Employment Law Attorneys
Hidden Arbitration Clauses: What You Don’t Know CAN Hurt You

Hidden Arbitration Clauses: What You Don’t Know CAN Hurt You

Employers are opting increasingly for forced arbitration as a tool to prevent their employees from seeking justice against them in court. A form of private dispute resolution, an effective arbitration agreement forces the parties to submit their dispute to a professional arbitrator (usually chosen by the employer), who will decide the result. The arbitrator’s decision is final: It is legally binding and cannot be appealed in court.

The Problem with Forced Arbitration

Forced arbitration comes at a tremendous cost to employees, who will no longer have their day in court.  As a result, their right to fair treatment on the job is inevitably compromised.  Even a favorable monetary arbitration award can feel like a hollow victory for an employee who has suffered years of discrimination at the hands of their employer.  For a large company in particular, even a high six-figure payout is effectively nothing but a slap on the wrist. A license to continue their unfair employment practices.

An employee’s real bargaining power comes from the public nature of the court system. By signing mandatory arbitration contracts, employees are waiving their fundamental, constitutional right to a trial by a jury.

According to a recent study, nearly 52% of employees are subject to mandatory arbitration procedures. “Extrapolating to the overall workforce, this means that 60.1 million American workers no longer have access to the courts to protect their legal employment rights and instead must go to arbitration.” Alexander J.S. Colvin, Economic Policy Institute, EPI.org.

Workers’ Rights Put at Risk

Just a few weeks ago, the Supreme Court ruled 5-4 in NLRB v. Murphy, that employers can include employment contract clauses forcing employees to arbitrate their disputes individually, and waiving the right to resolve those disputes through joint legal proceedings.  In a rambling, logically incoherent majority opinion, Justice Gorsuch asserted, “[t]he policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written.”

This decision paves the way for companies to strip workers of the right to pursue class action suits in cases of widespread discrimination. In her written dissent, Justice Ginsberg cautioned, “[t]he inevitable result of today’s decision will be the underenforcement of federal and state statutes designed to advance the well-being of vulnerable workers.”

Savvy employers are well aware of the advantages provided to them by private arbitration.  They are becoming ever more creative in finding places to bury mandatory employment arbitration clauses to ensure that their employees are bound by them.

The Supreme Court’s decision in the Murphy case left unanswered, the question of what constitutes valid “notice” to an employee.

Consider the case of an employer who sends an arbitration agreement through a company-wide email, requiring any employee who does not agree to be bound by mandatory arbitration to opt out proactively.  Are all employees who have not opted out of the agreement still bound by its terms, even if they never opened the employer’s email?

In another case, the employing company placed a mandatory arbitration clause within the text of the legal disclaimers included in its employment application.  In order even to be considered for a position, a potential employee is required to find and agree to mandatory arbitration.

Fighting Workplace Discrimination

The Supreme Court’s decision in NLRB v. Murphy will have significant consequences for the ability of employees to fight back against discrimination on the job.  Despite the unequal bargaining power inherent in employer-employee agreements, the decision marks a victory for companies seeking to avoid liability for the mistreatment of their employees.

It remains to be seen how the court will handle the issue of hidden arbitration clauses, whether long-standing contract principles requiring notice to both parties will become a thing of the past as well.

The following companies use forced arbitration clauses: Morgan Stanley, Hooters, Forever 21, Nordstrom, Neiman Marcus, Macy’s, Yahoo, Dillard’s, Manpower, Carrols, Papa John’s Pizza, Xerox, Amazon, Ford, GE, Coca-Cola, CVS, ExxonMobil, Bridgewater Associates, Glencore, RBS, Barclays, Tradeweb, Boehringer Ingelheim Pharmaceuticals.

Have employment questions? Need help with a case? The employment lawyers at Carey & Associates, P.C. handle each and every aspect of employment litigation and appellate work and act as the story tellers of our client’s personalized narrative to the company, the court and the jury.  Contact us today!

10 Things You Should Know About Employment in Connecticut

10 Things You Should Know About Employment in Connecticut

If you work in Connecticut, there are facts you need to know about when it comes to your employment rights. In this post we’ll cover the top 10 things you need to know as an employee in CT.

