This Week in 340B: June 17 – 23, 2025
Find this week’s updates on 340B litigation to help you stay in the know on how 340B cases are developing across the country. Each week we comb through the dockets of more than 50 340B cases to provide you with a quick summary of relevant updates from the prior week in this industry-shaping body of litigation.
Issues at Stake: Contract Pharmacy; Rebate Model; HRSA Audit Process
In five cases challenging Tennessee, Hawaii and Utah state laws governing contract pharmacy arrangements:
Tennessee: In one case, amici filed an amicus curiae brief in opposition to plaintiff’s motion for preliminary injunction and in a second case, the plaintiff filed a motion for preliminary injunctive relief and the defendant filed a motion to dismiss.
Hawaii: In one case, the plaintiff filed a motion for preliminary injunction.
Utah: In three cases, the plaintiffs filed oppositions to the defendants’ motion to dismiss and replies in support of plaintiffs’ motions for preliminary injunctive relief.
In two appealed cases against the government related to rebate models, the court granted appellant’s motion to consolidate the cases with other similarly situated cases, and consolidated two additional cases as cross-appeals.
In three appealed cases against the government related to rebate models, the appellants filed opening briefs.
In two cases related to the HRSA audit process, the court granted defendants’ motion to dismiss.
In a case by a covered entity challenging the government’s decision to allow a manufacturer’s audit, the covered entity filed a memorandum in opposition to the drug manufacturer’s motion for leave to file an amicus brief in support of the government’s motion to dismiss.
Mexico Imposes New Export Notice Requirement for 5 Tariff Lines Covering Certain Mechanical and Electric Machinery and Their Parts
After being postponed twice, effective August 11, 2025, Mexico will require an “Automatic” Export Notice prerequisite (Export Notice, which would be subject to evaluation and thus not necessarily “automatically” granted) for companies to be able to export products out of the country under 5 Harmonized Tariff Schedule -out of the originally 30 foreseen-lines (HTS), including (i) certain turbopropellers and gas turbines, (ii) other air or vacuum pumps, (iii) parts for electric motors and electric generating sets and rotary converters, (iv) electric transformers, static converters and inductors, and (v) optical fiber cables (Mexican HTS 8411.12.01, 8414.80.99, 8503.00.99, 8504.23.1, and 8544.70.01).
Export Notice petitions could begin being submitted no sooner than July 28, 2025, and the Ministry of Economy offered that it would provide a response within a 10-day working period; even though there is no automatic authorization or denial in case such period lapses, if a response is not received, exportation simply would not take place.
To impose this new requirement, the Ministry of Economy argued that it was necessary to generate and analyze information about the export flows directed to Mexico’s Free Trade Agreement partners, yet, at the same time, held that the country needed to increase its “productive integration” and reduce its dependence on inputs from abroad.
There are a number of precise formats to utilize and requirements to fulfill so that the Ministry of Economy can even begin to electronically consider Export Notices, and it is a fact that such a notice will be required every single time an export shipment is to occur.
It is of the utmost importance to fully understand and incorporate this requirement and its effects in the processing and scheduling of your international deliveries of mechanical and electric machinery and their parts, and to fully grasp how it could impact your company’s current operations, including your outstanding contractual obligations.
Texas SB 1318: Major Changes to Healthcare Non-Compete Agreements
On June 20, 2025, Texas Governor Greg Abbott signed into law Senate Bill 1318 (SB 1318), which amends Section 15.50 of the Texas Business and Commerce Code, commonly referred to as the “Texas Covenants Not to Compete Act.” SB 1318 significantly tightens restrictions on the permitted use of covenants not to compete for physicians and certain other healthcare practitioners, including dentists, nurses, and physician assistants (“Healthcare Practitioners”). The provisions of SB 1318 take effect and will apply to any non-compete entered into or renewed on or after September 1, 2025.
Below is a summary of key provisions of SB 1318 and resulting changes to the existing framework for physician and Healthcare Practitioner non-competes in Texas:
Key Provisions
1 Year Maximum Duration – Any non-compete clause seeking to limit or restrict the professional licensed practice of any physician or Healthcare Practitioner is now limited to a period of no more than one (1) year following termination.
5 Mile Geographic Cap – The geographic reach of a non-compete clause seeking to limit or restrict the professional licensed practice for any physician or Healthcare Practitioner is limited to a 5-mile radius from the practitioner’s primary workplace.
Mandatory Buyout Option – While healthcare employers have long been required to include a buyout option for physician non-competes, employers must now include buyout options in every non compete that seeks to limit or restrict the professional licensed practice of any physician and any Healthcare Practitioner, in each case, giving such practitioners the right to pay a buyout amount to eliminate an otherwise enforceable non-compete restriction. Further, no buyout amount may exceed a practitioner’s total annual salary and wages at the time of termination.
New “Void and Unenforceable” Provisions for Physician Non-Competes – SB 1318 expressly states that “a covenant not to compete relating to the practice of medicine is void and unenforceable against” a licensed physician “if the physician is involuntarily discharged . . . without good cause.” As such, unless there is a reasonable basis for discharge of a physician from contract or employment that is directly related to the physician’s conduct, a physician may not be subject to an otherwise enforceable non-compete if a physician is involuntarily discharged. Employers should address this aspect by paying close attention to how “cause” is defined in any agreements with physicians and other Healthcare Practitioners.
Impact of SB 1318
For Practitioners – SB 1318 significantly enhances mobility. Shorter duration and limited geographic restrictions ease professional transitions, and the use of consistent buyout calculations ensures professionals can voluntarily enter a restrictive period while keeping financial exposure in check.
For Employers – Healthcare employers will need to review and potentially revise existing provider agreements, adjusting clauses to align with the new limits. They must also anticipate an eventual buyout or risk having non-compliant clauses struck as unenforceable. Transparent communication of buyout terms will be essential, as will proactive efforts to ensure all agreements with any physicians and other Healthcare Practitioners align with the new law.
Policy Context – This new law aligns with a broader trend in Texas and nationally toward greater workforce mobility within the healthcare industry.
Practical Compliance Guidance
Before September 1, 2025 – Employers should audit existing contracts, flagging those set for renewal and contracts expected to be used for new hires. Template agreements expected to be entered into on or after September 1, 2025, should be updated to reflect the maximum one-year term, a 5-mile radius, and the required reasonable buyout clause.
Drafting Buyout Clauses – These must clearly specify how the buyout amount is calculated and ensure it does not exceed the practitioner’s annual compensation. Clear documentation minimizes future disputes.
Monitor Enforcement – Record contract dates, buyout transactions, and ensure practitioners understand their rights. Failure to comply risks rendering the entire non-compete unenforceable under Texas law.
Final Comments
SB 1318 marks a significant shift in Texas employment law by curtailing the reach and enforceability of non-compete provisions in the healthcare industry. Employers need to be mindful of the changed landscape and act promptly to revise contracts and processes to ensure timely and full compliance with the amendments brought about by SB 1318 by the deadline of September 1, 2025.
