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Preliminary Injunction of CTA and What it Means for Reporting Companies

Published on: December 6, 2024 | by Kelsey Gorman

On December 3, 2024 the United States District Court for the Eastern District of Texas granted a nationwide preliminary injunction, enjoining the enforcement of the Corporate Transparency Act (“CTA”) and staying its reporting deadline.

Congress passed the CTA in January of 2021, and it became effective on January 1, 2024. The CTA required companies deemed as “reporting companies” to report personal information about their beneficial owners to FinCEN, a bureau within the United States Department of the Treasury tasked with combatting money laundering, terrorist financing, and other financial crimes. All reporting companies that were in existence prior to January 1, 2024, had until January 1, 2025 to file their beneficial ownership information (“BOI”) reports.

However, in its recent decision the Court held that the CTA was likely unconstitutional and that “reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”

Remote Work and Cybersecurity: Keeping Law Firm Data Safe Beyond the Office

Published on: December 6, 2024 | by Gregory Hoffman

With the rise of hybrid and remote work in the legal industry, the challenge of securing sensitive client data has grown exponentially. Law firms must grapple with ensuring data protection across varied locations and through potentially vulnerable networks. Protecting data is not only a matter of compliance but also central to upholding client trust and confidentiality, as breaches can have severe legal, financial, and reputational consequences. This article explores best practices for securing remote access to legal systems, the importance of Virtual Private Networks (VPNs), and methods to mitigate risks associated with personal devices and unsecured networks.

Understand the Risks of Remote Access

Remote work opens a variety of vulnerabilities that may not exist within a traditional office setting. Law firms manage highly sensitive and privileged information, making them attractive targets for cyberattacks. In a remote environment, employees may access firm data on personal devices, over unsecured networks, or without adequate security protections. Without the proper software, policies, and training, your firm may be susceptible to data breaches, phishing attacks, ransomware attacks, and other cyber threats.

Texas District Court Strikes Down DOL’s Regulation Increasing Minimum Salary Requirement for White Collar Overtime Exemption

Published on: November 22, 2024 | by Joshua L. Weiner and Gozde Celik

The U.S. Department of Labor’s (“DOL”) final regulation increasing the salary threshold for the “white collar” overtime exemption came to a halt on November 15, 2024, when the U.S. District Court for the Eastern District of Texas vacated and set aside the regulation as exceeding the DOL’s statutory rulemaking authority.

The regulation sought to increase the salary requirements established in 1975 for the executive, administrative, and professional (“EAP”) exemptions (commonly referred to as the “white collar” exemptions) to the overtime requirements under the Fair Labor Standards Act (“FLSA”). The FLSA generally requires overtime pay for employees who work over forty hours in a week. However, under the EAP exemptions, those overtime requirements do not apply to employees employed in a bona fide administrative, executive, or professional capacity. To be classified under one of the EAP exemptions, the employee must i) meet or exceed a minimum salary requirement, and ii) meet certain duties tests mandated by the FLSA.

The challenged rule issued by the DOL raised the previous minimum salary requirement of $684 per week, or $35,568 per year, in three stages. The initial stage was rolled out on July 1, 2024, and raised the minimum salary for EAP overtime exemption to $844 per week, or $43,880 per year, placing an estimated one million previously exempt employees into nonexempt status. The second rollout, which was set to take place on January 1, 2025, sought to raise the minimum salary requirement to $1,128 per week/$58,656 per year. Following these initial increases, the minimum salary requirement was set to be raised every three years based on contemporary earnings data.

Trusts in New Jersey – Understanding the Duties and Responsibilities of New Jersey Trustees

Published on: October 15, 2024 | by Anne Marie Robbins

As a general rule, trusts are created in one of two ways. Inter vivos trusts are established by an agreement or declaration during the life of the creator (called the “grantor” or “settlor” of the trust). Testamentary trusts are created in the will of a testator and do not exist until the testator dies, the will is probated, and the executor of the will transfers assets to fund the trust. Testamentary trusts are irrevocable and cannot be changed except in limited circumstances, whereas inter vivos trusts may be revocable (i.e., may be amended or terminated) or irrevocable.

