Montreal

White & Case Advises Hg on Investment in Medical Systems

Global law firm White & Case has advised Hg, the specialist private equity investor focused on software and service businesses, on its agreement for an investment in Intelerad Medical Systems, a leading global provider of medical imaging software and enterprise workflow solutions.

Founded in 1999, Intelerad specializes in diagnostic viewing, reporting and collaboration solutions for radiologists. Headquartered in Montreal, Intelerad serves more than 300 healthcare organizations around the world, including radiology groups, imaging centers, clinics and reading groups, and has a strong and growing presence in hospital imaging departments.

Healthcare technology is a core sector for Hg, and Intelerad represents the fifth healthcare technology investment in Hg’s current portfolio.

The transaction is expected to close in the first quarter of 2020, following satisfaction of customary regulatory approvals.

The White & Case team was led by partner Oliver Brahmst and included partners Frank Lupinacci, Sang Ji, Steven Lutt, Tal Marnin and Arlene Arin Hahn, and associates Adam Plotkin, Jordan Kobb, Brian Fetterolf, Daniel Kozin, Brandon Dubov, Arian Mossanenzadeh, Harry Hudesman, Neeraj Shah, Caroline Cima, Julianne Prisco and Mark Kim (all in New York); partners Rebecca Farrington and Farhad Jalinous, counsel Paul Pittman and Keith Schomig, and associates Ajita Shukla and Daniel Rosenthal (all in Washington, DC); partner Jarlath McGurran and associate Mahir Maini (London); and partners Nirangjan Nagarajah and Michelle Keen, counsel Andrea Reeves, and associate Tiffany Leach (all in Melbourne).

Congress Approves New Disaster-Area Tax Relief

A flurry of tax legislation passed at the end of 2019 as part of an omnibus spending package. You might have already heard about changes to the retirement plan rules and tax extenders that were part of this package.

However, there are some lesser-known changes that you might not know about. Specifically, the disaster-related provisions of the Taxpayer Certainty and Disaster Tax Relief Act provide valuable relief to taxpayers affected by federally declared disasters that happened between January 1, 2018, and January 19, 2020.

Personal Casualty and Theft Losses

Prior to 2018, individual taxpayers that itemized their deductions could write off their unreimbursed casualty and theft losses to the extent that the losses exceeded 10% of adjusted gross income (AGI). In addition, the deductible amount had to be reduced by a “floor” of $100 for each casualty or theft event.

For example, Bill had $100,000 in AGI for 2017. He incurred a $25,000 loss to his home due to hurricane damage in 2017, and his insurance company paid him $10,000 for repairs. So, his unreimbursed loss was $15,000 ($25,000 – $10,000).

Bill itemized deductions on his 2017 tax return. How much was he able to deduct for unreimbursed hurricane damages? His deduction was subject to the 10%-of-AGI threshold of $10,000 (10% of $100,000). He also had to subtract $100 per loss. So, in 2017, Bill claimed a $4,900 itemized deduction for the loss ($15,000 – $10,000 – $100).

Important: A special election allows taxpayers to deduct a loss on a tax return for the preceding year. If you’ve already filed your return for the preceding year, you can file an amended return to make the election and claim the deduction in the earlier year. Decisions regarding this election should be based on an evaluation of 1) whether you need cash quickly, and 2) your overall tax situation in the casualty event year and the preceding year.

TCJA Changes

The Tax Cuts and Jobs Act (TCJA) repealed the deduction for casualties and theft losses for 2018 through 2025 — except for losses suffered in federally declared disaster areas. The special election to speed up the tax relief available to taxpayers in disaster areas remains in effect after the TCJA.

New Relief for Victims

The Taxpayer Certainty and Disaster Tax Relief Act doesn’t restore pre-TCJA law for all casualty and theft losses. However, it does provide the following seven tax breaks to victims in federally declared disaster areas, generally for 2018 through January 19, 2020:

