Immigration and mobility considerations can significantly impact corporate transactions, especially those in cross-border deals. Employers must ensure continued work authorization for impacted employees, manage visa statuses in other countries, and identify and address immigration issues up front. In our latest Global Immigration and Mobility Video chat, our on-the-ground immigration and mobility attorneys from EMEA, Latin
The FTC rule banning post-employment noncompetes was published in the Federal Register on May 7, which means the rule will take effect on September 4, 2024, unless pending lawsuits to void the rule are successful.
Despite considerable uncertainty around when, or even whether, the rule will apply, employers should prepare now so as not to be caught flatfooted. The first step is to understand the rule’s parameters and potential impact on your business. Our FAQs guide you through the intricacies of the rule and the steps you should take while waiting for the lawsuits challenging the rule to be resolved.
1. Does the rule apply to B2B noncompetes?
No, the FTC rule does not apply to business-to-business (B2B) noncompetes. Instead, existing federal antitrust laws should continue to be considered when evaluating B2B noncompetes.
2. Does the rule apply to all workers?
No, there are limited exceptions. First, the rule does not invalidate existing noncompete agreements (i.e. agreements entered into on or before the effective date of September 4, 2024) with “senior executives.” After that date, new noncompetes with all US employees will be prohibited.
“Senior executive” means a worker who received “total annual compensation” of at least $151,164 in the preceding year (or the equivalent amount when annualized if the worker was employed during only part of the year) and who is in a “policy-making position.”
Second, the rule does not apply to workers outside of the United States. See FAQ 11 below.Continue Reading Thirteen Things You Didn’t Know About the FTC’s Noncompete Ban and Five Steps to Prepare Now in Case it Takes Effect
On Tuesday this week, the Federal Trade Commission (FTC) issued its highly anticipated final rule on noncompetes, imposing a near-total ban on worker noncompetes in the United States. Barring injunctive relief from legal challenges (which have already started), the rule will take effect 120 days from publication in the federal register.
Interestingly, the rule exempts noncompete covenants entered into pursuant to a bona fide sale of a business. While “bona fide” is not defined in the final rule, the Supplementary Information for the rule explains that the FTC considered but rejected percentage and dollar minimum thresholds for the sale of business exception to weed out “exploitative and coercive” noncompetes and clarified that excepted noncompetes must be given “pursuant to a bona fide sale.” The Supplementary Information further explains that the FTC considers a bona fide sale to be one that is made between two independent parties at arm’s length, and in which the seller has a reasonable opportunity to negotiate the terms of the sale. In contrast, the FTC specifically calls out as problematic “springing noncompetes,” which apply to employees in the event of a sale and mandatory stock redemption or repurchase programs because the employee has no goodwill to exchange in the sale for the noncompete and no meaningful opportunity to negotiate at the time of contracting.
Nevertheless, the bona fide sale exception is broad and preserves the status quo by allowing buyers in M&A transactions to obtain noncompetes from individual sellers in circumstances where such noncompetes are otherwise permitted currently. While the pending and anticipated legal challenges to the rule are significant and place the entire rule in jeopardy, the sale of business exception is not likely to be narrowed because of these challenges.
So, what does this new regime mean for M&A?
The Supplementary Information confirms that the new rule does not apply to B2B noncompetes or nonsolicits. Instead, the focus of the rule is noncompetes with workers that limit their ability to work for others. So the rule does not impact current B2B agreements.
Second, the FTC repeatedly makes the point that noncompetes must meet existing state and federal law restrictions (e.g., reasonable in scope and duration; limited to the goodwill to be acquired, etc.) to be enforceable, even if they otherwise fall within the sale of business exception in the new rule. This is the case because the FTC rule creates a new floor for noncompetes by preempting more lax state rules, but it does not preempt more stringent state laws or federal antitrust restrictions.Continue Reading Still Going Strong: M&A Noncompetes and the FTC’s Final Rule on Noncompetes
In late breaking news out of New York, Governor Kathy Hochul has vetoed legislation that would have imposed the most restrictive state-level ban on employee non-competes in the United States. Last June, the New York State Assembly passed S3100, which if signed by Governor Hochul, would have voided any contract restraining anyone from engaging in a
Special thanks to co-presenters Nandu Machiraju and William Rowe.
Where the sellers or shareholders in a corporate transaction are individuals (especially where they may continue on as employees of the buyer), noncompetes are a valuable tool in a deal lawyer’s toolbox. However, there is a clear trend of increasing hostility to the use of
In first-of-its-kind legislation, under SB 54, California will require venture capital companies to collect and report diversity data from portfolio company founders as soon as March 1, 2025. The new Fair Investment Practices by Investment Advisers law intends to increase transparency regarding the diversity of founding teams receiving venture funds from covered entities
On Tuesday, June 27, US antitrust agencies announced proposed changes to the premerger notification form and associated instructions and rules that implement the Hart-Scott-Rodino Act. Among other things, the proposed amendments require a labor market analysis including workforce categories, geographic information, and details on labor and workplace safety violations.
The proposed amendments are intended
Special thanks to Jose (Pepe) Larroque, Salvador Pasquel Villegas, and Martha Mayorga-Luna.
“Nearshoring” in Mexico is a hot topic for multinational companies considering moving business and manufacturing closer to home. COVID-19-era global supply chain disruptions and changes to the global economy are causing companies to reexamine their sourcing options and relocating to Mexico
In April, California Gov. Gavin Newsom signed a statewide right-to-recall law — S.B. 93 — affecting certain employers. One of the key provisions of the new law, which has not been subject to much discussion, is how it affects corporate transactions.
In this article, we discuss how this new statute that could present challenges for
Only one thing is certain: Nothing is certain. The global transactions market remained robust in 2018 and still into 2019, despite well publicized macro-economic uncertainty, stemming from Brexit concerns, among other developments. Real threats to free trade and investment flows remain, with the potential for a much more serious outbreak of protectionism and isolation on
