Election Law / Legislative News – Page 6

Florida’s CHOICE Act Offers Employers Unprecedented Tools for Non-Compete + Garden Leave Agreements

Takeaways

The Florida Legislature’s recently passed CHOICE Act allows covered non-compete and garden leave agreements to extend for up to four years — double the current amount of enforcement time.
The Act makes it significantly easier for employers to obtain an injunction and enforce covered agreements.
Employers looking to take advantage of the Act will need to comply with its technical requirements.

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The Florida Legislature passed the Florida Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act on April 24, introducing the most sweeping changes to Florida’s restrictive covenant framework in years and offering employers unprecedented tools to protect their valuable business interests. If enacted, the Act will take effect on July 1, 2025.
Who Does the CHOICE Act Cover?
The CHOICE Act applies to covered employees or independent contractors earning more than twice the annual mean wage in the Florida county where either (i) the covered employer’s principal place of business is located or (ii) where the covered individual resides if the covered employer’s business is located outside of Florida. Therefore, depending upon the Florida county, the compensation threshold could range anywhere from $80,000 to nearly $150,000. Notably, the Act expressly excludes licensed healthcare practitioners as defined in Section 456.001, Florida Statutes, from its scope. But the Act does not prohibit enforcement of — or otherwise render unenforceable — restrictive covenants with healthcare practitioners under existing Florida restrictive covenant law, subject to the exclusions of Section 542.336, Florida Statutes, which prohibits restrictions between physicians who practice a medical specialty and an entity that employs or contracts with all physicians who practice that same specialty within the same Florida county.
Covered Non-Compete Agreements
Under the CHOICE Act, non-compete agreements with covered employees or contractors can extend up to four years post-employment. In contrast, under Florida’s current non-compete statute, employee-based non-competes lasting longer than two years are presumed to be unreasonable and unenforceable. To be enforceable under the CHOICE Act, covered non-compete agreements must:

Covered Garden Leave Agreements
The CHOICE Act also codifies enforcement of certain garden leave arrangements, allowing employers to require covered employees or contractors to provide advance notice — up to four years—before employment or contract termination. During this notice period, employees remain on the employer’s payroll at their base salary and benefits but are not entitled to any discretionary compensation. During the first 90 days of the garden leave period, an employer may require the worker to continue working. But a worker may engage in nonwork activities at any time thereafter.
To be enforceable under the Act, a covered garden leave agreement must:

Be in writing and advise the worker of their right to consult legal counsel, providing at least seven days for review before execution.
Include a written acknowledgment from the worker confirming receipt of confidential information or substantial client relationships during employment.
Not obligate the worker, after the first 90 days of the notice period, to provide any further services to the employer and allow the worker to engage in nonwork activities. (The worker may also work during the remainder of the notice period for another employer so long as the covered employer has provided permission to the worker.)

How Are Covered Agreements Enforced?
The CHOICE Act provides robust remedies for employers seeking to enforce covered agreements. For covered entities, the Act requires strict enforcement and makes it significantly easier for employers to obtain injunctions. Upon application, courts are required to issue preliminary injunctions to enforce a covered agreement unless the employee or contractor can demonstrate, by clear and convincing evidence, the agreement is unenforceable or unnecessary to prevent unfair competition. Further, if an employee or contractor engages in “gross misconduct,” an enforcing employer may reduce the salary or benefits provided to the employee or “take other appropriate action” without such activity constituting a breach of the covered agreement. An employer who prevails in its enforcement action is entitled to recover its monetary damages and attorney’s fees.
What Should Employers Do Now?
The CHOICE Act represents a significant development in Florida’s restrictive covenant law, offering employers enhanced mechanisms to safeguard their business interests through enforceable non-compete and garden leave agreements. Employers seeking to avail themselves of the new Act should take immediate steps to review and modify existing agreements or, if appropriate, draft new agreements.

States Move Forward with Privacy Protections to Close HIPAA Gaps for Health, Reproductive Health Info

Takeaways

Multiple state laws are strengthening protections for health data, increasingly going beyond HIPAA, healthcare providers and health plans.
Certain categories of health information, such as reproductive health, have greater privacy protections.
Organizations cannot look solely to HIPAA when assessing privacy compliance.

And Now the Rest of the Story: Alabama’s New Hemp Restrictions Also Legitimize Segments of the Industry

They paved paradise and put up a parking lot. That’s been the tenor of what I’ve heard and read from stakeholders in the Alabama hemp industry in response to the enactment of comprehensive hemp reform legislation earlier this month. And for reasons I will explain below, I am extremely sympathetic to anyone whose livelihood was negatively impacted by the legislation (although some actors are probably more sympathetic than others).
But, I’ve had a couple of weeks since the close of the Alabama legislative session to think about the comprehensive hemp legislation that significantly reformed Alabama’s hemp policy. I’ve had numerous conversations with hemp operators. And I’ve had the good fortune to talk to the good ones, which brings with it the sad duty of informing them that many of their unsavory competitors in the space have created an ecosystem that may no longer allow them to survive in business.
I also had a chance to catch up with an old colleague and friend with rare intellect and deep connections to the cannabis industry. I’ll spare his name here because he would probably rather avoid the disrepute of being mentioned in these quarters of the internet, but he’s the smartest and most thoughtful cannabis lawyer and consultant I know. While we were talking about the legislation, he turned to me and said, “Do you realize how remarkable it is that in a state like Alabama you can now walk into a store and legally purchase 40 milligrams of THC?” And I had to admit I could not have imagined that being the case several years ago.
A quick rundown on the key points of Alabama’s hemp reform legislation:

The top line is that consumable hemp products were not banned, as many had hoped/feared.
The bill does, however, impose substantial limitations on how and where consumable hemp products can be manufactured and sold. For example, consumable hemp beverages may be sold at 21+ stores and certain licensed grocery stores and are limited to 10 milligrams per 12 ounce serving. Edible hemp products are also limited to 10 milligrams per single-serving doses and four doses per container. Of great significance to many, neither product can be sold at convenience stores (perhaps the largest point of sale for such products currently).
Smokable flower is prohibited.
A licensing regime has been put in place, and the Alcoholic Beverage Control Board has been tasked with regulating the manufacture and sale of consumable hemp products.
Consumable hemp products will be subject to similar types of age-gating, testing, packaging, labeling, and advertising, as will medical cannabis products.