1. Employers Can Give Bad References, Just Not False Ones

Employers no longer give references for former employees, so stop worrying.  Employers fear being sued for defamation or claims for negligent hire. The majority if not all employers will provide prospective employers and their recruiters with your dates of employment, position, and possibly salary. The employer will not provide the reason(s) for termination.  However, if you hear your former employer said they would not recommend for rehire, that is code language that you are a poor employee. The only exception I can think of is if you and your employer are FINRA registered members, i.e. brokerages and licensed employees in the financial industry.  FINRA regulated employers are required to provide the reason for termination in the employee’s U-5 record.

2. Connecticut Employees Allowed 16 Weeks Unpaid FMLA Leave

Under the Connecticut Family Leave Act, employees are entitled to take up to 16 weeks of unpaid leave. Connecticut law provides for an additional 4 weeks on top of the federal FMLA (12).  Employees should ask there employers if they have short term disability benefits to coincide with the 16 weeks of leave.  A typical STD plan provides for six months of paid leave at 60% of the employees base pay. Nothing is guaranteed, and the employer will not volunteer the information. Employees in need of a leave of absence must self-advocate for their rights and document all their requests in writing. Remember, your job is protected during the FMLA, but if you fail to return before your leave ends, you will lose your job.

3. Connecticut Employees Have a Right to Personnel Files

Connecticut employees are entitled to a complete and accurate copy of their personnel files, including a copy of their supervisor’s version of their file.  All the employee has to do is make a written request via email to the HR department and the employer must provide a copy of the file within 30 days.  If the employer refuses, please contact the CT Department of Labor and register a complaint.

4. An Unfair Employment Termination is Not Necessarily Illegal

Listen, employers can be really mean and behave in very unfriendly ways. However, just because the employer is a pain in the butt and trying to make your life miserable, this does not mean the employer’s actions are illegal.  Employers do not care about employees, so get over it. Your job cannot be your identity.  You are an “at will” employee and you should never assume your job is secure, even if you worked for the company for 10 years.  In order to determine if your employer’s action to terminate you were illegal, you would need to speak to our employment attorneys.  A quick 15 minute call to our office will flesh out the legal issues and permit us to determine if you were fired unlawfully.

5. Independent Contractors Have Rights Too

You may not know it, but if you are an independent contractor you are still protected against unlawful employment actions such as discrimination.  You should also investigate if your employer is correctly classifying you as an independent contractor (IRS Form 1099) or regular employee (IRS Form W-2). We see a lot of employees misclassified as independent contractors when they should be regular workers. Employees fear challenging the employer on this classification because they believe they will lose their contract.  If you are in doubt, call the CT Department of Labor or call our office to speak with an employment attorney.  Also search the internet in Connecticut for the “ABC Test for Independent Contractors.” You can also search the IRS.gov website for the same information.

6. The Legal Effect of Quitting Your Job

Don’t ever quit your job!  You cannot collect unemployment benefits.  Also, it is too difficult to prove your voluntary job termination was a “constructive discharge”. The facts must show a series of recent events that violate state and federal law and that any reasonable person would also quit.  If you are in a tight bind where your employer is giving you the writing on the wall treatment to get out, speak to an employment attorney in our office first.  We will deter you from quitting and will advise you to leave your job through the signing of a separation agreement which includes a severance payment for your service with the company as a result of unlawful treatment.

7. Employees with Criminal Records Are Protected

Under Connecticut law, employers cannot refuse to hire or terminate an employee because of a criminal record. Obviously, each case is different, so you will need to contact an employment attorney in our office to figure out if you are protected.