  1. 10%-of-AGI threshold. The new law eliminates the usual 10%-of-AGI threshold on deducting losses from federally declared disasters. It also raises the floor for qualified disaster losses from $100 to $500.
  2. Itemizing vs. taking the standard deduction. Under the new law, you don’t have to itemize deductions to claim a disaster-related loss. You can write off your loss even if you claim the standard deduction for the tax year in question.
  3. Charitable contribution limits. The new law temporarily suspends the tax return limits for charitable contributions associated with qualified disaster relief. For instance, monetary contributions are normally limited to 60% of AGI, but this limit doesn’t apply to qualified donations in a disaster area.
  4. Certain tax credits. A special rule allows taxpayers in designated disaster areas to refer to the preceding tax year for purposes of determining the Earned Income Tax Credit (EITC) or the Child Tax Credit (CTC).
  5. Early withdrawal penalty. Generally, distributions from qualified retirement plans, such as a 401(k) or Simplified Employee Pension (SEP), are hit with a 10% tax penalty in addition to regular tax liability if made before age 59½ — unless a special exception applies. The list of exceptions is lengthy. The new law now provides another exception for qualified disaster relief distributions, though qualified hurricane distributions can’t exceed $100,000.
  6. Cancelled home purchases. The new law permits re-contributions of retirement plan withdrawals for home purchases cancelled due to eligible disasters. It also provides flexibility for loans from retirement plans for qualified hurricane relief.
  7. Extended tax-filing deadlines. An individual with a principal place of residence within a federally designated disaster area, or any taxpayer with a principal place of business in such a disaster area, is granted an automatic 60-day extension for any tax filing. This provision acknowledges that victims probably have other concerns taking priority. The automatic filing extension applies to federal disaster areas declared after December 20, 2019, the new law’s date of enactment.

Special Break for Small Businesses

The new law also creates a special “employee retention credit” for 2018 and 2019. Essentially, a disaster-affected employer is entitled to a 40% tax credit for the first $6,000 of wages paid to an employee from a core disaster area. The maximum credit is $2,400 per worker.

The employee retention credit applies to wages paid regardless of whether services associated with those wages were actually performed. It’s treated as part of the general business credit.

For More Information

This article highlights the key tax breaks available to individuals and small businesses that have suffered losses in a federally declared disaster area. Other special rules may apply. If you’re hit with a disaster, consult with your tax advisor to maximize the benefits for your situation.

Repeal of”Church Parking Tax”

Starting in 2018, a provision of the Tax Cuts and Jobs Act (TCJA) triggered unrelated business income tax (UBIT) on tax-exempt organizations like churches that provide employees with transportation and parking fringe benefits. Now that provision has been repealed under the Taxpayer Certainty and Disaster Tax Relief Act.

The change is effective for amounts paid or incurred after 2017. So, churches and other not-for-profit entities that paid UBIT on applicable transportation benefits in 2018 and 2019 may be eligible for a refund. Contact your tax advisor for more information.

Still on Registration of Foreign Judgments in Nigeria

In Suit No. FHC/ABJ/CS/203/2019; Emmanuel Ekpenyong Esq. v. Attorney General and Minister of Justice of the Federation, the Federal High Court, Abuja Judicial Division by a Judgment dated 10th June 2019, held that the Plaintiff (“Emmanuel”) has not placed before the Court, evidence to show that the Defendant (“the Attorney General”) ought to be satisfied to promulgate an Order to bring Part I of the Foreign Judgment Reciprocal Enforcement Act, 1990 (“the 1990 Act”) into operation pursuant to Section 3 (1) of the 1990 Act which provides that;

“The Minister of Justice if he is satisfied that, in the event of the benefits conferred by this Part of this Act being extended to judgments given in superior courts for any foreign country, substantial reciprocity of treatment will be assured as respects the enforcement in that foreign country of judgments given in the superior courts in Nigeria, may by order, direct:

(a) That this Part of this Act shall extend to that foreign country; and
(b) That such courts of that foreign country as are specific in the order shall be deemed superior courts of that country for the purpose of this part of this Act..”

The Court further held that the phrase “the Minister of Justice if he is satisfied………..may by order direct…..” shows discretion on the part of the Attorney General. The Court found that though in some instances, the word “may” in a document may be interpreted to mean “shall”; the clear wordings of the 1990 Act suggests discretion on the part of the Attorney General on whether or not to promulgate the Order to bring Part I of the 1990 Act into operation.

By a Notice of Appeal dated 29th August 2019, Emmanuel appealed against the Judgment to the Court of Appeal, Abuja Judicial Division. Emmanuel contends that the provisions of Section 3 of the Reciprocal Enforcement of Judgment Ordinance, CAP. 175 1958 (“1958 the Ordinance”) and Section 9 of the United Kingdom’s Administration of Justice Act, 1920 codifies the substantial reciprocity treatment of Judgments of superior Courts of Nigeria on one hand and England, Ireland and the Court of Session in Scotland on the other hand. Section 9 of the 1990 Act codifies the substantial reciprocity treatment of Judgments of superior Courts in Nigeria and other commonwealth countries.

