Another State Is Closer to Adopting an Anti-Competitive Statute
Your company may utilize restrictive covenants such as non-competition and non-solicitation agreements. As many of you who operate in the Southeast may know, Georgia has been an East Coast hold out in recognizing such provisions. Given the growth of cities such as Atlanta, the inability to enforce non-competition and non-solicitation agreements in Georgia has caused concern for many companies looking to protect their trade secrets and confidential information. Accordingly, we have been tracking the progress of a proposed bill in the Georgia Legislature that would allow Georgia to become one of the more business-friendly states by recognizing the enforceability of certain restrictive covenants like non-competition agreements.
We are now happy to report that Georgia is one step closer to taking the action necessary to allow courts to engage in what is commonly referred to as “blue penciling” — the practice of modifying an overbroad and unenforceable restrictive covenant in a manner to make the restrictions more reasonable and, arguably, enforceable.
Even if the change occurs, however, there are many questions to be answered regarding what is necessary to ensure enforceability of non-competition or non-solicitation agreements in the first instance in Georgia. One such question is whether the company must provide additional consideration to its employees in order to obtain an agreement that contains provisions restricting or regulating competitive activities; or whether the employee’s continued employment will be sufficient consideration. Additionally, the general permitted scope of such agreements is yet to be determined.
Based on the current status of the law, it is not yet time to start requiring your employees in Georgia to execute non-competition and non-solicitation agreements. Companies may, however, want to consider whether such agreements would be a useful tool in Georgia, if ultimately permitted by the General Assembly, and begin to contemplate the scope of reasonable restrictions they may want to impose.
Whoops! They Did It Again, But This Time It’s Different
On March 2, 2010, President Obama signed into law the Temporary Extension Act of 2010 (TEA), extending, yet again, the COBRA premium subsidies that were to expire at the end of February 2010. The first COBRA subsidy program was passed as part of the American Recovery and Reinvestment Act of 2009, commonly referred to as the Stimulus Bill. Under the prior COBRA subsidy legislation, eligible individuals — generally these who are “involuntarily terminated” — pay only 35 percent of the total COBRA premium. The employer “subsidizes” the remaining 65 percent of the COBRA premium and recoups this cost by taking a tax credit against payroll taxes owed by the employer.
Under the new TEA extension, involuntary termination must occur on or before March 31, 2010, at which time eligibility for the COBRA subsidy will expire. However, unlike the prior extension, TEA makes some changes to the original COBRA subsidy program. The period of application for the COBRA subsidy has been extended from the original nine months to 15 months. In addition, TEA provides that individuals who experience an involuntary termination that occurs on or after March 2, 2010, but before March 31, 2010, and previously suffered a reduction of hours that occurred at any time from September 1, 2008 through March 31, 2010 that was a prior qualifying event, are eligible to receive the subsidy. A reduction of hours is a COBRA qualifying event if the employee loses coverage because the number of hours he or she is working falls below the minimum number of hours set forth in the health plan’s eligibility requirements.
Another change occasioned by TEA allows the U.S. Department of Labor to assess a new $110-per-day penalty against a plan sponsor or health insurer who fails to comply with the Department’s determination made under expedited review procedures regarding an individual’s entitlement to premium assistance. The expedited review process was a feature in the original COBRA subsidy that allowed terminated employees who were denied the subsidy to get a decision from the Department of Labor as to their eligibility with 15 days of submitting their paperwork.
Plan administrators must notify current and former participants and their beneficiaries about the subsidy program. The Department of Labor has provided model notices on its Web site. As was the case under the original legislation, the subsidies are mandatory for those who are eligible. Plan participants who are involuntarily terminated but are eligible to obtain coverage through a spouse or family member’s plan are not eligible for the subsidy. There are income limits ($145,000 for single filers; $290,000 for joint filers) for who is eligible to receive the subsidy.
The new extension provided under TEA is only for one month, expiring on March 31, 2010. Many pundits predict Congress will again pass some form of extension/amendment to the COBRA subsidy program at that time. Readers should stay tuned for further action from Washington and the changes that may be passed.
Legal News is part of our ongoing commitment to providing legal insight to our clients and colleagues. If you have any questions about or would like to discuss these topics further, please contact your Foley attorney or any of the following individuals:
Authors
Christi Adams
Orlando, Florida
407.244.3235
[email protected]
Mark Neuberger
Miami, Florida
305.482.8408
[email protected]