August 2024 - MPL Law Firm

September 4th is Approaching!

September 4^th is rapidly approaching. Why is that date important? If you forgot, that’s when the FTC non-compete regulation goes into effect. There are a number of lawsuits, but none thus far have caused a change.

On July 23^rd, the Eastern District of PA ruled against the Plaintiff’s motion for a nationwide injunction in ATS Tree Services v. FTC. Conversely, in the Eastern District of Texas, the motion (Ryan, LLC v FTC) for a preliminary injunction was partially granted for one Plaintiff staying the effective date of the FTC non-compete rule. However, the Court also blocked the request for a nationwide injunction because the Plaintiffs had not sufficiently briefed the issue. Importantly, the Ryan court intends to issue a ruling on the merits of the case by August 30^th. There are also a number of other cases where there have been limited injunctions granted as well, so stay tuned.

What does that mean for the rest of us? The September 4^th compliance date still sticks. If you need guidance on the FTC Rule, check out this link. It will be interesting to see how employers and employees (past, present and future) navigate this new regulation.

“If you have ten thousand regulations you destroy all respect for the law.” Winston Churchill

Other items of interest:

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com), Brad Leber (bleber@mpl-law.com) or anyone in our office with questions or comments.  

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.

When Expenses Exceed Sales, You Eventually Run Out of Money – Chapter 7

What happens when your expenses exceed your sales? Eventually you run out of money (unless you’re the Federal Government). You can close your doors and move on right? Well, your creditors may have something to say about that. Chapter 7 provides a way for a business to close its doors, sell its assets and try to satisfy its creditors as much as possible.

In a Chapter 7, a bankruptcy trustee is appointed to sell all of the business assets and distribute the proceeds among creditors according to the priority rules established in bankruptcy law. However, be careful with this process. A business (e.g., LLCs and corporations) will not receive a debt discharge at the end of the process. Why? The remaining debt obligations are left in place to allow creditors the option to enforce personal guarantees or intervene in the event the company’s equity holders fraudulently conveyed the business assets to another entity or individual (including themselves).

So, what is the best way to avoid a Chapter 7…….”STAY IN BUSINESS” (yes, I borrowed from Captain Obvious for this statement).

Here are a few other things that may be of interest:

Everyone Else Is Doing a Remake – Chapter 11

We have covered the business bankruptcy process in the past. With the economy showing signs of weakness, it might be a good idea to revisit this topic. This week, we will start with Chapter 11. As I wrote about a year ago, this is the Six Million Dollar Man option (“We can rebuild him. We have the technology. We can make him better, than he was. Better, stronger, faster”). Okay, maybe the two aren’t totally analogous, but the goal is very much the same. The company is hoping to emerge better and stronger.

A company that files a Chapter 11 does so to restructure their debts and make a fresh start. The business will first propose a reorganization plan to the US Bankruptcy Court. If the plan is accepted, the business continues to operate with the goal of emerging as a viable and functional entity.

The bottom line is that the company and its management team in a Chapter 11 need to make some hard choices if it is going to come out of this process successfully. If it does not, then the other alternative is to close its doors and liquidate (i.e., a Chapter 7 Bankruptcy), which we will get into next week. Everyone else seems to be doing remakes these days, why can’t a business do it.

Here are a few other items of interest:

Webinar | Securing Your Small Business: Privacy and Data Security (nfib.com) (08/07 @ 12pm EST)
Picture It: The Path to Pay Transparency | Stambaugh Ness
Heading Towards the Cliff: Tax Update & Planning in Dynamic Times Part 2 | Stambaugh Ness (8/13 @ 2pm)
Compensation Philosophy & Strategy: The Art and the Science | Stambaugh Ness (08/20 @ 2pm EST)