8. You May Have a Legal Right to Severance Pay

Employees employed in Connecticut may have a legal right to severance pay.  If the employer maintains a severance plan governed by ERISA (federal regulation), employees working in Connecticut are considered participants and entitled to severance pay pursuant to the plan document.  The one condition to receive severance pay set forth in every ERISA severance plan is that the employee must signed a general release of claims.  How do you know you company has a severance plan? You can check your internal human resource portal or employee handbook.  All ERISA severance plans have to be filed with the U.S. Department of Labor.  Years ago I found this free website where you can research your employer. Insert the employer’s name in the site and go through the various plans listed. You are looking for a plan labeled with the word “severance” in it.  The plan severance plan code is “4i”.  If you find it listed, then you know a severance plan exists. Once you have identified your employer’s severance plan, make a written request to the Human Resources Department for a copy of the severance plan.  The HR Department has a legal obligation to provide a copy of the severance plan within 30 days of your written request.  You will find in the plan the amount of severance pay based on your years of service with the employer.  Don’t leave money on the table, but chances are the employer will remind you about your benefits, as they have a fiduciary obligation to you as a plan participant.  If you need a severance attorney, call our office and speak with one of our employment attorneys.

9. How to Predict When You Are Getting Fired

Hmmm, try your gut instinct.  Are you getting the awful feeling that your boss and coworkers have turned on you?  You may have been a satisfactory performer last year, but this year your rating sunk or needs improvement.  Or, you made a complaint to your supervisor or HR about your wages or unlawful discriminatory treatment, and suddenly your once friendly work place is not so friendly.  Maybe you just announced you are four months pregnant and you are getting the cold shoulder.  Worse, your supervisor makes pregnancy related comments and jokes.  Finally, if your coworkers and/or supervisors are openly hostile with you and use derogatory language directed at your gender, sexual orientation, race or age, then you know the crap just hit the fan and you need to speak to one of our employment attorneys.

10. Don’t Sign Anything When You Get Fired

Isn’t this obvious?  You should never sign anything when you leave your job. You should also not participate in any exit interview with the HR Department. No state or federal law mandates your participation in the exit interview.  What you need to do is speak with an employment attorney in our office who will figure out if the termination was lawful and whether the employer acted unlawfully prior to the termination date, i.e. demotions, discrimination, etc.

If anything mentioned above sounds like your current situation, or if you find yourself there in the future, Carey & Associates, P.C. can help! Our firm specializes in employment, wrongful termination, discrimination, whistleblowing, and more.

Contact us now!

Sexual Harassment Investigations and Settlements Must be Transparent

Sexual Harassment Investigations and Settlements Must be Transparent

If a woman makes a sexual harassment complaint to her employer, should the claim and the resulting settlement be confidential? The short answer is “no.”

INTERNAL SEXUAL HARASMENT INVESTIGATIONS SHOULD BE TRANSPARENT

When an employee files an internal complaint of sex discrimination or sexual harassment, the company immediately begins an internal investigation.  However, the complaining employee will never know the result of the internal investigation and she lacks any legal rights to demand a written or verbal finding.  Employers are mandated to conduct the investigation under federal law, if the employer wants the protection of an affirmative defense that it took action to remediate the underlying cause of the sexual harassment complaint.  You would think an “investigation” would have some curative effect, but it does not.

The corporate investigation should be open for all to see how terrible a male co-worker or supervisor actually behaved toward his female counterpart.  We cannot bury our heads under the cover of confidentiality of corporate investigations, just because the legal department said so.  The only reason why companies keep corporate investigations confidential is because the company is seeking to build a case to protect itself against the complaining employee; there is no value to the employee whatsoever.

THE SETTLEMENT AGREEMENT SHOULD ALSO BE TRANSPARENT

Employers love confidentiality provisions in settlement agreements.  They and their counsel claim the company is buying confidentiality in exchange for the settlement payment.  In reality, the company is buying the release of legal claims.  Confidentiality provisions have long been a staple of settlement agreements, in particular in employment discrimination cases, because employers demand them.  Employees who complained of sexual harassment did not demand confidentiality.  Employees want public disclosure in order to signal to other employees to watch out for the alleged perpetrator so he does not repeat the offense on others.  In addition, public shaming of individuals who commit sexual harassment offenses is now the norm.

Today, Congress has taken one step closer to making confidentiality provisions illegal.  The new  Tax Cuts and Jobs Act seeks to restrain corporate tax deductions for legal fees and settlements related to sexual harassment claims.  In essence, if a corporation wants a tax deduction it has to make the settlement of sexual harassment cases public and not confidential.   If the company seeks the confidentiality clause in the settlement agreement, they are prohibited from taking the deduction.