California Battery Energy Storage Update
California has set ambitious clean energy standards, mandating that 100% of the state’s electricity be supplied by renewable and zero-carbon resources by 2045, with interim targets of 60% by 2030 and 90% by 2035. In order to meet these goals, California must be able to successfully store solar and wind energy generated only when the sun is shining, and the wind is blowing. In 2024, California made significant progress, bringing more than 7,000 megawatts of clean energy and over 4,000 megawatts of new battery storage online. Battery storage systems are key to California’s ability to meet energy demand, but the current installed battery storage capacity is over 20% of California’s peak demand. The state’s projected need for battery storage capacity is estimated at 52,000 megawatts by 2045.
To help achieve this ambitious target, since 2022, the California Energy Commission (CEC) was given temporary authority to permit certain renewable energy projects, including energy storage facilities capable of storing 200 megawatt-hours or more, through its Opt-In Certification Program originally enabled under AB 205. The Opt-In Certification Program is an optional permitting process through which project developers receive a permit from the CEC in lieu of any local permit and most, but not all, state permits. Since the enactment of the program, Allen Matkins has developed significant experience supporting Opt-In projects. As of this publication, there are eight Opt-In projects in the CEC’s queue.
The January 2025 fire that destroyed a portion of the 300-megawatt Moss Landing energy storage facility near Santa Cruz, California has brought increased attention to safety standards at storage facilities. This legislative session, three bills, AB 303, AB 434, and SB 283 were introduced, each proposing different standards for energy storage safety.
AB 303: BATTERY ENERGY SAFETY & ACCOUNTABILITY ACT
AB 303, introduced by Assemblymember Dawn Addis, proposes to remove energy storage facilities from the CEC’s Opt-In Certification Program and return land use authority back to local agencies. Additionally, AB 303 would establish restrictions for locations of new energy storage facilities. If passed, new facilities could not be constructed in high fire and high flood zones and a 3,200-foot setback from environmentally sensitive sites, such as homes, schools, hospitals, and prime agricultural land would be required. As drafted, AB 303 would not impact existing energy storage facilities but would seek to address safety concerns for new facilities across the state. At the beginning of June, AB 303 became a two-year bill by not passing through to the Senate by the applicable deadline.
AB 434
AB 434, introduced February 5th by Assemblymember Carl DeMaio, would similarly exclude energy storage facilities from the CEC’s Opt-In Certification Program. However, AB 434 would further prohibit, until January 1, 2028, a public agency from authorizing the construction of new energy storage facilities and would require the State Fire Marshal, on or before January 1, 2028, to adopt guidelines and minimum standards for the construction of energy storage facilities. Further, AB 434 would require public agencies authoring new energy storage facilities on or after January 1, 2028, to require the facility to meet either the standards adopted by the State Fire Marshal or more stringent guidelines as determined appropriate by the public agency. At the beginning of June, AB 343 became a two-year bill by not passing through to the Senate by the applicable deadline.
SB 283
SB 283, introduced February 5th by Senator John Laird, would require new energy storage facilities to meet the National Fire Protection Association (NFPA) 855 standards for battery storage safety and hazard mitigation. Further, prior to submitting an application for a new energy storage facility through either the CEC’s Opt-In Certification Program or a local approval process, developers would be required to engage and confer with local fire authorities to address facility design, assess potential risks, and integrate emergency response plans. As of this writing, SB 283 is being considered in the Assembly and will be heard before the Energy, Utilities and Communications and Local Government committees.
Challenging the Industrial Exodus: Legal Lessons from Santa Ana’s Planning Reboot
The City of Santa Ana (City) has recently undertaken an ambitious — and highly controversial — effort to reshape the landscape of its historically industrial-centric Transit Zoning Code (TZC) district. Through the adoption of a development moratorium and the introduction of Zoning Ordinance Amendment (ZOA) No. 2024-02 (the Zoning Code Update), the City has sought to restrict, phase out, and ultimately eliminate industrial uses within the TZC area. Together, these legislative tools illustrate a growing trend among municipalities to leverage interim ordinances and zoning amendments as instruments of long-range planning, often to the detriment of long-established industrial users. Similar efforts have been pursued in recent years by a number of other Southern California cities – including Pomona, Redlands, Rialto, Pico Rivera, Rancho Cucamonga, and Lynwood – through the use of zoning overlays, targeted use restrictions, and industrial moratoria. This list is not exhaustive, but reflects a broader regional shift in policy toward phasing out legacy industrial activity.
This article examines the legal underpinnings of the City’s approach, with particular focus on the statutory limits governing moratoria, the erosion of legal nonconforming rights under the Zoning Code Update, and the vested rights framework that enabled certain property owners to successfully defend against overreach. For landowners, developers, and practitioners across California, the City of Santa Ana case study offers timely insights into the risks — and opportunities — of navigating land use regulations in a shifting policy landscape.
DEVELOPMENT MORATORIA AS PLANNING TOOLS AND THEIR LEGAL LIMITS
A growing trend has emerged among Southern California municipalities: the use of moratoria to freeze industrial development while more permanent land use regulations are drafted and baked into existing zoning codes. Many cities have expressed concern that their industrial zoning codes — often decades old — are no longer equipped to address the intensity, scale, and externalities associated with modern warehousing and logistics operations. Often styled as temporary “pauses,” these moratoria are increasingly being deployed to sidestep political or procedural delays in controversial rezonings. The City’s approach is emblematic of this shift.
In April 2024, the City adopted Urgency Ordinance No. NS-3063, establishing an immediate 45-day moratorium on industrial use approvals in the TZC area. The urgency measure term was initially extended to April 15, 2025 via the City’s adoption of Ordinance No. NS-3064, ostensibly to provide the City with time to “alleviate conditions” associated with industrial impacts on surrounding neighborhoods. Yet, in practice, the moratorium functioned less as a temporary regulatory pause and more as a de facto blanket ban on industrial activity blocking even ministerial permits for minor tenant improvements and routine facility upgrades for existing facilities. In some jurisdictions, such as Pomona, staff went even further — interpreting local moratoria as grounds to withhold business licenses altogether, compounding the regulatory chilling effect.
While cities are authorized by State law to impose interim ordinances under California Gov. Code § 65858, that authority is narrowly tailored. Subsection (a) requires a city to make express findings that “there is a current and immediate threat to the public health, safety, or welfare,” and that the approval of certain land uses “would result in that threat to public health, safety, or welfare.” These findings must be supported by specific and demonstrable facts, not merely policy preferences or speculative concerns. Notably, establishing a moratorium requires a higher approval threshold (a four-fifths vote), yet many cities routinely adopt moratoriums without adequately substantiated findings meeting this elevated standard.
Moreover, Gov. Code § 65858(c) limits extensions (moratoria may be in place for up to a maximum of two years) of interim ordinances to cases where the city adopts “new findings” evidencing continued urgency. Courts have interpreted this to mean that local governments may not simply recycle generalized concerns from the original ordinance; instead, they must produce fresh and substantial evidence justifying continued restrictions. As one court observed, the power to adopt moratoria “must not be used as a subterfuge to accomplish through interim action what would otherwise require permanent legislation subject to full procedural safeguards.” (See San Diego Gas & Electric Co. v. City of Carlsbad (1998) 64 Cal.App.4th 785, 792.)
The City’s blanket application of its moratorium — even to longstanding industrial businesses performing non-expansion work — ultimately tested the boundaries of lawful urgency regulation. In practice, we have observed in multiple jurisdictions that planning and building department staff frequently misapply moratoria by freezing all permit activity, regardless of whether a proposed action would establish a new industrial use or expand or intensify an existing one. This overreach leads to delays for purely ministerial work, such as tenant improvements, equipment upgrades, or basic maintenance for long-standing businesses, even when no land use intensification is proposed.
