Richard Rabin Quoted in The Hedge Fund Law Report on Fund Manager Employment Agreements

For its article “What the NLRB Complaint Against Bridgewater Means for Hedge Fund Manager Employment Agreements,” The Hedge Fund Law Report spoke with Akin Gump labor and employment partner Richard Rabin about how the National Labor Relations Act (NLRA) apples to hedge funds. A complaint against Bridgewater by the National Labor Relations Board (NLRB), the article reports, cites several provisions from its employment agreement that allegedly violated the rights of employees under the NLRA.

Rabin explained that many hedge fund managers may not realize the NLRA applies to them, noting that when people think of the act, they tend to think of unions and traditional labor activities such as protests, strikes, boycotts and picketing. He discussed the standard nature of the provisions challenged in the Bridgewater complaint, including policies prohibiting employees from disparaging their company or communicating with the media on company issues. Rabin said many people would accept the fair and logical nature of these provisions: “When you think of the provisions at issue – confidentiality, non-disparagement and other standard and eminently reasonable clauses – it strains credulity that they are under attack. You read the facts in these cases, and companies seem to be acting sensibly, yet in decision after decision, their policies and actions are deemed unlawful.”

Still, Rabin said the NLRB’s move is not surprising, given that the board’s thinking and legal tactics have been evolving in this direction for some time. This has become more so under the Obama administration, he noted, adding that the complaint against Bridgewater has now given what seemed a distant and theoretical danger sudden immediacy.

Rabin said the “catch-22” in this particular instance is that, while the SEC has encouraged hedge fund managers to develop social media policies in keeping with their compliance, anti-fraud and record-keeping obligations, the NLRB now is taking action against Bridgewater for policies aimed at least in part at accomplishing those very objectives. “It’s an untenable position,” he said, “yet one that managers need to understand and prepare for.”

Rabin suggested that fund managers work meticulously on crafting policies, contracts and protocols that balance a number of competing interests. Fund managers’ policies, he said, must protect a firm’s legitimate business interests, while ensuring that, if the policies become the target of an enforcement action, they can be defended.