See a similar discussion on the same topic at #metoo Sexual Harassment Laws Are Broken.

If you have employment law questions or need help with specific workplace issues, contact Carey & Associates, P.C. Our employment lawyers can consult with you regarding your issue and offer guidance on next steps.

Why Won’t Men Pay Women More?

Why Won’t Men Pay Women More?

Unequal pay is an important concern for women in the workplace. According to a Pew Research survey, working women report that that equal pay is the top issue for them.  Although under the Obama administration significant progress was made in enacting policies and legislation to level the playing field, much of this advancement has already been reversed under Trump.  For example, the Trump administration recently ended a modest attempt to close the gender wage gap when it rescinded a policy from the Obama administration that had not yet gone into effect which simply required businesses to report employees’ pay by gender and race.

The Statistics Don’t Lie

Overall, women in the U.S. are paid an average of 79 cents for every $1 paid to men.  Gender pay disparity varies greatly from state to state.   Women in Connecticut fare slightly better than the national average, earning 83 cents for every $1 men earn.  These statistics are even lower for African-American and Latin American women in comparison with men.

Current Equal Pay Laws

The Equal Pay Act (EPA) of 1963 prohibits discrimination in pay on the basis of gender.  The laws against pay discrimination cover all forms of compensation, including salary, overtime pay, bonuses, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits.

A Connecticut bill that was passed earlier this year and went into effect on October 1st strengthens the requirement that employers provide “comparable” pay for workers performing similar duties.  In addition, the bill protects employees from losing seniority based on time spent on maternity or other family or medical leave.  However, unlike similar bills passed in Massachusetts, and in the cities of New York and Philadelphia, Connecticut’s gender equity bill stops short of prohibiting an employer from inquiring into a prospective employee’s salary history.  In its original form, the bill would have banned an employer from asking a prospective employee about wage history.  This provision was contested by several Republican members of the state House and Senate until it was ultimately removed.

Federal law affords more protection to employees from having to provide information to potential employers about their past wage histories.  The Equal Employment Opportunity Commission (EEOC) takes the position that prior salary alone is an inherently sex-based consideration. This perspective essentially assumes that because women have been subjected to unlawful pay discrimination by prior employers, it is unfair for an employer to use past salary history alone to determine an employee’s pay rate.

Businesses Are Not Doing Enough

Overall, American businesses have done little proactively to ensure that men and women are paid equally.  In 2017, even with the continuous growth of the country’s largest technology leaders, most have shown little progress in their efforts to level the playing field for women, who are underrepresented in key engineering and leadership roles and are paid less than men.

In recent months, several well-known technology and financial firms have come under fire for systematic gender pay disparity.  Google, for example, has come under investigation by the Labor Department and has faced criticism from investors and some of its own employees over differences in how women and men are paid.  While Google has vehemently denied that its salaries are discriminatory, it is currently facing a class action lawsuit in which 60 women have alleged that there are clear disparities and prejudices in the way the company determines the salaries, bonuses and stock options of women as opposed to men.  The claims against Google hinge on the way that women are channeled to levels and positions that pay less than men with similar education, qualifications and experience.

The financial services giant State Street Corp. has also faced recent allegations that it paid female executives less than men.  The DOL’s Office of Federal Contract Compliance Programs determined that since 2010, State Street has paid women in senior vice president, vice president, and managing director positions less in base salaries, bonus pay, and total compensation annually than similarly situated men in those positions.   State Street Corp. denied those claims, but agreed to pay $5 million resolve the matter.

Pay Disparity is also Complicated by Fear

The issue of gender pay disparity is more complicated than simply ensuring that companies pay women the same salaries as they do men.  With the wave of highly publicized sexual harassment scandals, men report that they have become more cautious in their interactions with women at work, for fear that a single misstep could result in an accusation that would end their careers.  This ultimately ends up depriving women of the kind of workplace camaraderie that leads to career advancement.  According to research, building genuine relationships with senior coworkers is one of the most important contributors to pay raises and promotions.  When women are not afforded the same opportunities to build these types of relationships, their careers are more likely to stall at lower levels of company hierarchy.

