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Andrew C. Liazos heads the Firm's Executive Compensation Group and the Boston Employee Benefits Practice. Andrew focuses his practice on compensation and benefit matters, including related securities, M&A, IPO, private equity, international and litigation matters. Clients range from Fortune 500 companies to compensation committees to individual executives in employment and severance negotiations. Read Andrew Liazos' full bio.

Evan Belosa, Tony Bongiorno and Andrew Liazos summarize key changes and important issues associated with Massachusetts Noncompetition and Trade Secret Law and next steps to consider as the date of effectiveness approaches.

The Massachusetts Noncompetition Agreement Act and Trade Secret Law will become effective October 1, 2018.

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Join us on Thursday, September 6 at 1:00 PM EDT for a webinar designed to address questions around the Massachusetts Noncompetition Agreement Act (the Act), signed into law by Governor Baker on Friday, August 10. The Act, which takes effect on October 1, requires all employers doing business in Massachusetts to change the way they establish and structure noncompetition agreements and related forfeiture provisions under compensation arrangements.

Our panel of lawyers focused on litigation, employment and employee benefits law from Massachusetts and other states, will discuss key aspects of this legislation, strategies and best practices. Questions that will be addressed by the panel include:

  • What changes should be made to support noncompetition agreements going forward?
  • How can a noncompetition agreement be used in connection with providing severance benefits?
  • What is the status for existing non-competition agreements? When is grandfathering available?
  • Are there other available types of agreements that can adequately protect employers’ interests?
  • Might ERISA preempt the new Massachusetts noncompetition law as related to benefit plans?
  • How will the changes to Massachusetts law impact corporate transactions?
  • How will the changes in Massachusetts law affect restrictive covenant litigation in Massachusetts courts?
  • What approaches to address the Massachusetts changes will make sense for multi-state employers?

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On August 21, 2018, the IRS issued guidance regarding recent statutory changes made to Section 162(m) of the Internal Revenue Code. Overall, Notice 2018-68 strictly interprets the Section 162(m) grandfathering rule under the Tax Cuts and Jobs Act.

Public companies and other issuers subject to these deduction limitations will want to closely consider this guidance in connection with filing upcoming periodic reports with securities regulators. Further action to support existing tax positions or adjustments to deferred tax asset reporting in financial statements may be warranted in light of this guidance.

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The Massachusetts legislature’s recent approval of a comprehensive non-competition reform bill includes significant restrictions for employers seeking to impose non-compete obligations on Massachusetts workers. The Massachusetts Noncompetition Agreement Act will become effective on October 1, 2018, leaving little time for employers to consider what actions to take to protect their business interests.

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While momentum may be building for a single-payer health care system in New York, such a dramatic shift in the way health care is financed will have to overcome a number of significant obstacles. With ERISA preemption being one of those hurdles, Andrew Liazos comments, “There will be a challenge from somewhere. I don’t know who will lead the challenge, but I don’t think employer groups will just sit by idly.”

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Originally published in Bloomberg Law, August 2018.

Andrew Liazos said that it makes sense for companies to consider Q-SERPs in response to the end of the performance-based pay deduction, but he questioned whether the plans would offer much “bang for your buck.” “You first have to deal with the obvious time and effort you have to spend to show it’s not discriminatory, and then take a certain level of risk that the rules aren’t going to change,” he said.

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Originally published in Tax Notes Today, July 2018.

Section 162(m) of the Internal Revenue Code (Code) previously limited the tax deduction to $1M annually for covered employee compensation paid by a company that is publicly traded, subject to some important exceptions. The Tax Cuts and Jobs Act modified the reach of Code Section 162(m) in several significant ways.

  • Expanding the number of companies to which Section 162(m) will apply, including non-public companies that register debt or equity securities with the Securities and Exchange Commission, like foreign companies publicly traded through American depositary receipts (ADRs);
  • Expanding the number of covered employees to five and including the chief financial officer, with a provision that any covered employee after 2016 permanently remains a covered employee;
  • Eliminating performance-based and commission-based exceptions to the $1M deduction limit; and
  • Grandfathering certain compensation provided under a written and binding agreement in effect on November 2, 2017, if no material changes are made to such agreement.

These changes will have a significant effect not just on performance-based compensation, but also on stock options, stock appreciation rights and even nonqualified deferred compensation plans and supplemental executive retirement plans. To navigate these changes, Andrew Liazos stressed the importance of understanding the new grandfathering provisions under Section 162(m) and their corresponding planning opportunities at the Mid-Year Meeting of the American Bar Association’s Tax Section on February 10, 2018 in the attached slides.

On Tuesday night, Senate Finance Committee Chairman Orrin Hatch (R-UT) released a new modified mark of the Senate version of the Tax Cuts and Jobs Act that modifies provisions related to Internal Revenue Code (Code) Sections 409A and 162(m).

The Chairman’s modification adds a transition rule for the elimination of employer deductions for payments over $1 million to certain executives under Code Section 162(m). The transition rule provides that elimination of the employer deduction does not apply to payments under a written and binding contract in effect on November 2, 2017, provided that the contract was not materially modified after that date.

In addition, the Chairman’s modification eliminates the provision that would have replaced Code Section 409A with a new Section 409B, which would have required payments under non-qualified deferred compensation plans to be taxed when they vested. Currently, Section 409A allows employees to defer taxation on such fully-vested payments, provided they meet other requirements under Section 409A. The proposed replacement of 409A with 409B would have had significant tax implications for those employees with non-qualified deferred compensation plans.

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The US House of Representatives Committee on Ways and Means proposed Tax Cuts and Jobs Act intends to reduce corporate and individual tax rates. To pay for the proposed changes, the House Tax Bill would, if enacted, negatively impact long-standing current executive compensation practices.

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