Foley Hoag LLP

SUMMARY

We know that the recent financial crisis and related economic downturn unfortunately are causing many employers to consider ways to reduce operational expenses, including through workforce restructuring and layoffs. We offer a few preliminary considerations: any such reduction-in-force (RIF) must be carefully planned and executed both to minimize exposure to liability under various employment laws and to mitigate negative effects on employee morale and operations. The following are some issues for employers to consider as they grapple with whether and how to implement a layoff.

Questions Include:

• Is a Layoff Necessary?
• Voluntary or Involuntary Program?
• Develop Uniform Selection Criteria
• Conduct a Layoff Analysis
• Is Advance Notice Required
• Severance and ERISA
• Asking for a Release
• Don't Forget Immigration Implications
• Don't Lose Sight of Termination Basics

SUMMARY

Chapter 151B, the Massachusetts anti-discrimination statute, does not apply to small employers, meaning those with fewer than six employees. However, last Friday, the Massachusetts Supreme Judicial Court (“SJC”) held that an employee may nonetheless sue a small employer for discrimination under the Massachusetts Equal Rights Act. The decision has potential ramifications for all employers -- large or small -- because it suggests that a plaintiff has a claim for discrimination under the Massachusetts Equal Rights Act whenever Chapter 151B does not apply, such as discrimination claims brought by non-employees.

SUMMARY

Included in this Issue:

• A Market Perspective
  
• Selected New England "Series A" Round Transactions
  Commentary from Bruce Kinn
  
• Terms of Selected New England Series A Rounds 2008
  Commentary from Mark Haddad
  
• The Activity Level Summary: New England Series A and First Round Transactions by Industry
  
• Size of New England 2008 Year to Date Series A and First Round Transactions by Industry
  Commentary from Paul Sweeney

SUMMARY

Last year, in the wake of the TJ Maxx data security breach, Massachusetts enacted a data security law intended to protect residents from identity theft. The law provides that businesses must provide prompt notice of security breaches relating to personal information. “Personal information” means a person’s name together with either his or her Social Security Number, driver’s license number, state identification number, financial account number, credit card number or debit card number. Because all employers hold their employees’ Social Security numbers, the law applies to all employers in Massachusetts, not just those businesses that collect customer information, such as retailers. 

SUMMARY

Last week, the Massachusetts Division of Health Care Finance & Policy issued new regulations defining what is “a fair and reasonable” contribution by an employer towards health insurance under the Massachusetts Health Care Reform Law. Under that law, the state is permitted to assess an annual per-employee fee called the Fair Share Contribution (FSC) against non-contributing employers with 11 or more full-time equivalent employees. The fee can be as much as $295 per employee. To avoid the fee, the law requires an employer to offer a group health insurance plan and to make a “fair and reasonable” premium contribution towards that insurance. The new regulations make this test more stringent in order to increase the number of employers who are subject to the FSC.

SUMMARY

Foley Hoag LLP’s interdisciplinary team counsels and protects the interests of its clients facing new realities, challenges and risks framed by today’s tumultuous economic and market conditions. By maintaining an active and engaged dialogue with our clients during this period of economic distress, our lawyers are better able to adapt to the changing legal needs of clients affected in the short term. More importantly, our immersion in their businesses and industries enables our lawyers to provide sound, strategic counsel to protect our clients’ interests in the longer term. The Economic Crisis Team delivers forward-thinking advice, focusing on long-standing core, integrated strengths of the firm.

Topics include:

• Financial investigations, enforcement proceedings and litigation
• Federal and state securities regulation
• Deal-making, corporate finance and investment restructuring
• Bankruptcy, corporate reorganization and financial disputes

SUMMARY

Yesterday, President Bush signed into law the ADA Amendments Act of 2008, which expands the protections of the Americans with Disabilities Act (the “ADA”). The purpose of the new law is to overturn two decisions of the United States Supreme Court -- Sutton v. United Air Lines, Inc. and Toyota Motor Manufacturing, Kentucky, Inc. v. Williams -- in order to broaden the scope of who is disabled under the ADA.

SUMMARY

Yesterday, President Bush signed into law the ADA Amendments Act of 2008, which expands the protections of the Americans with Disabilities Act (the “ADA”). The purpose of the new law is to overturn two decisions of the United States Supreme Court -- Sutton v. United Air Lines, Inc. and Toyota Motor Manufacturing, Kentucky, Inc. v. Williams -- in order to broaden the scope of who is disabled under the ADA.

SUMMARY

Section 409A is an extremely broad law that covers many arrangements not generally considered deferred compensation, such as stock options, bonus plans, and severance and change in control agreements. In general, 409A governs any arrangement where an employee or consultant has a vested right to compensation in one year that will be paid in a later year, unless the arrangement fits into one of the exemptions to 409A. Arrangements subject to 409A must comply with strict rules as to the time and form of payment, and it is very difficult to make changes to an arrangement once it is in place. Any deferred compensation arrangement that does not comply with 409A will subject the employee or consultant to income tax liability at the time that the right to payment vests (even if there is no right to receive payment at that time), together with a 20% penalty tax on the deferred amount. (continues)

SUMMARY

Three years ago, the Massachusetts Supreme Judicial Court held in Modern Continental/Obayashi v. Massachusetts Commission Against Discrimination that an employer may be held liable under Massachusetts state law for discrimination committed by persons who are not its employees. The Massachusetts Appeals Court recently held that the converse is also true: an employer may be held liable for the discriminatory acts of its employees against employees of another employer.

