Employment contracts for high-level employees typically have to address a wide variety of issues, including base salary, stock options, bonuses, benefit plans and non-compete provisions. It is in the best interests of the employee and the employer to ensure that the employment agreement is carefully drafted and can stand up to scrutiny. Otherwise, both parties may find themselves in costly litigation.
That was the case for Wells Fargo and Co. and two brokers who took issue with a provision in their former employer’s compensation plan. The brokers worked for Wells Fargo Advisors, LLC, and according to the provision in question, if the brokers left the firm to work for a competitor, then they had to forfeit bonuses that would have otherwise been deferred to the brokers’ retirement plans.
The brokers, one of whom now works for UBS AG, the other of whom works for Morgan Stanley, claimed that their bonuses were earned by meeting set performance goals, and that Wells Fargo’s forfeiture policy violated California law and South Dakota law.
In 2012, the brokers brought a class action claim against Wells Fargo, and the firm recently agreed to settle for $7.4 million. Pending court approval, the deal would provide a $5.6 million fund for about 135 brokers in the class, with the remaining amount going toward legal fees and other expenses.
The settlement document also indicates that Wells Fargo has not used the forfeiture provision since 2012 and has no plan to impose the policy.
Legal ambiguities in an employment contract can lead to costly disputes. At Shulman, Hodges & Bastian LLP, we handle employment contract negotiations, as well as draft and review contracts that protect the rights and interests of high-level employees and their employers.