Forfeitures-for-Competition (and other breached loyalty covenants)
>>> see also:U.S. state-by-state noncompete index
2020.02.27 Forfeitures for Competition: What Would Maryland Do? The 4th Circuit has issued a split-decision in Allegis vs. Jordan, with Maryland law being examined in detail with respect to the circumstances under which post-employment plan benefits may be forfeited and clawed-back when executives breach their non-competition and non-solicitation covenants. The dissent favored the executives, based on a long-standing Maryland Court of Appeals decision: Food Fair Stores v. Greeley (1972). The majority found Greeley to be distinguishable. As a result, Allegis succeeded not only in being released from making any further plan payments to the executives, but also in recouping the payments previously made to them.
In particular, the court explained that the disputed benefits "more closely resembled consideration for post-employment services [indirectly through obedience to the covenants] provided to Allegis than a coercive deferred benefit" from services while actively employed. The court found it significant that the executives --
Because the Allegis decision involves having a federal court draw nuances when interpreting Maryland law, it is not clear how a Maryland court would rule. There are, however, two main lessons from the decision. First, courts generally favor employers when they seek to enforce clearly written forfeiture-for-competition provisions, especially when executive-level employees have specifically agreed to the controlling terms and conditions. Second, employers should be careful --
2018.09.21 Executives Behaving Badly - Remedies for Wronged Employers. The fact pattern is not atypical: a senior executive allegedly misled his employer into paying him excessive bonuses. In the face of executive wrongdoing, employers typically pursue a variety of state law tort claims in order to recover their damages. For a sense of the possible claims, and their basic elements, see Northstar v. Alberto (E.D. VA, 7/31/2018). In that decision, a federal court in the Eastern District of Virginia held that --
2017.01.10 Top Hat Forfeiture Enforced for Executive's Refusal to Sign Non-Compete (WD Penn). As a general matter, employers win when they seek to enforce the unambiguous terms -- and forfeiture provisions - of their top hat and other executive-only ERISA plans. Good faith administration by the employer is ordinarily sufficient. Case in point: a Penn. district court upheld forfeiture of top hat benefits where an executive refused to sign a non-competition agreement that the underlying plan required as a condition for benefits. See Sikora v. UPMC (WD Penn, 1/10/2017) for a comprehensive discussion of federal decisions examining (1) the standard of review for litigation involving non-qualified plans, and (2) the circumstances under which courts will enforce forfeiture provisions under top hat plans.
Litigation re Executive Compensation
Conflicts of Law
U.S. STATE LAW
Stock Options Forfeitable due to Competition?
MI and NE:
MI and NE:
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