So, let’s get a few key points straight:
Although nearly (if any) hemp operator was totally satisfied with the result given the fact that points of sale have been reduced, those hemp companies who are still allowed to operate should welcome the fact that they have moved from a regime where their product was “not illegal” to a statutory regime that expressly allows for the manufacture, distribution, and sale of their products under strict testing and labeling requirements. That change should, by itself, open up shelf space in retailers that previously had been reticent about selling hemp products. That’s a huge win for those companies, and hopefully retailers and consumers as well.
Anyone selling high-THC products definitely drew the short straw here. The fact is, however, that anyone purveying those products in a state like Alabama knew or should have known they were on borrowed time. For those closely following the political winds, it was always going to be a short-term money play that would almost certainly require those purveyors to pivot when the laws almost inevitably changed as they have recently. The same goes for companies selling smokable flower, although it was perhaps somewhat of a less foregone conclusion that smokable flower would be banned.
If you are upset that connivence stores and gas stations are no longer allowed to sell consumable hemp products, I will tell you there was very little chance that the Legislature was going to allow business as usual for all hemp products in those venues. If you are looking to place blame, I have two suggestions: (1) the high THC products so readily available at so many stores and often targeted to minors and (2) the failure of stakeholders most interested in sales in convenience store and gas stations (and that includes both the manufacturers and the retailers) to put together a meaningful advocacy team to educate lawmakers on how they could have addressed the issue with a scalpel and not a sledgehammer. I know from personal experience that many such stakeholders were looking to other type of hemp companies with different agendas to foot the bill for that effort.
Conclusion
There is just so much a government can do to limit hemp to responsible adult use under specific circumstances and at specific locations. Alabama’s Legislature didn’t get it entirely correct, but it took steps towards striking a balance and hopefully will use future sessions to do even better.
I’ll close with some words from perhaps an unlikely source: Sen. Ted Kennedy. In this context, he was eulogizing his brother Robert, but I think it may provide some solace and motivation to those who seek a better policy:
The work goes on, the cause endures, the hope still lives and the dreams shall never die.

Thanks for stopping by.
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Montana Amends Law to Cover Collection and Use of Neural Data

Montana recently revised its Genetic Information Privacy Act to address neural data. The law went into effect in 2023 and applies to both entities that offer genetic testing services as well as entities that use genetic data.
Under the current law, covered entities must provide notice and also have choice obligations. This includes getting consent about collection, use and sharing of genetic data. Covered entities must include specific content in the consent request. They also need to give separate notice in several circumstances. This includes if they want to share genetic information with non-vendor third parties or use it for marketing purposes. There are also data security obligations under the law, as well as access obligations.
The Montana governor signed SB 163 on May 1 to amend the Genetic Information Privacy Act. As a result, beginning October 1, 2025, there will be several changes to the law. They include:

Neural data will be covered by the law: As revised the law will cover “neurotechnology data.” This is information capable of “recording, interpreting, or altering the response of an individual’s central or peripheral nervous system” to its external environment. (This definition is slightly different than that which California and Colorado added to their comprehensive privacy laws.)
De-identified neural data out of scope: As modified, the law will also except from coverage deidentified neural data that is used for research purposes. To be deidentified, among other things, the information cannot be reasonably linked to the individual, and measures must be taken to ensure that the data cannot be reassociated with an individual.
Exceptions added to right of access: Also as modified, the law will provide for exceptions to the obligation to give individuals access to covered data, including if express consent was obtained from an individual participant in a clinical trial which was obtained following the provisions specified in the law (these include content and font size obligations, among other things).

Putting it Into Practice: This modification to Montana’s Genetic Information Privacy Act reflects regulators’ concerns with uses of neural data, which companies might use when offering wearable technology or engaging in advertising that measures emotional engagement. This modification is a reminder for those who engage in these activities to review their notice process and consider whether consent might be needed under this or similar laws.
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Proposed Renewable Regulations in Texas Might Trigger Force Majeure and Change in Law Clauses

The renewable energy industry in the United States is facing new headwinds in the form of state legislation that could delay, disincentivize, or even potentially prevent the completion of planned solar and wind projects. For example, the Texas State Senate recently voted to enact new burdensome regulations on solar and wind generation of a certain scale. Critics of the bill claim that these measures are designed to slow renewable energy expansion in the state of Texas.
Could laws like Texas Senate Bill (SB) 819 trigger change in law or force majeure clauses if they delay or prevent the construction/operation of renewable energy projects in Texas? Some parties may have specifically allocated permitting risk in their existing contracts. Others may not have foreseen this issue because of Texas’ reputation as a relatively de-regulated energy market. Whether a change in law or force majeure clause captures this situation will depend on the language of each individual contract.
In this alert, we explore the role that change in law clauses, force majeure provisions, and specific permitting language may play for solar- and wind-generation projects in Texas as parties seek to manage the risk of potential permitting delays attributable to the requirements provided by SB 819.
SB 819 Background
Texas SB 819 passed with a Senate vote of 22-9; it must still pass the House. The bill adds new permitting requirements from the Public Utility Commission of Texas for solar and wind projects with a capacity of 10 megawatts (MW) or more before construction or operation can commence. Existing facilities interconnected prior to 1 September 2025 are excepted. SB 819 adds minimum setback requirements from property lines and habitable structures, unless written waivers are obtained from neighbors. The proposed legislation requires an Environmental Impact Statement with review by the Texas Parks and Wildlife Department and imposes a new annual environmental impact fee. Applicants will also be required to satisfy public notice requirements. Finally, the bill would prohibit local taxing authorities from agreeing to property tax abatements for renewable energy projects with a capacity of 10 MW or more.
In January 2025, K&L Gates wrote about the potential impact of SB 819 on renewable energy investments. That article can be found here. In sum, if passed, SB 819 will impose regulatory burdens on the Texas renewable energy industry and is likely to have a chilling effect on investors’ appetites to finance new projects or expand existing facilities, which could negatively impact the development of renewable projects in the state. If a solar or wind project is materially delayed or unable to be constructed due to the failure to obtain approvals or permits required by SB 819, parties may have arguments that a change in law clause applies or that they have suffered an event of force majeure, provided the applicable contractual language captures the subject event.
Change in Law
A change in law clause is designed to allocate the burdens of any unexpected change in the legal or regulatory landscape that has a substantial impact on the obligations of a party. Such clauses are designed to offset the losses or damage due to changes in the law applicable at the time of contract execution.
Where the change is captured by the change in law clause and hinders a party’s performance, that party can claim relief in accordance with the terms of the clause. Foreseeable costs and laws enacted before the effective date of the contract are ordinarily not included in such provisions. In the energy industry, we have seen change in law clauses related to duties and tariffs on key equipment. Changes or adjustments to production and investment tax credits under the Inflation Reduction Act are also areas where parties have liberally utilized change in law provisions to account for this risk. Whether changes in permitting, environmental, and tax requirements are captured by a change in law clause is a contract-specific question that rests on the wording of the individual clauses.
Force Majeure
The Firm recently explored the contours of force majeure in the context of tariffs. That article can be found here. Generally, “force majeure” provisions are designed to excuse nonperformance or delayed performance of contractual obligations for extraordinary, uncontrollable events that negatively impact a party’s ability to fulfill those obligations. In other words, force majeure provisions allocate the risk of events outside of the control of the parties that impact performance under a contract. There is no implied force majeure under US law, meaning that a party can only invoke force majeure if the contract includes a force majeure provision. The applicability of force majeure depends on the specific language in the contract. Force majeure clauses are “narrowly construed” and will excuse a party’s nonperformance only if the event alleged to have prevented performance is “specifically identified” in the parties’ contract. This narrow construction also applies to a “catchall” in a force majeure clause, cabining the meaning to “things of the same kind or nature as the particular matters mentioned.”1
Despite relatively strict rules of construction, several courts have found that delays attributable to permitting can constitute force majeure where the contractual language contemplates such an event. For example, in Pennington v. Continental Resources, Inc., the Supreme Court of North Dakota held that a force majeure clause operated to prevent termination of an oil and gas lease and extended the term of the lease when the project faced delays attributable to permitting delays. As the court stated, “Continental was prevented from commencing operations within the primary term of the Leases by a contingency beyond its control, namely the decisions of the U.S. Fish and Wildlife Service and the [Bureau of Land Management] … to withhold approval of Continental’s May 15, 2012 APD [application for a permit to drill] ….”2
Likewise, in Burns Concrete, Inc. v. Teton County, the Idaho Supreme Court held that a developer’s failure to obtain zoning approval for a 75-foot-high facility was not reasonably foreseeable and constituted an event beyond the developer’s control. The court found that the force majeure clause, which included “any other act of force majeure or action beyond Developer’s control,” applied to the county’s denial of a permit, excusing the developer from completing construction within the specified timeframe.3
The Ohio Court of Appeals upheld the application of a force majeure clause when a petroleum company was denied access to property by adjoining property owners and faced unreasonable demands for compensation, preventing drilling operations. The court found that the inability to obtain necessary access and easements was beyond the lessee’s control and tolled the lease’s primary term, allowing the lessee additional time to commence operations.4 SB 819 provides neighboring property owners with considerable rights that could delay or alter ongoing projects. This is another factor that should be analyzed against the force majeure clause in a contract.
In the analogous context of frustration of purpose, a California appellate court found in Johnson v. Atkins that the seller’s inability to obtain the necessary permit for the entry of goods into the country excused further performance due to impracticability. Obtaining the necessary entry permissions for the goods was found by the court to be fundamental to the contract. The failure, without fault, to obtain permission excused further performance.5
However, these outcomes regarding the applicability of force majeure clauses to excuse lack of performance attributable to permitting delays are not uniform. There are numerous decisions where courts have held that the contract in question did not provide force majeure for failure to obtain specific permits.6 The foreseeability of required permissions, the diligence undertaken in pursuing such permits, and whether the denial or delay in issuing permits was the fault of the party claiming force majeure are all critical factors that need to be examined closely, along with the specific contract language, to determine whether force majeure may offer relief in a specific instance of permitting-related delay.
Specific Permitting Clauses
While force majeure and change of law clause are often the key provisions that parties use to allocate risk, agreements sometimes contain a bespoke “permitting delay” clause that provides specific schedule relief for a delay in the issuance of a required permit. The agreement may also include a condition precedent that enables either party to terminate the agreement without liability in the event required permits have not been secured in a final, nonappealable form by a particular date. Force majeure and change of law clauses should be considered in the context of these other provisions if they have been included in the contract.
Key Takeaways
If enacted, Texas SB 819 will impose additional permitting and regulatory requirements on most solar and wind projects to be interconnected in Texas. If these new regulatory requirements delay or prevent the construction of these projects, parties may try to argue that a change in law clause applies or that their performance is excused by force majeure. The success of such claims will depend heavily on the text of the clauses in each contract, along with the facts surrounding the inability to obtain the required SB 819 permitting approvals.
Footnotes

