Independent Contractors vs. Employees: What Hedge Fund Managers Must Know About Classifying Staff and Protecting Proprietary Secrets

As high-profile corporations such as FedEx and Uber find themselves embroiled in, or in the aftermath of, costly lawsuits over the misclassification of people they have hired, it is critically important for hedge fund managers to understand how classification issues may affect their businesses. Under federal and state law, the status of independent contractors is fundamentally different from that of employees, affecting everything from compensation and taxes to the safety procedures and protocols needed to protect employers’ sensitive information from theft. Even without the crackdown at the regulatory level and the massive liability facing employers who misclassify workers, the risk of data theft requires asset managers to be specially knowledgeable and vigilant about the issue’s implications. These topics were the focus of a recent panel discussion held at the New York offices of law firm Pepper Hamilton. Moderated by Pepper Hamilton partner Gregory Nowak, the panel featured Richard Reibstein, a partner at Pepper Hamilton, and Laura Kibbe, managing director of professional services at RVM Enterprises. For more on hedge fund manager employment issues, see “District Court Decision Suggests That Overly Broad Restrictive Covenants Will Not Be Enforced in Employment Agreements in the Wealth Management Industry” (Apr. 26, 2012); and our two-part series on “How Can/Do Hedge Fund Managers Legally Penalize Employee Wrongdoing?”: Part One (Apr. 7, 2016); and Part Two (Apr. 14, 2016). For coverage of other Pepper Hamilton seminars, see our two-part series on “How Hedge Fund Managers Can Establish/Operate an AML Program Under FinCEN’s Proposed Rules”: Part One (Nov. 5, 2015); and Part Two (Nov. 12, 2015); as well as “Tax Proposals and Tax Reforms May Affect Rates and Impose Liabilities on Hedge Fund Managers” (Apr. 16, 2015). 

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