Companies can encourage these relationships by hiring more women in top positions. According to research, women in companies with many female executives were more likely to say that male-female work relationships had never been an issue for them.

Combating Gender Pay Disparity

To combat gender pay disparity directly, there are several steps an employer can take including conducting equal pay audits with transparent results and methodology, increasing transparency about pay, banning the use of salary history and negotiation to set compensation, and moving towards clearer compensation metrics for staff. For example, the tech start-up Buffer conducted a pay data analysis in 2016 which revealed that men’s salaries averaged almost ten thousand dollars more than women’s salaries. In order to address its wage gap, Buffer began examining its process for determining how employees are placed at particular experience levels, which determines compensation, and hiring more women to address the gender imbalance in its workforce.

Studies have shown that openness around compensation can increase the likelihood that employees believe they are paid fairly.  Because a culture of secrecy around pay can provide cover to discrimination, many employers have been moving towards more transparent pay practices.  Some companies have made the salaries of all staff available to their employees. By doing this, employees can compare their salaries to coworkers in the same position.

Other employers have initiated policies to standardize compensation-setting, eliminating the need for salary negotiation. This has the effect of minimizing the role of bias and discretion when determining compensation.

Although there are many tools at the disposal of an employer trying to correct the gender pay gap, many companies continue to promote policies which result in higher pay for men than for women. But proving that you have been paid less because of your gender is often a difficult task.

Bringing Pay Disparity Claims

To bring a claim under the EPA as a female employee, you must show that a man working at the same place and doing the substantially the same job (equal work) is paid more than you are paid.  Your jobs not have to be identical, but must be substantially the same.  What’s important is the actual work being done, not the job titles or descriptions.  Under the EPA, two jobs are considered equal when they require the same basic level of skill, effort, and responsibility, and are performed under similar working conditions.

Once you have shown a court that you were subject to gender pay inequity, your employer must provide some evidence that it had a legitimate, nondiscriminatory motive for its decision.  Employers have a great deal of latitude in justifying a decision to pay one employee less than another.  Under the EPA, your employer can justify a pay differential by proving it is the result of a seniority system, a merit system, a system which measures quantity or quality of work, or any reason other than gender.  Your employer will likely claim that that a man who is paid more than you are is in some way more qualified.

Finally, you will have an opportunity to show that the employer’s stated reason is a mere pretext, intended to cover its true discriminatory intent.  This is where a documented history of your manager’s sexist comments or history of promoting only men may be invaluable, particularly if you can show that equally or better qualified female employees were turned down.

Remedies available to victims of pay discrimination may include; back pay, hiring, promotion, reinstatement, front pay, compensatory damages (emotional pain and suffering), punitive damages (damages to punish the employer), other actions that will make an individual “whole” (in the condition he or she would have been but for the discrimination).  Your employer also may be required to take corrective or preventive actions and to minimize the chance it will happen again, as well as discontinue the specific discriminatory practices involved in the case.

It is unlawful to retaliate against an individual for opposing employment practices that discriminate based on compensation or for filing a discrimination charge, testifying, or participating in any way in an investigation, proceeding, or litigation under the Equal Pay Act.  If your employer fires you, or takes any other adverse action against you for reporting a pay disparity, it may be subject to a charge of retaliation.

If you think that you have been a victim of gender pay discrimination, seek the advice of an employment attorney.  A qualified lawyer will be able to talk you through the steps of preparing a claim to file with the Equal Employment Opportunity Commission and your state’s counterpart.  Filing with these agencies is a prerequisite to filing a lawsuit in court, and you may be able to resolve your claims prior to litigation.  You can find out more about the process for filing an EEOC claim at https://www.eeoc.gov/employees/charge.cfm. Please contact one of our employment attorneys at Carey & Associates, P.C. to resolve your equal pay claim.