1 JN Contemp. Art LLC v. Phillips Auctioneers LLC, 29 F.4th 118, 124 (2d Cir. 2022) (quoting Kel Kim Corp. v. Cent. Mkts., Inc., 70 N.Y.2d 900, 903, 519 N.E.2d 295 (1987)).
2 Pennington v. Cont’l Res., Inc., 2019 ND 228, ¶ 20, (N.D. 2019).
3 Burns Concrete, Inc. v. Teton Cnty., 161 Idaho 117, 120–22 (Idaho 2016).
4 Haverhill Glen, LLC v. Eric Petroleum Corp., 67 N.E.3d 845, ¶¶ 35–37, (Ohio Ct. App. 2016).
5 See Johnson v. Atkins, 53 Cal. App. 2d 430, 433–35 (1942).
6 See, e.g., Aukema v. Chesapeake Appalachia, LLC, 904 F. Supp. 2d 199, 209-211 (N.D. N.Y. 2012) (refusing to apply a force majeure clause where a particular type of drilling permit was denied).

Healthcare Preview for the Week of: May 27, 2025 [Podcast]

Short Congressional Recess, Short Preview

While Congress is in recess this week, we are still on reconciliation watch as consideration of the One Big Beautiful Bill Act moves to the Senate. We are on the lookout for a printed version of the full bill as it was passed (we currently only have this Rules Committee version of the package and the separate manager’s amendment). We are also waiting for an official, complete score from the Congressional Budget Office, which will affect Senate consideration.
Over the weekend, House Speaker Mike Johnson made pleas for the Senate not to make significant changes to the bill since it will be difficult to get through the House again. But we can anticipate that the Senate will insist on putting its mark on the package. This week we will watch for signs of Senate Republican agreement around new or adjusted bill provisions. We know they have thoughts on tax; however, it is less clear how many changes are coming in healthcare.
We will also be watching for additional administrative input on reconciliation, potentially seeing the president’s full fiscal year 2026 budget (in follow up to the “skinny budget” released earlier this month), or any number of other regulations, executive orders, or unanticipated activities.
And, finally, a reminder that our Medicare Physician Fee Schedule Preview Webinar is happening this Wednesday at 3:00 pm EDT. Register here to join us.
Today’s Podcast

Debbie Curtis and Rodney Whitlock join Julia Grabo to discuss what we know (and don’t know) about the House-passed reconciliation package and what we are watching for in the Senate.

CMMI Unveils New Strategic Direction: Preventive Care, Patient Empowerment, and Competition

The Center for Medicare and Medicaid Innovation (CMMI) recently announced a new strategic direction during a public webinar and accompanying white paper, outlining its evolving priorities under the current administration. During the May 13, 2025 webinar, Abe Sutton, Director of CMMI and Deputy Administrator for the Centers for Medicare & Medicaid Services (CMS), emphasized CMMI’s continued mission to improve the U.S. health care system and to build on its 15 years of testing alternative payment models. As described in more detail below, however, CMMI’s new strategic direction reflects a shift in focus from CMMI’s approach under the Biden administration even while certain longstanding goals remain the same.
CMMI Under the Trump Administration: Prevention, Patient Empowerment, and Competition
CMMI’s new strategy emphasizes evidence-based prevention, personal agency, and market competition as central pillars to improving health outcomes and reducing costs. This three-pillar approach is structured around the following strategies:

Promote Evidence-Based Prevention. While CMMI has arguably been focused on preventive care for some time (e.g., the PC Flex Model, which focused on incentivizing primary care and preventive services), in his comments Sutton highlighted a renewed emphasis on prevention to avoid disease occurrence, promote early disease detection, and manage chronic diseases. Specifically, CMMI will include preventive care measures in all of its models, which may include working with community-based organizations to assist with nutrition and lifestyle counseling or offering access to evidence-based alternative medicine. Other examples offered by CMMI include (i) waivers for accountable care entities to assume global risk to provide durable medical equipment (DME) if the DME supports patients’ ability to transition or remain in their homes, (ii) reduced cost-sharing for preventive services, and (iii) payments to caregivers to support individuals with cognitive decline.
Empower People to Achieve Their Health Goals. Under CMMI’s new strategy, CMMI will aim to give individuals more control over their health care decisions by increasing access to usable data aimed at supporting individuals’ understanding of their health status. For example, CMMI may use models to test how mobile device applications, shared decision-making tools, and health education materials empower people to manage their chronic conditions and improve their health. CMMI may also explore opportunities to support individuals’ decision-making by publishing data about providers and services, including costs and quality performance. Lastly, CMMI indicates that it is considering waivers to support predictable cost-sharing for certain health care items, specifically prescription drugs or medical devices.
Drive Choice and Competition. The third strategic pillar focuses on supporting a competitive health care marketplace where providers are incentivized to deliver high-quality, cost-effective care. CMMI discusses designing models intended to incentivize participation by independent physician practices and providers that are not part of a larger health system or owned by a health plan. It is worth noting that CMMI has endeavored to incentivize these types of entities’ participation in value-based care for several years as demonstrated by its ACO REACH and PC Flex Models, both of which included incentives for smaller organizations that had not previously participated in a CMMI model. The new CMMI strategy also addresses potential changes to Medicare Advantage models, which, for example, could include requirements for site-neutral payments across care settings to incentivize the use of outpatient and community-based care.

