course of action (empirically observed) to take place.
(My personal preference would be to replace free market for labor with worker democracy, while leaving most other things up to free market. Although such a system could hardly be called capitalism anymore.)
But for SW devs, the non-competitive agreements in Finance industry isn’t really the same kind of bondage as for Quants. If Quant changes company - his options are very much limited to other companies doing trading, thus directly covered by non-competitive agreement. If SW Dev changes the company - he can choose the company working in other industries not related to finance, and then he is free as a bird.
If gardeners were paid 500k/year, they would be exalted. It has nothing to do with the work or the value provided to society.
People just love money and praise those that have it.
The more likely response then would be to move the team somewhere that does allow non-competes?
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.
Perhaps. But just because it's called that doesn't mean it is that. In fact, even crony capitalism is kinda a joke because it's such a perversion it's not even close to capitalism. Manipulation is the antithesis of free markets. Along the same lines, bails outs by defintion don't mean capitalism is a more successful paradigm. That just doesn't make sense.
My favorite way to reframe shameless newspeak is this: If your pet barked, would you still call it a cat? Of course not? So when there isn't a free market for miles, that's not capitalism.
My fav thing would be to see more co-ops. There's no reason why the more workers can't own a piece of the action.
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.
I consider my position (employers can and should use other mechanisms to go after employees that _really_ stealing their IP instead of forcing NCAs on every random McDonalds employee or even junior tech IC) valid reply to position stated by OP. I stand by my words.
> And there are significant cases on the news where an employee steals trade secrets and takes them to a competitor (see Levandowski among others).
Levandowski example proves my point though since he did it in a state that doesn't enforce NCAs and Google found the way to go after him.
> It comes across like you have an axe to grind rather than making a thoughtful point.
That ad hominem was uncalled for.
To underscore it one more time, we both agree that there are other mechanisms like NDAs that protect IP. However, when used in conjunction with the inevitable disclosure doctrine, these prevent someone from being hired by a competitor. So they are doing the same thing as NCAs in the vein of the OP. If the end is the same (prevent hiring by a competitor to protect IP), your point is a pedantic distinction without a difference. If you disagree, you need to provide a rationale as to why an NDA + inevitable disclosure scenario shouldn't be allowed to prevent hiring by a competitor.
Levandowski's trial was settled before it concluded, so it doesn't really prove much in terms of legality, other than the term "trade secret" is nebulous and companies will use whatever is at their disposal to protect IP. One of the takeaways for many companies is that they need to rigorously pursue NDAs with their employees which, again, would have the same potential consequence as NCAs when inevitable disclose exists.
Your whole argument belies a misunderstanding of IP law.
"If an employee knows trade secrets, they should be paid not to move"
(except, knowledge doesn't equate to IP rights)
"Other mechanisms exist to protect IP"
(yes, except some of those mechanism also prevent being hired by competitors, so it doesn't really do much in terms of changing the outcome in the cases pertinent to this discussion)
"It's dumb to have McDonalds employees sign NCAs"
(smart legislators have already addressed this by refusing to enforce NCAs for lower-salaried employees who aren't at risk of exposing trade secrets)
Rinse and repeat, ad nauseum because you either aren't getting the distinction or don't want to understand it so you can 'stand by your words'.
You are being obtuse. It obviously proves that NCA is not required to go after former employee that copied bunch of internal company docs with IP to his flash drive and brought it to direct competitor.
> would have the same potential consequence as NCAs when inevitable disclose exists.
Doesn't exist in Cali, same as NCAs.
> Your whole argument belies a misunderstanding of IP law.
I don't appreciate your ad hominems and overall patronizing tone. This is not reddit.
> except, knowledge doesn't equate to IP rights
Where did I said it does?
> yes, except some of those mechanism also prevent being hired by competitors, so it doesn't really do much in terms of changing the outcome in the cases pertinent to this discussion
Sure it does. NCAs are usually blanket poorly-defined "can't work for any potential competitor" bans. Would be hard to prove in court that Bob-the-senior-front-end that worked on Gmail interface enshittifaction in Google for 3 years could suddenly disclose some trade secrets to Amazon even if signed an NDA. For NCA they won't need to prove anything since the two companies are definitely directly competing.
> smart legislators have already addressed this by refusing to enforce NCAs for lower-salaried employees who aren't at risk of exposing trade secrets
What does it have to do with the salary? If McDonalds employee is promoted to shift manager or something and gets paid slightly past threshold they suddenly shouldn't be able to go work for Burger King? Doesn't make any sense to me.
>It obviously proves that NCA is not required
Already stated: "Non-competes and NDAs are literally the mechanisms that companies try to protect their trade secrets."
To wit, look at what lawyers say are some takeaways from this case:
"Require employees to sign nondisclosure agreements (NDAs)."[1]
Now why would a lawyer say that? Because contracts are easier to uphold in court. But that's already been stated:
"The reason is that these contracts help protect the IP by explicitly stating their case."
And guess what happens when you combine an NDA with inevitable disclosure doctrine? A prohibition from working with a competitor. But that's already been covered here too:
"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."
>Doesn't exist in Cali, same as NCAs.
I'm sorry, I know HN tends to be in a bubble, but at no point did I claim California as the sole scope of my comments. Actually, I did the opposite by citing other states, like Illinois regarding their $75k threshold. Regardless, there are still provisions that provide similar relief in CA, like the UTSA.
>This is not reddit.
Ironically, it's your comment that goes against HN guidelines:
"Please don't post comments saying that HN is turning into Reddit. It's a semi-noob illusion, as old as the hills."[2]
>Where did I said it does?
Literally, your original comment I was replying to makes the claim that knowledge equates to deserving more pay:
>"If knowledge of some particular employees worth so much to the quant firms, then they should pay them not to leave accordingly."
We have mechanisms for determining who gets paid from that knowledge. It's an IP license.
>NCAs are usually blanket poorly-defined
I guess if your threshold is poorly defined contracts, then no contract law is relevant. But its a strawman to point to badly formed NCA as a rationale to ban them completely. I'm talking about good contracts, with a meaningful purpose to protect trade secrets. See any of the previous posts to this effect. If your claim is that bad NCAs should be banned, I'm with you. This, however, is not about that.
>What does it have to do with the salary?
As already discussed, contract law is completely about convention and can be changed:
"IP rights are legal rights of convention."
It's relevant because the convention used by IL is that an NCA for an employee below that threshold is "void and unenforceable." In other words, it's not a legal contract.
The fact that you railed against all that despite already being shown while it's wrong and resorting to statements like "it doesn't make sense to me" tells me this is more about you proselytizing than having a reasoned discussion.
[1] https://www.jdsupra.com/legalnews/protecting-trade-secrets-l...