By Jill Saluck

New York Times Article Mentions Mark Carey: “Bridgewater’s Ray Delio Spreads His Gospel of ‘Radical Transparency'”

New York Times Article Mentions Mark Carey: “Bridgewater’s Ray Delio Spreads His Gospel of ‘Radical Transparency'”

[Picture Attributed to the NYTimes]

On Sunday, September 10, 2017, the New York Times published an article captioned as “Bridgewater’s Ray Dalio Spreads His Gospel of ‘Radical Transparency'”.  The article purports to be a fuller examination of Dalio’s social experiment at Bridgewater Associates in comparison to similar articles by the New York Times.  The above article appears on the eve of his September 19, 2017 publication of Principles: Life & Work.  In the article, I was quoted as stating, “[t]his whole transparency and truth-seeking thing is juxtaposed with the fact that they intentionally secretize all interactions with employees from public view.”

I enjoy taking issue with Dalio’s principles and the adverse personal impact they have had on employees at Bridgewater Associates.  From my vantage point, I can see exactly what takes place inside the organization, including the fallout from poor, arbitrary, discriminatory and self-minded management decisions. Yes, Bridgewater is transparent to …an employment attorney like myself.

Can’t Get In Synch- Your Fired!

Frankly, I cannot take Principles seriously given the ample contradictory evidence I have seen. For example, Principle 20 is titled “Constantly Get In Synch”.  I have repeatedly read accounts that this principle is used to throw other employees under the bus.  Employees are too quick to hear the other side and grade others as “not getting in synch”, resulting in a negative score in their personnel file.  Under the same umbrella, Principle 26 states “recognize that conflicts are essential for great relationships because they are the means by which people determine whether their principles are aligned and resolve their differences.”  I have seen cases where Bridgewater has used this principle to deter employees from making legitimate discriminatory complaints regarding their own employment, only to be terminated shortly thereafter.  I have seen legitimate discrimination cases where Bridgewater took no action to resolve them internally before the conflict erupted into a legal dispute, or maybe that was the intended result.  This result conflicts with Principle 25 which states “Recognize that getting in synch is a two-way responsibility”.  I have only seen employees who have felt the brunt of the one-way communication policy that exists at Bridgewater, which becomes even narrower when employees escalate to management when they “can’t get in synch”. Principle 36 states “If you can’t understand or reconcile points of view with someone else, agree on a third party to provide guidance. This person could be your manager or another agreed-upon, believable person or group who can resolve the conflict objectively, fairly, and sensibly. This mechanism is a key element of our culture and crucial for maintaining a meritocracy of ideas.”  Honestly, the only objective and believable person in the conflicts brought to my attention was ….well me!  If your manager is discriminating against you, please don’t believe that management at Bridgewater will take your side.  You will be tossed to the curb without notice under the accusation that your refused to “cross-over” to the other side or you weren’t a “believable” person.

Trust in Truth is Misinformation

 “Trust in Truth” is the number one principle at Bridgewater, but nothing could be further from the truth. Dalio states “being truthful, and letting others be truthful with you, allows you to explore your own thoughts and exposes you to the feedback that is essential for your learning” (Principle 2) and “openness leads to truth and trust.” (Principle 4).  If these three laudable values are uniformly and consistently followed by the company, then the following practices violate all of them.  Bridgewater uses confidentiality and arbitration agreements to quell anyone from expressing the truth about what internally occurs at this company.  Any employee leaving the company for any reason is forced to sign a one-sided settlement agreement that contains a confidentiality provision.  The company demands such confidentiality in exchange for severance pay, settlement money, releases from noncompetition agreements or to receive profit sharing payments, no different than any other company.   Dalio and the company should be openly transparent with the public about internal employee complaints, not shield them forever in confidential settlement agreements and in private arbitration filings. This is especially true when Bridgewater is the fiduciary of public funds.  How can “we” the public trust in Dalio’s truth when “we” are not being given the full weight of the evidence to decide for ourselves; we can’t and we are not in synch!  More important, how can “we” confirm that employee feedback was taken seriously and the company learned from its own mistakes? As long as there is no openness, there is no trust among “we the people”.