The legal standard of satisfaction required of the Attorney General by the phrase “The Minister of Justice if he is satisfied…” as used in Section 3 (1) of the 1990 Act ought not to be based on an indefinite, unhindered, incontestable and subjective discretion or prerogative of the Attorney General but ought to be based on a reasonable and objective premise of whether there are superior Courts of any foreign country with substantial reciprocity treatment of Judgments with Nigeria.

The common knowledge that superior Courts in England, Ireland, the Court of Session in Scotland and other commonwealth countries have substantial reciprocity treatment of Judgments with Nigerian superior Courts has fulfilled the objective legal standard for the Attorney General’s satisfaction and forms the legal basis upon which the Attorney General ought to have promulgated the Order to extend the application of Part I of the 1990 Act to the Judgments of superior Courts in England, Ireland, the Court of Session in Scotland and other commonwealth countries.

The failure of the Attorney General to promulgate the Order since 1990 when the Act was enacted has made Nigerian Courts to rely on the colonial and out dated 1958 Ordinance as well as its Rules of 1922 for registration of foreign judgments in Nigeria. This has made the process of registration of foreign Judgments in Nigeria to be uncertain and burdensome.

Emmanuel further contended that it is settled Nigerian law that “may” in a legal document may be construed as “shall” so that justice will not be a slave to grammar. Again, if interpreting “may” as used in a legal document as discretionary will result in serious general inconvenience to innocent persons of the public without furthering the object of the enactment; it shall be construed to be mandatory. Furthermore, the Court would interpret “may” as mandatory whenever it is used to impose a duty on a public functionary, the benefits which inures to a private citizen.

Since the failure of the Attorney General to promulgate the Order pursuant to Section 3 (1) of the Act to bring Part I of the Act into operation for the benefit of Nigerians has resulted in serious general inconvenience to innocent Nigerians, especially Emmanuel, without furthering the objectives of the Act, the justice of the case demands that the mischief rule of interpretation ought to be applied in the interpretation of “may” as used in the provision as “shall” so that justice will not be a slave to grammar.

Enforcement of Foreign Judgments in India

Enforcement of Foreign Judgments in India – Inclusion of UAE as a Reciprocating Territory

The Ministry of Law and Justice, Government of India vide its Notification dated January 17, 2020 (“Notification”) declared United Arab Emirates (“UAE”) a “reciprocating territory” for the purposes of enforcing foreign civil decrees in India. The declaration has been made by the Indian government in exercise of powers under Explanation 1 appended to Section 44A, Code of Civil Procedure, 1908 (“CPC”). Pursuant to the Notification, decrees passed by the courts in UAE are now executable in India as if they were passed in India.

CPC lays down the procedure for enforcement of foreign judgments and decrees in India. A foreign judgment is a judgment of a foreign court and a foreign court means a court situated outside India and not established or continued by the authority of the Central Government. A foreign judgment needs to be conclusive for it to be enforceable in India. The test of conclusiveness of a foreign judgment is provided under Section 13 of CPC, which postulates that a foreign judgment shall be conclusive unless:

  1. It has not been pronounced by a court of competent jurisdiction;
  2. It has not been given on the merits of the case;
  3. It appears, on the face of the proceedings, to be founded on an incorrect view of international law or a refusal to recognize the law of India in cases in which such law is applicable;
  4. The proceedings in which the judgment was obtained are opposed to natural justice;
  5. It has been obtained by fraud;

f)    It sustains a claim founded on a breach of any law in force in India.

Broadly, a foreign judgment in India can be enforced in the following ways:

  1. Decrees passed by courts in reciprocating territories: Reciprocating territories enjoy the privilege of direct enforcement of a decree within the territory of India by filing execution proceedings of the decree before an Indian court. A reciprocating territory is any country or territory outside India which the Central Government may, by notification in the official gazette, declare to be a reciprocating territory and the superior courts with reference to any such territory, are the courts as may be specified in the notification notified by the Government. In accordance with the CPC, if a certified copy of the decree of any of the superior courts of any reciprocating territory is filed in a district court, the decree may be executed in India as if it has been passed by the district court. Such foreign judgment to be executable in India must be conclusive (i.e., should not be falling under any of the above stated six categories) and needs to comply with the laws of limitation of India. Also, the decree with reference to a superior court would be any decree or judgment of such court under which a sum of money is payable, not being a sum payable in respect of taxes or in respect of a fine or other penalties, but shall in no case include an arbitral award, even if such an award is enforceable as a decree or judgment.