Such was the case for Adams Iron Co., whose long-operating facility at 811 N. Poinsettia Street was denied a ministerial permit for internal dust collection upgrades during the moratorium period. Allen Matkins submitted a formal letter to the City Attorney on September 4, 2024, later covered by various media outlets, arguing that the City’s refusal to issue the permit violated Adams Iron’s vested rights under California law. The letter cited long-standing case law, including Avco Community Developers, Inc. v. South Coast Regional Com. (1976) 17 Cal.3d 785, and emphasized that Adams Iron had expended significant resources in reliance on existing zoning and permits. The City’s blanket denial, we argued, was not only unsupported by the moratorium’s express terms but also exposed the City to potential liability for unconstitutional takings and inverse condemnation.
Ultimately, the City relented. Adams Iron received its permit — one of the few granted during the moratorium — illustrating how careful legal positioning and a clear articulation of vested rights can successfully overcome unlawful regulatory applications.
This episode illustrates a broader caution: moratoria are not planning shortcuts. They are statutory tools of last resort, meant to address genuine emergencies — not a means for incrementally phasing out disfavored uses without going through appropriate legislative processes.
REZONING AND THE EROSION OF NONCONFORMING RIGHTS
While the moratorium temporarily paused industrial activity in the City’s TZC area, the City simultaneously moved to make such restrictions permanent through a sweeping legislative overhaul. Specifically, the City initiated the Zoning Code Update, consisting of Zoning Ordinance Amendment (ZOA) No. 2024-02 and Amendment Application (AA) No. 2024-03. These measures proposed major revisions to permitted land uses, nonconforming use regulations, and operational standards within the TZC.
The centerpiece of the Zoning Code Update is a dramatic reclassification of large swaths of formerly industrially zoned land — including M1 (Light Industrial) and M2 (Heavy Industrial) designations — into a newly created “Urban Neighborhood” zoning. Industrial uses are no longer permitted under the Urban Neighborhood zoning designation and existing industrial businesses (including standard warehousing) are reclassified as legal nonconforming uses, subject to heightened scrutiny and eventual phase-out.
Among the most concerning features of the Zoning Code Update were:
Amortization provisions allowing the City to forcibly terminate nonconforming uses after an undefined “reasonable” period.
Transfer restrictions that prohibit the continuation of a nonconforming use upon sale or lease to a new operator, effectively undermining financing, succession planning, and property value.
Operational standards that retroactively impose new noise, environmental, and performance obligations on existing businesses.
These mechanisms pose an existential threat to industrial operators. As California courts have long recognized, the right to continue a legal nonconforming use is a “vested right that runs with the land” (Edmonds v. County of Los Angeles (1953) 40 Cal.2d 642). By conditioning continued operation on an arbitrary amortization timeline or restricting successor use rights, the Zoning Code Update risked unlawfully extinguishing these protected interests.
Equally problematic was the City’s attempt to justify the Zoning Code Update by relying on its Transit Zoning Code Environmental Impact Report (EIR No. 2006-02), certified in 2010. That EIR was prepared 15 years ago and does not evaluate the displacement, cumulative socioeconomic, or environmental impacts of a wholesale elimination of industrial land uses. Nevertheless, the City merely prepared an addendum to that EIR, claiming that the proposed changes fell within the scope of prior review under CEQA Guidelines section 15162.
Allen Matkins, on behalf of multiple affected property owners — including Adams Iron — submitted formal comment letters, provided public testimony, and engaged in direct negotiation with City staff to raise legal concerns with the procedural and substantive adequacy of the EIR addendum and the substantive legal risks embedded in the Zoning Code Update.
While these advocacy efforts did not halt the Zoning Code Update entirely, they produced meaningful improvements. The City ultimately incorporated several clarifying provisions and exceptions in response to public comments — including a more flexible approach to abandonment determinations, refined amortization language, and narrowly tailored allowances for specific industrial sites. These changes significantly reduced the burden on our clients and preserved key operational rights.
With the City Council scheduled to vote on final adoption of the Zoning Code Update on May 5, 2025, continued attention is warranted. The City’s approach illustrates the increasing use of comprehensive rezoning as a policy tool to phase out disfavored uses. For industrial property owners, it also underscores the importance of early engagement, robust legal analysis, and clear documentation of vested rights when facing existential regulatory change.
TERMINATION OF THE MORATORIUM AND LESSONS LEARNED
Faced with vocal opposition and detailed legal scrutiny, the City Council surprisingly allowed the moratorium to expire on April 15, 2025, after failing to achieve the required statutorily required four-fifths vote for extension. This termination represented a significant legal victory, validating the arguments advanced by businesses and highlighting the necessity for municipal transparency and statutory adherence.
City Council recently adopted the permanent Zoning Code Update for the Transit Zoning Code (TZC) area on June 3, 2025, after introducing several last-minute amendments during the public hearing. We are actively assisting clients in navigating the newly enacted regulations, interpreting their impacts, and developing strategies to protect vested rights and maintain operational continuity.
Looking forward, the City is now in the initial stages of stakeholder outreach and drafting a broader Comprehensive Zoning Code Update. Unlike the TZC update, this forthcoming comprehensive revision will affect zoning citywide, impacting property owners and businesses throughout Santa Ana. Businesses and property owners should proactively engage in this planning process, clearly document and assert their vested rights, and remain prepared to leverage precise legal arguments grounded in statutory compliance and constitutional protections. Continued vigilance will be essential to successfully navigating these extensive zoning reforms.
PRACTICAL IMPLICATIONS AND FORWARD–LOOKING GUIDANCE
The City of Santa Ana’s recent experiences offer critical insights:
Municipalities must strictly adhere to statutory standards: Property owners should scrutinize local governments’ “findings” supporting urgency ordinances, challenging vague or insufficient evidence.
Documentation of vested rights is crucial: Clear records demonstrating continued use and permits become essential to asserting constitutional and statutory rights against municipal overreach.
CEQA compliance matters: Advocating against reliance on outdated EIRs ensures legally adequate environmental review and protects against arbitrary zoning amendments.
In navigating similar municipal strategies elsewhere, proactive and assertive legal engagement remains critical. As municipalities increasingly adopt aggressive planning tools, particularly those targeting industrial uses, businesses and property owners must remain informed and strategically prepared to defend their vested rights.
California’s New Climate-Related Disclosure Laws: Requirements, Compliance Costs, and Deadlines for Impacted Businesses
California is often the vanguard of climate-related policies and programs. From legislation requiring the state to reduce overall greenhouse gas (GHG) emissions and procure electricity from renewable and carbon-free sources to the Cap-and-Trade Program and Low Carbon Fuel Standard, businesses operating in California must constantly stay informed of the shifting regulatory landscape.
In 2023, California enacted two laws continuing this trend. Senate Bill (SB) 253, known as the Climate Corporate Data Accountability Act, is the first law in the United States to require businesses to disclose their GHG emissions in an annual report submitted to the California Air Resources Board (CARB). SB 261, known as the Climate-Related Financial Risk Act, requires businesses to assess and report every two years to CARB on how climate-related financial risks may impact their market position, operations, and supply chains. In 2024, SB 219 amended both SB 253 and SB 261 to clarify reporting requirements and extend certain deadlines.