CMMI’s white paper also states that these strategic pillars are underpinned by a foundational commitment to protecting federal taxpayer dollars. Under its new approach, CMMI states that it will focus on models that are fiscally responsible and scalable, aligning with its statutory mandate to reduce program expenditures while preserving or enhancing quality of care.
CMMI Under the Biden Administration: Emphasizing Health Equity and Aligning with Stakeholders to Achieve System Transformation
While there are similarities between CMMI’s new strategic approach and CMMI’s previous strategic approach, introduced in 2021, they differ in focus and implementation. The previous strategic approach emphasized health equity, multi-payer alignment, and person-centered care as opposed to an emphasis on market-based competition and patient choice. The prior strategic direction was around five key objectives:

Drive Accountable Care. CMMI aimed to expand the number of beneficiaries in care relationships accountable for quality and total cost, aiming for universal Medicare fee-for-service participation by 2030. The new strategic direction appears to reiterate that goal by stating that new model designs could require a growing proportion of beneficiaries in global downside risk arrangements.
Advance Health Equity. Previously, CMMI endeavored to integrate equity into every model by collecting demographic data, addressing social determinants of health, and ensuring underserved populations were represented. This objective is notably absent from the new strategic direction, which instead focuses on patient empowerment.
Support Care Innovations. One of CMMI’s previous objectives was to use data, technology, and payment flexibilities to enable integrated, person-centered care, including behavioral health and home-based services. While the new CMMI strategy also focuses on using data and technology to improve health care, the focus is on empowering patients with more data to help them take control of their health care.
Improve Access by Addressing Affordability. Under its prior strategic direction, CMMI emphasized reducing health care prices, particularly with respect to drug prices, and using models that waive cost-sharing. CMMI’s new strategic direction echoes these goals. One distinction, however, is that the prior strategy included a goal of setting targets to reduce the percentage of Medicare beneficiaries who forgo care due to cost – a goal that is not specifically mentioned in the new strategic direction.
Partner to Achieve System Transformation. Previously, CMMI had a goal to align priorities across CMS and engage stakeholders, including payers, purchasers, states, patient advocates, and patients, to improve quality, outcomes, and reduce costs, targeting multi-payer alignment in all new models by 2030. In contrast, the new CMMI direction calls for increasing financial risk for providers and discontinuing models that fail to meet cost-saving criteria.

Looking Ahead
These contrasting strategies illustrate the impact of administrative philosophies on health care policy and the direction of innovation within Medicare and Medicaid services. As CMMI continues to develop and then implements its updated strategy, stakeholders can expect a sustained emphasis on value-based care, with evolving priorities that reflect the current administration’s policy framework. The coming years will likely bring new models and initiatives aimed at improving outcomes, enhancing patient engagement, and ensuring fiscal responsibility in Medicare and Medicaid services.

One Big Beautiful Bill Passed by the House

On Thursday May 22, the House of Representatives passed the One Big Beautiful Bill Act (H.R. 1, hereafter the “Bill”). The Bill will now be considered by the U.S. Senate.
The following is a summary of some of the key provisions that have been changed from the version that passed the House Ways and Means Committee:

The SALT Deduction Cap Has Been Raised. The Bill raises the SALT cap from $10,000 to $40,000 starting in 2025. The previous version of the Bill would have raised the SALT cap to $30,000. The deduction would be phased out for taxpayers with modified adjusted gross income of over $250,000 for single taxpayers and $500,000 for married taxpayers. For tax years between 2026 and 2033, the limits would be increased by 1% per year, and the cap would remain at the 2033 amount for subsequent tax years after 2033.
BEAT Rate. The Bill increases the base-erosion and anti-abuse tax (“BEAT”) rate under Section 59A from 10% to 10.1%. The previous version of the Bill repealed the increase to 12.5%.
FDII and GILTI. The Bill lowers the global intangible low-taxed income (“GILTI”) inclusion deduction amount from 50% (an effective rate of 10.5%) to 49.2% (an effective rate of 10.668%) and the foreign-derived intangible income (“FDII”) deductions from 37.5% (an effective rate of 13.125%) to 36.5% (an effective rate of 13.335%). The Bill as originally written would have made permanent the reductions under the Tax Cut and Jobs Act of 2017.
Itemized Deductions. In addition to the proposed itemized reduction limits that were in the previous draft of the Bill, the Bill adds a second prong, which effectively imposes an additional 5% tax on income equal to a taxpayer’s SALT taxes. The original draft of the Bill repealed the Pease limitation and effectively imposed an additional 39% bracket equal to the taxpayer’s itemized deductions in excess of the SALT deduction.
Proposed 501(p) Expansion Removed. The original draft of the Bill would have expanded Section 501(p) of the Code, which permits suspension of the tax-exempt status of an organization, to any organization deemed a “terrorist supporting organizations” (from just “terrorist organizations” under current law). The provision was not included in the final version of the Bill passed by the House.
Royalties Received by Tax-Exempts for Licensing Names/Logos. The original draft of the Bill would have treated any royalties received by a tax-exempt organization from a sale or license of its name or logo as “unrelated business taxable income,” which would be taxable income for the tax-exempt organization. This provision was not included in the final version of the Bill passed by the House.

Key provisions in the final passed Bill include:
Business Provisions:

