THIS ISSUE'S HEADLINES

FTC Proposes to Make Non-Compete Agreements Illegal

Recent Zoning Act Amendments Result in Significant Changes to Zoning Board Procedures

New Delaware Court Decision Places Added Responsibility on Corporate Officers

Important Considerations When Filing a Claim Against an Estate

Dealing With the Challenges of a Family-Owned Business

Stay Informed — PLDO COVID-19 Resource Library


FTC PROPOSES TO MAKE NON-COMPETE AGREEMENTS ILLEGAL

Imagine this: your business has entered into various non-compete agreements with certain of your employees, particularly those who are executive-level or highly-compensated. These non-compete agreements are intended to protect your legitimate business interests by preventing those employees from unfairly competing against you by taking all of their experience, know-how, processes, training and best practices across the street to work for your competitor. Your employees willingly and freely entered into these agreements, and some of them may have consulted with their own attorneys and negotiated substantial benefits or compensation before doing so.

Now imagine that a government regulator – in this case, the Federal Trade Commission (FTC) – not only wants to prohibit you from entering into such agreements in the future, it wants to force you to rescind all of the non-compete agreements you have in place right now. This is essentially what would happen if the FTC’s proposed rule regarding non-compete agreements is approved. In support of this proposed rule, the FTC claims that non-compete agreements reduce workers’ wages, stifle new business and new ideas, exploit workers, and hinder economic liberty. The FTC believes that non-compete agreements are not necessary to protect a company’s trade secrets and confidential information, and that non-compete agreements unfairly burden workers and prevent them from freely moving about the workforce.

Unsurprisingly, business have raised numerous concerns in response to the proposed rule. Public comments on the proposed rule are due by March, and thereafter the FTC will take those public comments into consideration as it formulates the final rule. Often, public comments can influence a regulator’s final language in a rule, so it is possible that the FTC retreats or softens the proposed rule, but given the public statements made by the FTC in support of this rule, we expect the final rule will likely not vary considerably from what is being proposed. We are confident that the FTC’s rule, regardless of its final form, will be challenged in court proceedings that could substantially delay its enactment or enforcement. Businesses should keep an eye out for updates on this rule as this process plays out this year.

Brian J. Lamoureux is a Partner on the Firm’s Litigation, Employment, and Cybersecurity teams. He can be reached at bjl@pldolaw.com or 401-824-5155. For additional information on the FTC’s proposed rulemaking on non-compete agreements, click here to read Attorney William. F Miller’s Advisory.

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RECENT ZONING ACT AMENDMENTS RESULT IN SIGNIFICANT CHANGES TO ZONING BOARD PROCEDURES

In the 2022 legislative session, the General Assembly enacted critical amendments to the Zoning Act, chapter 45 section 24 of the Rhode Island General Laws. These changes impact not only the quorum requirements for a Zoning Board, but also the votes necessary for a motion to either pass or fail.

Zoning Boards are made up of five members and two alternate members. Prior to the 2022 amendment, a meeting of a Zoning Board was required to have five members (whether regular or alternate) present to conduct a meeting. Furthermore, for a motion to pass made on an appeal petition it was required to receive 3 affirmative votes, while a motion made on a variance or special use permit petition was required to receive 4 affirmative votes to pass.

With the 2022 amendments effective as of January 1, 2023, the Zoning Act now only requires four members (whether regular or alternate) present to achieve a quorum and conduct a meeting. Moreover, the voting requirements for all petitions (whether an appeal, variance, or special use permit) are by a simple majority. Therefore, whether the Zoning Board has four or five members present, the vote required for a petition to pass will always be three. The newly enacted amendments should simplify what had previously been a confusing outcome, whereby a petition for a variance or special use permit would fail despite receiving a majority of the Board’s votes. By making all petitions subject to a simple majority vote, the legislature has remedied this previously confusing aspect of Zoning Board procedure.

