Arthur R. Lehman, L.L.C.

Secrecy contracts under fire

The National Labor Relations Board filed an administrative against the world's largest hedge fund firm, Bridgewater Associates, concerning its confidentiality contract. This case could increase the need for employer representation because of its potential impact on these agreements, nondisparagement clauses and compulsory arbitration agreements used by other New York industries in their employment contracts and handbooks.

The NRLB case pertained to a sexual harassment complaint filed by a former Bridgewater employee. He claimed that he was the victim of harassment by a supervisor and that the firm retaliated against him.

Although the harassment case was resolved, the NRLB is pursuing its action because the firm allegedly engaged in retaliation by placing him on paid leave after he said that he would contact the NLRB about the firm's employment practices. The NLRB claimed that the firm interfered with, restrained and coerced its employees from exercising their rights.

A copy of the firm's employment contract, from several years ago, forbid employees from revealing the terms of the confidentiality agreement with anyone except their immediate family and attorneys even after leaving this business. It also requires all current and former employees to notify the firm's executives when they receive a subpoena and before they respond to it. They must cooperate with the fund with maintaining the confidentiality of nonpublic information.

The NRLB, however, has not challenged a contentious 2-year non-compete provision prohibiting employees from employment in other financial services jobs. Current employees must notify the firm's president of any potential employment opportunities and the firm could object. The hedge fund can also ask former employees to provide updates on new jobs, up to four times each year, to assure that the former employee is not employed by a rival.

Experts believe that this litigation could lead to more narrowly drafted agreements instead of a catch-all employment or confidentiality contacts that infringes on employee rights. This case may be settled before the scheduled Dec. hearing commences. The firm said that its policies legally protect its intellectual property and are consistent with industry standards.

Legal assistance may help prevent or mitigate employment litigation. Experienced attorneys can help businesses draft its agreements and handbooks that lower the potential for these actions.

Source: The New York Times, "Labor Board challenges secrecy in Wall Street contracts," By Alexandra Stevenson and Matthew Goldstein, Oct. 17, 2016

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