SB 253 requires businesses to begin reporting emissions data in 2026, while SB 261’s climate-related financial risk reports are due on January 1, 2026. If they haven’t already, covered businesses should begin preparing now. This article summarizes SB 253’s and SB 261’s reporting requirements, processes, and penalties for noncompliance. It also provides an update on litigation challenging both laws in federal court and steps taken by CARB to implement SB 253 and SB 261.
SB 253: CLIMATE CORPORATE DATA ACCOUNTABILITY ACT
SB 253, as amended by SB 219, directs CARB to adopt regulations by July 1, 2025, requiring “reporting entities” — businesses with total annual revenues over $1 billion that are formed under state or federal law and do business in California — to annually disclose their Scope 1, Scope 2, and Scope 3 emissions. SB 253 defines each scope as follows:
Scope 1 emissions are “all direct greenhouse gas emissions that stem from sources that a reporting entity owns or directly controls, regardless of location, including, but not limited to, fuel combustion activities.”
Scope 2 emissions are “indirect greenhouse gas emissions from consumed electricity, steam, heating, or cooling purchased or acquired by a reporting entity, regardless of location.”
Scope 3 emissions are “indirect upstream and downstream greenhouse gas emissions, other than Scope 2 emissions, from sources that the reporting entity does not own or directly control. These may include, but are not limited to, purchased goods and services, business travel, employee commutes, and processing and use of sold products.”
Examples of Scope 1 emissions (direct emissions) include company-owned vehicles or heavy machinery; on-site fuel combustion (e.g., diesel backup generators or natural gas boilers); and process emissions (e.g., from cement production or refining operations). Scope 2 emissions (indirect) are associated with the generation of purchased energy.
Scope 3 emissions, typically the largest share of a company’s GHG footprint, are the most complex and resource-intensive to measure. These emissions result indirectly from a company’s operations and are not directly emitted by the company. Upstream examples include employee travel, waste disposal, capital goods, and inbound transportation. Downstream examples include delivery, use, and disposal of sold products, franchises, and investments. SB 219’s amendments to SB 253 delayed Scope 3 reporting requirements until 2027.
To accurately measure emissions, reporting entities will likely need legal counsel, environmental consultants, and accounting/auditing support. The California Chamber of Commerce estimates initial compliance costs exceed $1 million per company, with ongoing annual costs between $300,000 and $900,000, plus additional costs for supply chain data collection and verification. SB 253 allows penalties up to $500,000 for misreporting but includes a safe harbor provision for good-faith Scope 3 emissions reporting through 2030. The law also requires third-party assurance of emissions reports, with specific requirements to be defined by CARB.
SB 261: CLIMATE-RELATED FINANCIAL RISK ACT
SB 261 applies to any “covered entity” with total annual revenues over $500 million that is formed under state or federal law and does business in California. Beginning January 1, 2026, covered entities must biennially disclose on their website a report covering two categories of climate-related financial risk information, defined as information related to the “material risk of harm to immediate and long-term financial outcomes due to physical and transition risks.” This report must also be submitted to CARB.
The two required categories are:
The covered entity’s climate-related financial risk, following the framework and disclosures recommended in the Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures (June 2017); and
The covered entity’s measures adopted to reduce and adapt to the disclosed risks.
Unlike SB 253, SB 261 is self-executing and does not depend on CARB regulations, although the law directs CARB to adopt rules specifying administrative penalties — capped at $50,000 — for failure to publish a report or for inaccuracies. Business groups estimate initial compliance costs to range from $300,000 to $750,000, with recurring biennial costs between $150,000 and $500,000.
CARB’S IMPLEMENTATION OF SB 253 AND SB 261
On December 5, 2024, CARB issued an Enforcement Notice stating that it would “exercise its enforcement discretion” for the first reporting cycle, provided that reporting entities demonstrate good-faith efforts to comply. CARB explained that it understood businesses “may need some lead time to implement new data collection processes” and that, for the first reporting year, businesses may rely on information already in the businesses’ possession to determine their scope 1 and scope 2 emissions.
This prompted criticism from SB 253 and SB 261 authors, California State Senators Scott Wiener and Henry Stern, in a December 11, 2024 letter. They stated they were “beyond frustrated” with CARB’s lack of progress and warned that, unless CARB acts swiftly, they would consider calling leadership before the Legislature for oversight hearings in 2025.
On December 16, 2024, CARB issued an Information Solicitation requesting stakeholder input on the implementation of SB 253 and SB 261 (as amended by SB 219). Though the comment deadline (February 14, later extended to March 21) has passed, the questions and stakeholder feedback offer valuable insight for affected businesses who will have another opportunity to comment during CARB’s formal rulemaking process.
As of this publication, CARB has not yet issued its notice of proposed rulemaking in the California Regulatory Notice Register, which would initiate the formal rulemaking process and a 45-day public comment period. CARB conducted a widely attended virtual workshop on May 29, 2025, to further discuss the rulemaking efforts and its current views of potential regulatory approaches. Rulemaking proceedings, especially for proposed regulations that generate substantial public interest often require close to the full year allowed by statute to promulgate the regulations.
LEGAL CHALLENGES TO SB 253 AND SB 261
After the enactment of SB 253 and SB 261 in October 2023, the U.S. Chamber of Commerce and various other business groups filed suit in January 2024 in the U.S. District Court for the Central District of California. The motion for preliminary injunction is currently scheduled to be heard on July 1, 2025, though a ruling may not issue until later this summer.
NEXT STEPS
Amid active litigation and delayed regulatory implementation, significant uncertainty remains around SB 253’s reporting requirements and general compliance timelines. However, consistent with CARB’s Enforcement Notice, reporting entities and covered entities should begin good-faith efforts to comply with both SB 253 and SB 261 by 2026. Companies subject to California’s new climate disclosure laws should take immediate steps to engage consultants and establish internal systems to collect the required data.
Citizen Suit Enforcement Under the Industrial General Permit: How Businesses Can Avoid Substantial Costs Associated with Notice Letters
Each year, many California businesses receive letters from private entities, typically environmental nongovernmental organizations (Citizen Groups), alleging that those businesses’ facilities are in violation of applicable stormwater permits. The letters, commonly referred to as Notices of Violations and Intent to File Suit (Notice Letters), are authorized by the Clean Water Act’s citizen suit provision and often threaten litigation with steep civil monetary penalties up to $68,445 per violation, per day.
Resolving Notice Letters is costly and typically requires a business to retain legal counsel and an environmental consultant. Although most Notice Letters are resolved through settlement and do not result in extensive litigation, settlement payments can be substantial. Settlement agreements also often include terms for injunctive relief that obligate the owner/operator of a facility (or discharger) to make certain stormwater-related improvements, further adding to the costs associated with resolving Notice Letter allegations.
Receiving a Notice Letter that threatens legal action is a stressful experience for any business owner. This article provides an overview of California’s Clean Water Act permitting programs for industrial dischargers, including the Industrial General Permit (IGP), and offers practical tips on how dischargers subject to those permits can reduce the risk of receiving a Notice Letter. A copy of the IGP and its attachments is available here.