163(j) Deductions. The definition of “adjusted taxable income” under section 163(j) is based on EBITDA (which is more favorable for taxpayers than EBIT under current law) for taxable years 2025 to 2028.
Section 199A. The deduction for qualified business income under Section 199A is increased to 23% (from 20%) for an effective rate of 28.49% (from 29.6%) and made permanent. Section 199A is also expanded to apply to the portion of dividends representing net interest income paid by a “business development company” (“BDC”) taxable as a regulated investment company. This expansion will reduce the effective rate of interest income earned through a BDC from 37% to 28.49% and will increase the attractiveness of BDCs as vehicles for credit funds. Dividends from real estate investment trusts (“REITs”) have had the benefit of Section 199A deductions.
GILTI/FDII Inclusion Deductions Made Permanent. Global intangible low-taxed income (“GILTI”) inclusion deduction amount is lowered from 50% (an effective rate of 10.5%) to 49.2% (an effective rate of 10.668%), and the foreign-derived intangible income (“FDII”) deductions is lowered from 37.5% (an effective rate of 13.125%) to 36.5% (an effective rate of 13.335%).
BEAT Made Permanent at Lower Rate. The current tax rate on the base-erosion and anti-abuse tax (“BEAT”) under Section 59A is increased from the current rate of 10% to 10.1% (instead of increasing to 12.5% after 2025).
Qualified Production Property Deductions. Taxpayers can deduct 100% of “qualified production property” costs immediately for certain newly constructed or acquired nonresidential real property in the United States. These properties must be in connection with the manufacturing, agricultural and chemical production, or refining of a qualified product.
Limitation for Qualified Depreciable Property Deductions. The deduction limitation from qualified depreciable property as business assets is increased to $2.5 million (from $1 million). The phase-out threshold is raised from $2.5 million to $4 million.
Bonus Depreciation for Qualified Property. The bonus first-year depreciation deduction under Section 168(k) is extended through 2029 (2030 for longer production period property and certain aircrafts). Under the Bill, taxpayers can claim 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025, and before January 1, 2030 (January 1, 2031, for certain qualified property with a longer production period, as well as certain aircrafts).
Opportunity Zones Reestablished. A second round of Opportunity Zones (“OZs”) are established for taxable years 2027 through 2033, with similar but modified benefits in temporary deferral of capital gains taxes, basis step-up, and exclusion of taxable income on new gains. The first round of OZs is set to expire in 2026. There is a greater focus on rural areas, such as the offer of higher basis step-up of 30% for investments in qualified rural opportunity funds (as opposed to 10% from the first round of OZs).
Deduction for Excessive Employee Compensation. An aggregation rule is added to the Section 162(m) limitation for executive compensation so that compensation paid by all entities within a covered corporation’s “controlled group” is counted for purposes of the $1 million limit.
Limitation of Amortization Deductions for Sports. The 15-year amortization of a professional sports franchise and related intangible assets that are acquired in an acquisition of interest (or assets) of a team is limited to 50% of the adjusted tax basis of those assets. This change is effective for assets acquired after the date of the enactment of the tax legislation.
Excess Business Losses Extended. The limitation on excess business losses for noncorporate taxpayers is made permanent. The maximum amount of business loss taken in a year is based on an inflation adjusted threshold, with $313,000 for single filers and $626,000 for joint filers in 2025. The Bill also changes the manner in which the excess business loss is calculated by including prior year’s excess business losses in calculating the current year’s excess business loss limitations. Under the current rules, excess business losses are treated as net operating losses for future years and are not included in determining the future years’ excess business loss limitations. This change further limits a noncorporate taxpayer’s ability to use business losses against other income of the taxpayer.
Charitable Donation Limitation. A C corporation’s charitable contributions are subject to a 1% floor.
Increased Taxes on Residents of Countries Imposing a UTPR. The individuals, entities, and governments of countries that impose an undertaxed profits rule (“UTPR”), digital services tax, diverted profits tax, and, (subject to regulations) an extraterritorial tax, discriminatory tax, or any other “unfair” foreign tax enacted with a public or stated purpose that the tax will be economically borne, directly or indirectly, disproportionately by U.S. persons are subject to an increased rate of U.S. taxes, generally increased by 5% for each year of the unfair foreign tax up to 20% maximum, and the governments of such countries are denied benefits under Section 892 (which generally exempts eligible government entities from U.S. withholding taxes on certain types of investment income).
Clean Energy Credits Rolled Back. The Bill proposes accelerated termination of clean energy tax incentives put in place under the Inflation Reduction Act. For example, it would terminate clean electricity tax credits for wind, solar and battery storage projects by 2028 and require projects to begin construction within 60 days of the Bill’s passage.
Taxable REIT Subsidiary Asset Test. Taxable REIT subsidiaries may represent 25% of the value of the REIT’s total assets (rather than 20% under current law).
COVID-related Employee Retention Tax Credits (“ERTC”). The Bill increased the penalty for aiding and assisting the tax liability-related understatements by a COVID ERTC promoter. The penalty is the greater of $200,000 ($10,000 in the case of a natural person) or 75% of the gross income derived by such promoter with respect to the aid and assistance of such understatement. A penalty of $1,000 is applied to COVID ERTC promoters that do not comply with due diligence requirements with respect to a taxpayer’s COVID ERTC eligibility.
No Carried Interest Provision. There is no provision affecting carried interest.

Tax-Exempt Provisions:

Increased Excise Tax on Private University Endowments and Private Foundations. The current 1.4% excise tax on net investment income of private colleges and universities is replaced with a tiered system based on an institution’s “student-adjusted endowment”. For such schools with a student-adjusted endowment of more than $2 million, the excise tax is increased to 21%. The scope of “net investment income” would also be expanded. Additionally, the current 1.39% excise tax on private foundations is replaced with a tiered system based on the foundation’s total size of assets. For purposes of calculating a private foundation’s assets for purposes of this test, the assets of certain related organizations are treated as assets of the private foundation. The excise tax rate would be 5% for private foundations with gross assets of at least $250 million but less than $5 billion, and 10% for private foundations with gross assets equal to or more than $5 billion.
UBTI for qualified transportation fringe benefits. UBTI is increase by any amount incurred for any qualified transportation fringe benefit or any parking facility that is not directly connected to any unrelated trade or business that is regularly carried on by the organization.
Tax on Excessive Employee Compensation. The $1 million limit applies to any employee or former employee of a tax-exempt organization, and for purposes of determining the $1 million limit, all compensation paid to a related person (including a related taxable entity) is included. The change applies to taxable years beginning after December 31, 2025.

Individual Provisions:

Ordinary Income Tax Rates. The maximum rate of 37% for individuals is made permanent.
Standard Deductions. For tax years of 2025 to 2028, the standard deduction is increased to $26,000 for joint filers (from $24,000), to $19,500 for head of household filers (from $18,000), and to $13,000 for all other filers (from $12,000).
Personal Exemption Elimination. The personal exemption is repealed permanently.
Section 199A. As mentioned above, the deduction for qualified business income is increased to 23% for an effective rate of 28.49% and made permanent. Individuals may also benefit from these lowered effective rates for dividends representing net interest income from BDCs.
Itemized Deduction Limits. Itemized deductions (which were disallowed under the TCJA) are allowed and made permanent. The Bill repeals the Pease limitation and creates a two-pronged reduction. The allowable itemized deduction is reduced by 5/37 of the lesser of (i) the amount of the taxpayer’s SALT taxes or (ii) so much of the taxable income of the taxpayer for the year (without regard to the proposal and increased by the amount of otherwise allowed itemized deductions) as exceeds that dollar amount at which the 37% tax rate bracket starts for such taxpayer. The effect of this change is to impose an additional 5% tax on income equal to a taxpayer’s SALT taxes. The itemized deduction is secondly reduced by 2/37 of the lesser of the (i) amount of itemized deductions otherwise allowed for the year that exceeds the allowed SALT deduction or (ii) so much of the taxable income of the taxpayer for the year (without regard to the proposal and increased by the amount of otherwise allowed itemized deductions) as exceeds that dollar amount at which the 37% tax rate bracket starts for such taxpayer. The effect of this second prong is to impose an additional 39% bracket equal to the taxpayer’s itemized deductions in excess of the SALT deduction.
SALT Deduction Cap Increased; SALT Denied for Various Service Professionals. The SALT deduction cap is made permanent and raised to $40,000, going down to $10,000 at a rate of 20% beginning at income of $250,000 for single filers and $500,000 for joint filers. For tax years between 2026 and 2033, the limits would be increased by 1% per year, and the cap would remain at the 2033 amount for subsequent tax years after 2033. Pass-through entity tax (“PTET”) deductions are denied for individuals who perform services in the fields of health, law, accounting actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing services, investment management services, and trading or dealing in securities, partnership interests, or commodities, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees. Therefore, under the Bill, asset managers who are partners in partnerships will not be permitted to deduct their share of state and local taxes. In addition, the Bill disallows deductions for taxes imposed on partnerships and S corporations (such as the New York City unincorporated business tax).
Deductions for Tips. Taxpayers earning $160,000 or less in 2025 (adjusted in the future for inflation) are permitted a deduction for cash tips from an occupation that “traditionally and customarily received tips” to the extent the gross receipts of the taxpayer from the trade or business of receiving the tips exceeds the sum of the cost of goods sold allocable to the receipts and other expenses, losses, or deductions properly allocable to those receipts. This deduction is allowed for tax years 2025 through 2028.
Overtime Compensation Deductions. Deductions are allowed for overtime compensation for itemizers and non-itemizers for tax years 2025 through 2028.
Deductions for Car Loan Interest. Deductions (up to $10,000) of interest payments on car loans from 2025 through 2028. These deductions are allowed for itemizers and non-itemizers. The deduction phases out for single taxpayers earning $100,000 ($200,000 for joint returns).
Expansion of Childcare Credits. Employer-provided childcare credits are further expanded from 25% to 40% (and up to 50% for eligible small businesses). The maximum annual credit is also increased from $150,000 to $500,000 for employers (up to $600,000 for eligible small businesses).
Family and Medical Leave Credits Expanded. Employer-provided paid family and medical leave credits are expanded by giving employers the option to choose between credit paid for wages paid during the employee’s leave or credit for insurance premiums paid on policies that provide paid leave. The family and medical leave cannot be already mandatory from state and local laws.
Adoption Tax Credits. Up to $5,000 of adoption tax credits are refundable, which makes the credit available to lower-income families who do not earn sufficient income to pay tax.
Scholarship-Granting Tax Credits. Tax credits are allowed for contributions by individuals to scholarship-granting organizations. The credits may not exceed the greater of 10% of the taxpayer’s adjusted gross income for the taxable year, or $5,000.
Expansion of Qualified Tuition Programs. Qualified tuition programs that are exempt from federal tax (i.e., “529 accounts”) are expanded to include tuition and material expenses for elementary, secondary, and home school expenses. Qualified higher education expenses are also expanded to include tuition and expenses in connection with a recognized postsecondary credential program.
Extension of Increased Alternative Minimum Tax Exemption from TCJA. The increased exemptions and increased exemption phase-outs from the individual alternative minimum tax are made permanent.
The $750,000 Limitation on Qualified Residence Interest Deduction Is Made Permanent. The $750,000 limitation on deductions for qualified residence interest is made permanent.
Personal Casualty Loss Relief Further Extended. The requirement that personal casualty loss deductions exceed 10% of adjusted gross income for taxpayers to benefit from deductions is waived for qualified disasters that occurred between December 2019 until 2025 (extended from 2020) and allows taxpayers to claim both a standard deduction and qualified disaster-related personal casualty losses.
Qualified Bicycle Commuting Reimbursements Are Taxable. Reimbursements of bicycle commuting expenses are subject to income tax. Before the TCJA, the reimbursements were not taxable.
Reimbursements for Personal Work-Related Moving Expenses Are Taxable. Before the TCJA, deductions were given to certain personal moving expenses for employment purposes and gross income did not include qualified moving expense reimbursements from employers. The deductions are permanently repealed, and the reimbursements are permanently taxable.
Student Loan Discharged on Death or Disability Made Tax-Free Permanently. Discharged student loans on the account of death or disability is not being taxable is made permanent.
Child Tax Credits Made Permanent. The child tax credit is made permanent, and the maximum child tax credit is temporarily increased to $2,500 (from $2,000) from 2025 to 2028 (subsequent years will be $2,000). Social security numbers for the child will be required to qualify for child tax credit benefits.
Creation of “Trump” Accounts. Trump accounts are tax-exempt trust accounts that can be created for U.S. citizens under age 18. The funds from the Trump accounts can be used for qualified expenses of the beneficiary such as higher education and first-time home purchases. The Bill provides a one-time $1,000 federal credit per eligible child born between 2025 and 2028, which will be deposited directly into the child’s Trump account.

Additional Authors: Robert A. Friedman, Martin T. Hamilton and Christine Harlow

Tracking Lien Law Requirements: Alabama

This is the first in a series of blog posts discussing lien requirements in states where we most frequently litigate and states with unique lien requirements.
Alabama Lien Law Basics
Alabama’s statutory mechanic’s lien law can be found at Ala. Code §§ 35-11-210 et seq. These statutory lien requirements are strictly enforced. Some basic precepts of Alabama lien law include:

In Alabama, a mechanic’s lien claim can only arise out of a contract for performing work or furnishing materials for construction or repair of a building or improvement upon land. Clearing, grading, and excavation work, for example, constitute improvements to land. Additionally, architects or engineers who provide plans and supervise erection are also entitled to lien construction projects.
A general or original contractor has the right to lien the full amount of its contract with an owner (a full price lien).
Subcontractors, suppliers, and other materialmen not in privity with an owner typically are entitled to lien only on the unpaid balance due from the owner to the original contractor. But see § 35-11-210 (permitting full price lien rights for certain materialmen (not supplying labor or services) when notice provided to owner prior to furnishing materials)).
Upon request of an owner, an original contractor shall furnish a complete list of all materialmen, laborers, and employees who have furnished any material or are under contract to furnish material or labor for a project, along with the terms and prices thereof (Ala. Code § 35-11-219). If an original contractor fails to supply such information or fails to pay any materialman, subcontractor, or laborer, the contractor may forfeit its lien rights against the owner.
Notice of an intent to file an unpaid balance lien (Ala. Code § 35-11-218) must be given to the owner prior to filing or recording a lien. The notice must be in writing, state that a lien is claimed, set forth the amount due, set forth the work performed, and describe the entity or person who owes the money. Original contractors are not required to submit this notice.
A verified statement of lien must be filed with the probate court in the county or counties where the property for the project is situated (a) within six months after the last item of work has been performed or the last item of material has been furnished for original contractors, (b) within 30 days after the last item of work has been furnished for laborers, or (c) within four months for all other entities after the last item of work or material has been furnished. For (b) and (c), the verified statement of lien must follow the notice of intent required under Ala. Code § 35-11-218.
Following filing of a verified statement of lien, a party seeking to enforce its lien rights must file suit within six months after maturity of the entire indebtedness (usually the date when labor was last performed or materials were last furnished on a job).
To bond off a lien filed against your project, Alabama law requires the bond to cover the amount of the lien, plus interest on that amount at 8% for three years and $100 for court costs (Ala. Code § 35-11-233). If you are seeking to bond off a lien prior to an enforcement action being filed, a trip to the local probate court may be required.