Some of the countries that have been declared to be “reciprocating territories” are United Kingdom, Singapore, Bangladesh, Malaysia, Trinidad & Tobago, New Zealand, Hong Kong, Papua New Guinea, Fiji, etc.

  1. Judgments passed by non-reciprocating territories: Such judgments can be enforced only by first preferring a lawsuit in an Indian court for a judgment based on the foreign judgment and second, filing for execution proceedings after obtaining the Indian decree. Section 14 of the CPC provides for presumption, albeit a rebuttable one, in favour of the foreign judgment being one passed by a court of competent jurisdiction. For the purposes of Indian courts, such foreign judgment is of evidentiary value only.

Considering that the decrees from reciprocating territories are directly enforceable in India, the inclusion of UAE as a “reciprocating territory” will be beneficial for a UAE decree-holder to enforce the decreed time and cost-efficiently in India. The courts in UAE which will be considered as the superior courts of UAE for the purposes of section 44A of CPC are the Federal Supreme Court; Federal, the First Instance and Appeals Courts in the Emirates of Abu Dhabi, Sharjah, Ajman, Umm Al Quwain and Fujairah; and local courts in Abu Dhabi Judicial Department, Dubai, Ras Al Khaimah Judicial Department, Abu Dhabi Global Markets and Dubai International Financial Center.

It further implies that Indian expatriates in UAE would no longer be able to seek safe haven in their home country if they have a decree against them in a civil case in the UAE. It would also be interesting to see how this development will impact the proceedings under the Insolvency and Bankruptcy Code, 2016 were so far the National Company Law Tribunal (“NCLT”, in the matter of M/s Stanbic Bank Ghana Limited v. M/s Rajkumar Impex Private Limited CP/670/IB/2017), has held that NCLT has no jurisdiction to enforce foreign decree, however, there is no bar in it taking cognizance of the foreign decree. The Notification, however, will have no impact upon enforcement of arbitral awards passed by arbitral tribunals seated in UAE as the scope of Notification is strictly limited to decrees covered under section 44A of CPC.

Brexit and the implications for your Intellectual Property Rights

What will the Brexit mean for your intellectual property (IP) rights? Will Britain leave the European Union (EU) without a deal? Or will the Prime Minister manage to get the British Parliament to vote in favour of a Plan B-deal? The Brexit will have consequences for trademark rights, design rights, copyright and patent rights that involve the UK and the EU. Start prepping to protect your IP before Brexit!

The Brexit does not just impact organizations doing business in or with the UK from a commercial trade perspective (e.g. customs and import). You should also think about the ‘crown jewels’ of your organization (e.g. trademark rights, design rights, copyrights or patent rights) covering the European Union.

Brexit will impact every company having intellectual property, licenses and distribution agreements within the EU or UK scope.

Although the uncertainty about the Brexit remains, you should know that whatever happens, you should start preparations. For instance, what happens with the UK coverage of your EU trade mark and design registrations? Should you amend the territorial scope in your intellectual property contracts? A mere reference to the ‘EU’ may become difficult to interpret. This blog outlines the potential implications concerning your intellectual property rights following a Brexit.

Impact of Brexit on European Trade Marks and Designs

EU trade marks and designs are granted by the EU Intellectual Property Office (EUIPO). Currently, companies and individuals owning a registered EU trade mark or design have their trade mark or design right protected across all EU member states including the UK.

After the Brexit, existing EU trade mark and design registrations will no longer include protection in the UK. However, even in case of a ‘no deal-scenario’, the UK government ensured that the rights in all existing registered EU trade marks and designs will continue to be protected and enforceable in the UK by providing an equivalent trade mark or design registered nationally in the UK.

If you have pending applications for trademark or design rights in the EU at the Brexit date, you may refile your application with the UK Intellectual Property Office under the same terms for a UK equivalent right. For a period of 9 months from exit, the UK government will recognize filing dates and claims to earlier priority and UK seniority recorded on the corresponding EU application.

