Non-Compete Trends

Non-Compete Agreements  that would also include non-solicitation agreements and trade secret protections have become part of the territory in employment and trade secret law for the past two decades or so as an aid to employers to protect sensitive information, investment in employee training and customer relationships, but what are the trends now that non-compete agreements have been around for a while.

The trends in recent years suggest the pendulum is swinging in favor of placing more limitations on the enforcement of non-compete agreements.  In response to more pervasive use of non-compete agreements including company policies which compel lower level employees to execute non-compete agreements state legislatures have introduced legislation of the past several years seeking to restrict non-compete agreements in response to their overuse.   Six states including Alabama, Hawaii, Illinois, New Mexico, Oregon, and Utah have passed legislation restricting or otherwise limiting the enforceability  of non-compete agreements.  Legislatures in seven other states have introduced but not passed legislation with the same focus including Idaho, Massachusetts, Missouri, Maryland, Michigan, New Jersey and Washington.  Likewise, there is a growing trend among courts with discretion on the issue of enforceability to curb what is being perceived as the overuse or abuse of non-compete agreements beyond their intended purposes.  Not so recently, California and Oklahoma have enacted laws to prohibit non-competes except in very limited circumstances and generally related to the sale of a business.

It will be up to employers in states where non-competes remain valid and enforceable to utilize the non-compete tools in a responsible manner consistent with their intended purposes and not to over utilize non-compete agreements, otherwise the trend toward limiting or eliminating enforcement of non-compete agreements will continue.  Consultation with qualified legal counsel is an effective way to determine the judicious use of non-competes tailored to your business or industry.

 

 

 

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Legal Checklist for Startups and Founders

Whether a first time startup, repeat founder onto the next venture or an operational business trying to get your “legal house” in order, a simple legal checklist is always helpful.  There are lots of samples available, but here is a practical one that can help guide you, and your lawyer, as you begin and hopefully prosper.

Entity Formation/Initial Set-up

–Form entity (corporation, LLC, partnership, etc.)

–Anticipated financing path (amount needed, growth anticipated, multiple financing rounds)

–Rights of Founder(s) (vesting?)

–Equity compensation for employees/consultants/advisors (vesting and repurchase rights)

–Involve CPA/tax advisor early

Financing

–Convertible Note

–Convertible Preferred Stock (Series Seed, Series A, B, C, etc.)

–Others (SAFE (Simple Agreement for Future Equity), Debt)

Practical Considerations of Financing

–How much will you need?

–Disclosure

–Finders

–Organization

Contracts/Agreements

–Employment/Independent Contractor/Advisor Agreements (work for hire)

–Non-Disclosure/Non-Circumvention/Non-Use

–Website Agreements (Terms of Use, Privacy Policy, Copyright Policy, Disclaimers)

Trademark

–Protect your house mark and brands

–Trademark Availability Assessment/Clearance

–Register domain names (Defensive registrations)

–Social Media, including online reputation management

Copyrights

–Personal ownership of IP versus ownership by entity (licensing issues)

Patents and Trade Secrets

–Assess opportunities and risks

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Local Municipal Approvals for Your Cannabis Business

Local Municipal Approvals for Your Cannabis Business

Local municipal approval of your proposed marijuana business may be one of the most difficult hurdles you face in launching your cannabis based business. Simply because your state has approved the cultivation and sale of either medical or recreational marijuana does not guarantee you can locate close to home.

Most states require local approvals in addition to any state licensing required for your marijuana based business. For instance, in Michigan the statutory scheme provides that those municipalities who do not adopt a local ordinance and opt in are considered to have opted out of allowing cannabis based businesses within their boundaries. If a municipality in Michigan opts in but does not expressly provide for local zoning of cannabis based businesses then it is limited to industrial or agricultural zones.

If you are interested in locating in a municipality that has not yet opted in you may be in a position where you must engage in some aggressive lobbying in order to obtain your approvals. Since marihuana remains illegal under federal law and retains a historical stigma among many, you can count on the fact that you will have opposition to your proposal. One of your keys to success is to gauge the political climate in advance and determine a strategy for how hard you may need to lobby to achieve your objectives. There is a significant body of literature available to educate these local officials and to dispel the many myths you are likely to encounter from your opposition and so use these up front to your advantage. Create a professional business plan to provide the municipality up front and consider recruiting a local resident who is well respected to become associated with your enterprise to improve your chances of convincing the municipality to opt in and participate in the Michigan Medical Marihuana Facilities Licensing Act (MMFLA). Finally, we’ve all heard the saying “money talks” and so you should be prepared to educate your local community on the potential tax revenue and fees it stands to generate from accepting a marijuana based enterprise within their borders which in Michigan and in most states can be substantial.

Once you have convinced the local municipality to opt in under the MMFLA you will likely still need approval under whatever version of a local marijuana ordinance is adopted and in addition zoning and planning approvals. It may be that a municipality will not require additional approvals under a land use or zoning ordinance but typically there will be an additional process to locate your marijuana enterprise to comply with local land use requirements which may be a special land use approval or other review by a local zoning or planning board or commission. Just because you have convinced the municipal governing body to cooperate does not mean you will have the same sentiments with members of zoning or planning boards who may need their own education and lobbying to get you by this next hurdle in finding an approved location in town for your business.

When it comes to obtaining permission to operate your marijuana based enterprise obtaining local approval may be your more challenging than any required state approval, and so preparation and planning along with education and diplomacy are keys to your success in winning local approval for your cannabis based business.

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