BACKGROUND
The Clean Water Act (CWA) prohibits discharges from point sources to waters of the United States unless the discharges are in compliance with a National Pollutant Discharge Elimination System (NPDES) permit. Section 402(p) of the CWA specifically regulates discharges of stormwater associated with industrial activity. Like most states, California has been delegated permitting authority under the CWA and, through the State Water Resources Control Board, develops its own NPDES permits for stormwater discharges associated with industrial activities, which are then implemented by one of California’s nine Regional Water Quality Control Boards.
California has a “general” industrial discharge permit — the IGP — which allows many prospective permittees to obtain NPDES coverage in a fairly consistent and uniform manner in exchange for agreeing to a similarly consistent and uniform set of permit conditions and requirements. The IGP applies to a wide variety of industries such as heavy manufacturing (paper mills, petroleum refineries, and chemical plants); mineral mining and oil and gas exploration and processing; and metal fabricators, scrapyards, and automobile junkyards. A comprehensive discussion of covered facilities is found in Attachment A to the IGP, available here.
For permittees that do not qualify or otherwise choose not to seek coverage under the IGP, California also issues site-specific industrial discharge permits. These site-specific permits are often utilized by large manufacturing facilities and/or dischargers with unusual or complex operations and ideally provide permit conditions tailored to the facility and operations at issue.
Under the IGP and virtually all site-specific industrial discharge permits, dischargers are required to take certain actions to protect waters of the United States from facility discharges, including the following:
Develop a Stormwater Pollution Prevention Plan (SWPPP) (a site-specific document that identifies potential sources of pollutants in stormwater and Best Management Practices (BMPs) to reduce any discharges associated with those pollutants).
Adequately train on-site personnel (and maintain training log documentation) to implement the BMPs identified in the SWPPP.
Collect and analyze stormwater samples (up to four times per year under the IGP) to confirm the effectiveness of the SWPPP and BMPs.
Finally, the IGP requires permittees to upload documentation to a publicly accessible database maintained by the SWRCB and known as the Stormwater Multiple Application and Report Tracking System (SMARTS), while site-specific permittees are typically required to upload documentation to a similar database known as the California Integrated Water Quality System (CIWQS).
BEST PRACTICES FOR AVOIDING A NOTICE LETTER
The best approach for dischargers to avoid a Notice Letter is to be proactive with compliance at their facilities, particularly with regard to submitting timely and correct documentation to SMARTS and/or CIWQS. Citizen groups seldom identify a facility with potential violations by visiting or personally observing that facility. Instead, citizen groups will often search SMARTS and CIWQS for signs that facilities are not in compliance with permit conditions.
Below are some of the most common reasons facilities are targeted by citizen groups:
Outdated SWPPPs: Numerous facilities operate under a SWPPP that is several years old and does not contain permit-required information or accurately reflect current facility operations.
Lack of Sampling: A failure to sample the requisite number of times, usually twice between July 1 and December 31 and twice between January 1 and June 30, may constitute a violation of the IGP. Of course, if a storm event does not have sufficient precipitation to produce a discharge, or occurs outside the facility’s operating hours, then no sampling is required. However, a prolonged lack of sampling in an area with documented storm events will draw the attention of citizen groups.
Overdue Ad Hoc Monitoring Reports and Annual Reports: Under the IGP, stormwater sampling results are required to be submitted to SMARTS within 30 days of receiving the lab report while the Annual Report must be submitted no later than July 15 following each reporting year. Facilities that submit required reports after these deadlines are attractive targets for citizen groups.
As the above points illustrate, many facilities become targets for citizen suits not based on actual discharge violations or egregious harm to the environment, but from the failure to properly and timely follow procedural requirements set forth in the applicable permit. Ensuring compliance with these procedural requirements is one of the most simple and cost-effective ways dischargers can reduce the risk of receiving a Notice Letter and becoming a target for citizen suit enforcement.
CONCLUSION
Clean Water Act permit requirements can be onerous and industrial dischargers, in particular, face significant scrutiny from citizen groups. Taking proactive steps to ensure compliance with the procedural requirements of these permits can be an efficient and highly effective method of dissuading citizen groups from issuing Notice Letters and bringing citizen suits. If a discharger is either unaware of its compliance status or is having difficulty ensuring compliance, it should consider retaining an outside environmental consultant to assist with this work.
Minimum Wage Increases Coming Soon Across the Nation – Especially in California
Employers in many states and localities will see an increase in minimum wages starting July 1, 2025.
Many Changes Coming in California
As it often does, California leads the way with a patchwork of minimum wage increases across localities and industries scheduled for this summer.
Los Angeles Prepares for the Olympics with Proposed Wage Increases
Employers, workers, and advocates have been closely following headlines regarding Los Angeles’s so-called “Olympic Wage” initiative. The legislation in question, Ordinance 188610, requires higher minimum wages, minimum health benefits, and training standards for employees of large hotels and employers servicing the Los Angeles International Airport (“LAX”). This is not the first time these industries have been singled out; however, this proposal specifically contemplates the upcoming 2026 World Cup and 2028 Olympics.
Los Angeles’s City Council adopted the ordinance on May 23, Mayor Karen Bass signed it into law on May 27, and it was published on May 29. Opponents quickly submitted a petition for referendum, seeking to overturn the ordinance before it takes effect. In accordance with local rules, though the ordinance has been signed into law, if nearly 93,000 signatures are collected within 30 days after publication of the ordinance, it is suspended until it can be placed on a ballot for a general election in June 2026. This leaves the proposed minimum wage increases, and related measures, in flux through at least June 30, 2025.
If the ordinance is not overturned and the new provisions take effect, beginning on July 1, 2025, the minimum wage will increase to $22.50 for workers in hotels with at least 60 guest rooms and employees of employers servicing LAX. If employers servicing LAX do not provide health benefits to an employee, the ordinance stipulates a minimum wage of $30.15 for that employee.
If the referendum passes, and the ordinance does not take effect, the minimum wage for hotel workers will raised slightly to $21.01. Airport workers will be subject to existing minimum wage laws.
The City of Santa Monica matches the hourly wage for hotel workers set by Los Angeles. Santa Monica has already announced that it will apply the increased minimum wage for hotel workers. This means that the outcome of the referendum will impact hotel employers in both Los Angeles and Santa Monica.
We are keeping a close eye on these developments. Employers in the hospitality and tourism industries should be aware of the provisions in the ordinance and prepare for changes, if any, required by July 1, 2025.
First Scheduled Minimum Wage Increase for CA Health Care Workers
Following several amendments, on October 16, 2024, a new minimum wage scale for health care workers went into effect in California. The first scheduled increases start July 1, 2025. There are two tiers of increases effective July 1 depending on the facility.
Tier 1: minimum wage increases from $23 to $24
Large health systems and dialysis clinics
“Covered Health Care Facilities” run by large counties
Tier 2: minimum wage increases from $18 to $18.63 (a 3.5% increase)
“Safety Net Hospitals,” meaning hospitals with high populations of Medicare/Medicaid patients, rural health care facilities, and health care facilities owned, affiliated or operated by a county with a population of less than 250,000
“Covered Health Care Facilities” run by small counties
Employers should refer to the state’s Labor Commissioner FAQs or our previous post (published prior to amendments that postponed implementation) breaking down the covered facilities and employers for more information.
