In a groundbreaking move, David Bolno, a principal at a leading business management firm, is part of a collective lawsuit challenging the validity of noncompete agreements, asserting that their parent company, Focus Financial Partners, is in violation of California law.

This legal step, led by Bolno and his colleagues, has far-reaching implications for labor laws and worker mobility, touching on a heated debate about the fairness and legality of noncompete clauses in American employment contracts.

A lawsuit filed last Wednesday saw approximately 50 principals from the firm, including David Bolno and other influential industry figures, contesting the noncompete provision in their contract with Focus. They assert that the noncompete stipulation contravenes California law, blocking them from progressing their careers independently if they choose to depart from the company.

Expiration of Noncompete Clause Prompts Suit

Following Focus Financial Partners’ acquisition of the firm in 2018, a significant number of business managers signed an agreement, which included a five-year noncompete clause. Per the lawsuit, this agreement expired on April 1, sparking a contentious debate about its amended version dated July 2022.

The focus of the dispute is on a clause in the revised agreement that contains a noncompete provision. The lawsuit lodged by the business managers, including Bolno, targets this specific provision, arguing it’s incompatible with California’s legal landscape as it doesn’t correlate with the sale of a business entity.

Conflict With California Law

The law in California, particularly Section 16600 of the California Business and Professions Code, stringently restricts agreements that inhibit individuals from pursuing a legitimate profession, trade, or business. As the lawsuit alleges, “Focus has threatened that it will seek to enforce the noncompete provisions if the principals leave the management company and venture into the same business line.” The principals counter-argue that such provisions contravene California law and thus are unenforceable.

The business managers, including Bolno, are seeking a declaratory judgment from an L.A. judge. They want the court to rule that the agreement’s choice of Delaware law is both unsuitable and unenforceable. Additionally, they argue that under California law, the noncompetition provisions are also unenforceable to the extent that they encompass services provided in California.

This battle doesn’t just exist in the realm of theoretical possibilities. It appears that the principals, including David Bolno, are keen to break away from their parent company. With a history of strained relations with Focus, this development is hardly unexpected.

In addition, the lawsuit doesn’t only involve contesting noncompete provisions. It also seeks an injunction, which would prevent Focus from inhibiting the principals from pursuing their professional and business interests post-termination of their employment with the management company.

A Broader Scope

This legal suit extends beyond the confines of the entertainment industry. It serves as a microcosm of broader tensions between American workers and corporate interests, specifically over noncompete clauses. As Bolno and his colleagues push against these restrictive agreements, they shed light on an issue that affects millions of workers nationwide.

For a significant portion of the American workforce, noncompete clauses act as barriers to career progression, limiting opportunities for individuals to explore new job prospects, negotiate better wages, or start their own businesses. In the face of these restrictions, Bolno’s legal action represents a crucial step towards freeing workers from the binds of these agreements.

As the principals push for the invalidation of noncompetes in the court of law, they simultaneously forge a path for workers to reclaim their freedom to move between jobs and industries. The decision in this case could set a critical legal precedent, challenging the conventional approach to noncompete clauses, and reshaping the landscape of labor law.

Not an Isolated Incident

David Bolno’s lawsuit against Focus Financial Partners is not just an isolated incident but part of a broader movement demanding labor market reforms. The verdict, therefore, won’t just affect Bolno and his colleagues but also the lives of American workers nationwide, marking a significant moment in the evolution of American labor law.

This unfolding story serves as a stark reminder of the ongoing struggle between employee rights and corporate interests. Through the actions of figures like David Bolno, American workers may eventually find themselves in a more favorable position to chart their professional journeys, unhampered by restrictive noncompete clauses.

Upcoming Vote Addresses Noncompete Clauses

Next April, a critical vote is expected from the Federal Trade Commission (FTC) regarding the finalized version of their proposal to eradicate noncompete agreements in employment contracts.

The proposal, which was first put forth in draft form in January, received close to 27,000 comments, revealing the depth of public interest in this issue. The FTC’s own estimates suggest that the proposed ban on most noncompete agreements could potentially influence about 30 million Americans and could give an impressive boost of roughly $300 billion per year to wages.

The commission will conduct its rulemaking following procedures akin to those of other federal agencies, particularly given the high volume of public comments, as per the insider. The FTC’s staff will consider making amendments to the rule, considering the feedback received from the comments.

A broad array of labor and advocacy groups have expressed their support for the proposed rule, finding allies in Democrats in Congress. In contrast, industry organizations, spearheaded by the US Chamber of Commerce, have voiced strong objections to the rulemaking. These groups question whether the FTC possesses the appropriate statutory authority for such a move and have hinted at potential legal action if the rule is confirmed in its current iteration.

Cary Coglianese, a professor at the University of Pennsylvania Law School, has observed that a 16-month timeframe for rulemaking is typical. “Sixteen months is certainly sufficient time to craft a new rule, particularly if an agency is dedicating a concerted effort towards it,” remarked Coglianese. “Given focused effort and successful management of the rule’s development within that schedule, there’s no reason to believe the agency would falter in achieving a responsible rulemaking process.”

According to a letter from the FTC, obtained by Bloomberg Law under the federal Freedom of Information Act and addressed to House Judiciary Committee Chairman Jim Jordan (R-Ohio), around $500,000 had been expended on this rulemaking endeavor by the end of February.

The FTC’s letter disclosed that at this stage, a team consisting of 47 agency employees, contractors, advisers, and consultants had invested more than six thousand hours into the rulemaking process.

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