Amendments to Proposed Health Bill Lower Deductibility of Insurance Executive Pay
Tuesday, October 13th, 2009 | Executive Compensation, Federal Legislation | No Comments
On October 1, 2009, the Senate Finance Committee, by a vote of 14-8, approved an amendment proposed by Sen. Blanche Lincoln (D., Ark.) which would lower the current executive pay tax deduction from $1 million to $500,000. The amendment was made to the proposed America’s Healthy Future Act of 2009 and includes deferred remuneration and previous existing contracts.
Sen. Lincoln reasons that the proposed legislation will serve as a windfall to the insurance industry and therefore the deduction for executive compensation should be reduced to ensure that revenue stays within the company to lower premiums. For the reduction to apply to an insurer, the company must receive 25% of its gross premium income from plans that meet the minimum creditable coverage requirements in the proposed Act.
However, there is still ambiguity because the definition of minimum creditable coverage as defined by the Act does not apply to individual, small group and other group private health insurance. That is left to each state’s insurance commission.
This amendment is consistent with last year’s amendments to IRC § 162(m)(5) which lowered the tax deduction of executives of companies receiving T.A.R.P. monies from $1 million to $500,000. Perhaps we are seeing the start of a new trend.
For information on The Employment Law Group® law firm’s Executive Compensation practice, click here.
The Employment Law Group® Law Firm Publishes Article on Non-Compete Litigation
Wednesday, June 17th, 2009 | Noncompete Litigation | No Comments
Litigation News has published an article by Scott Oswald and Jason Zuckerman of The Employment Law Group® law firm on non-compete litigation. The article discusses strategies for defending non-compete claims, including filing a declaratory judgment against the employer; asserting the “unclean hands” defense; seeking sanctions against an employer attempting to enforce an invalid non-compete; and potential claims available where an employer tries to enforce an invalid non-compete. To read the article, click here. Additional information on The Employment Law Group® law firm’s Non-Compete Litigation Practice is available at http://www.employmentlawgroup.net/PracticeAreas/NonCompeteLitigation.asp.
White House to Announce New Rules on Executive Pay
Wednesday, June 10th, 2009 | Executive Compensation, Federal Legislation | No Comments
Today, the Obama administration is scheduled to announce proposals that would give shareholders more input on executive compensation and ensure that corporate compensation committees have more independence when determining executive pay. The first proposal, known as the “Say on Pay” proxy resolution would require all publicly traded companies to allow an annual, nonbinding vote for shareholders to decide on proposed executive compensation measures. Additionally, the “Say on Pay” program provides that shareholders maintain the right to vote on the compensation for the top five company executives. The second proposal which seeks legislation similar to the Sarbanes-Oxley Act, would give more authority and more exacting standards to corporate compensation committees, including the ability to hire independent compensation consultants and outside counsel.
For more information on executive compensation, visit The Employment Law Group® law firm’s Executive Counsel Practice at http://www.employmentlawgroup.net/PracticeAreas/Executive-Compensation.asp.
Former Executive Wins $4.1 Billion in Employment Contract Dispute
Tuesday, June 9th, 2009 | Breach of Contract, Breach of the Implied Covenant of Good Faith, Executive Compensation | No Comments
A California Court has recently confirmed an arbitration award of $4.1 Billion for a former executive in a suit against his former employer, iFreedom Communications, Inc. (iFreedom). The award, which is being touted as the largest damages award issued in an employment arbitration, stems from a dispute over a compensation agreement where iFreedom agreed to pay its former chief marketing officer a commission structure of five percent of gross sales, company stock, and other benefits in exchange for his experience in building marketing organizations. According to the former executive, the company failed to pay him according to the compensation agreement and terminated him without cause when he confronted the company about the unpaid wages. The arbitrator found in Chester’s favor, concluding that iFreedom and its founder were liable, among other things, for breach of contract, breach of the implied covenant of good faith and fair dealing, and failure to pay wages. The arbitrator also determined that Chester demonstrated by clear and convincing evidence that the defendants engaged in “a pattern of despicable conduct,” and thus, an award of punitive damages was appropriate.
