UPDATE: FTC Non-Compete Rule

In our previous post from July 2024, we informed our clients about the FTC’s impending ban on non-compete agreements, which was scheduled to take effect on September 4, 2024. Since then, a significant legal development has halted the rule from going into effect.

On August 20, 2024, the U.S. District Court for the Northern District of Texas ruled in Ryan, LLC v. FTC that the FTC lacked the statutory authority to implement this nationwide ban. This ruling has stopped the FTC from enforcing the non-compete rule, which would have required employers to invalidate most existing agreements and notify workers accordingly. The FTC now has until October 19, 2024, to appeal this decision, and it is currently considering its options.

At BridgehouseLaw https://bridgehouse.law, we are closely monitoring this evolving situation. While the future of the FTC’s rule remains uncertain, businesses need to stay aware of ongoing legal proceedings and state-specific non-compete regulations. Should the FTC choose to appeal or other rulings emerge, we will provide further updates to ensure that our clients remain compliant and informed.

Stay tuned for more updates as we continue to track this case. If you have any questions about how this ruling may potentially impact your current agreements or would like to assess your existing contracts under state laws, please reach out to our team. We are here to assist you every step of the way.

A Journey to Citizenship: Henriette Morton’s Story

Dulles International Airport, July 29, 1999—the heat was relentless. Henriette Morton had just touched down for what was supposed to be a one-year internship at a hotel in Raleigh, NC. Her plan was simple: complete the internship, return to Germany, and start the next chapter of her life. But as life often does, it took her on an unexpected adventure.

After a whirlwind romance, Henriette found herself in Las Vegas, NV, where she married. Soon after, the couple welcomed their first child, and Henriette began the process of applying for her Green Card. Things were moving along until the unimaginable happened—9/11 shook the world, and suddenly, her immigration file vanished in the bureaucracy of the INS (now USCIS). At that time, everything was still paper-based, and it felt like her future in the U.S. hung in the balance.

After months of frustration and dead ends, her husband reached out to their congressman. Six months later, Henriette’s Green Card was finally in hand. Life resumed. She worked, traveled, and even welcomed another addition to their family. Her career eventually led her to BridgehouseLaw, where she worked closely with Attorney Reinhard von Hennigs.

One day, Reinhard asked: "Do you ever plan on becoming a U.S. citizen?"

Henriette hadn’t seriously considered it. As a German national, she knew obtaining a Beibehaltung (dual citizenship retention) permit would be difficult. The rules were strict, and she didn’t feel she had a strong case for it—after all, she hadn't faced significant discrimination or compelling reasons to apply. Plus, she had been working on similar cases for clients, so the process seemed daunting. However, Reinhard suggested waiting until she had held her Green Card for 20 years, at which point she could apply based on "gesteigertes Einbürgerungsbedürfnis" (increased need for naturalization).

Then, a change in German law opened a new path for her. With renewed optimism, Henriette decided to pursue U.S. citizenship.

Attorney Crystal McBride dove into research, finding the newly launched online submission process for naturalization (N-400). She guided Henriette through the preparation, ensuring everything was in order. The process moved faster than Henriette had anticipated. Before she knew it, she received her receipt notice, began studying for the citizenship exam, and soon passed with flying colors.

The moment she had been working toward for years arrived—the Oath Ceremony. On September 20, 2024, in Charlotte, North Carolina, Henriette proudly became a U.S. citizen. It was a surreal moment of pride, especially knowing that her American-born children now shared the same citizenship as their mother.

Her journey, though long and filled with challenges, is a testament to perseverance, patience, and the unwavering belief in building a future in a country that she now calls home.

Dathan D'Agostino, BridgehouseLaw LLP

NIL Licensing for College Athletes Brings a Revival in the Video Game Industry

In what has been deemed the “most anticipated sports video game in American history”, EA Sports College Football 25 made history when it premiered on July 19^th, 2024. Although EA Sports has been making college-sport-related video games since the 1990s, this new edition has more than just a roster update for fans’ favorite teams. For the first time, the college athletes depicted in the video game are being compensated for the use of their image – their name, image, and likeliness (NIL). This is due to new legislation that allows for college athletes to be compensated for the use of their NIL, as opposed to previous laws only allowing for professional athletes to be able to profit from their NIL.