SUMMARY

Included in this Issue:

• A Market Perspective

  Ham Lord, Managing Director, Launchpad Ventures

  Angel financing is more than just seed round financing for future venture capital deals. In fact, angels fund 10 to 20 times more companies than venture firms do on an annual basis. This is because many angel deals will never need the type of large financing ($10M+) that is typical of most venture deals.

• Structuring a Seed Stage Investment

  David A. Broadwin, Partner, Foley Hoag LLP

  Many of the entrepreneurs who walk through our doors at the EEC are at the seed/angel stage and are looking for those kinds of investments as well as advice around how to structure the investments so as to (a) fund the early needs of the business and (b) not create barriers to a larger investment later in the life of the business.

SUMMARY

The Massachusetts Health Care Reform Law permits the state to assess an annual per-employee fee called the Fair Share Contribution (FSC) against non-contributing employers with 11 or more full-time equivalent employees. The fee can be as much as $295 per employee. To avoid the fee, the law requires an employer to offer a group health insurance plan and to make a “fair and reasonable” premium contribution towards that insurance.

SUMMARY

We recognize that many Massachusetts- and New England-based companies have employees in California, and therefore wanted to make you aware of a recent decision from California’s Supreme Court holding that noncompetition agreements are invalid under California law, even when they are carefully drafted to prohibit only certain competitive activity.

SUMMARY

In a decision that will have far reaching implications for drug and medical device development, the Court of Appeals for the Federal Circuit held yesterday that the Hatch-Waxman safe harbor of 35 U.S.C. § 271(e)(1) is inapplicable to patented research tools that are not themselves subject to the FDA review process. While the decision is good news for the providers of research tools such as drug screening assays, it will make drug and medical device development in the United States costlier and more risky.

SUMMARY

Implementation of the Electronic System of Travel Authorization

The Department of Homeland Security (DHS) has announced the implementation of the Electronic System for Travel Authorization (ESTA), which will be used to apply for travel to the United States under the Visa Waiver Program (VWP). To apply for travel authorization to the United States, VWP travelers will access the ESTA web-based system and complete an application online. The application will consist of the biographical and eligibility information currently required on the I-94 paper form, and will be used to determine traveler eligibility and to assess any law enforcement and/or security risks posed by a VWP traveler. DHS is recommending that VWP travelers obtain an ESTA approval as soon as possible, and no later than 72 hours prior to departing to the United States. However, ESTA has been designed to accommodate last minute and emergency travel as well.

(continues)...

SUMMARY

U.S. Citizenship and Immigration Services (USCIS) has reinstituted Premium Processing on a limited basis for certain employment-based immigrant I-140 Preference Petitions. USCIS will accept Form 1-907, Request for Premium Processing Service, for I-140 Petitions filed for alien Beneficiaries who meet all of the following specific criteria: (continues ...)

SUMMARY

Understanding Medicare coverage and payment policy is critical to the successful launch of any new life sciences technology. Foley Hoag’s Medicare Coverage & Payment Practice provides regulatory and legislative advice to a broad array of leading life sciences companies, including:

• global pharmaceutical and biotechnology firms,
• trade associations,
• venture capital and investment funds,
• patient associations and advocacy groups, and
• early-stage companies.

SUMMARY

Included in this Issue:

• A Market Perspective: Foster Hinshaw on 'B' Rounds - Opportunity in 'Gloom and Doom'

  In 2002, during the valley of the tech bubble burst, one of the most respected VC’s in the tech community said to me, "It’s all about survival, survival, survival – I don’t know if we will ever recover". Notwithstanding, the resiliency of our tech community proved its intrinsic value to the economy and there were some nice IPO’s and exits from companies that were incubating during the bubble years (including FAST, EqualLogic and Netezza). Today the news is similar: (a) zero IPOs in Q2 2008; (b) the financial sector is in a major, albeit predictably cyclical, reset; and worse (c) another 1970’s style energy crisis is on us. (continues...)

• Selected New England "Series B" and Later Round Transactions
• Terms of New England Series B and Later Rounds
• The Activity Level Summary

SUMMARY

In Kentucky Retirement Systems v. EEOC, the Supreme Court held that Kentucky’s pension and disability system did not discriminate against older workers in violation of the Age Discrimination in Employment Act (ADEA). Under Kentucky’s system, pension benefits are calculated based upon years of service. Employees are eligible for normal retirement benefits after 20 years of service or after the employee works 5 years and has reached the age of 55. The system also provides benefits to employees who become disabled before becoming eligible for normal retirement benefits. A disabled employee is treated as if he or she had 20 years of service or 5 years of service, if the employee is already 55 years old. The purpose of this rule is to treat disabled workers as if they are retirement eligible upon becoming disabled.

SUMMARY

Last week, the U.S. Supreme Court held in Metropolitan Life Insurance Co. v. Glenn, that a conflict of interest exists if an entity such as an employer or an insurance company evaluates claims for benefits under an employee benefit plan and also pays out those benefits from its own pocket. This conflict does not disqualify entities from occupying this dual role, however the dual role will be considered as a factor in determining whether the plan administrator abused its discretion in denying benefits. The decision is significant because it affects the plan administrator’s discretionary authority to determine eligibility for benefits and to construe the terms of the plan. Employers now need to worry about such a conflict whenever they make determinations about whether employees are eligible for benefits.