Impact on Private Fund Advisers of Obama Administration’s and State Lawmakers’ Actions to Restrict Use of Non-Compete Agreements 

A growing drumbeat of government hostility toward non-compete agreements may portend state-level legislation that would restrict employers’ use of such agreements. While the impetus behind this movement primarily appears to be a concern for low-wage employees, some of the proposals sweep wide and would affect the abilities of private fund advisers to impose and enforce non-competes against their professional employees. In a guest article, Anne E. Beaumont and Lance J. Gotko, partners at Friedman Kaplan Seiler & Adelman, review the call to action by the Obama Administration for state legislators to significantly curtail, through legislation, an employer’s ability to use and enforce non-compete provisions; the responses from various state policymakers to this request; and the likely impact on private fund advisers if legislation that is substantially similar to the proposals were adopted. For additional commentary from Beaumont and Gotko, see “How Hedge Fund Managers Can Balance Protecting Confidential Information Against Complying With Whistleblower Laws” (Aug. 25, 2016). For further insight from Beaumont, see our three-part series on Kovel arrangements: Part One (Oct. 20, 2016); Part Two (Oct. 27, 2016); and Part Three (Nov. 3, 2016). For more on non-competes and other restrictive covenants, see “What the NLRB Complaint Against Bridgewater Means for Hedge Fund Manager Employment Agreements” (Sep. 8, 2016); “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 “Non-Competition and Non-Solicitation Provisions and Other Restrictive Covenants in Hedge Fund Manager Employment Agreements” (Nov. 23, 2011).

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