Hedge fund Citadel's New York employees may be hit with 4-year non-competes too
If you're thinking of leaving hedge fund Citadel, either in New York or Miami, you might want to do so before July 1st 2025.
Get Morning Coffee ☕ in your inbox. Sign up here.
This is the date when the CHOICE Act allowing for non-compete periods of up to four years is expected to be signed in to existence by Gov. De Santis in Florida. Bloomberg reported on Citadel's role in lobbying for the act earlier this week. What was not noted then, however, was that the act will apply as much to employees in New York as to those in Miami.
The text of the act is accessible here. It states clearly that the non-competes of up to four years will apply both to employees who "maintain a primary place of work in the state" and to employees working for employers with a "significant nexus" to the state.
Citadel declined to comment for this article. The fund is headquartered in Miami and senior industry figures say the expectation is that employees at Citadel in New York will therefore also be covered by the new rule.
Citadel already imposes 21 month non-competes on some portfolio managers. Lawyers say the new four year non-competes will require changes to employees' contracts. They apply only to individuals earning double the mean average in the country where the employee resides, which is likely to mean everyone working for both Citadel and Citadel Securities.
Alex Ershock, a partner at law firm Lewis Brisbois notes that because the CHOICE act extends to employees working for Florida-based employees in other states and also "asserts its supremacy over all other states’ non-compete laws," it stands to create disputes. "Litigation seems inevitable," says Ershock. California and Minnesota already ban non-compete agreements, and New York is seeking to do the same.
New York portfolio managers are already railing against the prospect of being compelled to sit out of the market for four years. "It's pretty shocking," says one. "I would never do this," says another, reflecting that it demonstrates the strength of major employers in the current market.
Supports of the CHOICE act claim that it's no worse than Florida's current provision for five year non-competes and that will help avoid situations like that between Millennium and Jane Street last year, when the judge effectively ordered Jane Street to disclose the allegedly stolen trade secret to Millennium before the two settled out of court.
Citadel employs over 500 investment professionals in New York, according to a recent regulatory filing. If a portion of them are indeed asked to sign non-competes of up to four years, they may want to look on the upside. - The CHOICE act states that if employees are placed on garden leave, they'll be paid salaries plus bonuses for four years and will only have to work for the first 90 days, after which they are free to relax or travel. Supporters also claim that the non-competes enable employees to do interesting work; without them, funds can sometimes be wary of sharing information about the full scope of interesting projects.
Have a confidential story, tip, or comment you’d like to share? Contact: +44 7537 182250 (SMS, Whatsapp or voicemail). Telegram: @SarahButcher. Click here to fill in our anonymous form, or email editortips@efinancialcareers.com. Signal also available.
Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libellous (in which case it won’t.)
