Articles Posted in Outlook and Trends

13 May 2024

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In the article below, Partner Michael H. Strub, Jr., analyzes the complexities surrounding non-compete agreements and the FTC’s recent decision to ban them. With the enforceability of the FTC’s rule facing legal scrutiny, he discusses the likelihood of a cohesive federal approach and its implications for employers nationwide.

Navigating Non-Competes

by

Michael H. Strub, Jr., JMBM’s Litigation Group

The Federal Trade Commission’s rule that would ban non-competition faced legal challenges from the day it was issued. What are the obstacles the rule faces, and what is the likelihood that some form of federal rule will be created?

Before analyzing these questions, it should be noted that state laws on the enforceability of non-competes are, literally, all over the map. In his article, Fifty Ways to Leave Your Employer: Relative Enforcement of Covenants Not to Compete, 13 U. Pa. J. Bus. L., 751, 786 (2011), Norman Bishara ranked the states from 1 to 50 based on their willingness to enforce non-competes and had a separate ranking for each one. Based on his analysis, Florida is the state that has been the friendliest for enforcement, while California is the most hostile.

As Robert McAvoy notes in his article, How Can Federal Actors Compete on Noncompetes?, 126 Dick. L. Rev. 651 (2022), this panoply of laws is complicated by the employer’s efforts to use choice of law provisions to select the law of a friendly state even if the employee is employed in a state where non-competition clauses are invalid. In Stone Surgical, LLC v. Stryker Corp., 858 F.3d 383, 391 (6th Cir. 2017), for example, the court enforced a non-competition clause under Michigan law against a terminated employee even though the employee worked exclusively in Louisiana, whose law would have prohibited the agreement. CONTINUE READING →

24 April 2024

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The U.S. Federal Trade Commission’s recent decision to ban non-compete agreements marks a pivotal shift in employment regulations nationwide. This rule not only prohibits new agreements but also retroactively impacts existing ones. From its broad definition of “worker” to its exceptions and impending legal challenges, understanding the nuances of this rule is crucial for employers preparing for compliance. JMBM Partner Michael H. Strub, Jr. explains the implications of this landmark decision.

FTC Announces Rule Banning Non-Competes

by

Michael H. Strub, Jr., JMBM’s Litigation Group

Employers throughout the country should be aware that on April 23, 2024, the U.S. Federal Trade Commission adopted a rule that would generally prohibit non-compete provisions, which prohibit workers from accepting work in a competing business or operating a competing business. Specifically, the rule prohibits employers from entering into new non-compete provisions and acts retroactively to prohibit employers from enforcing existing ones.

The rule defines “worker” broadly, and includes, for example, independent contractors and unpaid workers.  The rule includes an exception in connection with the bona fide sale of a business and allows existing lawsuits to enforce non-compete clauses to continue. The rule also permits enforcement of existing non-compete provisions with senior executives—policy makers whose total compensation is at least $151,164 when annualized—but prohibits new ones.

The rule also requires employers to give notice of the new rule, so there will be yet another piece of paper that must be tacked to the cork board in the company kitchen. CONTINUE READING →

26 January 2024

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Global Hospitality Group® Chairman Jim Butler to receive [CLIC] Lifetime Achievement Award

LOS ANGELES—Jeffer Mangels Butler & Mitchell LLP (JMBM) is pleased to announce that Jim Butler, a founding partner of JMBM and chairman of the Firm’s Global Hospitality Group®, will receive the Lifetime Achievement Award at the 2024 California Lodging Investment Conference [CLIC].

“Jim was the obvious and unanimous choice to receive the third [CLIC] Lifetime Achievement Award,” said Craig Sullivan, founder/president, [CLIC] in a press release. “Not only did he co-found one of the leading hospitality law firms that has become synonymous with the industry, but he also has worked on thousands of acquisitions, sales, developments, brandings, repositionings and financings throughout his career. He has graciously taken the time to mentor new hospitality professionals, helping to make the industry a better place. For this and so many more reasons, he is the perfect recipient.”

Jim is one of the top hotel lawyers in the world, and he devotes 100% of his practice to hospitality, providing unmatched hotel business experience and practical legal advice.

Jim and his team represent lenders, owners, developers, independent management companies and capital providers on their hotel projects worldwide. The Group brings more than 30 years’ of hotel experience with more than 4,700 hospitality properties located around the globe valued at more than $125 billion. They have worked on more than 2,700 hotel management and franchise agreements and more than 100 hotel mixed-use developments.

“I am honored to accept CLIC’s Lifetime Achievement Award,” said Butler. “I would like to extend my gratitude to the thousands of clients who have trusted the Global Hospitality Group to help them accomplish their goals.” CONTINUE READING →

07 December 2023

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On December 5, 2023, the Los Angeles City Council removed a contentious measure from the March 2024 ballot which would have required hotels in the city to provide accommodation for homeless individuals alongside paying customers. The proposed ordinance, initially sponsored by hospitality worker union UNITE HERE Local 11, was withdrawn at the request of the union following a compromise ordinance.

