Peter A. Steinmeyer, Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Chicago office, was quoted in efinancialcareeers, in “The Truth About the New Non-Compete Ban for Banks & Hedge Funds,” by Sarah Butcher.
Following is an excerpt:
Last week, the US Federal Trade Commission (FTC) published its new “draft” but “final” 570 page rule banning the sorts of non-compete clauses that have been a much-loved part of banks’ and hedge funds’ arsenal for preventing employees wandering into jobs at competitors.
Depending upon who you speak to, this is either a disaster or a pinprick. Here, we attempt to dissect which. …
Claim 2: The non-compete ban eliminates non-competes in all their forms
This is not strictly true. Even under the rule, Peter Steinmeyer, an attorney at law firm Epstein Becker says it’s still possible to make an employee sit out of the market. However, they need to be a current employee. If, therefore, an employee who wants to leave for a rival is asked to defer joining for six months while still employed and paid by their current employer, all is fine.
“What you can’t have under this rule is a post-employment non-compete period,” says Steinmeyer. “This would constitute a post-employment restrictive covenant. But if someone remains your employee, and you tell them ‘Ok, go and sit at home and we will pay you,’ you can do that.” …
Claim 4: Banks will not be able to withhold deferred stock for employees who leave
Not withstanding the fact that banks aren’t necessarily covered by the rule anyway (see 1), this sounds like it might an issue. Withholding deferred stock from leavers is one of the preferred practices on Wall Street. Jefferies famously asks its employees to repay cash bonuses if they leave within a fixed period of receiving them. …
Steinmeyer says there is “ambiguity” around the issue. “Technically forfeiture of deferred compensation is not a non-compete agreement if it’s not preventing someone from working, but could there be a deferred compensation agreement that functions to prevent someone taking a new job,” he says. In this case, it would be a non-compete after all. “One of the many things that needs to be worked out,” Steinmeyer adds. …
Claim 6: The non-compete ban will never come to pass
Before anyone reconfigures their business, though, it’s worth considering that Steinmeyer says the non-compete ban will never come into force anyway. “There are at least three papers against it, and I am telling my clients not to change anything,” he tell us.