The massive award of $4.1 billion in this case is significant because it highlights the fact that employers can face severe penalties for failing to satisfy contractual obligations owed to employees. The Employment Law Group® law firm has successfully represented and advised senior executives in employment-related contract disputes including breach of stock option agreements and compensation agreements. For more information about the firm’s Executive Counsel Practice, click here.
Jury Awards $130 Million to Minnesota Dentists
Thursday, June 4th, 2009 | Breach of Contract, Tortious Interference | No Comments
A Hennepin County jury has awarded PDG P.A. (“PDG”), a Twin Cities dental group, more than $130 million in damages for multiple claims, including breach of contract and tortious interference. The verdict stems from a dispute over a 1996 service agreement where PDG agreed to pay PDHC Ltd. (“PDHC”) certain fees in exchange for non-dental administrative services. In 2006, PDG filed a complaint against PDHC, alleging that the company wrongfully engaged in conduct constituting the practice of dentistry in violation of Minnesota law and the parties’ service agreement. PDG also alleged that after it terminated its contract with PDHC, the company tortiously interfered with its ability to transition patients to new clinics by refusing to provide copies of patient records and recruiting PDG dentists for a new venture in direct competition with PDG. PDHC denied all allegations. After a month-long trial, the jury found for the plaintiffs and concluded that PDHC was liable among other things, for breach of contract, breach of fiduciary duty, and tortious interference. Finding that PDHC acted with deliberate disregard when it tortiously interfered with PDG’s prospective economic advantage, the jury awarded PDG $42 million in punitive damages. This verdict is significant because it reminds companies that there is no tolerance for the interference of plaintiff’s existing and prospective contractual relationships. For information on The Employment Law Group® law firm’s practice go to http://www.employmentlawgroup.net/PracticeAreas/EmploymentContractDisputes.asp.
House Passes New Bill with More Restrictions on Executive Pay
Wednesday, April 8th, 2009 | Executive Compensation, Federal Legislation | No Comments
The House has approved H.R. 1664, the Pay for Performance Act of 2009, to restrict executive compensation at companies that have received funds from the Troubled Assets Relief Program (TARP). The decision to impose additional limitations on executive payouts follows a massive public outcry about the $165 million that American International Group, a recipient of nearly $200 billion in bailout funds, has issued in payouts to its executives in the last month. The bill, which amends the executive compensation provisions of the Emergency Economic Stabilization Act of 2008, would bar recipients of TARP funds from paying any bonus that is “unreasonable or excessive” or that is not “directly based on performance-based measures.” The bill also calls for financial institutions subject to the new compensation requirements to submit an annual report to the Treasury Secretary stating how many executives received or will receive total compensation above specified dollar amounts during the fiscal year. To learn more about The Employment Law Group® law firm’s Executive Counsel Practice, go to http://www.employmentlawgroup.net/PracticeAreas/Executive-Compensation.asp.
Homebuilder Agrees to Pay $4 Million to Former Executives in Breach of Contract Dispute
Friday, March 27th, 2009 | Breach of Contract | No Comments
Standard Pacific Corp. (“SPC”) has agreed to pay a total of $3.95 million to two former executives to resolve a breach of contract dispute. According to the former executives, SPC breached their employment agreement when it allegedly violated the terms of a December 1, 2006 change-in-control agreement. The settlement agreements call for lump sum payments to be made to the former chief financial officer and former executive vice-president in the amount of $2.4 million and $1.55 million, respectively. The lump sum payments represent more than half of the maximum amount each executive could have received under their 2008 bonus arrangements and the December 2006 change-in-control agreement. Additionally, each executive will receive a reimbursement of up to 24 months of COBRA/Cal-COBRA payments and 90 days to exercise any vested stock options.
The settlement agreements are significant because they demonstrate the willingness of some employers to readily resolve employment-related disputes to avoid litigation. However, due to the complex nature of such disputes, executives who believe that the terms or conditions of their employment have been compromised by their employer should seek experienced counsel capable of handling such disputes.