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Federal Take It Down Act Targeting Revenge-Porn Becomes Law

On May 19, 2025, President Donald Trump signed into law the Take It Down Act (S.146). The federal legislation criminalizes the publication of non-consensual intimate imagery and AI-generated pornography. It comes following approximately forty states already enacting legislation targeting online abuse.
What are the Take It Down Act’s Requirements?
The federal Take It Down Act creates civil and criminal penalties for knowingly publishing or threatening to share non-consensual intimate imagery and computer-generated intimate images that depict real, identifiable individuals. If the victim is an adult, violators face up to two years in prison. If a minor, up to three years.
Social media platforms, online forums, hosting services and other tech companies that facilitate user-generated content are required to remove covered content within forty-eight hours of request and implement reasonable measures to ensure that the unlawful content cannot be posted again.
Consent to create an image will not be a defense.
Exempt from prosecution are good faith disclosures or those made for lawful purposes, such as legal proceedings, reporting unlawful conduct, law enforcement investigations and medical treatment.
What Online Platforms are Covered Under the Take It Down Act?
Covered Platforms include any website, online service, application, or mobile app that that serves the public and either: (i) provides a forum for user-generated content (e.g., videos, images, messages, games, or audio), or (ii) in the ordinary course of business, regularly publishes, curates, hosts or makes available non-consensual intimate visual depictions.
Covered Platforms do not include broadband Internet access providers, email services, or online services or websites with primarily preselected content where the content is not user-generated but curated by the provider – and interactive features are merely incidental or directly related to the pre-selected content.
What are the Legal Obligations for Covered Online Platforms?
The Take It Down Act requires covered platforms to ensure compliance via, without limitation: (i) providing a clear and accessible complaint and removal process; (ii) providing a secure method for secure identity verification; and (iii) removing unlawful content and copies thereof within forty-eight hours of receipt of a verified complaint.
The new law also contained recordkeeping and reporting requirements.
While not expressly required, platforms are well-advised to address content moderation filtration policies. Reasonable efforts are, in fact, required to identify and remove any known identical copies of non-consensual intimate imagery.
Website agreements, as well as reporting and removal processes are amongst the legal regulatory operational compliance areas that warrant consideration and attention.
Who is Empowered to Enforce the TAKE IT DOWN Act?
The Federal Trade Commission has been authorized to enforce the Take It Down Act notice and takedown requirements against technology platforms that fail to comply. Violations are considered deceptive or unfair.
Good faith, prompt compliance efforts may be considered a safe harbor and a mitigating factor for platforms in the context of regulatory enforcement. Internal processes that document good faith compliance efforts, including the documentation of all takedown actions, should be implemented in order to avail oneself of the safe harbor.
Removal and appeals processes must be implemented on or before May 19, 2026.
Takeaway: Covered online platforms including, but not limited to, those that host images, videos or other user-generated content should consult with an FTC and State Attorneys General Defense and Investigations to discuss compliance with the Act’s strict takedown obligations and so in advance of the effective date in order to minimize potential liability exposure.

New York Attorney General Advances Consumer Protection FAIR Act Intended to Bolster GBL Section 349

In March 2025, Office of the Attorney General for the State of New York introduced the Fostering Affordability and Integrity Through Reasonable (“FAIR”) Business Practices Act in the State Senate and State Assembly. The proposed legislation is intended to revise Article 22-A of New York’s General Business Law.
The FAIR Act is designed to expand and strengthen consumer and small business protections, in part, by amending New York’s General Business Law §349 to also cover “unfair” and “abusive” practices, rather than just “deceptive” practices. Many other states have already enacted UDAP statutes. The bill may foreshadow what is to come from numerous state consumer protection enforcers as federal consumer protection enforcement is being rolled back and policy under the current administration remains uncertain.
As drafted, the program bill would provide the New York Attorney General and private plaintiffs the ability to seek enhanced civil penalties and restitution in amounts significantly more than available statutory damages pursuant to New York General Business Law Section 349. The FAIR Act would significantly increase statutory damages available under GBL §349 from $50 to $1,000, and permit recovery of actual and punitive damages. Penalties for unfair, deceptive or abusive practices could potentially include penalties of up to $5,000, per violation. Knowing or willful violations could result in penalties totaling the greater of $15,000 or three times the amount of restitution, per violation. Prevailing plaintiffs in private actions would also be permitted to recover attorneys’ fees and costs.
Analogous to federal policy, the proposed legislation provides for enhanced civil penalties for harm to vulnerable people, veterans and those with limited English proficiency. The FAIR Business Practices Act contemplates stopping lenders, including auto lenders, mortgage servicers, and student loan servicers, from deceptively steering people into higher cost loans. It would purportedly reduce unnecessary and hidden fees and stop unfair billing practices by health care companies.
The bill would also permit the NY AG and private plaintiffs (individuals, small businesses and non-profits) to enforce even a single instance of unfair, deceptive and abusive acts and practices, including, but not limited to, false advertising. Moreover, its prohibitions apply regardless of whether the act or practice is “”consumer-oriented,” possesses a “public impact,” or is part of a “pattern of conduct” – judicially imposed limitations that presently exist pursuant to GBL §349.
“This legislation will strengthen New York’s consumer protection law, GBL §349, to protect New Yorkers from a wide array of scams, including deed theft, artificial intelligence (AI)-based schemes, online phishing scams, hard-to-cancel subscriptions, junk fees, data breaches, and other unfair, deceptive, and abusive practices. Forty-two other states and federal law already prohibit unfair practices, making New York’s current law both antiquated and inadequate,” according to the NY Office of the Attorney General.
New York’s current consumer protection law, GBL §349, currently prohibits only deceptive business acts and practices, not unfair or abusive acts by companies and individuals. The FAIR Business Practices Act is designed to protect New Yorkers from unfair and abusive business acts, such as:

The imposition of hidden “junk fees” in various industries
Companies that make it difficult for consumers to cancel subscriptions
Student loan servicers that steer borrowers into the most expensive repayment plans
Car dealers that refuse to return a customer’s photo ID until a deal is finalized and charge for add-on warranties that the customer did not actually purchase
Nursing homes that routinely sue relatives of deceased residents for their unpaid bills despite not having any basis for liability
Companies that take advantage of consumers with limited English proficiency and obscure pricing information and fees
Debt collectors that collect and refuse to return a senior’s Social Security benefits, even though they are exempt from debt collection
Health insurance companies that use long lists of in-network doctors who turn out not to accept the insurance

The proposed legislation reflects the federal Consumer Financial Protection Act that prohibits unfair, deceptive or abusive acts and practices (“UDAAP”).
The Fair Business Practices Act provides specific definitions for the following terms:

Unfair: An act or practice is considered unfair when it causes or is likely to cause substantial injury to a person, the injury is not reasonably avoidable by such person, and the injury is not outweighed by countervailing benefits to consumers or competition. Note, however, that the FAIR Act’s definition of “unfair” does not possess a provision similar to the CFPA’s § 5531(c)(2) that permits regulatory agencies to weigh public policy when assessing whether an act or practice is unfair.
Deceptive: An act or practice is deceptive when the act or practice misleads or is likely to mislead a person and the person’s interpretation of the act or practice is reasonable under the circumstances.
Abusive: An act or practice is abusive when it materially interferes with the ability of a person to understand a term or condition of a product or service, or it takes unreasonable advantage of (i) a person’s lack of understanding of the material risks, costs, or conditions of the product or service; (ii) a person’s inability to protect such person’s interests in selecting or using a product or service; or (iii) a person’s reasonable reliance on a person covered by this section to act in such person’s interests.

