Asset managers typically use non-competes when hiring certain C-suite executives, portfolio managers and other “high-end” roles, especially in technology and alternatives, said Alan Johnson, a managing partner at compensation consultancy Johnson Associates. It is also fairly common for top distribution, sales or product development leaders to have non-compete agreements, as reported.

The ban may also cause shops to think twice about lift-outs or recruiting talent to start new strategies. “I can’t even really tie you down,” said Johnson. “I’m going to pay you to develop this product and you go compete with me tomorrow?”

The FTC noted that employers already have trade secret laws and non-disclosure agreements at their disposal to protect sensitive information, and that more than 95% of workers with non-competes also have an NDA.

Still, such non-disclosure and non-solicitation agreements may get more “elaborate,” said Johnson the comp consultant. “[Y]ou’re going to have to be draconian,” he said.

Firms may also consider shifting certain roles overseas as a workaround, while stipulating in contracts with new hires that the firm has a right to move the employee, he added.

FundFire / April 29, 2024