Executive Compensation

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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The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) made some significant changes to the executive pay area for tax-exempt organizations with the imposition of a new excise tax on certain amounts paid to some employees of the tax-exempt organization. Imposing taxation in areas which previously had no such result will warrant tax-exempt organizations reviewing their compensation structures in light of the new rules to ensure not only an understanding of the new rules but to evaluate feasible options in minimizing any taxes.

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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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During the previous quarter, the SEC acted to expand the number of companies that may rely on the “smaller reporting company” scaled disclosure regime and Congress directed revisions to the Regulation A+ and Rule 701 exemptions. The SEC also took enforcement action on a major cybersecurity breach, reinforcing its recent interpretive guidance on the subject. The director of the SEC Division of Corporation Finance also spoke on how blockchain assets may or may not constitute securities, and the 9th Circuit created a circuit split related to securities litigation after a tender offer.

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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.

The Director of the SEC’s Division of Corporation Finance William Hinman gave a speech in which he discussed whether a digital asset originally offered as a security can become something other than a security over time. The speech provided some of the most important considerations to date for analysis of blockchain token transactions under US securities law.

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Executive compensation for the health care industry is always an important topic for the board, made even more critical by the provisions of the Tax Cuts and Jobs Act and recent governance trends. We’re joined by two of the leading health care industry voices on executive compensation practices: Tim Cotter of Sullivan, Cotter and Associates, and McDermott partner Ralph DeJong.