The Benefits of Using Contract Equity to Attract, Reward, and Retain Key Employees of Closely-Held Companies

In today’s hypercompetitive business environment, non-public companies are always looking for effective and creative ways of attracting, retaining, and incentivizing their key employees. For many non-public companies, the perfect solution is a phantom equity arrangement (also known as a contract equity arrangement). A phantom equity arrangement offers, among other things, flexibility and simplicity, particularly as compared to real equity awards, such as stock options. This column compares stock options and phantom equity arrangements to provide a clear understanding of the advantages of a phantom equity arrangement. This column also discusses “profits interests,” which is another approach to granting real equity to key employees of limited liability companies. Read more…

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Tie Goes to the Employer: National Labor Relations Board Overrules Past Precedent Regarding Dual-Marked Ballots

The National Labor Relations Board (“Board” or “NLRB”) on Wednesday, May 13, 2020, overruled decades of convoluted Board precedent regarding “dual-marked ballots” in union representation elections – establishing a new bright line test.  A “dual-marked ballot,” to put it simply, is a ballot that has markings in or around both the “YES” and “NO” box, thus, making it difficult, if not impossible, to tell whether the employee who cast the ballot actually intended to vote for or against union representation. Indeed, a dual-marked ballot might also mean that the employee who completed the ballot actually did not want to take a position either way.   The treatment of such a single dual-marked ballot can have dramatic consequences in a close election, as was the case in Providence Health & Services.

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The Cadieux Case: Nine Years of Meanderings for the Employer and the Union — All Starting With A Simple Dismissal

By Eliab Taïrou, from our Labour and Employment Law Practice Group

May 15, 2020 — On April 6 the Quebec Court of Appeal ruled, in Cadieux c. Greyhound Canada Transportation Corp., 2020 QCCA 498, that a unionized employee, dismissed by his employer, did not have sufficient legal interest to personally and directly appeal an arbitral award, even in the context of significant and manifest conflict of interest on the part of the union. In other words, the employee could not bypass the union in order to challenge his dismissal himself.

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5th Circuit Upholds Non-Compete Provision Despite Former Employee’s Forfeiture of Stock Options, Which Constituted Express Consideration for Restrictive Covenant Agreement

On April 27, 2020, the U.S. Court of Appeals for the Fifth Circuit affirmed a lower court’s decision to grant a preliminary injunction preventing a real estate agent from working for a competitor, because her non-compete, attached to a grant of restrictive stock units, was likely enforceable despite the agent’s forfeiture of the company stock.

The employee in this case worked for Martha Turner Sotheby’s International Realty (“Martha Turner”) in Houston, Texas for over four years. Approximately nine months before her resignation, Martha Turner’s parent company Realogy Holdings Corporation (“Realogy”) notified the employee that she was selected to participate in the company’s stock option program through an equity grant, in recognition of her accomplishments.  The grant was in the form of restricted stock units, which gave her the opportunity to receive shares of the parent company’s common stock upon vesting of the award after a three-year period.

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Defamation on Social Media: Be Careful What You Post Online!

By Martin Côté and Sydney Warshaw, from our Business Law Practice Group

May 14, 2020 — Much of our communication with one another has been taking place on social media. Networks such as Facebook and Instagram provide an unbeatable platform for making ourselves heard. Think twice before you criticize or complain online because your rant on social media could make you liable for defamation.

In Ville de Longueuil c. Théodore, 2020 QCCS 1339, the Quebec Superior Court recently held that the right to express opinions is not unlimited. Mr. Théodore had written a series of Facebook posts about various City of Longueuil officials, including several police officers. He was complaining about corruption, criminality and incompetence of City officials.

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Three Major Changes in the Drug Registration Measure

Drug registration is an important part of drug administration and supervision. With the development of drug administration and supervision system in China, regulations on drug registration are improving step by step as well, developed from Provisions for New Drug Approvals (新药审批办法) (1999) , Drug Registration Measures (Trial) (药品注册管理办法(试行))2002 to Drug Registration Measures (药品注册管理办法) 2005.  After a major revision in 2007, the Drug Registration Measures has been revised again this year, with the new Drug Registration Measures being implemented on July 1, 2020…… Read more…

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Delaware Choice of Law Clause Unenforceable Against Nebraska Employee: A Cautionary Tale

Citing Nebraska’s fundamental public policy, the U.S. Court of Appeals for the Third Circuit recently affirmed a District Court’s refusal to enforce a Delaware choice of law clause in a non-compete agreement signed by a Nebraska employee.

Delaware law is generally favorable to enforcing non-compete restrictions.  Hundreds of thousands of new corporate entities (corporations, LLCs, LPs, LLCs, etc.) are created in Delaware every year, and the First State is home to more than two-thirds of the Fortune 500 and 80 percent of all firms that go public.[1] Many of these Delaware entities are headquartered in, and have operations in, states with less favorable non-compete law than Delaware.  Choosing Delaware law to govern non-compete restrictions thus seems like a bullet-proof strategy for side-stepping unfavorable state law and enforcing non-compete restrictions.  However, a Delaware choice of law clause does not guarantee enforcement.

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New York Employers: Engage in the Interactive Process Before Disciplining Medical Marijuana Users

Failing a drug test may not kill the buzz for medical marijuana patients in the Empire State.  In contrast to courts in California and other jurisdictions, a New York state court has held that medical marijuana users are entitled to reasonable accommodations, even if they only obtain certification after testing positive for marijuana.

In Gordon v. Consolidated Edison, Inc., Kathleen Gordon failed a random drug test by her employer, Consolidated Edison, Inc. (“CEI”).  After testing positive, but before her termination, Gordon became a certified medical marijuana patient to treat her inflammatory bowel disease.  Gordon informed CEI of her certified status on several occasions between the time she failed her drug test and her termination date.  Gordon brought an action alleging discrimination and failure to accommodate under New York State and City Human Rights Laws (“NYSHRL” and “NYCHRL”), as well as the State’s medical marijuana law.  Because New York’s medical marijuana law provides that certified patients are disabled for purposes of the NYSHRL, Gordon claimed protected status.

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RSS, Member of a New Professional Alliance

May 12, 2020 — RSS is pleased to announce the launch of the Regroupement des firmes de services professionnels indépendantes — the RFSPI.

The Regroupement is an alliance of 80 Quebec-owned firms united to promote their expertise with Quebec decision-makers, who will have to make crucial judgments over the coming weeks in the interest of their businesses.

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In a process that began with lawsuits led by current and former players, including former UCLA forward Ed O’Bannon, the National Collegiate Athletic Association (NCAA) announced on April 29 its recommendations for approving a framework which allows college athletes to earn money from the use of their names, images and/or likenesses from third parties.
This recent round of NCAA activity comes in response to the flurry of states seeking to pass their own versions of California’s Fair Pay to Play Act, which was signed into law in September 2019. For more information on the Fair Pay to Play Act, see our previous alert.
Click here to read the full Alert   >>
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