While college athletes could not previously license out the use of their NIL, this did not stop video game companies, including EA Sports, from creating college-based football videogames with attempts at anonymity – instead of including athletes’ names in the game, players selected an athlete avatar to play based on a position on the field, and the number of the player (for example, Quarterback #10). However, college athletes quickly caught on to the fact that while these avatars were technically nameless, they shared specific qualities with the athletes themselves, including hair color, height, weight, jersey number, school of attendance, and athletic skill attributes) that made it clear that the video game companies had used everything but the athletes’ names. A UCLA college athlete led a class action lawsuit against the NCAA for profiting off of the image of athletes without compensation and won in 2014. Since then, there has been a complete stop to the use of athletes’ names in video games, disappointing gamers who appreciate the realism of playing as their favorite college athletes within a virtual college stadium.

That is until the Supreme Court announced in a unanimous decision that the NCAA refusing to allow college athletes to license their NIL violated antitrust law. With this new ruling, college athletes can profit off of their image after giving consent for that image to be used, which could prove to be incredibly lucrative. The highest-valued college athletes have NIL valuations upwards of $4.5 million, which presents unforeseen opportunities for revenue for college athletes and universities alike. However, it’s notable that while these valuations are high, EA Sports paid each athlete only $600 for the use of their NIL, in addition to a free copy of the video game (valued at $70).

While the new ruling certainly opens the door for new opportunities for college athletes to profit and for fans to engage in more realistic videogames, the uncertainties in the NIL negotiation process in determining “how much an athlete’s image is worth” are likely to remain as other video game companies begin to create their variations of interactive games. These games are likely to become more prevalent given the success of NCAA 25, bringing in over $200 million in revenue before the game was even officially released. However, with college athletes now legally able to take control of their own NIL, it seems that for now, the situation is a triple win; more opportunity for companies to create video games without the threat of legal action, more realistic gameplay for the consumers, and payment to the college athletes for the use of their NIL.

 

Mary-Kathryn Appanaitis, Law Clerk, BridgehouseLaw LLP, Charlotte, NC

image: EA 

Federal Trade Commission Act has issued a final rule called the “Non-Compete Clause Rule”

The US Federal Trade Commission under authority granted to it under the Federal Trade Commission Act has issued a final rule called the “Non-Compete Clause Rule” effective Wednesday, September 4, 2024.

In short, this rule prohibits covered employers from entering into, enforcing, or attempting to enforce POST-EMPLOYMENT non-compete agreements with workers, with a very limited exception for certain senior executives.

 

Who is considered a worker?

 

           Workers are employees, independent contractors, interns, externs, and volunteers.

 

Who is considered a senior executive under the rule?

 

A senior executive is a person who (1) is in a policy-making position with final policy-making authority (President, CEO, Officer of the Company, or equivalent position) AND (2) earns at least USD 151,164.00 annually. Current non-competes remain in effect and can be enforced for persons qualifying as senior executives.

 

Who is a covered employer?

 

           All employers within the FTC’s jurisdiction except certain banks, savings and loan associations, federal credit unions, Common Carriers, Air Carriers, certain persons covered under the Packards and Stockyards Act, and Non-profit organizations.

 

What are your responsibilities as a covered employer?

 

           1. Employers subject to this rule must notify all workers (current and former employees with existing non-competes) who are parties to non-compete agreements that non-compete agreements are prohibited as of September 4, 2024, and that any existing non-compete agreement cannot and will not be enforced. This notification must be in writing, either via paper, mail, email, or text. The FTC has provided guidance and language that meets the minimum verbiage requirements for the notification.

 

           2. The mandatory required notification must be sent before Wednesday, September 4, 2024.

 

What else do Employers need to know?

 

           The new rule does not invalidate any confidentiality, non-solicit, non-disparagement, or other restrictive clauses in current employment agreements.

 

If you have questions regarding your company’s current agreements, your current agreement, or the written notification requirement, please get in touch with BridgehouseLaw LLP at (980)219-5200. One of our attorneys will be happy to assist you.

