Hedge fund and private equity firms are watching and waiting for resolution of a complaint filed by the National Labor Relations Board against Bridgewater Associates LP alleging some confidentiality provisions in the firm's standard employment agreements are illegal.
Employment lawyers and money management company general counsels broadly agree that the potential impact on money managers likely will be minimal regardless of whether the NLRB and Bridgewater settle before a Dec. 6 hearing or Bridgewater resorts to the court to decide the merits of the case.
“I don't see anything remarkable in this case. There's nothing new here that we haven't seen in other industries,” said Marshall Babson, counsel, Seyfarth Shaw LLP, New York, who served on the NLRB between 1985 and 1988.
“The central thesis of the NLRB's complaint is that Bridgewater's employee agreements include impermissibly broad confidentiality restrictions. Under the law, employees have the right to discuss their compensation and the terms of their employee contracts,” Mr. Babson stressed.
“Managers are paying attention to the case,” said an executive from a hedge funds-of-funds manager who requested anonymity. “Their ears are perked ... but they aren't making changes yet. They want to see the details and to know which employment clauses the NLRB is focusing on.”
A settlement is not unusual in cases like Bridgewater's of alleged violations of the National Labor Relations Act and generally requires the employer to correct its rule and publicly post the change for 60 days, added Mr. Babson.
The NLRB trained its sights on the Westport, Conn., company at the beginning of the year after a former Bridgewater employee filed a complaint alleging sexual harassment by his supervisor. The employee withdrew his initial charge but filed a second complaint after Bridgewater allegedly placed him on indefinite paid leave because he threatened to go to the labor board.
In the complaint, filed June 30, the NLRB said Bridgewater has been “interfering with, restraining and coercing employees in the exercise of the rights guaranteed” in the NLRA in its employment agreements. Section 7 of the NLRA gives employees the right to unionize and to work in concert for the protection of employees while section 8(a)(1) prohibits employers from interfering with those rights.
Bridgewater executives declined to comment but provided the following statement: “We spent decades building our intellectual property and have policies to protect it that are legal, consistent with industry standards and with the agreement of the people who are affected by them. We will let the legal-regulatory system judge their merits.”
As Mr. Babson suggested, the NLRB seems to favor a settlement with Bridgewater. “I can confirm that settlement discussions are ongoing,” said NLRB spokeswoman Jessica Kahanek in an e-mail.
Russell Sherman, a Bridgewater spokesman, declined to comment about a possible settlement.
The NLRB complaint broadly challenges the provisions of Bridgewater's employment agreement as violating the NLRA because they prohibit employees from:
- talking about the terms of their own employment;
- disclosing anything non-public in a variety of circumstances — with a particular focus on the media — about company business including employee lists, employee compensation and organizational charts; and
- disparaging Bridgewater “in any way whatsoever ... except as required by law.”
Bridgewater's employment agreement also requires that employees resolve complaints individually through binding arbitration and prohibits class-action suits or other collective actions, the NLRB's complaint further stated.
