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Emerging Companies Insider

The Emerging Companies Insider blog focuses on recent and developing areas of the law affecting startup and emerging growth companies and their investors, including choice of entity, shareholders’ agreements, issuance of equity to employees, preparing for and executing a capital raise, exit strategies and the JOBS Act and its impact on how companies can and should raise capital from investors.

Recent Blog Posts

  • Supreme Court Agrees to Review Validity of Class Action Waivers in Arbitration Agreements Last week, the Supreme Court granted petitions for certioriari in Epic Systems Corp. v. Lewis, Ernst & Young v. Morris, and NLRB v. Murphy Oil USA.  All three cases involve clauses in arbitration agreements that require employees to waive their rights to pursue class and collective actions. In theory, the Supreme Court will resolve a split between federal circuits and determine if employees can be compelled to litigate claims individually rather than in a class or collective action. However, because Justice Scalia’s seat remains... More
  • Watch Manufacturer Avoids “Franchise” Designation The question of whether a relationship between a watch manufacturer, Swatch, and a watch shop operator amounts to a “franchise” was answered in the negative by the U.S. Court of Appeals for the Third Circuit in Philadelphia in Orologio v. Swatch Group (U.S.) Inc. Here, after Swatch terminated its relationship with the operator, the operator brought suit against Swatch under the New Jersey Franchise Practices Act (“NJFPA”) claiming that Swatch’s termination of the relationship violated the NJFPA for termination of... More
  • What Changes Can We Expect at the FDA Due to the 21st Century Cures Act? Patient-Focused Drug Development Additional information focusing on the patient’s experience while using an investigative drug will be included in 505b submissions.   Input on the experience will be derived from any person, including patients, family members and caregivers of patients, patient advocacy organizations, disease research foundations, researchers, and drug manufacturers. Methodologies to collect such information will be issued in a guidance from the FDA.   Clearly, the FDA will be seeking more input regarding the experience of the patients, other than the manufacturer... More
  • One Step Closer: US House Passes “HALOS Act” Legislation Clarifying VC Pitch Events are not “General Solicitation” On January 10, 2017, the U.S. House of Representatives passed a bill commonly known at the “HALOS Act”, which directs the Securities and Exchange Commission (SEC) to revise Regulation D.  Prior to the proposed amendment, Regulation D exempts certain offerings from SEC registration requirements but prohibits “general solicitation” with respect to such offerings.  The proposed amendment states that the prohibition shall not apply to events with specified kinds of sponsors — including “angel investor groups” unconnected to broker-dealers or investment advisers... More
  • PA Supreme Court Affirms Franchisors Do Not Employ their Franchisees’ Employees Is a franchisor liable as a “statutory employer” under Pennsylvania law if its franchisee fails to obtain workers’ compensation insurance?  The Pennsylvania Supreme Court recently answered “no” under the facts of Saladworks, LLC v. W.C.A.B. (Gaudioso). The decision is a victory for franchisor Saladworks on a narrow legal issue.  But it is a bigger win for the franchise model itself, which relies on the premise that a franchisor is not the employer of its franchisee’s employees. Copyright: halfpoint / 123RF Stock Photo In... More
  • Coming Attractions: Can You Surcharge? A very important case for the retail industry–and all franchisors and franchisees operating within it–will be argued before the United States Supreme Court on January 10, 2017. The case is Expressions Hair Design v. Schneiderman. The issue is credit card surcharges. The background is pretty simple. New York, nine other states, and Puerto Rico prohibit retailers from engaging in the practice of charging a surcharge when a customer uses a credit card. Importantly, the ten states involved are some of the... More
  • State Regulators Strike Back: Franchisees Reclassified as Employees While the changes coming to Our Nation’s Capital in 2017 likely mean the end of the fight over reclassifying franchisees as employees at the federal government level, a recent New York state case suggests that the battle will remain alive and well at the state level. The case, In re Baez, was decided by the New York Supreme Court, Appellate Division. The question presented by the case was whether the franchisor, Jani-Pro Cleaning  Systems (“Jani-Pro”) was the employer of two independent... More