In New Jersey, a trustee is entrusted with significant responsibilities that require not only the proper management and distribution of assets but also the fulfillment of strict fiduciary obligations. Whether the trustee is an individual or a corporate entity, the role demands a high level of diligence, integrity, and accountability. For beneficiaries, understanding a trustee’s duties is essential to ensure that their rights are protected, while for trustees, knowing the full extent of their responsibilities is crucial for effective administration.

The trustee’s role lasts the length of the trust’s duration, or until the trustee sooner resigns, dies, or is removed.

Heat Stress: OSHA’s Proposed New Rule and What it Means for Employers

Published on: September 9, 2024 | by James K. Estabrook and Gozde Celik

On August 30, 2024, the Occupational Safety and Health Administration (OSHA) published in the Federal Register its proposed regulations for Heat Injury and Illness Prevention in Outdoor and Indoor Settings, delivering on the Biden administration’s three-year long promise to have the agency put forward a rule to protect workers from heat related injuries and deaths. The proposed measure would be the first comprehensive federal regulation to address the recent increase in heat related emergencies occurring across a large swath of workplaces, including farms, construction sites, warehouses, and commercial kitchens.

Industry Backlash and Legal Uncertainty

Although many states have adopted or proposed their own heat safety regulations, OSHA’s proposed rules, due to their wide application and extensive requirements, have received more backlash than their state counterparts, indicating that the implementation of the rules is likely to face many challenges. The proposed regulations come in during the tail end of President Biden’s first term and are also vulnerable to an administration change where Former President Donald Trump has expressed a contrary intent to roll back on OSHA’s regulations on private industry, thereby indicating that his administration could block the rule’s implementation. Additionally, the extent of OSHA’s, as well as other federal agencies’, ability to rule make and enforce their regulations has been questioned by the Supreme Court in its decision overturning the Chevron deference in Loper Bright Enterprises v. Raimondo and Relentless Inc. v. Department of Commerce, which places the proposed rule into even more uncertainty.

Not So Fast: Texas District Court Blocks FTC’s Ban on Noncompete Agreements

Published on: August 22, 2024 | by Kathleen M. Connelly

On August 20, 2024, the U.S. District Court for the Northern District of Texas invalidated the Federal Trade Commission’s (FTC’s) final rule that effectively banned the use of noncompete agreements by U.S. employers. The ruling comes just in time for employers facing the inability to enter into or enforce noncompete agreements when the rule was slated to go into effect on September 4, 2024.

The Texas court reasoned that the FTC exceeded its constitutional authority by proposing “arbitrary and capricious” sweeping prohibitions against noncompete agreements rather than a more targeted ban on specific noncompete provisions that are deemed unfair competitive practices. In addition, the court noted that only Congress is authorized to issue substantive rules banning non-competes, whereas the FTC’s authority is limited to procedural rules aimed at implementing legislation passed by Congress, adding “[t]he role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do.”

Prior Judicial Proceedings:

CCA 202352018 – A Cautionary Tale

Published on: June 25, 2024 | by Mary Patricia Magee

Since passage of the Uniform Trust Code in New Jersey in 2016, planners now have an established procedure to modify or terminate an irrevocable trust, and it is undoubtedly a valuable tool. Clients frequently have trusts that could be made better if one or two changes were made. However, while attractive, the modification or termination of an irrevocable trust so that the trust will accommodate circumstances unforeseen when the trust was created, can have unintended gift tax consequences.

It was just such a situation that a recent Memorandum issued by the Chief Counsel for the IRS, CCA 202352018 (hereafter the CCA or Memorandum), addresses. In that Memorandum the grantor of the trust established an irrevocable trust for her child for the child’s life. The trustee had the power to distribute income and principal to the child, in the trustee’s discretion, and on the child’s death the trustee was directed to distribute the proceeds to the child’s descendants. The grantor had no right to income or principal from the trust and essentially had relinquished all control over the assets in the trust. As such, the grantor appeared to have successfully removed the assets in the trust from her taxable estate.