NYTimes Article: Labor Board Challenges Secrecy in Wall Street Contracts (Bridgewater Associates in particular)

NYTimes Article: Labor Board Challenges Secrecy in Wall Street Contracts (Bridgewater Associates in particular)

Wall Street in New York. The National Labor Relations Board is reviewing employment contracts used by the financial industry. CreditSeth Wenig/Associated Press

On Wall Street, moneymaking companies have long relied on confidentiality agreements to prevent employees from divulging their secrets.

But now, the nation’s labor board has challenged some provisions in the contracts that Bridgewater Associates, the world’s biggest hedge fund firm, requires each full-time employee to sign.

The unusual action is calling into question longstanding practices and prompting some companies to re-examine their employment agreements.

Prompted by a sexual harassment complaint by a former Bridgewater employee, the National Labor Relations Board filed a pending administrative action against the firm this summer saying Bridgewater “has been interfering with, restraining and coercing” employees from exercising their rights. The former Bridgewater employee, Christopher Tarui, claimed that he was the victim of sexual harassment by a male supervisor and that the hedge fund had retaliated against him when he complained.

Industry lawyers have warned about a potential precedent that could be set by a ruling from the N.L.R.B. on the matter. The labor board and Bridgewater are also discussing a settlement, which could come in the next few weeks, according to Michael Cass, a labor board official.

The terms of any agreement could have bearing on the industry, too.

“I would say it is a watershed event,” said Richard Rabin, a partner in the labor and employment group at the law firm Akin Gump Strauss Hauer & Feld. “The risk of these cases has always been out there. But they have always seemed quite remote, and this is making investment managers take notice in a way they hadn’t before.”

Mr. Rabin says the labor board’s action against Bridgewater — thought to be the first ever filed against a hedge fund — has money management firms worried because they share many of the same contractual provisions that are being challenged. Hedge funds and private equity firms are bracing themselves for a potential ruling against Bridgewater, he added.

The labor board has set its sights on several aspects of Bridgewater’s employment contracts, including the confidentiality agreement, a nondisparagement clause and a compulsory arbitration provision that states that if mediation fails, employees must enter binding arbitration and waive their right to a trial by jury or to participate with other employees in a lawsuit.

It is part of a broader move by the labor board to go after employers in other industries that are using similarly restrictive employment contracts and employee handbooks.

The labor board is continuing to pursue the matter even though the underlying sexual harassment claim has been resolved. The N.L.R.B. action is not focused on the merits of the harassment claim, but rather on a contention by the former Bridgewater employee that he was put on paid leave from his job this year after informing the hedge fund that he intended to file a complaint with the labor board about the firm’s employment practices.

“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,” Bridgewater said in a statement. “We will let the legal-regulatory system judge their merits.”

The hedge fund firm — which manages $150 billion for more than 300 institutional investors, including state pension funds and sovereign wealth funds — is known for having an unusual internal culture. Employees are required to publicly challenge each other in pursuit of what its 67-year-old founder Ray Dalio calls “radical transparency.” The firm is governed by a little white book called Principles, which is a compilation of Mr. Dalio’s personal musings on life and work; all employees are expected to read it.

Video cameras capture much of what happens inside the walls of the firm’s offices in Westport, Conn., and employees are often asked to review and weigh in on recorded meetings and debates among employees.

When the sexual harassment complaint against Bridgewater and the N.L.R.B. case were detailed in a front-page article in The New York Times, Mr. Dalio responded with a two-page letter arguing that his firm had been a victim of “sensationalistic and inaccurate” reporting.

The labor board’s move comes as the hedge fund firm is scaling back its operations. It began to slow down its hiring this summer, and last month it announced plans to lay off some of its more than 1,500 employees. So far this year, its largest fund — the Pure Alpha II fund — is down 4.7 percent as of last week, and its All Weather fund is up 12.3 percent as of last week.

Within the industry, Bridgewater’s standard employment contract is considered to be among the more restrictive, legal experts and recruiters say.

A copy of a Bridgewater contract from several years ago, which was reviewed by The New York Times, prohibited employees from disclosing the terms of the agreement to anyone except immediate family members and legal advisers even for a period of time after leaving the firm.

In another section, all current and former employees were required to inform Bridgewater executives if he or she received a subpoena before responding and to cooperate with the hedge fund in keeping nonpublic information about the firm confidential.