Crystal McBridem, Attorney, BridgehouseLaw LLP, Charlotte

image: istock 

NFL Rookie Superstar May Want to Know When Term Sheets Are Binding

Marvin Harrison Jr. is a former Ohio State University wide receiver who was drafted 4^th overall in the 2024 NFL Draft by the Arizona Cardinals. “MHJ” is proclaimed by many to be among the greatest wide receiver prospects of all time. He earned the Biletnikoff Award this past year, awarded to the nation’s best college wide receiver. And it certainly does not hurt his stardom or merchandising potential that his father, Marvin Harrison Sr., is an NFL Hall of Fame wide receiver.

 

All of that to say – sports paraphernalia companies should be itching to sign MHJ to deals.

 

Earlier this month, May 2024, Fanatics informed the public that it wanted to do just that. However, instead of revealing lucrative and eye-popping terms, Fanatics sued MHJ and his LLC for claims including breach of contract, anticipatory repudiation, and tortious interference. The damages are likely in the range of millions of dollars.

 

The claims are rooted in MHJ’s alleged violation of a binding term sheet – sometimes labeled a letter of intent, agreement in principle, or memoranda of understanding. These documents outline the basic terms of an agreement and help parties streamline the completion of outstanding negotiable terms and conditions. While a term sheet, and even a “binding” term sheet, are often unenforceable agreements due to their nature of laying out terms and more so agreeing to agree, there are factors that may cause such a term sheet to become enforceable. Key considerations determinative of whether such a document is enforceable include, but are not limited to (1) whether the writing incorporates all essential terms of an agreement; and (2) whether there is offer, acceptance, consideration, intent to be bound, and all other requisite elements of a binding agreement. Term sheets will likely be non-binding where material terms are undecided or where the document expressly states a right to not be bound until a formal agreement is executed.

 

Fanatics is likely quite certain of its chances of success here, as Fanatics would probably prefer to avoid an ensuing, unintended narrative for future rookies to consider. Something, perhaps, along the lines of, “Don’t sign with Fanatics, they sue their players.”

 

The fallout of this lawsuit will likely affect how young sports stars, and perhaps many others, treat binding term sheets. Prospective signees may be further incentivized to agree in principle to only very loose and incomplete terms, firmly articulating a given terms sheet is not binding and remains subject to signing a more formal and complete agreement.

 

This case illustrates a lesson in factors that determine whether a term sheet may be binding, and it seems reasonable to expect a certain NFL rookie superstar to take note . . .

Cole Haaf, Attorney, BridgehouseLaw LLP, Charlotte, NC

Rideshare Drivers: Employees or Contractors?

On May 21, the California Supreme Court heard arguments that may determine the future of ridesharing in the state. Specifically, the Court is considering how rideshare drivers operating under Uber and Lyft should be compensated following the 2020 ballot measure known as Proposition 22.

The case is championed by the Service Employees International Union (SEIU) alongside four rideshare drivers who are challenging the constitutionality of Prop 22. The proposition was supported by nearly 60% of the state’s voters and effectively exempted app-based drivers from a state law that restricted the type of workers who could be classified as contractors rather than traditional employees. This is a critical distinction for workers and companies alike, as the classification determines whether a worker is entitled to overtime, benefits, minimum wage, and other protections that are not guaranteed to contractors. These considerations have dramatic effects on both the drivers’ ability to make a living and the companies’ bottom lines.

Prop 22 was heavily supported by app-based ridesharing companies who stated that without the measure, the increased compensation to drivers could make them reconsider whether they will continue operating within California. The terms of the passed proposition allow rideshare drivers to be classified as contractors, however only if the company meets certain compensation requirements. For example, the drivers must be paid at least 120% of the state’s minimum wage amount while passengers are in the car, and the drivers must also receive expense reimbursements and subsidies to pay for health insurance.

During oral arguments, the justices reminded the SEIU attorneys that the electorate and the legislature are required to share lawmaking powers under the state’s constitution. The justices further stated that if the legislature disagrees with the passing of Prop 22, lawmakers could choose to extend traditional employee benefits and protections to rideshare drivers anyway. However, lawyers from the SEIU pointed out that a provision within Prop 22 barring amendments would make this workaround difficult for lawmakers to accomplish.