If you have questions about zoning laws and procedures, or other legal issues, please contact PLDO Partner Patrick J. McBurney at 401-824-5100 or email pmcburney@pldolaw.com.

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Delaware General Corporation Law has long held that directors of a Delaware corporation owe a fiduciary duty of “oversight” to the corporation and its stockholders. However, until now, there has not been a Delaware Chancery Court (“Delaware Court”) case that established a similar duty with respect to officers of a Delaware corporation. In In re McDonald’s Corporation Stockholder Derivative Litigation, the Delaware Court ruled that the fiduciary duty of oversight extended to corporate officers, as well as directors.

In an Advisory entitled, “New Delaware Court Decision Places Added Responsibility on Corporate Officers,” PLDO Partner William F. Miller discusses the McDonald’s case and what factors led to the Court’s decision. He also provides key takeaways for all businesses, whether or not your company does business in Delaware as other states often model their statutes based on Delaware statutes.

If you have questions or would like further information, please contact PLDO Partner William F. Miller at 508-420-7159 or email wmiller@pldolaw.com.

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In certain instances, a business or person may find themselves in a position needing to enforce or file a claim against a decedent’s estate. The fiduciary of an estate is typically required to pay enforceable and valid claims or debts. Claims for contractual breaches, torts, or money owed may survive the death of a claimant and could be recovered from the assets of an estate if an estate is solvent.

When presenting a claim against an estate, a creditor or a claimant must understand and follow the procedures set forth by the state that has jurisdiction over the decedent’s estate. Many states have strict time periods for when a claim can be filed against an estate and most states have their own unique and specific process that must be followed when filing.

For example, in Massachusetts, a claim must be filed within one year of date of death or the claim is forever barred, with only limited exceptions applying to this strict statute of limitations. Within this one-year time period the estate must be opened, an action must be filed against the estate to enforce the claim in a court with the proper jurisdiction to adjudicate the claim, and notice of the claim and action must be provided to the fiduciary. If no fiduciary is appointed, a claimant could further be required to file a petition to probate the estate and appoint a fiduciary before the one-year time period ends to preserve their rights.

In Rhode Island, a claimant or creditor must present a claim within six months from the first publication of the notice of the personal representative of the estate’s qualification. If the claim is not presented within this short window, it will be forever barred, except for limited exceptions. Furthermore, in Rhode Island a claim against the estate must be presented in writing, indicating the basis and amount for claim, contain the name and address of the claimant, and provide the name and address of the claimant’s counsel. It must be filed with the probate clerk of the probate court that has jurisdiction over the estate and delivered by mail to the personal representative.

It is critical to fully understand the time restrictions and follow the proper procedures to present a claim against an estate. For further information on presenting a claim against an estate, please contact Attorney Katherine B. Dunn at 401-824-5100 or kdunn@pldolaw.com.

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With a reported 32.4 million family-owned businesses in the U.S., there is no doubt they are a cornerstone of the U.S. economy and yet they face significant and constantly evolving challenges. Family-owned businesses share all the same concerns as non-family businesses, i.e., profitability, competitive forces, adapting to modern technology, as well as management and personnel issues, to name a few. However, family-owned businesses also have unique challenges that are not experienced by non-family entities. In fact, reports indicate that only 30% survive from the first to the second generation, and nearly half fail to develop a business succession plan.

PLDO Managing Principal Gary R. Pannone discusses these challenges in his latest Advisory, “Dealing With the Challenges of a Family-Owned Business.” He also provides practical ways that businesses can manage both family and non-family employees to minimize conflict and position the company for long-term success for generations to come.

If you have questions pertaining to a family-owned business, please contact PLDO Managing Principal Gary R. Pannone at 401-824-5100 or email gpannone@pldolaw.com.

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STAY INFORMED – PLDO COVID-19 RESOURCE LIBRARY

PLDO’s team of attorneys continue to add updates and advisories regarding the pandemic and its impact on families, businesses and organizations. To access our COVID-19 Resource Library, click here.

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