California Minimum Wage Rate Hikes by Industry
In addition to those detailed above, employers in hospitality-related industries will see increases in the minimum wage in several other California localities. All industry-specific minimum wage increases are detailed below. The minimum wage for fast food workers, which, at $20, is higher than the state’s general minimum wage rate, will not increase on July 1. Employers should keep in mind that these industry-specific minimum wage rates preempt the relevant jurisdiction’s general minimum wage rate.
The following chart summarizes coming industry-specific wage hikes:
Industry
Current Minimum Wage
Increased Minimum WageEffective July 1, 2025
Healthcare (Statewide)
$23 (large health systems and those run by large counties)
$18 (“safety net” facilities and those run by small counties)
*
$24 (large health systems and those run by large counties)
$18.63 (“safety net” facilities and those run by small counties)
*
Hotels with 60 or more Guest Rooms
(City of Los Angeles & City of Santa Monica)
$20.32
$22.50 or $21.01
pending resolution of referendum, see above
Employers Servicing LAX (City of Los Angeles)
$19.28 if the employer provides health benefits
or
$25.23 if the employer does not provide health benefits
$22.50 if the employer provides health benefits
or
$30.15 if the employer does not provide health benefits
pending resolution of referendum, see above
Hotels (City of West Hollywood)
$19.61
$20.22
Hotels (City of Long Beach)
$23.00
$25.00
Airport & Convention Center (City of Long Beach)
$17.97
$18.58
* other categories of facilities excluded from July 1, 2025, increases
California General Minimum Wage Rate Hikes by Jurisdiction
Several localities in California will also increase their general minimum wage on July 1, 2025. These cities and counties enforce a minimum wage above the state’s minimum of $16.50. Note that the City of Malibu, one of the localities with scheduled increases effective each July 1, has suspended its planned increase this year in light of the Palisades Fire. Employers should keep in mind that, where applicable, the industry-specific minimum wage rates detailed above preempt each jurisdiction’s general minimum wage rate.
Jurisdiction
Current Minimum Wage
Increased Minimum WageEffective July 1, 2025
City of Alameda
$17.00
$17.46
City of Berkeley
$18.67
$19.18
City of Emeryville
$19.36
$19.90
City of Fremont
$17.30
$17.75
City of Los Angeles
$17.28
$17.87
Unincorporated Los Angeles County
$17.27
$17.81
City of Milpitas
$17.70
$18.20
City of Pasadena
$17.50
$18.04
City & County of San Francisco
$18.67
$16.51 (government supported employees)
$19.18
$16.97 (government supported employees)
City of Santa Monica
$17.27
$17.81
Minimum Wage Increases Outside of California
Though California leads the way in mid-year minimum wage rate hikes, employers in several states and localities will also see increases soon. The following chart summarizes the coming changes, which are effective July 1, 2025, unless otherwise noted. Note that the chart only lists rates that are changing imminently.
Jurisdiction
Current Minimum Wage
Increased Minimum Wage
Alaska
$11.91
$13.00
District of Columbia
$17.50
$10.00 for tipped workers (total hourly rate must meet full minimum wage)
$17.95
$12.00 for tipped workers (total hourly rate must meet full minimum wage)
Florida
$13.00
$14.00
* effective Sept. 30, 2025
Chicago, Illinois
(employers with more than four employees)
$16.20
$11.02 for tipped workers (total hourly rate must meet full minimum wage)
rates for youth workers vary
$16.60
$12.62 for tipped workers (total hourly rate must meet full minimum wage)
rates for youth workers vary
Montgomery County, Maryland
$17.15 (employers with 51 or more employees)
$15.50 (employers with 11 to 50 employees)
$15.00 (employers with 10 or fewer employees)
$17.65 (employers with 51+ employees)
$16.00 (employers with 11 to 50 employees)
$15.50 (employers with 10 or fewer employees)
St. Paul, Minnesota
$14.00 (employers with six to 100 employees)
$12.25 (employers with five or fewer employees)
*
$15.00 (employers with six to 100 employees)
$13.25 (employers with five or fewer employees)
*
Oregon
$14.70 (standard)
$15.95 (employers within the Portland metropolitan boundary)
$13.70 (employers within a nonurban county)
$15.05 (standard)
$16.30 (employers within the Portland metropolitan boundary)
$14.05 (employers within a nonurban county)
Burien, Washington[1]
$16.66, the Washington State Minimum Wage (all employers with 21 to 499 full-time equivalent employees)
*
$20.16 (all employers with 21 to 499 full-time equivalent employees)
*
Everett, Washington
$16.66, the Washington State Minimum Wage
$20.24 (“large employers” of 500 + employees worldwide)
$18.24 (“covered employers” with 15+ employees worldwide or $2 million+ in annual gross revenue)
Renton, Washington
$18.90 (employers with 15 to 500 employees)
*
$19.90 (“mid-sized employers” of 15 to 500 employees or $2 million+ in local annual gross revenue)
*
Tukwila, Washington
$20.10 (employers of 15-500 employees worldwide or over $2 million of annual gross revenue in Tukwila)
*
$21.10 (“mid-sized employers” of 15-500 employees worldwide or $2 million+ in local annual gross revenue)
*
* Other categories of employers/employees excluded from July 1, 2025, increases
Maureen Maher-Patenaude, a Summer Associate (not admitted to practice) in Epstein Becker Green’s New York office, contributed to the preparation of this piece.
ENDNOTES
[1] On February 25, 2025, the City of Burien filed a complaint seeking clarification of a voter-approved initiative regarding the city’s minimum wage. The case is pending in King County Superior Court. The scheduled minimum wage increase for “Level 2 employees” on July 1, 2025, is unaffected by the suit. Updates may be found on the city’s website.
Bid Protests in New Mexico
In New Mexico, vendors who compete for public contracts have legal recourse if they believe that a government solicitation or contract award was improper. The New Mexico Procurement Code provides a formal bid protest process that allows “aggrieved” bidders or offerors to challenge procurement decisions made by state agencies or local public bodies. This post provides an overview of that process, including important deadlines, procedures, and potential remedies.
Who Can File a Bid Protest?
Any bidder or offeror who is aggrieved in connection with a solicitation or contract award may file a protest. An “aggrieved” party is typically one who claims that the procurement process was flawed in a way that affected their ability to win the contract — for example, through unfair evaluation criteria, improper award decisions, or procedural violations.
How and When to File
Under Section 13-1-172 NMSA 1978, a protest must:
Be submitted in writing;
Be delivered to the state purchasing agent or the appropriate central purchasing office; and
Be filed within fifteen (15) calendar days after the protester first knew (or should have known) the facts giving rise to the protest.
This strict deadline means that prospective protesters must act quickly once they are aware of the issue — such as learning of an award decision or a potentially problematic solicitation term.
Automatic Stay of Procurement
When a timely protest is filed, the procurement process is generally halted. Specifically, the state purchasing agent or central purchasing office is prohibited from proceeding further unless they determine that continuing with the award is necessary to protect substantial interests of the agency or local public body. This safeguard ensures that procurement decisions are not finalized before potential violations are reviewed.
Authority to Resolve the Protest
The state purchasing agent, central purchasing office, or their designee has the authority to take any action reasonably necessary to resolve the protest. However, their authority does not include the power to award money damages or attorneys’ fees.
