ABA Banking Journal - July 2010 - (Page 18)
ABA Community BAnking | empLOymeNt AGReemeNts
compete agreement is at the beginning of employment. In this way, the consideration involved becomes part of the actual offer. However, as employees develop and key employees emerge during employment, some states have found continued employment and other options to suffice as consideration for a noncompete entered into at the outset. Creative strategies can be used, as discussed online, to address post-offer situations to protect your bank. It is also advisable to include a non-solicitation provision and provisions protecting confidentiality of the bank’s business information, client lists, trade secrets, financial information, strategies, etc., in a bank’s noncompete agreements. There’s a flip side here, too: What should a bank do when an incoming employee is bound by a noncompete agreement? Banks must be diligent in honoring enforceable noncompete agreements which bind incoming employees. Different strategies can be used to determine if the agreement is enforceable. Your own noncompete agreements Turnabout applies here. There are steps that bankers, CEOs, CFOs, or other key employees can take to protect themselves individually in regard to noncompete agreements. These steps—similar to those for employers—include obtaining legal advice; evaluating the enforceability of the noncompete agreement; knowing which state law will be applicable; and, possibly, negotiating changes in your favor. In addition, an employee may take “preemptive” action by filing a lawsuit asking the court to declare the noncompete agreement unenforceable. Where the board’s interests lie Directors must have a general under standing of noncompete agreements and when they should
18 | ABA BANKING JOURNAL | july 2010
“Should board members get their heads examined?”
Jeff Gerrish of Gerrish McCreary Smith blogs about what he’s seeing in the trenches. Here is an excerpt from his June 16 “Jeff Gerrish on Community Banking” blog:
hy in the world would anyone in their right mind agree to serve on the board of directors of a community bank? For directors and trustees at most community banks and savings institutions, it is certainly not about the pay. Nor can board members take advantage of the bank’s credit facilities, except in compliance with some pretty strict regulations like Reg O. So, again, why would anybody do it? Most of the directors I have run across in community banks over the last 30 years have joined the ranks of the board because they continued to believe it is an honor that allows them to economically develop the community and do something positive, notwithstanding the potential liability. I, too, in my past life, for approximately five years was on a board of directors of a larger holding company’s subsidiary bank. In view of my checkered past—having sued bank directors for FDIC in the late 1970s—when the bank announced publicly that I had joined its board, I quickly received a number of inquires from my consultant and attorney friends around the country inquiring about my apparent lobotomy and other mental health issues. My response then, as it would be now, is that the risk of service on a community bank board is still manageable. To see how Jeff says to manage the risk, go to http://bit.ly/jeffblog616 Other ABABJ blogs you and your staff should be watching: • Talking Credit, by Ed O’Leary: http://bit.ly/talkingcredit • Lucy and Nancy’s Common Sense Compliance, by contributing editors Nancy Derr-Castiglione and Lucy Griffin: http://bit.ly/commonsensecompliance • AML, Fraud, And Other Things, by John Byrne: http://bit.ly/amlfraud • Beyond the Bank, by Dan Fisher: http://bit.ly/beyondbank • Pass the Aspirin: The Blog: Bankers helping bankers, http://bit.ly/passtheaspirin • Books for Bankers, reviewed by bankers and other experts: http://bit.ly/bankbook • Sign up for our free weekly e-letter: http://bit.ly/ABABJReport
be used. In any hiring decision in which the board is involved, the board will want to ensure that a valid and enforceable noncompete agreement is required of key employees. Given these high-level employees’ important positions with the bank, their relationships to clients, their access to confidential information, and their influence with customers, employees, and the community, a valid noncompete agreement is critical. Board mem-
bers, especially in smaller communities, may become aware of information suggesting that a former employee is competing with your bank in violation of his or her noncompete agreement. Swift action must be taken to permit “damage control.” n
Heidi Guttau-Fox is an attorney with Baird, Holm, LLP Omaha, Neb., and a director of , Treynor (Iowa) State Bank. A moredetailed version of this article appears on www.ababj.com
Table of Contents for the Digital Edition of ABA Banking Journal - July 2010
ABA Banking Journal - July 2010
Of Mutual Interest
Pass the Aspirin
What’s PayPal Up To?
Brother, Would You Take a Lease?
Surveys & Trends
ABA Banking Journal - July 2010
If you would like to try to load the digital publication without using Flash Player detection, please click here.