The trust included a provision that made the trust income taxable to the grantor under section 671 of the Internal Revenue Code. Using such a provision in a trust is actually very popular. Because the trust will not pay any income taxes, the trust can grow more quickly. In effect, it is as if the grantor is making a tax-free gift to the trust each year in the amount of the tax the trust would otherwise have paid. Sometime after the trust in the CCA was operational, however, the grantor no longer wished to pay those income taxes and instead sought to have the trust reimburse her for those tax payments.

Supreme Court Ruling Sparks Urgency in Reassessing Buy-Sell Agreements for Closely Held Companies

Published on: June 25, 2024 | by Anne Marie Robbins

Ensuring the seamless transition of ownership and safeguarding a company’s stability is of paramount importance to any closely held business. Buy-sell agreements play a crucial role in achieving these objectives. These agreements dictate the terms under which shares of the business can be bought or sold, typically triggered by events such as death, disability, retirement, or voluntary departure of an owner. A recent decision by the United States Supreme Court necessitates that owners of closely held businesses review their buy-sell agreements, particularly those that involve using life insurance proceeds to purchase a deceased shareholder’s interest in the company.

In a unanimous decision issued on June 6, 2024, the Supreme Court held that life insurance proceeds payable to a corporation are includible in the corporation’s value for Federal Estate Tax purposes, with no offset allowed for the obligation to purchase a deceased shareholder’s interest. Estate of Connelly v. United States, 602 U.S. ___ (2024) (No. 23-146, June 6, 2024).

Michael and Thomas Connelly were the owners of Crown C Supply, a building supply corporation (the “Company”). Michael was the CEO and owned almost 80% of the stock, with Thomas owning the rest. The brothers had entered into a buy-sell agreement that was to be effective in the event of their deaths. Under the agreement, the surviving brother was given the option to purchase the deceased brother’s shares. If he did not do so, the Company itself would be required to redeem the shares. The Company obtained life insurance policies of $3.5 million on each brother.

Employers Should Audit Exempt Classifications in Response to USDOL’s Increased Salary Requirements to Qualify For Overtime Exemption

Published on: May 17, 2024 | by Kathleen M. Connelly

On April 24, 2024, the U.S. Department of Labor (DOL) announced a long anticipated final rule increasing the minimum salary requirements that “white collar” and highly compensated employees must meet to qualify for exemption from the overtime requirements of the Fair Labor Standards Act (FLSA). It is estimated that the rule could impact up to 4 million employees who may now be eligible for overtime pay unless employers increase their salaries to meet the new requirements.

Two-Phased Increase for White Collar Exceptions

The DOL’s rule announced a phased-in increase in the salary basis test applicable to the white collar exemptions for executive, administrative and learned professional employees.

NJ Supreme Court Limits Use of Non-Disparagement Provisions in Employment Settlement Agreements

Published on: May 9, 2024 | by Joshua L. Weiner

In a unanimous opinion, the New Jersey Supreme Court recently held that a non-disparagement provision in a settlement agreement that prevented a former employee from revealing details about allegations of sexual harassment, sex discrimination and retaliation was against public policy and cannot be enforced.

The plaintiff, a former police sergeant, appealed a trial court order enforcing a non-disparagement provision in a 2020 settlement agreement reached in her employment discrimination case. Under the non-disparagement clause, the plaintiff was barred from making any statements “regarding the past behavior of the parties” that would “tend to disparage or impugn the reputation of any party.” The agreement clearly stated that the provision extended to statements to the media, government offices and the general public. After the settlement was reached, the plaintiff was interviewed by a reporter for NBC’s Channel 4 News, where she stated that the police department had not changed because “it’s the good ol’ boy system,” among other things. The department and various officers then filed a motion to enforce the non-disparagement provisions of the agreement.

The trial court granted the defendants’ motion, ordering the plaintiff not to give further interviews or to make disparaging statements. The judge declined to award the roughly $23,000 in damages sought by the defendants but awarded counsel fees of $4,917.50 for the plaintiff’s breach of the clause. The Appellate Division affirmed in part and reversed in part, holding that while the terms of the non-disparagement provision were enforceable, the plaintiff did not break them during the television interview.