Bridgewater Case Raises Confidentiality Agreement Questions

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By Chris Opfer and Lawrence E. Dubé

Oct. 20 — A legal dispute over the confidentiality agreements that Bridgewater Associates LP requires employees to sign may be raising some eyebrows on Wall Street, but it doesn’t seem likely to immediately change the way financial firms shape those contracts.

The National Labor Relations Board’s general counsel says the world’s largest hedge fund manager violated federal labor law by making employees sign agreements that restrict them from sharing information about pay and other terms and conditions of their jobs. That includes provisions requiring workers to keep confidential “any non-public information,” barring them from disparaging colleagues and forcing them to waive the right to bring class action lawsuits.

A ruling against the firm—known for its unorthodox and intense company culture—would certainly get some attention in an industry that hasn’t traditionally been a target for the agency tasked with enforcing federal labor law. The case also signals that the board may be following the lead set by the Securities and Exchange Commission and Equal Employment Opportunity Commission in taking a closer look at confidentiality, arbitration and other employee contracts.

“Hedge funds have not really been exposed to the NLRB because many board matters arise in the union context,” Richard Reibstein, a partner at management-side law firm Pepper Hamilton LLP, told Bloomberg BNA. “The board is making a lot of inroads in areas outside of the traditional union-management arena by dealing with workers’ general rights to act in a collective way.”

Still, Reibstein and other attorneys told Bloomberg BNA that financial firms and other businesses can make some quick fixes to ensure they protect trade secrets and client information without thwarting workers’ legal rights.

“I don’t see anything on the face of this that would suggest that there’s some new soil that the NLRB general counsel is tilling here,” former board member Marshall Babson told Bloomberg BNA.

A ‘Hotbed of Activity.’

An NLRB regional director issued an administrative complaint June 30, alleging Bridgewater illegally suspended an employee after he threatened to file an unfair labor practice charge against the company ( Bridgewater Assocs., LP , N.L.R.B. A.L.J., No. 1-CA-169426, ALJ hearing 12/6/16 ).

The complaint also asserts Bridgewater violated the National Labor Relations Act by requiring the worker to sign an agreement restricting his right to discuss the terms and conditions of his job and forcing him to arbitrate certain disputes. The contract language unlawfully interferes with the worker’s right to join a labor union and act collectively with other employees, according to the complaint.

NLRB General Counsel Richard F. Griffin has repeatedly issued complaints challenging employer rules, handbooks and mandatory employment agreements. The board has found that overly broad policies may violate federal law even where there is no evidence that they have actually been enforced.

“Employer policies that seem to chill rights and protections in any way seem to be the focus of the board in recent years,” Mark Risk, who represents workers in labor and employment cases, told Bloomberg BNA.

The board isn’t the only agency keeping an eye on employment contracts.

The EEOC recently sued CVS over severance agreements that restrict a former worker’s right to sue for discrimination. Building products distributor BlueLinx Holdings Inc. agreed in August to pay $265,000 to settle claims its severance agreements violated whistle-blower protection rules.

“What you have is a hotbed of activity among governmental agencies that are focused on these types of provisions, which they allege have a chilling effect on the rights protected under a particular law,” Gary Friedman, a partner at Weil, Gotshal & Manges LLP, told Bloomberg BNA.

Friedman and the other attorneys echoed Bridgewater’s response to the complaint, telling Bloomberg BNA that the board should take the nature of the industry into account in looking at these agreements. They noted that financial services firms are highly regulated to protect client confidentiality, and said businesses have a right to protect their investment and management strategies.

The trick, they said, is to expressly state that the contracts aren’t intended to infringe on workers’ right to discuss pay information and other parts of their jobs with colleagues and to share certain information with labor organizers. “You have to take a look at the entire agreement to make sure it’s clear that an employee’s right to engage in protected activities are expressly preserved,” Friedman said.

Disparagement Ban Could Muzzle Employees

Some employers have complained that NLRB precedent makes it tough to distinguish lawful policies from unlawful ones.

Griffin responded to the criticism in March 2015 by issuing a guidance memorandum (Memorandum GC 15-04) on employer rules. He said a confidentiality provision runs afoul of the law if “employees would reasonably understand it to encompass such non-public information as employee wages, benefits, and other terms and conditions of employment.”

The memo provides examples of what Griffin believes are policies that go too far. That includes a number that resemble those in the Bridgewater contract.

Bridgewater’s employment agreement requires a worker’s commitment that “the terms of your employment with Bridgewater are confidential.” It also defines “confidential information” to mean “any non-public information.”

A separate provision advises employees that the ban on disclosing confidential information “applies in all contexts, industries and businesses.”

Griffin has also said disclosure bans can be unlawful, even if they don’t refer to employment conditions or employee information. That’s particularly true where the contract doesn’t clarify that the restrictions don’t apply to protected activity.

The Bridgewater agreement’s non-disparagement provisions also appear to raise some questions under the Griffin memo. The contract states that workers may not “disparage Bridgewater and/or its present or former affiliates, directors, officers, shareholders, employees or clients, whether directly or indirectly, in any manner whatsoever” unless required by law.

Griffin said in the memo that similar terms seem to go beyond protecting against defamation and instead extend to “concerted communications” protected by the NLRA.

The complaint against Bridgewater also takes aim at the company’s arbitration requirement, which forces employees to waive their right to bring class actions.

The board has held that such waivers unlawfully obligate employees to forfeit their rights under the NLRA. That position has drawn multiple challenges in federal appellate courts and is likely to be tested in the U.S. Supreme Court.

Hedge Fund Denies Wrongdoing

Bridgewater has denied that any of the language in its employment agreement violated federal law.

The company said it has never attempted to interfere with employee rights under the NLRA. It also argued that employees in the financial services industry wouldn’t reasonably believe Bridgewater’s agreement would limit their labor law rights, the company asserts.

Attorneys for the company didn’t immediately respond to Bloomberg BNA’s request for comment.

Scott Grubin, a lawyer for Wigdor LLP who is representing the Bridgewater employee, declined to discuss the specifics of the case. He said generally, however, that many businesses use overly broad confidentiality agreements that may run afoul of labor and other laws.

“Many financial services firms might be surprised that such traditional labor laws perhaps more commonly associated with the garment industry also apply equally to employees in the financial services industry,” Grubin told Bloomberg BNA via e-mail.

The case will be heard Dec. 6 by an NLRB administrative law judge, unless representatives of Bridgewater and the general counsel arrive at a settlement. An ALJ’s decision may be appealed to the five-member NLRB in Washington, and then to a federal appeals court.

To contact the reporters on this story: Chris Opfer in Washington at; Lawrence E. Dubé in Washington at

To contact the editors responsible for this story: Peggy Aulino at; Terence Hyland at

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