ML BeneBits

This is the third part of a multi-part blog post series discussing the implications and fallout from the Final Rule recently adopted by the Federal Trade Commission (FTC), banning the enforcement of almost all noncompete agreements with workers. In Part 1 of this series, we discussed the general parameters of the rule and several threshold questions that it raises. In Part 2, we discussed the types of arrangements that are prohibited by the Final Rule and the alternatives to noncompete clauses that likely remain available to companies following the effective date of the Final Rule.

This is the second in a multipart series on ML BeneBits discussing the implications and fallout from the Final Rule recently adopted by the Federal Trade Commission (FTC) banning the enforcement of almost all noncompete agreements with workers. In Part 1, we discussed the general parameters of the rule and several threshold questions that it raises. In Part 2, we discuss the types of arrangements that are prohibited by the Final Rule and the alternatives to noncompete clauses that likely remain available to companies following the effective date of the Final Rule.

On April 23, the Federal Trade Commission (FTC) approved by a 3-2 vote a Final Rule that, if it becomes effective, will ban almost all noncompete clauses for nearly all workers. This is the first in a blog series exploring the fallout from the sweeping ban, specifically in terms of executive compensation and employee benefits. In Part 1, we address the first important threshold questions posed by the Final Rule. Future posts in the series will address the wide scope of the Final Rule and the types of executive compensation arrangements it prohibits; the types of arrangements that survive the Final Rule; and specific issues related to equity compensation, corporate transactions, Section 280G of the Internal Revenue Code (Code), and other compensation-related tax issues.

The Securities and Exchange Commission (SEC) is continuing its focus on disclosure of executive perquisites—and aircraft usage in particular—in registration statements, periodic reports, and proxy statements.

When private equity investment transactions close, management and private equity investors are off to the races—generally aligned on strategic and financial objectives. However, as market conditions and the economic climate shift, key parties may become misaligned and management incentive plans (MIPs) could become underwater or ineffective.

Besides being Valentine’s Day, February 14, 2024 is an important day for employers with any California employees: It is the last day for employers to notify California employees (including former employees who were employed after January 1, 2022) that any unlawful noncompetes applicable to them are void. These notices need to be specific to each employee and individually addressed, and so will likely involve some investment in time and effort by employers to ensure compliance with the law.

Publicly traded companies generally file registration statements on Form S-8 to register the offering of the company’s stock pursuant to the company’s equity incentive plans under the Securities Act of 1933, as amended (Securities Act). This same filing requirement applies under certain circumstances to a company’s nonqualified deferred compensation plans.

Join Morgan Lewis for webinars on employee benefits and executive compensation.

The New York Stock Exchange (NYSE) and Nasdaq, on June 5 and June 6, respectively, amended the proposed listing standards they previously submitted to the US Securities and Exchange Commission (SEC) to extend the compliance deadline. As amended, if the listing standards are approved by the SEC (as expected to happen this week), the clawback rules would be effective on October 2, 2023, and public issuers would be required to adopt compliant policies within 60 days after the effective date, i.e., no later than Friday, December 1, 2023.

In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), new rules directing national securities exchanges, including the New York Stock Exchange (NYSE) and Nasdaq Stock Market (Nasdaq), to adopt listing standards for compensation recovery (clawback) policies were announced on October 26, 2022 by the US Securities and Exchange Commission (SEC).