Impact of Brexit on Copyrights

Various international treaties (such as, the Berner Convention and the WIPO Copyright Treaty) govern the protection of copyright. Under these rules, countries provide cross border copyright protection. These rules are luckily not dependent on the UK’s membership of the EU. As a consequence, copyright protection in the UK for EU protected works will largely remain unchanged.

What about database rights and other EU specific IP legislation?

The EU copyright system is based on EU legislation so it only extends to EU member states. Although the protection rights under EU legislation will be preserved in UK law, cross-border IP protection mechanisms will be different. For example, in the event of a no deal-Brexit, there will be no obligation for EU member states to provide database rights to UK businesses. As a result, owners of UK database rights may find their rights unenforceable in the EU. So companies may need to consider other forms of protection for their databases.

Impact of Brexit on Patents and supplementary protection certificates

Only a few areas of UK patent law are derived from EU legislation. Probably the most important issue here is patented pharmaceutical products and chemical compounds. EU law provides for an additional period of protection after a patent has lapsed, the so-called ‘supplementary protection certificate’.

In addition, EU law provides for compulsory licenses to be granted for UK manufacture of a patented medicine for export to a country with a public health need. Also, EU law demonstrates that certain studies, trials and tests using a patented pharmaceutical product will not be regarded as an infringement of the patent.

Luckily, regardless of the Brexit, any relevant EU legislation (including its implementation in UK law) will remain. This means that the supplementary protection certificates, compulsory licenses and exempted studies and trials will be kept under UK law.

What about the Unitary Patent?

Under the European patent regime, a European patent application essentially forms a bundle of national applications. Each application needs to be validated per EU member state. The Unitary Patent will be one inseparable right covering 26 EU countries. The UK is one of those 26 countries. They ratified the Unitary Patent system only in April 2018 which indicates their desire to be part of this system in spite of Brexit.

However, the Unitary Patent protection cannot be separated from the general principle of the EU’s Internal Market. As a consequence, and especially in the event of a ‘no deal-Brexit’, it is questionable whether the Unitary Patent protection will remain applicable to the UK once it has left the EU. If not, it means that businesses seeking patent protection in the UK will still need to commit to the national UK patent system.

Exhaustion of IP rights after Brexit

Another topic for your business to consider, is the so-called exhaustion of intellectual property rights. ‘Exhaustion’ limits intellectual property rights. Once an IP protected product has been legitimately put on the market anywhere in the EU, the IP rights (e.g. prevent the resell or other commercial use) over such product can no longer be exercised because these rights are exhausted.

In a ‘no deal-scenario’, products rightfully placed on the UK market after Brexit, will not be considered exhausted in the EU. As a result, if your company exports products from the UK to the EU you may still require the IP owner’s consent.

To discuss potential effects of the Brexit on your IP rights, please do not hesitate to contact Lukas Witsenburg from Penrose. Email: l.witsenburg@penrose.law or telephone: +31 (0)20-240 0710.

Koen De Puydt

News Article by Leaders in Law Member – Koen De Puydt

Professional Liability of Intellectual professions in the Construction Sector 

Following the ten-year liability insurance for real estate projects for architects, engineering firms and contractors, which was made mandatory by the “Peeters-Borsus Law” since 1 July 2018, another insurance obligation has been introduced within the construction sector by the “Peeters-Ducarme Law” effective 1 July 2019. 

The title of this law is self-explanatory. It introduces “a professional liability insurance for architects, surveyor experts, safety and health coordinators and other service providers in the construction sector relating to construction works and amends various legal provisions regarding civil liability insurance in the construction sector”, as mentioned earlier also called the Peeters-Ducarme Law. 

peeters-law_buildings_2.jpg

This title shows that this law has in principle a larger scope than the Peeters-Borsus Law. Where the latter applies primarily to contractors and architects in the context of housing projects and for works that require the intervention of an architect, the Peeters-Ducarme Law introduces a professional liability insurance for all intellectual professions within the construction sector, with regard to all construction work. 

Consequently, the Peeters-Ducarme Law does not apply to contractors, but it applies to all kind of real estate work (and therefore not only with regard to housing projects). Thus, as a result of the execution of all real estate works, the principal will enjoy this protection regardless of the final destination of the property or the possible intervention of an architect. 

Compulsory insurance coverage cannot be lower, per claim, than:

  • € 1,500,000 for damage resulting from physical injuries;
  • € 500,000 for the total material and immaterial damage;
  • € 10,000 for the objects entrusted to the insured by the principal.