California is not the only state dealing with the issue of how to classify rideshare drivers. The Minnesota legislature recently lowered the minimum wage amount that companies have to pay drivers. This decision followed threats from Uber and Lyft to stop providing services in Minneapolis after the city passed higher minimum wage requirements. Meanwhile, the Massachusetts Attorney General has initiated a lawsuit against Uber and Lyft alleging that the companies classified drivers as contractors to avoid having to abide by the state’s minimum wage and overtime laws.

Rulings from the California Supreme Court are usually issued within 90 days of oral arguments. So for now, sit back, buckle up, and consider tipping your driver!

Emiley Hatten, Law Clerk, BridgehouseLaw LLP, Charlotte

image: Freepik

New Copyright Laws Thanks to Spotify?

The music industry has always been on the frontline of change within the copyright realm. The fast-developing and ever-changing landscape has always been an issue to try and pinpoint the specific mechanism that should exist within the United States to protect this type of art. When trying to determine the protection a song receives, two different copyright points need to be included:

1.    As per section 102(a)(2) of the Copyright Act, musical works, including any accompanying words that include the lyrics, melodies, and harmonies are protected by themselves. This means that anything that can be fixed in writing (notes, lyrics, etc.) is protected by this section.

2.    As per section 102(a)(7) of the Copyright Act, sound recordings by themselves are protected. This means that the actual song that any person can listen to is protected in this regard. Generally speaking, the sound recordings are considered the “masters” of the songs.

To understand this more specifically, here are two examples:

1.    Dolly Parton in 1973 wrote and recorded the song “I Will Always Love You”. She, here, thus has the copyright over the song composition and the song recording that she produced. In 1992, with the film The Bodyguard, Whitney Houston released a cover version of the song. The song recording of Whitney, thus, is separate from the song composition and the original recording and is protected separately.

2.    Taylor Swift became the face of this separation when she started to re-record her original albums to get ownership of her recordings as she was only the owner of the songwriting portion of the songs as per the contract she signed when she was just starting. The “Taylor’s Version” albums have become massive hits for the singer and are solely owned by her.

With the development of different technologies, it has become more complicated to try and get the protection the copyright allows for these creations. Most recently, Spotify – the streaming giant – was sent a cease-and-desist letter from the National Music Publishers Association (hereinafter “NMPA”) and other songwriters’ groups over the newest video function and podcasts use of lyrics and the remix feature that enables subscribers to edit songs they like and, as a result, create a derivative work. The NMPA is accusing Spotify of copyright violations and should be paid for this type of use because they are using the lyrics – a separate copyrightable work – when using the recordings. Spotify has denied wrongdoing and has mentioned that they are a platform for licensed content and that they have a process for anyone to contact them if there is a belief that there is an unlicensed song.

This has gone a step even further as the NMPA has sent a letter to the leaders of the Judiciary Committee in the Senate and House of Representatives requesting a complete update on the Copyright Act on the topic of statutory license because according to them it “prevents private negotiations in a free market”. They mention that although the Music Modernization Act (MMA) has been very beneficial in certain updates based on the new landscape of the music business there are still changes that need to be done to protect songwriters.

It will certainly be interesting to see the position the House of Representatives and the Senate will take on this and whether there will be a new addendum to the Copyright Act in the near future.

Sources:

·     https://variety.com/2024/digital/news/spotify-copyright-violation-claims-lyrics-remixes-1236003575/

·     https://variety.com/2024/music/news/music-publishers-congress-overhaul-copyright-act-1236012128/

·     https://www.billboard.com/business/publishing/nmpa-copyright-act-overhaul-spotify-bundling-full-letter-congress-1235687539/

·     https://www.smoothradio.com/features/the-story-of/i-will-always-love-you-whitney-houston-facts-video/

·     https://www.today.com/popculture/music/taylors-version-meaning-swift-rerecording-albums-rcna98513

José Portabella Villela, Abogado, BridgehouseLaw LLP, Charlotte