Facebook Firings

Posted on May 27, 2010 by Rob Radcliff

                                                 

There are more and more stories about employees being fired/disciplined for improper use of social networking sites.  The most recent was the waitress who complained about the customer who only tipped $5 in her Facebook update post --- she was fired.  Others include:

  • The firing of a Dallas radio producer who made negative remarks about Spurs fans in a Tweet.  (He also happens to be the pitcher who served up Barry Bonds' 756th home run.)
  • Ex-Kansas City Chiefs' running back Larry Johnson'a tweets that cost him his job.
  • The non-profit employee who had a sex blog.
  • The Scottish politician who was forced to end his campaign because of Twitter rants.

Do you have any other examples?

 

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The Big Deal with Brokers and Fiduciary Duties

Posted on May 18, 2010 by Rob Radcliff

 

After the financial meltdown there was talk of the Securities and Exchange Commission imposing a fiduciary duty standard on financial advisors and brokers.  That no longer looks like the case and apparently the SEC is only going to "study" the situation.  Why does it matter?  In Texas, a fiduciary-defendant has the burden of proof in a trial.  Below is the question the jury considers on fiduciary duty:

Did Mr. Broker comply with his fiduciary duty to Mr. Customer?

Because a relationship of trust and confidence existed between them Mr. Broker owed Mr. Customer a fiduciary duty.

To prove he complied with his duty, Mr. Broker must show:

a.     The transaction[s] in question [was/were] fair and equitable to Mr. Customer;

b.     Mr. Broker made reasonable use of the confidence that Mr. Customer placed in him;

c.     Mr. Broker acted in the utmost good faith and exercised the most scrupulous honesty toward Mr. Customer;

d.     Mr. Broker placed the interests of Mr. Customer before his own, did not use the advantage of her position to gain any benefit for himself at the expense of Mr. Broker, and did not place himself in any position where his self-interest might conflict with her obligations as a fiduciary; and

e.     Mr. Broker  fully and fairly disclosed all important information to Mr. Customer concerning the transaction[s]. 

      Answer: _______________

 

In most civil cases, the burden of proof is on the Plaintiff. Not in a fiduciary duty case where the defendant has the burden. Though the majority of broker/dealer disputes take place in the arbitration format, a proceeding in state court would have a far different complexion if fiduciary duties are imposed, not to mention the effect it would have on the broker/customer relationship.

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Cash for a Non-Compete - The Future of Texas?

Posted on May 12, 2010 by Rob Radcliff

                                       

 As has been widely commented on, the Texas Supreme Court will determine whether stock options can serve as the basis for an employee's non-compete agreement.  The Dallas Court of Appeals, in Marsh USA v. Cook, ruled that options could not. 

A ruling that reverses the Dallas court could  have much wider ramifications:  What would the employment landscape look like if an employer could pay an employee to enter into a non-compete? Would employers like to require their sales force to enter into non-competes that would either: (1) guarantee continued employment; or (2) put a departing salesperson out of the market for a year?  Would an employee agree to an extra $10,000 signing bonus in exchange for signing a non-compete?

Texas courts do not like to analyze whether the "consideration" that forms the basis of a contract is sufficient, meaning the Court won't review whether a business or person paid too much or too little for something.  Employers will always confront potential employees with different bargaining power.  A salesperson with a significant client base and track record of success may be able to demand a year of salary for a non-compete or not agree to enter into such an agreement.  The first year salesperson right out of college is in a little different position usually unable to demand anything. 

I'm not convinced the Texas Supreme Court will make the sweeping ruling some suggest, but if it does it could significantly alter employment relationships and the ability of employees to freely move from employer to employer.   How that would play out remains to be seen, but employers will certainly look to lock down employees with non-compete or non-solicitation agreements.

 

 

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Brokers have to pay bonuses back.

Posted on May 3, 2010 by Rob Radcliff

                                               

We've previously discussed  the lucrative compensation packages wire houses use to attract high producing FAs.  The mechanics of those packages usually include a signing bonus, but it's not an up front bonus like the 1st round draft choice in the NFL draft receives.  In many instances it is a forgivable promissory note conditioned on the  broker staying a certain time period.  If they leave early the broker must pay it back.

Recently, Judge Lewis Kaplan of the Southern District of New York dismissed a group of former Citigroup brokers' lawsuit who left employment early and refused to pay off their loans.  Typically, breach of a promissory notes is almost impossible to defend.  It's a simple proposition, I loan you money you have to pay it back.

The Judge was not impressed with the Plaintiffs' case:

These plaintiffs all received substantial interest-free advances when they joined Smith Barney . . . They all promised to repay Smith Barney over terms of years out of their compensation and to repay any unpaid balance if they left the firm ‘for any reason or no reason.’ Having left the firm without repaying everything they owed, they brought this baseless lawsuit in what quite plainly was a studied effort to prevent collection of the debts they owed through the arbitration process.

Brokers should assume that if they are going to sign a note like this, they are going to have to pay it back unless they stay the term of their agreement.  

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