(As first published in nvla LeaseWire)
Non-Compete Agreements
As I reported earlier this year, the Federal Trade Commission (“FTC”) published a final rule on April 23, 2024, banning employers from entering into, enforcing or attempting to enforce most non-compete agreements covering post-employment. The effective date of the rule was to be September 4, 2024. See my article on non-compete agreements here.
On August 20, 2024, the U.S. District Court for the Northern District of Texas granted a nationwide injunction against the rule in Ryan LLC v. Federal Trade Commission, holding that the FTC had improperly exceeded its authority, the rule was arbitrary and capricious and violated the Administrative Procedures Act. On October 18, 2024, the FTC filed an appeal of the order with the Fifth Circuit Court of Appeals.
Meanwhile, there have been other cases brought in Pennsylvania and Florida that have also challenged the FTC rule and held it to be improper. The U.S. District Court for the Middle District of Florida’s decision was appealed to the Eleventh Circuit on September 24, 2024.
The FTC now has the opportunity to litigate the legality of the rule in two different appeals courts giving rise to the possibility of inconsistent decisions that ultimately may end up going to the U.S. Supreme Court.
What should you do now as an employer? While the non-compete ban is not currently in effect, if you use these clauses in your employment agreements, you should remain vigilant in 2025 to see how these cases resolve.
Corporate Transparency Act
The Corporate Transparency Act (“CTA”) applies to most entities formed in the United States before January 1, 2024. The CTA requires filing beneficial ownership information of reporting entities with the Financial Crimes Enforcement Network. Reporting entities include LLCs, corporations and other entities formed by filing a document with the secretary of state or its equivalent may be subject to this law, with some exceptions. For entities formed before January 1, 2024, a filing was required to be made before January 1, 2025. For entities formed after January 1, 2024, the CTA requires filing within 30 days after formation.
However, on December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction enjoining the CTA and its enforcement so that filing is not required pending resolution of the case Texas case. Be aware that this issue has been litigated in other states that have not agreed with the Texas District Court decision.
What should you do as a reporting company? You may voluntarily report at this time although it is not required, or you may monitor this situation to be certain to make a timely filing if the outcome of the Texas case reverses the ruling and the injunction is dismissed.
Commercial Finance Disclosure Laws
States across the country continue to consider and adopt disclosure laws for commercial finance transactions. These disclosures are similar to those required for consumer transactions. The laws vary in the states where they have been introduced and they may apply to your transactions depending on their financial substance. Many of these laws exempt leases. Note that even though a transaction is labelled a “lease” it may not mean it is a lease for all purposes under a particular statute. As the laws are not uniform, they may present challenges for you to comply using a multistate form. States that have adopted commercial finance disclosure laws include:
- California
- Connecticut
- Florida
- Georgia
- Kansas
- New York
- Utah
- Virginia (sales-based financing only)
What should you do as a lessor/lender? Have your lease contracts reviewed to be certain that they comply with applicable financial disclosure laws.
Finally, we are in a state of uncertainty with a new administration on the horizon. It is likely that there will be changes afoot that will impact the leasing industry. In particular, we may see developments concerning disclosures arising under Dodd-Frank regulations and matters enforced by the Consumer Financial Protection Bureau. All bets are off.
Wishing you all a happy and healthy New Year!
Sloan Schickler is a partner in the commercial finance law firm, Schickler & Schickler PLLC. Schickler, a veteran vehicle leasing, finance and bank attorney and the attorneys in her firm have decades of experience representing and protecting lessors, banks, captive and independent finance companies in all facets of the vehicle leasing and financing business. She has served as the NVLA Legal and Legislative counsel since 2017, is currently the only woman on the NVLA board of directors and is a supporter of Leasing News and sits on its Advisory Board.
Sloan can be reached at: sloan.schickler@schicklerlaw.com or 212-262-5297.