New York business groups have criticized the consumer protection bill intended to strengthen consumer protection against deceptive practices such as junk fees and hard-to-cancel subscriptions. Business groups are aggressively resistant to the program bill, asserting that the legislation would be exploited, resulting in frivolous and abusive litigation that will weaken New York’s ability to attract and keep businesses.
Affirmative defenses to the Fair Business Practices Act could potentially include, without limitation, a private plaintiff meeting minimum threshold standing requirements, the alleged harm being capable of remedy via federal securities or intellectual property laws, and/or the alleged harm arising during the course of a high-value experienced commercial transaction and directed to the involved parties only. Contact a States Attorney General law firm if you or your business are the subject of a New York State or other State Attorney General subpoena or inquiry.
The Act is intended to expand consumer and small business protections, and enhance the scope of available remedies. If passed, it is anticipated that the law will result in a dramatic increase in private consumer lawsuits, and New York State Attorneys General investigation and enforcement.
Takeaway: New York’s existing consumer protection law is primarily governed by GBL §349 which focuses primarily on “deceptive” acts and practices. According to the New York AG, GBL §349 is antiquated and insufficient to adequately protect New Yorkers. Businesses operating in New York should consult with an Attorney General defense lawyer and monitor the progress of the FAIR Act. As drafted, the bill would increase the damages available in a private right of action from the greater of $50 or actual damages under current law to $1,000 in statutory damages, plus the aggrieved person’s actual damages, if any. In cases involving willful or knowing violations, courts would be mandated to award treble damages, reasonable attorneys’ fees and costs to a prevailing plaintiff. The Act would also permit class action lawsuits to recover actual, statutory or punitive damages if the prohibited act or practice has caused damage to others similarly situated. The availability of supplemental civil penalties for vulnerable persons would also be significantly expanded. If enacted into law, an experienced State Attorneys General law firm can assist with the implementation of business practices designed to comply with applicable New York State legal regulatory requirements, including, but not limited to additional restrictions relating to “unfair” and “abusive” acts or practices, and the review of applicable business and advertising practices.

Tenth Circuit Decision Highlights Distinction Between Traditional Non-Compete and Forfeiture-for-Competition

In Lawson v. Spirit AeroSystems, Inc., the U.S. Court of Appeals for the Tenth Circuit upheld the forfeiture of certain stock awards for violating a covenant not to compete. Like the Seventh Circuit in LKQ Corp. v. Rutledge(which applied Delaware law), the Tenth Circuit concluded that, under Kansas law, the remedy of forfeiting future compensation is not subject to the same reasonableness standard as traditional enforcement of a non-compete obligation. The Tenth Circuit reached this conclusion even though the executive’s agreement included both a forfeiture-for-competition provision and traditional enforcement rights (i.e., the right for the company to pursue monetary damages and specific performance), because the agreement terms enabled the forfeiture provision to be severed from the traditional enforcement provisions.
Background and the Court’s Analysis
A retirement agreement allowed the former CEO of Spirit AeroSystems (“Spirit”) to receive cash payments and continue vesting in certain stock awards if he continued working for Spirit as a consultant and complied with a non-compete agreement. The CEO subsequently contracted with a hedge fund that was pursuing a proxy contest against one of Spirit’s suppliers. Spirit determined that this activity breached the non-compete and therefore stopped payments to the CEO and cut off continued vesting of the stock, resulting in forfeiture of the CEO’s then-unvested stock awards. Notably, Spirit did not seek to claw back cash that had already been paid or stock that had already vested: only future compensation and vesting were affected.
The court first found under Kansas case law a distinction between a traditional penalty for competition and forfeiture of future compensation for competition. Under Kansas case law, the former is valid and enforceable only if “reasonable under the circumstances and not adverse to the public welfare.” But the court concluded that Kansas law does not subject the latter to the same reasonableness standard because it does not restrain competition in the same way. Rather than imposing a penalty, a forfeiture for competition provision “merely provides a monetary incentive in the form of future benefits for not competing.” The court reasoned that a forfeiture for competition provision gives the worker “a choice between competing and thereby forgoing the future benefits or not competing and receiving those benefits.” And because the forfeiture applied only to future compensation, it did not amount to a penalty: the executive forfeited only “the opportunity for the shares to vest notwithstanding his retirement.”
Second, the court reasoned that the policy justifications for reasonableness review did not apply to forfeiture in this case. The court stated that reasonableness review addresses the risk that (1) the employer’s bargaining power can lead to a one-sided non-compete that leaves former employees unable to support themselves after their employment ends and (2) “overbroad” restrictions on competition can “decrease options available to consumers and generate market inefficiencies.” The court concluded that neither of those risks were present in this case, noting that the executive was sophisticated and had support of counsel and that the executive had an opportunity to receive substantial compensation if he had complied with the covenant.
Third, the court reasoned that “[f]reedom of contract is the fountainhead of Kansas contract law.” Accordingly, the court determined that the forfeiture-for-competition provision should be presumed enforceable, absent the policy concerns described above.
Unlike the Seventh Circuit in LKQ—which certified a question of Delaware law to the Delaware Supreme Court—the Tenth Circuit refused to certify the question of Kansas law to the Kansas Supreme Court. For the reasons described above, the court determined that it could predict the Kansas Supreme Court’s interpretation of Kansas law with sufficient confidence to make certification unnecessary.
Finally, the court rejected an argument that reasonableness review should be required because Spirit had both the right to invoke forfeiture and the right to seek traditional enforcement (monetary damages and specific performance). The court determined that, in this case, the right to seek traditional enforcement could be severed from the right to invoke forfeiture. Because Spirit relied exclusively on the forfeiture provision and expressly declined to pursue traditional enforcement, the fact that Spirit could have pursued traditional enforcement was not fatal.
Takeaways
Although Lawson is binding only on federal courts in the Tenth Circuit that are applying Kansas state law (and Kansas state courts could still reach a different conclusion), it provides meaningful authority for the proposition that a forfeiture for competition provision can be enforced even if applicable law otherwise limits the enforceability of non-compete provisions. (Notably, however, some states reject forfeiture for competition.) The decision offers a few important practical takeaways:

The particular facts matter. In this case, the court noted that the forfeiture provision had been negotiated by sophisticated parties represented by counsel and determined that policy concerns with non-compete provisions (interfering with the ability to make a living and potential to generate market inefficiencies) were not present.
Drafting matters. If an agreement has more than one enforcement mechanism (e.g., a right to seek damages and injunctive relief and a separate statement that breach will result in forfeiture of certain compensation or benefits), it is important to make each enforcement mechanism distinct and severable from the others. The result of this case could have been different if the agreement did not have a severability clause. It also helps to state clearly that amounts subject to forfeiture are not considered earned or fully vested (even if considered vested for tax purposes) unless and until the employee has satisfied all applicable conditions. Clarity on this point helps the court to distinguish between a permissible compensatory incentive to comply and a potentially impermissible penalty for breach.
Enforcement strategy matters. The court emphasized that Spirit did not pursue injunctive relief or damages and that the forfeiture applied only with respect to future payments and vesting. Had Spirit sought to claw back prior payments or stock that had already vested, the court might have treated the forfeiture as a penalty that required reasonableness review.