It is ideal to have a new employee sign a restrictive covenant when he begins his employment. But what if you don't do so at that time? Is it too late? The short answer is no. However, you should not present the agreement to an existing employee without first ascertaining whether the state in which the employee is located is a "consideration" state. If you do (or you already have), you may unfortunately have an agreement that is unenforceable against the employee. In a "consideration" state, the employer must provide adequate consideration to the existing employee in order for the employee's non-solicitation covenant to be enforceable. In these states, the employee's "continued employment" is not adequate consideration. Depending upon the state, adequate consideration could be a raise, bonus, or promotion. I generally prefer a one-time execution bonus so that the employee cannot later attempt to assert an insufficient consideration defense to enforcement of the agreement, claiming that he was due the raise or promotion in the ordinary course of his employment. Even in "continued employment" states, I recommend that the firm consider providing the existing employee with some type of consideration.
Access complimentary resources from Cambridge Investments to help navigate the fiduciary rule changes.
If you’re thinking of changing broker-dealers, you owe it to yourself to read this article that covers all major aspects of the transition process.
This White Paper outlines the immediate actions firms can take to correct outdated and costly supervision procedures.
Sep 27, 2016
Some broker-dealers have already decided to exit certain lines of business and are sizing up how the rule will impact their IT and compliance budgets....
Sep 20, 2016
This webcast will review the key aspects of the amendments and the steps that funds and intermediaries can take in order to comply with the...
Sep 13, 2016
Nationwide is providing a deeper look into the rule’s implications and a discussion of decisions firms will need to make in order to comply.