Two former advisors of Goldman Sachs Personal Financial Management, based in California, have initiated a legal battle challenging the applicability of their employment agreements after leaving the company. This lawsuit specifically targets the non-compete clauses in these agreements, which restrict advisors from participating in the industry for six months after their departure from Goldman Sachs in September.
It also addresses clauses that prohibit them from soliciting their former clients.
This Goldman Sachs lawsuit arises just before Goldman concludes the sale of its fourth-quarter unit, which holds around $29 billion in assets and has 300 advisors. Overland Park, Kansas-based advisory firm Creative Planning will be the buyer. Peter Mallouk, CEO and majority owner of Creative Planning, has previously expressed his intention to aggressively enforce the terms of employment agreements that advisors signed while at Goldman Sachs or its predecessor, United Capital.
Meanwhile, several PFM advisors have opted to leave the company to establish their own firms, and at least another 16 have joined competitors, according to industry news website Citywire.
The price Creative Planning pays for PFM is subject to the number of advisors who ultimately transfer, according to a source familiar with the terms of the deal. Additionally, it’s important to note that Creative Planning, which has over 1,500 advisory employees, according to its website, will not automatically inherit any liability from this lawsuit or others filed by departing PFM advisors against Goldman before the closing, according to the same source, who spoke on condition of anonymity.
On September 28, brokers Gary Corderman and Janet Kohrmann filed a petition in a California state court seeking an injunction to prevent Goldman from enforcing the “restrictive clauses” in their employment agreements, including non-compete and non-solicitation provisions.
Corderman and Kohrmann argue that these clauses violate California state laws that favor employee choice. The lawsuit also asks the court to order Goldman to deliver any gains obtained from enforcing the challenged contractual terms, as well as attorney fees, costs, and interest.
In their claim, the advisors argue that non-compete clauses “illegally prohibit” them from working in broad segments of the financial industry and violate California law, which prohibits employers from restricting employees from engaging in “a lawful profession.”
The advisors also contend that a provision requiring them to submit their disputes to arbitration violates California state law, as they were required, in a “take it or leave it” manner, to sign the employment agreements to secure their jobs and had no opportunity to negotiate mandatory arbitration provisions.
A spokesperson for Goldman responded to these allegations by stating, “We believe this lawsuit lacks merit.”
Unfortunately, non-compete agreements are common tactics that many employers may use to prevent their “secrets” from being exposed. However, these clauses can be a significant limitation for millions of employees seeking new and better opportunities.
If you or someone you know is facing labor violations or unfair practices at work, you should know that you have the right to seek justice and hold your employers accountable. We all have the right to work in safe spaces where we are respected and valued. Don’t let these violations affect your professional career; seek the legal help you need today.
Call Labor Law Advocates. We are available 24/7.