The Employment Law Group® law firm has successfully represented and advised senior executives in employment-related contract disputes including breach of stock option agreements, compensation agreements, and severance. For more information about The Employment Law Group® law firm’s Executive Counsel Practice, click here.
New FINRA Rules Limit Motions to Dismiss in Arbitration
Thursday, February 12th, 2009 | New Rules and Procedures | No Comments
The Securities and Exchange Commission (“SEC”) has approved new rules to the Financial Industry Regulatory Authority (“FINRA”) Code of Arbitration Procedure, which severely limits a party’s right to file a motion to dismiss during arbitration. The new rules address investors concerns about abusive filings of dispositive motions by limiting the circumstances under which a FINRA arbitration panel can grant a pre-hearing motion to dismiss. In particular, the new rules prohibit a pre-hearing dismissal unless the arbitration panel finds: (1) that the parties have settled their dispute in writing; (2) that the moving party was not involved with the account, security or conduct at issue; or (3) the claim was not filed within six years of the events at issue. In addition to narrowing the grounds on which an arbitration panel can grant a motion to dismiss, the new rules also permits the following:
- The prohibition of a party’s ability to re-file a denied motion to dismiss without an explicit order from the panel;
- The issuance of sanctions for bad faith motions to dismiss; and
- The authority to award costs and attorneys’ fees to the opposing party if it is determined that the moving party’s motion to dismiss was frivolous.
The new rules should apply equally to employment arbitration to ensure that like investors, employees will have the opportunity to argue their case in employment arbitration.
President Caps Executive Pay at $500K
Thursday, February 5th, 2009 | Executive Compensation, Severance Agreements | No Comments
Yesterday, President Obama announced that senior executives of companies receiving the most funds from the Troubled Assets Relief Program (TARP) will have their pay capped at $500,000. The decision to limit executive compensation follows a report that financial institutions that received money from the economic bailout paid as much as $18 billion in bonuses in the last year despite the economic crisis. In addition to limiting executive compensation, the plan to protect taxpayers’ interests also includes:
- Decreasing severance pay for top executives who leave TARP funded institutions;
- Increasing the number of senior executives subject to the golden parachute rule;
- Restricting the liquidation of stock incentives until government funds are repaid; and
- Requiring corporate boards to modify their policies on executive perks.
To learn more about The Employment Law Group® law firm’s Executive Counsel Practice, go to http://www.employmentlawgroup.net/PracticeAreas/Executive-Compensation.asp.
Defamatory Statements Must be Considered as a Whole, Not Piecemeal
Wednesday, January 28th, 2009 | Defamation | No Comments
In Hyland v. Raytheon Technical Services Company decided January 16, 2009, the Virginia Supreme Court held that the whole alleged defamatory statement must be analyzed by the court to determine as a matter of law if it contains statements of provable false facts or just opinions. Common law based on the First Amendment to the U.S. Constitution and the Virginia Constitution protects statements of pure opinion, but false factual statements may be actionable as defamation. Furthermore, opinion statements that imply provably false facts may also be actionable as defamation. The judge sends alleged defamatory statements containing provably false factual statements to a jury to decide if they are actually defamatory.
Defamation is a false statement made to one or more third-parties that causes harm to a private person or their reputation. The plaintiff must show that the speaker knew the falsity of the facts, lacked a reasonable basis for believing the facts were true, or was negligent in obtaining the facts.
In this case, the employee appealed the Virginia circuit court’s decision not to send the allegedly defamatory statement to a jury. The circuit court concluded that the plaintiff admitted to the factual statements. However, the court excluded the defendant’s opinion statements. The Virginia Supreme Court held that the circuit court improperly failed to consider the allegedly defamatory statements as a whole. The court observed that the circuit court’s error denied the employee the right to submit evidence to prove the falsity of the statements and to have a jury decide if the statements as a whole were defamatory.
For information on The Employment Law Group® law firm’s Executive Compensation practice, click here. To view the decision, Hyland v. Raytheon Technical Svcs. Co., Et al., No. 080157 (Va. Jan. 16, 2009), click here.