The law also provides for a posterior coverage on the basis of which the liability for claims must be covered if the claim is filed within three years after the cessation of the activities of the insured service provider . 

Although it could be expected that the Peeters-Ducarme Law has a larger scope than the Peeters-Borsus Law, we must conclude that it is largely eroded by the exceptions that are provided for in respect of the damage that the insurance must cover. 

For example, Article 5 of the Peeters-Ducarme Law states that damages are not covered if it is the consequence of a failure to comply with one or more contractual obligations or if damages resulting from environmental degradation, claims relating to an inadequate budget, or disputes in relation to fees and expenses.

These exceptions erode the potentially extensive coverage provided by the Peeters-Ducarme Law significantly and therefore the latter offers less protection than might be expected at first sight. 

The Peeters-Ducarme law has been published yesterday (26 June 2019) in the Belgian Official Gazette and will enter into force on 1 July 2019. 

Peeters Law (to be soon Seeds of Law) will be happy to provide you with the necessary advice or assistance in this matter. Please contact us via info@seeds.law or by telephone on +32 (0)2 747 40 07.

Koen De Puydt – Toon Delie

Real Estate and Construction Law    Professional Liability     Professional Liability insurance     Intellectual professions     construction sector     architect surveyor expert    safety and health coordinator

2020 Global Awards – Trophy Example

2020 Global Awards – Example Profile Page

Simon Steel

LCF Law Firm Celebrates Domains 21st Anniversary

A leading Yorkshire law firm’s domain name is celebrating its 21st anniversary, making it one of the oldest legal domains in the region and reinforcing the importance of trade marking to protect company names, domains and brands.

LCF Law initially registered www.lcf.co.uk in the summer of 1998, which was two months before www.google.co.uk was registered and the search engine giant was born. It would also be another seven to 10 years before iconic domain names such as YouTube, Twitter and Facebook arrived on the scene.
Simon Stell, Managing Partner at LCF Law, said: “In 1998 the internet was in its infancy, you needed a modem to connect to it and lots of patience! However as a forwarding thinking business, we could immediately see its potential and how it was going to be transformational for our industry. We started exploring how to capitalise on the online world and launched a website. We had to buy a domain name, so we went for www.lcf.co.uk because it was distinctive, straightforward and easy to remember.

“At the time, some people suggested that creating a website for a law firm was frivolous and insignificant. However, we were ahead of the curve, as very few regional or national legal firms took the initiative that early on. It quickly became one of our best ever investments and has attracted millions of visitors over the years, doing a great job to illustrate LCF Law’s foresight and innovative approach to exploring new technologies.”

Simon added: “Another thing that became apparent early on was how important it is to trade mark both company names and domain names, because it can be easy for unscrupulous operators to impersonate companies or brands using the internet. They can register a similar domain and create a genuine looking website to divert users away from the site they were aiming for and there are lots of examples of this happening.”

Abid Perwaze, Commercial & Intellectual Property Solicitor at LCF Law, added: “Having the right trade marks in place makes it much easier to stop anyone that tries to do this and also helps to protect company names and brands. There’s a common misconception that it costs thousands of pounds to create a trade mark, but in most cases it can be done for just a few hundred pounds.”

 

Merritt J. Green

Brief Survey of Non-Compete Law impacting East Coast States

There has been a recent trend of states moving to limit the application of restrictive covenants, especially post-employment non-compete agreements, on employees.  Within the past year, Maryland, Maine, Massachusetts, and New Hampshire have all passed legislation restricting the enforceability of non-competition agreements against low-wage earning employees.  This is a growing national trend that all attorneys should monitor.  

Provided below is a brief survey of states with laws restricting non-compete agreements and general guidelines for other East Coast states.    

Connecticut:   No state legislation restricting non-compete agreements.  Case law holds that a covenant must be reasonable as relevant to time period, geographic scope, ability of employee to earn livelihood, protection to employer, and public interest.

Delaware:  No state legislation.  Case law holds that a covenant must be reasonable to be enforceable balancing legitimate interests of employer, ability of employee to earn livelihood, and public’s interest.

Florida:  Florida statute 542.335 requires that non-compete agreements be reasonable and necessary to protect the legitimate interests of the employer.  Case law applies balancing test.

