David Bolno, a partner in a prestigious management firm in Hollywood, is suing his firm’s parent company, Focus Financial Partners, over the non-compete clause in his contract. This lawsuit is part of a larger trend. It comes at a time when the FTC is reviewing how non-competes affect employees and whether they should be allowed to continue as-is. The question comes down to a basic right for an individual to pursue their choice in a career. We’ll look at how this case is playing out and how it might affect the rights of workers in the future.
The Story
In 2018, Focus Financial Partners purchased the management firm of David Bolno. From there, it was quickly split into two different organizations. As a part of the contribution and purchase agreement at the time of sale, the business managers all agreed to a five-year non-compete. The lawsuit claims that this non-compete ended on April 1, 2023.
However, Focus would go on to amend the management agreement in the summer of 2022. This contract adjustment was made, in part, due to how the company was split. The amended contract also included non-compete language for the managers. Focus has been staunch on the extension of the non-compete. Should any of the business managers choose to seek employment elsewhere, leadership has made it clear that the entity will enforce the penalties. The managers argue that non-competes cannot be enforced because they were not connected to the sale of the company.
Improper and Unenforceable
The lawsuit alleges that the non-compete goes against the laws in California. In general, the state’s professional codes are extremely restrictive on any contract that prevents an individual from working in a lawful trade. While the state does make concessions for non-completes in some cases, California law sides largely with the rights of the workers. David Bolno, who graduated Cum Laude with his law degree, claims that the language included in the amended contract from Focus is based on business law in Delaware, which would render the contract improper and unenforceable.
The complaint does not state that the business managers, including David Bolno, are seeking to part ways with Focus. However, there have been some notable disagreements between the divisions. Earlier this year, its partner firm accused Focus of undermining it by leaving the managers out of a major sale. The suit alleged that Focus set up agreements for the sale of its subsidiary firm when focus was attempting to sell the entire company. After it announced the $7-billion sale, the firm alleged that they were specifically left out of discussions to undercut the value of the subsidiary. Exactly how the lawsuits will go is unknown, but official spokespeople of Focus Financial Partners vehemently deny all wrongdoing.
Non-competes in the News
In April 2024, the Federal Trade Commission is said to vote on its proposal to ban non-competes from employment contracts. The proposal was made on the basis that non-competes violate Section 5 of the Federal Trade Commission Act because they’re considered unfair competition. The first draft was submitted in January of 2023, and the agency received close to 27,000 public comments on the proposal. If the law was to go through, the FTC claimed that wages would go up by nearly $300 billion per year across 30 million Americans.
Those in favor of the FTC’s proposal include Congressional Democrats as well as labor and advocacy groups. Those opposed, which are currently led by the US Chamber of Commerce, claim that the FTC does not have the authority to ban non-competes. Should the proposal be finalized in its current form, opponents are prepared to sue. The FTC is taking about 16 months to go over the details, which is not an unusual amount of time to spend on finalizing the rules. While there have been a remarkable number of reactions to the proposal, the commission is following the same process as other federal agencies when it comes to rulemaking.
If the agency is devoting its intentions to both the stipulations of the rules and the consequences of breaking them, then employees can be reasonably confident that the rules are being made in their best interests. By the end of February, it was estimated that the FTC had already spent half a million to get these rules passed. That’s 47 agency employees, contractors, and consultants and more than 6,000 hours to get it right.
The FTC argues that this exploitative practice makes it difficult for people to start new businesses and impedes innovation. An estimated 18% of all workers are covered by non-competes, and research suggests that this practice is contributing to the racial and gender pay cuts in the industry. If the FTC’s ruling is issued, it could help correct up to 9.1% of that chasm.
The Freedom to Change Jobs
At the core of David Bolno’s lawsuit is freedom for workers. Rules that stop workers from changing jobs can deny them higher wages and better working conditions. It also deprives businesses that require a pool of talented workers to thrive. Nearly all industries make use of non-competes for all kinds of reasons. Employers will often coerce employees, who range from warehouse pickers to doctors, to sign contracts that give them all the power.
Under the FTC’s new ruling, it would be illegal for an employer to enter a non-compete, maintain a non-compete, or imply in any way that the worker is subject to a non-compete. This would apply to independent contracts as well as both paid and unpaid employees. Should the law pass, all employers would have to tell their workers that their existing non-competes are no longer enforceable. This rule may also extend to other employee restrictions, such as NDAs if they are too broad in scope.
For professionals like David Bolno, freedom can be a truly galvanizing force in the working world. When employees feel pigeonholed by their employers, they can quickly lose their creative spirit. Bolno works with a variety of artists, including musicians and entertainers. Record companies, recording studios, and several high-profile people seek his advice on maximizing finances and preserving their long-term net worth.
Specializing in cash flow, business planning, tour accounting, and financial planning, his experience and proven track record have earned him a stellar reputation in the industry. With a law degree from Temple University and a bachelor’s from Duke, Bolno has used his education to give his clients an advantage. When wealth can be won and lost at the drop of a hat, particularly in the entertainment industry, he takes pride in protecting people from unpredictable market forces.
Holding Focus accountable to the law isn’t just a way for him to continue his work the way that Bolno deems best, it’s also a way to help other professionals in the future if they run up against a similar problem. No matter what rules the FTC comes out with next year (or who sues the FTC in the process), the more workers fight for their rights, the more likely it is that employers will cease exerting full control over them.