Resolution must follow applicable regulations promulgated by the relevant oversight body —whether it be the state’s General Services Department, a local government entity, or another authorized central purchasing office.
Determination and Notification
Once the protest has been reviewed, the deciding authority must issue a written determination that:
States the reasons for the action taken, and
Informs the protestant of their right to judicial review under Section 13-1-183 NMSA 1978.
This determination must be promptly issued and immediately mailed to the protester and all other bidders or offerors involved in the procurement, as required under Section 13-1-175 NMSA 1978.
Judicial Review
If a protester is dissatisfied with the decision, they may seek judicial review under Section 39-3-1.1 NMSA 1978, which governs how administrative decisions are challenged in court. This typically involves filing a petition in the appropriate state district court.
While the Procurement Code allows for judicial review, it does not authorize courts to award monetary damages as a remedy for bid protests. Relief is generally limited to declaratory or injunctive actions — such as setting aside an award or requiring a new solicitation.
Conclusion
New Mexico’s bid protest framework under the Procurement Code is designed to ensure transparency, accountability, and fairness in public procurements. By allowing aggrieved bidders to challenge potentially improper decisions, the system fosters competition and helps safeguard taxpayer dollars. However, contractors must act swiftly and follow procedural requirements closely to preserve their protest rights.
Government contractors in New Mexico should familiarize themselves with these rules and consult counsel promptly if they believe grounds exist for a protest. Early engagement can make the difference between a successful challenge and a missed opportunity.
Listen to this post
5 Things to Know About Senate Bill 1318: Navigating New Non-Compete Restrictions for Healthcare Practitioners in Texas
On June 20, 2025, Texas Governor Greg Abbott signed into law Senate Bill 1318 (“SB 1318”), which amends Texas Business & Commerce Code Section 15.50(b) to impose new limitations on physician non-competes. SB 1318 also adds a new Section 15.501, which restricts non-competes for dentists, nurses, and physician assistants. SB 1318 goes into effect September 1, 2025, and applies to agreements entered into or renewed on and after that day. Here are the five key things to know about the new law:
1. The “Reasonable Price” Buyout Standard Has Changed
Previously, Texas law required that physician non-compete agreements include a buyout provision at a “reasonable price,” often leading to disputes and uncertainty over what constituted “reasonable.” SB 1318 replaces this standard with a clear cap. Now, the buyout amount cannot exceed the physician’s total annual salary and wages at the time of termination. This change eliminates the prior option to arbitrate the buyout price.
2. New Time and Geographic Limitations
SB 1318 imposes limits on the duration and geographic scope of non-compete agreements for physicians. Non-competes may not exceed a period of one year following the end of the employment or contract, and the restricted area cannot exceed a five-mile radius from the location where the practitioner primarily practiced. These limitations apply to non-competes related to employment agreements, independent contractor agreements, or ownership documents. The limitations do not apply to physician ownership interests in a hospital or ambulatory surgery center (i.e., Section 15.50(c) remains unchanged). Additionally, SB 1318 requires that all terms and conditions of the non-compete be clearly and conspicuously stated in writing.
3. Non-Competes Are Void If Physician Terminated Without Good Cause
Physician non-compete agreements are now void and unenforceable if the physician is involuntarily discharged without “good cause.” SB 1318 defines “good cause” as a reasonable basis for discharge directly related to the physician’s conduct, job performance, or employment record. This means that if a physician is let go for reasons unrelated to their performance or conduct (i.e., without good cause), their non-compete will not be enforceable.
4. Non-Compete Restrictions Do Not Apply to Administrative Services.
SB 1318 does not create any restrictions for non-competes related to managing or directing medical services in an administrative capacity for medical practices or other healthcare providers. So, SB 1318 should not affect a majority of medical director agreements, which are purely for administrative services.
5. Expansion of Non-Compete Restrictions to Dentists, Nurses, and Physician Assistants
For the first time, SB 1318 extends non-compete restrictions to other healthcare practitioners, including dentists, professional and vocational nurses, and physician assistants. It is important to note that professional and vocational nurses include RNs, LPNs, CRNAs, nurse midwives, clinical nurse specialists, APRNs and others licensed under Chapter 301 of the Texas Occupations Code. The same requirements that apply to physicians—buyout cap, one-year duration, five-mile geographic limit, and clear written terms—now apply to these practitioners as well. Unlike physician non-competes, SB 1318 does not state that a non-compete for dentists, nurses, or physician assistants is void if the practitioner is terminated without good cause. Similarly, SB1318 does not require that these practitioners be permitted to continue treating former patients experiencing acute illness, receive a list of patients they treated during the year preceding the end of employment, or obtain access to medical records for patients if authorized.
SB 1318 represents a substantial change to Texas’s approach to non-compete agreements in the healthcare sector. By capping buyout amounts, limiting the scope and duration of restrictions, voiding non-competes for terminations without good cause, and expanding protections to additional practitioners, the law creates a more defined framework for restrictive covenants in the healthcare sector. In the meantime, both employers and practitioners should review their contracts and prepare for compliance with the new requirements.
New Jersey Legislature Introduces Bills Calling for Sweeping Bans on Non-Compete and No-Poach Agreements
On May 19, 2025, the New Jersey legislature followed in New York’s footsteps and introduced two bills, S.B. 4385 and S.B. 4386, seeking to significantly curtail, if not totally ban, the use of non-compete clauses in the employment relationship.
S.B. 4385
General Prohibitions
S.B. 4385 aims to ban “no-poach” agreements and non-compete clauses for most workers, even those agreements or clauses entered into before the bill is signed into law.
The proposed bill defines a “non-compete clause” broadly to mean any agreement arising out of an “existing or anticipated employment relationship” that prohibits, penalizes, prevents, or hinders a worker from seeking or accepting work with a different employer after the employment relationship ends, or from operating a business after the employment relationship ends. Severance agreements and workplace policies fall within this definition. The proposed bill also renders “no-poach” agreements, an agreement between two employers to not hire each other’s workers, void and unenforceable, as such agreement would hinder a worker’s ability to obtain employment.
Limited Exceptions
As currently drafted, S.B. 4385 provides for few exceptions to the encompassing ban. These exceptions include non-compete clauses entered into pursuant to the sale of a business, where the cause of action relating to the non-compete clause accrued prior to effective date of the ban, and existing non-compete clauses for senior executives entered into prior to the effective date of the ban so long as certain criteria is satisfied.
Non-Competes for Senior Executives
The proposed bill differentiates between workers who are not senior executives and those who are. A “senior executive” means a worker who holds a “policy-making” position and whose total compensation is $151,164 or more per year in the year immediately preceding their termination of employment. A “policy-making” position includes a business entity’s president, chief executive officer or the equivalent, or any other officer or individual similar to an officer who has “final authority to make policy decisions that control significant aspects of a business entity or common enterprise of which the entity participates.”
For workers who are not senior executives, the proposed bill prohibits non-compete clauses for such workers, and would extend to clauses entered into prior to the effective date of the ban. Under the proposed bill, employers are required to notify the worker within thirty (30) business days after the effective date of the ban that the non-compete clause will not be, and cannot legally be, enforced against the worker. The proposed bill provides “model” language for the required notice, which includes a disclaimer that: “You may seek or accept a job with any company or any person—even if they compete with (employer name).”