The labor board, however, is not challenging Bridgewater on a provision in its employment agreement that experts say is the most contentious — a two-year noncompete clause that limits the ability of hedge fund employees to move to another financial services industry job.

The two-year bar on taking a job is seen as extreme by some employment experts, who say that it is not just the length but how Bridgewater seeks to enforce the clause that stands out.

In the contract reviewed by The Times, Bridgewater stipulated that current employees inform the president of the firm of any new employment opportunities and added that the firm would let the employee know as soon as possible if it objected to the new job.

For two years after leaving Bridgewater, the firm can ask a former employee to provide an update on the new job up to four times a year to ensure the former employee was not working for a rival.

The former Bridgewater employee who prompted the N.L.R.B. action, Mr. Tarui, agreed to withdraw his sexual harassment claim against the hedge fund as a part of a settlement in which Bridgewater agreed not to enforce the two-year noncompete provision. That decision by the hedge fund allowed him to take a new job at the private equity firm Kohlberg Kravis Roberts & Company.

A lawyer for Mr. Tarui declined to comment.

The N.L.R.B. has scheduled a December hearing in Hartford, Conn., on its complaint. Still, the likelihood is that the N.L.R.B. case will settle, the outcome in most cases it brought last year.

Mr. Cass, a supervising lawyer with the federal labor board, said the N.L.R.B. was “still hoping to get this resolved.”

Robert Kraus, a lawyer who often represents Wall Street employees in disputes, said it did not surprise him if the N.L.R.B. was looking for an opportunity to challenge contracts used by investment firms.

“If it was a narrowly drafted clause, it would not trouble the agency,” he said. “But you see these agreements and they go on and on, and the agency believes they infringe on rights.”

Say No To Noncompete Agreements At Work

If you have a noncompetition agreement, it is not enforceable. Employers use noncompetition agreements mainly as a deterrence. In reality, employers know they are not enforceable and the courts feel the same way.  People need to work and unless you are going to pay an employee not to compete, no court is going to enforce such an agreement.  In my practice, I continually represent employees who have noncompetition agreements attached to equity compensation awards, employment and severance agreements and contained in employee handbooks.  Employees never ask to receive a noncompetition agreement, but employers force employees to take the job and the noncompetition agreement together or leave it. Employees are never afforded any real opportunity to negotiate the agreement.

There are a few tactics to overcome noncompetition agreements.  First, these agreements, like any contract, require “consideration” such as “cash” or some other compensation to bind the agreement.  In many states, like Connecticut, if the employer provides the agreement on the first day of work, then there is adequate consideration for the noncompetition agreement. However, in Connecticut, if the employer provides the agreement two, four or even six months after the start of employment, then there is no consideration for the agreement and it is unenforceable; Connecticut courts have fashioned a rule that continuation of employment is not valid consideration to bind the parties to an agreement.

Another creative and unused method to destroy a noncompetition agreement is the use of a sworn affidavit that is prepared for the employee prior to starting a new job with a competitive company. The affidavit will state in essence that the employee will not use confidential proprietary information at his new employer and will not poach or solicit former clients or former coworkers.  The only remaining fact is the Employee so happens to work for a competitor.  The affidavit ensures the former employer is protected and prevents it from waging litigation against the former employee.  No court will issue a ruling forcing an employee from his or her employment when there is no demonstrated injury or potential injury to the former employer.  I recommend the employee deliver the affidavit to the former employer before starting the new position or upon receiving a cease and desist letter from the former employer.  This is a very inexpensive way to destroy the noncompetition agreement and prevent unnecessary litigation.

The final and more common method of destroying the noncompetition agreement is to demonstrate to a court at the start of litigation that the agreement is unenforceable because the time period is too long, or the geographic scope too large and/or that the employee is unable to earn a livelihood. Courts largely focus on the balance between the employee’s interest to earn a living against the employer’s interest to protect itself.  Courts side with employees and refuse to enforce noncompetition agreements during difficult economic periods, most likely because judges feel reluctant to bar employees from active employment.

If you would like more information, contact Mark Carey at 203-255-4150 or mcarey@capclaw.com