Peter A. Steinmeyer, Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Chicago office, was quoted in Bloomberg Law, in “For Traders, the FTC Ban on Non-Competes Comes with Big Catches,” by Sabrina Willmer. (Read the full version – subscription required.)
Following is an excerpt:
Wall Street traders and money managers could be in for disappointment if they’re hoping a new US ban on non-compete clauses will clear the way for them to spring into the arms of higher-paying competitors.
The Federal Trade Commission’s sweeping prohibition on efforts to prevent staff defections makes an exception for mandatory garden leaves. Those have become a common facet of finance-industry contracts for employees privy to sensitive information, such as knowledge of a money manager’s trading strategies or pending deals.
As long as a firm keeps paying a departing employee normal wages during a required garden leave, it isn’t a non-compete clause, according to a copy of the rule published by the FTC. …
Go Surfing
Wall Street garden leaves, a concept popularized in the UK, often last a few months, but in some cases drag on longer. The cooling-off period helps to ensure that a departing employee can’t take knowledge of current transactions to their next job. Theoretically, the time could be spent in the garden.
The FTC rule — if it survives — will encourage more companies to adopt garden leaves in lieu of non-competes, said Peter Steinmeyer, an attorney who advises financial-services firms.
“There is relatively little litigation over garden-leave clauses because people think they are fair,” he said. “Who wouldn’t like to get paid to move out to Hawaii and learn how to surf for 180 days? It is a pretty good deal.”