Georgia:  Georgia Code 13-8-53 provides, in relevant part, that post-employment contracts that restrict competition shall not be permitted against any employee who does not, in the course of his or her employment:  

(1) Customarily and regularly solicit for the employer customers or prospective customers;  (2) Customarily and regularly engage in making sales or obtaining orders or contracts for products or services to be performed by others; (3) Perform the following duties: (A) Have a primary duty of managing the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof; (B) Customarily and regularly direct the work of two or more other employees;  and (C) Have the authority to hire or fire other employees or have particular weight given to suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees;  or (4) Perform the duties of a key employee or of a professional.

Maryland:  On May 25, 2019, Maryland enacted SB 328, which prohibits employers from entering into non-competition agreements with employees who earn equal to or less than $15 an hour or $31,200 annually. Under this new law, for employees earning wages at or below this threshold, non-compete agreements that “restrict[] the ability of an employee to enter into employment with a new employer or to become self-employed in the same or similar business or trade shall be null and void as being against the public policy of the State.”  The law becomes effective October 1, 2019.

Maine:  As of September 18, 2019, Maine employers are prohibited from having non-compete restrictions for any employee earning at or below 300% of the federal poverty level.  Furthermore, for all employees, no non-compete can take effect before the employee has worked at least one year, or six months after signing (whichever is later). And, employee must be provided three (3) days to consider before signing non-compete.

Massachusetts:  Effective October 1, 2018, Massachusetts banned non-compete restrictions for anyone classified as a non-exempt employee.  To be enforceable, a non-compete agreement must also, be in writing, be signed by both employer and employee, must advise employee of right to seek legal counsel before signing, and must be provided to employee with employment offer or ten (10) business days before the state of employment, whichever is earlier.  A “noncompetition agreement” is defined as “an agreement between an employer and an employee, . . . under which the employee or expected employee agrees that he or she will not engage in certain specified activities competitive with his or her employer after the employment relationship has ended.”  

New Jersey:  The New Jersey legislature has considered bills to restrict employer use of non-compete agreements, but nothing has passed yet.  Courts will enforce non-compete agreements that are reasonable in scope and duration.

New Hampshire:  passed legislation outlawing non-competes for “low wage” workers, defined as hourly rate that is less than or equal to 200% of federal minimum wage ($14.50 per hour).  This law takes effect in September 8, 2019. A “noncompete agreement” is defined as “an agreement between an employer and a low wage employee that restricts such low wage employee from performing:  (1) work for another employer for a specified period of time; (2) work in a specified geographic area; or (3) work for another employer that is similar to such low wage employee’s work for the employer who is party to the agreement.”

New York:  No laws prohibiting non-compete agreements.  A non-compete is only allowed and enforceable to the extent it (1) is necessary to protect the employer’s legitimate interests, (2) does not impose an undue hardship on the employee, (3) does not harm the public, and (4) is reasonable in time period and geographic scope.

North Carolina:  Courts will enforce non-compete agreements if supported by consideration, reasonable about time and territory, and designed to protect legitimate business interest.

Pennsylvania:  No legislation controlling.  Will be enforced if supported by consideration and reasonable to rights of employer, employee and public interest.

Rhode Island:  The Rhode Island legislature passed noncompete law on July 11, 2019 (it is not effective yet, still waiting on governor’s signature).  The law will prohibit non-compete agreements with low-wage employees with average annual earnings of less than 250% of the federal poverty level.

South Carolina:  Non-compete agreements will be enforceable if supported by consideration and are reasonable in not over-reaching employer’s legitimate business interests nor overly burdening employee’s ability to earn a livelihood.

Vermont:  No legislation restricting non-compete agreements.  Will be enforced if reasonable.

Virginia:  Non-compete agreements will be enforceable if supported by consideration and are reasonable in not over-reaching employer’s legitimate business interests nor overly burdening employee’s ability to earn a livelihood.

Conclusion:  Post-employment non-compete agreements are either being outlaws or facing greater judicial scrutiny.  Employers should utilize them sparingly. However, employers still can protect confidential information and client relationships.  Accordingly, attorneys should focus clients on Confidentiality Agreements, trade secret protection, and non-solicitation restrictions (both protecting employees and clients).

Most importantly, whenever considering any post-employment restriction, to be enforceable, it should narrowly define the post-employment restriction to protect the legitimate interests of the employer, in relationship to the services the employee provided the employer during employment, and his or her post employment opportunities.

Merritt Green, General Counsel, P.C.  mgreen@gcpc.com –703-556-0411