With respect to a worker who is a senior executive, non-compete clauses entered into prior to the effective date of the ban are enforceable only if certain criteria is satisfied, including:
Employers must provide the senior executive with written notice within 30 business days after the effective date of the ban describing the requirements of the ban and all revisions made to the provisions of an existing non-compete clause in order to comply with the requirements of the ban. Any revised non-compete clause must be executed again, after the senior executive is advised of their right to seek counsel.
Any non-compete clause must be no broader than necessary to protect the employer’s legitimate interests, such as the protection of trade secrets. A non-compete clause can be presumed necessary if the legitimate business interests cannot be adequately protected through an alternative agreement, such as a non-solicitation or confidentiality agreement.
A non-compete clause must comply with the guardrails imposed by New Jersey common law, including that it must be reasonable in time, geography, and scope, not unduly burdensome on the worker or injurious to the public, and consistent with public policy. The proposed bill provides its own interpretation of what these guardrails mean:
A maximum temporal limitation of twelve (12) months.
Geographic limitations tied to the geographic areas in which the senior executive provided services or had a material presence or influence during the two (2) years preceding the date of their termination and confined to New Jersey. This has significant impact on employers in the tri-state area, as a former worker based in New Jersey, for example, could simply join a competitor in New York under the language of the proposed bill.
Activities restrictions tied to the employer’s legitimate interests and limited to only the specific types of services provided by the senior executive during the last two (2) years of their employment.
A non-compete clause cannot penalize a senior executive for defending against or challenging the validity or enforceability of the non-compete clause, nor can it require the senior executive to waive their substantive, procedural, or remedial rights.
A non-compete clause cannot contain a choice of law provision applying another state’s laws if the senior executive is and has been for at least thirty (30) days immediately preceding their termination, a resident of or employed in New Jersey.
A non-compete clause cannot restrict a senior executive from providing services to the employer’s customers or clients so long as the senior executive does not initiate or solicit the customer or client.
A non-compete clause must specify that the employer will provide at least ten (10) days’ written notice of the employer’s decision to enforce the non-compete, unless the senior executive has been terminated for misconduct.
Unless the senior executive has been terminated for misconduct or breaches their contractual obligations, the employer must continue the senior executive’s salary or pay during the restricted period and make any benefit contributions needed to maintain the fringe benefits to which the senior executive would be entitled during the restricted period.
Rights, Remedies, & Notice Requirements
The proposed ban affords aggrieved workers a private right of action, with a two (2) year statute of limitations accruing from the later of: (1) when a prohibited non-compete clause or no-poach agreement was signed; (2) when the worker learns of the prohibited non-compete clause or no-poach agreement; (3) when the employment relationship is terminated; or (4) when the employer takes any step to enforce the prohibited non-compete clause or no-poach agreement. A court has jurisdiction to void any prohibited clause or agreement and to order all appropriate relief, including enjoining the conduct of the employer, ordering the payment of liquidated damages of not more than $10,000, and awarding lost compensation, damages, and reasonable attorneys’ fees and costs.
If signed into law, employers are required to post a copy of the ban, or a notice approved by the New Jersey Department of Labor in a prominent place in the work area. Failure to comply with the notice obligations can result in civil penalties.
S.B. 4386
General Prohibitions
S.B. 4386 largely parallels S.B. 4385 and bans no-poach and non-compete agreements in the employment relationship with a particular focus on clauses that “indebt” employees to their former employers. S.B. 4386 applies retroactively and broadly prohibits clauses or agreements that restrain an employee from engaging in a lawful profession, trade, or business after the conclusion of the employee’s employment, including, but not limited to:
A non-compete clause, which is defined broadly to include any employment contract or agreement, or term or provision thereof, “that prohibits an employee from, penalizes the employee for, or functions to prevent the employee from, seeking or accepting employment with any person, or operating a business, after the conclusion of the employee’s employment with the employer.”
A term that requires a debtor to pay for a debt if the debtor’s employment or work relationship with the employer is terminated. A “debtor” means “an individual who is or may become liable to pay an employer, a prospective employer, a third-party entity, or other business entity for all or part of an employment-related cost, education-related cost, or other debt.” A “debt” means “money, property, or their equivalent that is due or owing or alleged to be due or owing from an individual to any employer or other person, including, but not limited to, for employment-related costs, education-related costs, or a consumer financial product or service.”
Any term that imposes any penalty, fee, or cost on an employee for terminating the employment relationship, including, but not limited to, an employment promissory note, a replacement hire fee, a retraining fee, reimbursement for immigration or visa related costs, bondage fees, liquidated damages, lost goodwill, or lost profit.
Rights, Remedies, & Notice Requirements
S.B. 4386 requires that employers notify employees of the proposed ban within thirty (30) days of its effective date. Like S.B. 4385, S.B. 4386 affords aggrieved employees a private right of action and outlines a substantively identical two (2) year statute of limitations provision. A court has jurisdiction to award injunctive relief, order the payment of liquidated damages, and award lost compensation, actual damages, punitive damages of not more than $5,000 per employee, and reasonable attorneys’ fees and costs. An aggrieved employee can also file a complaint with the New Jersey Department of Labor, which is authorized to enforce the bill.
Key Takeaways
These proposed bills are in the early stages of the legislative process. Notwithstanding this, it is clear that legislators in New Jersey, like in other states, are seeking to fill a void left by the federal government and to curtail the use of non-compete and no-poach agreements in the employment context. Employers should stay informed about the status of these bills and review the restrictive covenant agreements they have in place to assess how these bills might impact those agreements. We will monitor developments in this area and provide updates as they become available.
‘One Big Beautiful Bill Act’: Senate Version Caps Section 899 ‘Revenge Tax’ at 15% and Carves Out ‘Portfolio Interest’
On June 16, 2025, the Senate Finance Committee released its own version (Senate Version) of the tax provisions of H.R. 1, entitled the “One Big Beautiful Bill Act,” which the U.S. House of Representatives passed on May 22, 2025.
The Senate Version introduces several important changes and clarifications to the proposed new Section 899 of the Internal Revenue Code (Code), “Enforcement of Remedies Against Unfair Foreign Taxes” that was included in the bill that was passed by the House (commonly referred to as the Revenge Tax). If enacted as proposed in the Senate Version, Section 899 would increase by up to 15 percentage points a range of U.S. federal tax rates, including both U.S. withholding tax rates (such as those on interest, dividends, and other fixed or determinable annual or periodical income paid to foreign persons) and certain other U.S. income tax rates (such as the regular tax rates applicable to nonresident individuals and foreign corporations, branch profits tax, and tax on private foundations), on income derived by taxpayers who are resident in, or otherwise connected to, jurisdictions the U.S. government designates as “offending foreign countries.”
The Senate Version includes a specific exception from the tax increase under Section 899 for “portfolio interest,” as well as a cap of 15% on the additional tax under Section 899 (as opposed to 20% cap the House proposed, determined without regard to any rate applicable in lieu of the statutory rate). The Senate Version also delays the implementation of the proposed Section 899, generally until Jan. 1, 2027 (compared to the effective date of Jan. 1, 2026, under the House version).
This GT Alert summarizes the most significant substantive changes and explains their potential impact.
Click here to continue reading the full GT Alert.