  • Baring a Last Minute Reversal, Philly Soda Tax Coming on New Year’s Day Copyright: grahammoore999 / 123RF Stock Photo Following up on our blog posts on March 29 and July 7 of 2016 about the Philadelphia Beverage Tax on Sugar-Sweetened Beverages (the “PBT”), a challenge to that tax in the Court of Common Pleas of Philadelphia County has been defeated in a decision by Judge Glazer on December 19. The plaintiffs included beverage distributors, the American Beverage Association, the Pennsylvania Beverage Association, the Philadelphia Beverage Association and the Pennsylvania Food Merchants Association. The court... More
  • Are You Prepared? Major Changes Coming to U.S. Copyright Database Contributed by Mark G. McCreary & Kevin P. Dermody One of the major benefits of the Digital Millennium Copyright Act (DMCA) is that website owners can gain the protection of the DMCA’s safe harbor provisions by registering a DMCA agent with the U.S. Copyright Office. The safe harbor allows a copyright holder to notify a website operator that its protected material was uploaded to the website and is being infringed. That website owner can avoid liability by removing the copyright-infringing material from... More
  • Winners and Losers Under the 21st Century Cures Act This week, the Senate passed an expansive health bill known as the “21st Century Cures Act” after the bill received approval from the House earlier this year.  Due to its far-reaching effects in the healthcare and life science industries, among others, the bill was one of the more lobbied pieces of legislation in recent history.  President Obama is expected to sign the bill into law by the end of the year. Highlights of the bill include significant amounts earmarked for improving... More
  • Accelerating Start-ups by Deferring Taxes A recently passed House bill would permit certain start-up employees to defer taxes on stock options and restricted stock units (RSUs).  The proposed legislation aims to help emerging companies attract and retain talent by offering equity compensation on more attractive terms. Copyright: yupiramos / 123RF Stock Photo Cash-strapped start-ups often grant an ownership stake to employees to compensate for below-market wages.  This strategy also aligns incentives by giving employees a share of the company’s growth. However, current tax law makes such equity compensation... More
  • PA Legislature Authorizes Payroll Cards On November 4, 2016, Pennsylvania Governor Tom Wolf signed into law Senate Bill 1265.  Act 161 of 2016 (the “Act”) amends the Pennsylvania Wage Payment and Collection Law (the “WPCL”) and allows employers to pay wages and other compensation via the use of debit cards commonly called payroll cards. This Act, which takes effect on May 3, 2017, supersedes previous case law which held that the use of payroll cards violated the WPCL. Copyright: nyo09 / 123RF Stock Photo There are some... More
  • December 1, 2016 Overtime Rules Blocked by Judge On November 22, Judge Mazzant of the U.S. District Court for the Eastern District of Texas issued a nationwide injunction against the Department of Labor blocking its Final Overtime Rule, which was set to go into effect on December 1, 2016. The Final Rule would have more than doubled the Fair Labor Standards Act (FLSA) salary test for executive, administrative, and professional employees from $455 per week to $921 per week. White-collar employees earning below the $921 threshold would have... More
  • Where Do Non-Compete Agreements Go from Here? Not long before the election, the Obama Administration issued a “call to action” statement in which it urged state governments to restrict many of the non-compete agreements that employers often impose on employees. The statement calls on state legislatures to adopt certain “best practices” for regulating employee non-compete agreements, including: banning non-compete clauses for certain categories of workers, such as workers under a certain wage threshold, workers in certain occupations that promote public health and safety, and workers who are unlikely to... More
  • Should You Tolerate Hold-Over Contracts? A recent ruling by the Nebraska Supreme court reminds franchisors to properly renew their Franchise Agreements with their franchisees as they may lack contractual protection, and in the least clarity, as to their rights in the case of hold-over franchise arrangements.  Though in the franchise context, much of the lessons learned from this case may apply to any contractual arrangement where the parties have not tended to the proper renewal of the contract.  I find this happens fairly frequently for... More