The US Federal Trade Commission’s action to ban non-compete agreements has left Wall Street businesses rushing to restructure contracts and find new ways to tie down the high-priced personnel that their business models rely on.
The contracts, which constrain a worker’s ability to work for a competitor for a certain period of time after leaving their current employer, have long been a hallmark at big banks, brokers, asset managers and hedge funds. But led by chair Lina Khan, FTC commissioners voted 3-2 on Tuesday to invalidate existing contracts for most employees and for all new contracts starting in August.
The move undermines some of the fixtures of Wall Street life, including the ability to impose paid “gardening leave” and to withhold deferred bonuses when an employee leaves for a competitor. Headhunters predict it will free talented traders, investors and bankers to leave jobs where they are unhappy and give a boost to well-run groups that can offer more money and a more congenial environment.