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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Commercial Law

Date & Time
  • event Date

    Tuesday, July 30, 2024

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE course will offer guidance in drafting noncompete clauses for both sellers and key employees in connection with the purchase and sale of a business. The panel will examine the FTC's new rule banning most noncompetes, the rule's application in M&A transactions, and the interplay of the new rule with existing state noncompete laws. The panel will also review recent case law regarding the enforceability of noncompetes and discuss the impact of certain unique buyer and seller circumstances and how noncompetes can be tailored to address them.

Faculty

Benjamin E. Stockman
Partner
Venable LLP

Mr. Stockman practices in all areas of labor and employment law. Ben has handled a range of legal matters involving wage and hour issues, employment discrimination, equal pay, family and medical leave, disability, and employee discipline and termination. He also handles traditional labor matters, including defending companies in proceedings before the National Labor Relations Board (NLRB). Mr. Stockman has a bicoastal practice and advocates for employers in federal and state courts, including preliminary injunctions, trials, appellate practice, depositions, subpoenas, and motions practice. he has substantial experience defending clients against employment collective and class actions. 

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Daniel G. Straga
Partner
Venable LLP

Mr. Straga is an experienced corporate attorney with expertise in mergers and acquisitions, divestitures, venture capital financings, real estate transactions, investment fund formation, and general corporate governance. He advises public and private corporations, private equity funds, family offices and early-stage companies across a wide variety of industries, including financial services and fintech, cannabis, gaming, real estate, aerospace, energy, entertainment and media, transportation, and government contracting. Mr. Straga brings a practical and collaborative approach to all matters, which allows him to efficiently navigate deal complexities and achieve successful outcomes for his clients.

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Description

Covenants not to compete are a critical, and often closely scrutinized, component of any M&A transaction, and practitioners must be able to carefully craft these covenants in a manner that will stand up to post-closing judicial scrutiny.

The FTC's new rule and most states distinguish between the law governing covenants not to compete when incident to the sale of a business versus when these covenants arise solely out of employment. This means that noncompete covenants applicable to sellers in an M&A transaction must be approached differently than those applicable to key employees of the acquired company. With respect to sellers, the presence of reasonable consideration and a clear nexus between that consideration and the covenant is essential. As it relates to key employees, courts generally respect restrictive covenants in employment agreements for the duration of employment, and noncompetes can survive the term of employment for certain key employees if drafted to comply with new federal and existing state law.

In addition to enforceability issues, the appropriate contours of noncompetition restrictions are highly fact-dependent and require careful consideration of the circumstances of each individual buyer and seller. Failing to tailor noncompetition covenants to these circumstances can result in a seller being unreasonably restricted from future endeavors and/or a buyer being inadequately protected.

Listen as our authoritative panel analyzes covenants not to compete in M&A transactions.

Outline

  1. Noncompete covenants incident to the sale of a business
  2. Key documentation
  3. Key provisions
  4. Merger clause
  5. Noncompetes for key employees: federal and state law limitations
  6. Including founders and major shareholders in noncompete covenants
  7. Enforceability
    1. FTC's new rule
    2. State laws

Benefits

The panel will review these and other critical issues:

  • What are some essential requisites to enforceability? How should noncompetition covenants be documented?
  • Where and when should noncompetition matters relating to a to-be-acquired business be addressed?
  • Why are noncompete covenants treated differently when part of an employment agreement?
  • What are some special circumstances that present unique drafting challenges? How can common pitfalls be avoided?