Benefits & Compensation

[As reported by our Baker McKenzie Compensation colleagues]

As of December 20, 2017, both the House of Representatives and the Senate have voted to approve the final version of the Tax Cuts and Jobs Act, in substantially the form released by the Conference Committee on December 15th. The bill is expected to be presented to the President for signature before Christmas, making US tax reform a reality for 2018.

What’s In? From a Compensation & Benefits perspective, among other things, the approved bill includes:

  • Significant changes to Code Section 162(m);
  • A new tax deferral regime for options and RSUs granted by private companies;
  • Elimination of exclusion for fewer than expected employer-provided fringe benefits; and
  • Increased disallowance of compensation-related deductions under Code Section 274.

What’s Out? Fortunately, the final bill does not include a Senate proposal to require the use of a first-in-first-out (FIFO) methodology when calculating capital gains on sale of shares, nor does it add back any of the changes to non-qualified deferred compensation that were proposed in the initial House version of the bill. Also, most of the changes proposed to qualified retirement plans have been eliminated.


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Last week, we discussed 5 executive agreement provisions to consider now to help avoid future risk. This week, we are back with our second installment.

As with the previous 5 provisions, companies should pay close attention when drafting the following executive agreement terms so as to best position itself in the event of future disputes.

6.  Trade Secret – Last year, the Defend Trade Secrets Act was passed and created a federal cause of action for misappropriation of trade secrets. However, to recover exemplary damages and/or attorneys’ fees under the Act, companies must provide explicit notice to employees that identifies the Act’s immunity provisions for certain types of trade secret disclosure, such as when a trade secret is disclosed through the reporting of a violation of law to federal, state, or local government officials. To maximize their recovery potential, companies should include the relevant notice in their executive agreements.

7.  Tax Code § 409A – The Internal Revenue Code includes significant tax penalties for certain deferred compensation arrangements. Under IRC Section 409A, there could be penalties if an executive agreement allows for payments to be made to the executive more than 2.5 months after the tax year in which the executive acquires a legal right to the compensation. This could apply to contract provisions regarding bonuses, severance payments, equity payments, change in control, terminations, and other compensation and benefits provisions. Given the intricacies surrounding these rules and exceptions, companies should engage in a specific review of all executive agreements for compliance to avoid these risks. For more information and updates on 409A in light of recent US tax reform, visit The Compensation Connection.


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On October 12, 2017, California Governor Jerry Brown signed a landmark new law barring California employers — and their agents — from inquiring about applicants’ previous salaries and benefits.

The law goes into effect on Jan. 1, 2018.

Here are 3 steps to take now to prepare:

  1. Remove all salary questions from hiring forms (including

The TLDR on the new UK pay gap reporting regs:

New Requirements

  • From April 2017, employers with at least 250 employees (which may include some contractors) in the UK will need to publish details of their gender pay gap on an annual basis.
  • The gender pay gap reflects the difference between what women are paid,

If your plan year coincides with the calendar year, the time to review your commission / bonus compensation plans is NOW.

We’re getting down to the wire. Friendly reminder that if you hope to make changes to 2018 commission / bonus compensation plans, act fast!

Recall that in most jurisdictions OUS, changes to terms and

Title VII and the Equal Pay Act expressly ban the unequal treatment and compensation of female employees. Yet pay inequity can creep in to even the most well-intentioned companies.  As a consequence, standards for evaluating pay practices are rapidly evolving in both the public and private sectors, and many companies are pledging to improve wage equality.  What’s more, with the EEOC now targeting equal pay discrimination, we are primed to see a wave of class action lawsuits that could cost companies millions in back pay and damages.  Is your company keeping up?
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