UNITE HERE Local 11’s original proposal would have compelled hotels to report their vacancies to the city of Los Angeles Housing Department. Individuals or families would then be given a “market rate” voucher for payment at these locations which the hotels would not be able to refuse.

The measure faced sharp criticism from the American Hotel & Lodging Association (AHLA). AHLA President and CEO Chip Rogers accused Unite Here of creating “an atmosphere of dangerous uncertainty for hotel employees, hoteliers and the City of Los Angeles.” He characterized the proposal as a bargaining chip rather than a genuine effort to tackle the homelessness issue. Following the withdrawal of the ballot measure, Rogers expressed gratitude to the LA City Council for brokering a compromise that removed what he called UNITE HERE’s “ridiculous homeless-in-hotels proposal” from consideration. He emphasized the importance of prioritizing the safety and security of hotel employees and guests, urging leaders in LA and other cities to learn from this episode and put safety first in future dealings with Unite Here. CONTINUE READING →

07 November 2023

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In 2021, Congress passed the Corporate Transparency Act in order to combat money laundering and other illegal activities. The CTA goes into effect on January 1, 2024, and requires almost all businesses to file a report with FinCEN identifying their beneficial owners. JMBM’s Taxation, Trusts & Estates Department has written the below article detailing the steps businesses should take to prepare for this new law.

Preparing for the Corporate Transparency Act
Disclosure of Beneficial Ownership Information to FINCEN

by JMBM’s Taxation, Trusts & Estates Department

New federal disclosure requirements for your businesses and entities will become effective January 1, 2024 – the reporting requirements are burdensome, can be triggered multiple times in a single calendar year and are subject to both civil and criminal liability. Accordingly, you should prepare to comply with the new law now.

Specifically, in 2021, Congress passed the Corporate Transparency Act, which can impact (subject to certain exceptions) essentially all businesses and investment vehicles (including, but not limited to, partnerships, limited liability companies and corporations). The CTA itself aims to combat money laundering, terrorism financing and other illegal activities by requiring entities to disclose information about the individuals who beneficially own and control them to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

In that regard, the CTA authorizes FinCEN to collect beneficial ownership information (“BOI”, as discussed below) and disclose it to various federal and state agencies (including the Internal Revenue Service). Accordingly, if you own or control an entity, then you may be subject to these requirements.

Reporting Requirements

Beginning on January 1, 2024, most U.S. entities will be required to file a report with FinCEN identifying the beneficial owners of such entity (inclusive of driver’s license and/or passport), in addition to (among other things) the reporting entity’s address, jurisdiction and taxpayer identification number (TIN). Reports will be filed electronically through FinCEN’s filing system. CONTINUE READING →

09 December 2022

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Last month Los Angeles voters approved Measure ULA, imposing a new tax on all real property sales or transfers over $5 million. This will affect all parties involved in a real property transaction, and it is important to understand the implications of the measure before negotiating on a new project. My colleague David Tabibian, partner in JMBM’s Real Estate Department and Global Hospitality Group®, explains the initiative and its potential impact below.

Measure ULA Approved: New Transfer Tax on All Real Property Sales Over $5 Million in the City of Los Angeles

by
David Tabibian

In an effort to combat the homelessness crisis, Measure ULA (aka the “Homelessness and Housing Solutions Tax”) was recently approved by voters in the City of Los Angeles on November 8, 2022. The measure imposes a very significant increase in transfer taxes on certain real property sales within the City of Los Angeles, which will have far-reaching impacts throughout the real estate market. It is anticipated that the new tax will generate approximately $600 million to $1.1 billion annually in order to fund affordable housing and tenant assistance programs administered by the Los Angeles Housing Department. Given the high cost of this new tax, it is important that buyers, sellers and developers fully understand its implications.

What Does Measure ULA Do?

Although commonly referred to as the “mansion tax,” it is actually much broader in scope since it applies to all real property asset classes, including residential and commercial properties as well as vacant land. In fact, many industry experts anticipate much of the revenue generated from Measure ULA will instead come from sales of apartment buildings and commercial properties as opposed to sales of mansions.

Currently, unless a specific tax exemption applies, all transfers of real property, regardless of value, are subject to a documentary transfer tax from both the City of Los Angeles and the County of Los Angeles at a combined rate of $5.60 per $1,000 of consideration. Simply put, it is a 0.56% tax on the consideration received and is collected at the time of closing.

Under the new measure, however, sales of residential and commercial real property valued at over $5 million but less than $10 million would be subject to an additional transfer tax at the rate of 4%, and sales of real property valued at $10 million or more would instead be subject to an additional tax at the rate of 5.5%. In contrast to the existing documentary transfer tax, the value of the property for purposes of the measure will include the value of any lien or encumbrance remaining on the property when it is sold so that the tax is on the gross value, not just the consideration received. Moreover, the tax would be due regardless of whether it is being sold at a gain or a loss. The thresholds under the measure will be adjusted each year for inflation. Although Measure ULA will become law on January 1, 2023, it applies to property sales occurring on or after April 1, 2023. CONTINUE READING →