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2021 Was a Record-Breaking Year for M&A – How Does 2022 Compare?

Posted: April 11th, 2022

By: Vincent Costa, Esq. email, Marc Saracino, Esq. email

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2021 was a record-breaking year for M&A deals. Global deal value rose to an unprecedented $5 trillion, smashing the previous record of $4 trillion set in 2007. In the United States alone, deal value records rose to $2.6 trillion, doubling the deal value of 2020.

Given that new records were set in the United States and all over the world in 2021, demand for M&A deals is clearly on the rise and many business owners and private equity firms are racing to find undervalued targets in 2022.

You may have already heard about Microsoft’s recent plans to acquire Activision Blizzard, one of the largest video game companies in the United States, for $68.7 billion, and that’s not all that’s swirling in the M&A-sphere in the first half of 2022. Some potential M&A targets for 2022 include well-known companies such as the fitness giant, Peloton, Kohl’s, and a leader in clean technology, Petroteq Energy (with offers already presented to Kohl’s and Petroteq).

Let’s take a look at the some of the heavy hitters that are already making headlines in the following key sectors, as well some deals that are on deck:

Technology

Technology was a coveted industry for US and global M&A deals in 2021. According to the PwC Global M&A 2022 outlook, new market opportunities, tech convergence, and an abundance of capital are paving the way for deal-making opportunities across the technology sector in 2022.

Tech advancements led to significant industry growth in 2021, which means more M&A deals in 2022. PwC predicts hotspots in the areas of crypto and NFTs as emerging markets are established. Moreover, with the pandemic coming to an end, business owners will begin to seek opportunities for consolidation, which will lead to an insurgence of M&A deals in 2022.

CMM attorneys were at the forefront of the tech M&A wave in 2021, representing an artificial intelligence tech leader in a complex recapitalization and M&A transaction in which CMM helped negotiate the terms of a multimillion-dollar loan agreement.

As for how tech deals are already playing out, Microsoft’s acquisition of Activision Blizzard could be the biggest tech/entertainment M&A deal in 2022. Another hot M&A deal announced in Q1 is Sony’s plan to buy Bungie, a gaming company, for $3.6 billion. Citrix, the cloud computing and virtualization company, has reported that they are being acquired by private equity firms Vista Equity Partners and Evergreen Coast Capital for $16.5 billion.

Healthcare & Pharmaceuticals

Deals in this sector rose to $288.9 billion in the US with SPAC (Special Purpose Acquisition Company) mergers playing a strong role in driving activity. In their 2022 M&A outlook, PwC predicts healthcare services consolidation and re-sale to lead M&A deals within this sector. We will also likely see more cross-border expansion and consolidation of private clinic and specialist care providers.

Proving the trend predictions correct, CMM already successfully represented a New York vet practice in the multimillion-dollar sale of its business to a larger partnership focused on acquiring vet practices around the tri-state area.

According to Digital Health Business & Technology’s data, there have already been 65 M&A deals in the digital health sphere in the first quarter of 2022. Additionally, several healthcare companies have been named targets for 2022 such as Health Gorilla and Summus Global. 

Manufacturing & Aerospace

Within the manufacturing industry, PwC also predicts strong M&A activity in 2022 as companies target vertical integration and operational consolidations. Likewise, as air passenger numbers increase in 2022, M&A activity in the aerospace and defense industry will also increase.

CMM attorneys recently represented a leading manufacturer in the sale of its business, assets, and property, resulting in a multimillion-dollar transaction. The team also negotiated and closed a complex transaction in the aerospace field, selling a family-owned aerospace supplier’s business to a Connecticut-based private equity firm.

As for deals already happening in the first quarter of 2022, Frontier Airlines and Spirit Airlines, the two largest discount carriers in the United States, have announced a merger in a deal valued at $6.6 billion. Private flying is also growing more common, a trend already reflected in aerospace M&A with Vista Global Holding announcing their acquisition of the U.S. charter operator Jet Edge for an undisclosed amount.

CMM’s Most Recent M&A Deals

With the second quarter of 2022 underway, we already see 2022 M&A heating up. Curious to see what CMM has been up to recently in the M&A space?

View the firm’s recent M&A highlights here

The information contained in this article is provided for informational purposes only and is not and should not be construed as legal advice on any subject matter. The firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship.

Supreme Court Tetris: How Social Media and First Amendment Rights Fit Together

Posted: February 22nd, 2022

By: Joe Campolo, Esq. email

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Social media meets freedom of speech: a complicated topic I predicted would be debated among lawmakers more than 25 years ago when I first encountered Section 230 of the Communications Decency Act. Essentially, Section 230 shields internet service providers (and now – although they did not exist when the law was first passed – social media platforms) from legal liability for the content of what a user on its platform may post. This legislation was passed in 1996, and now, more than two decades later, Section 230 continues to be entangled in the web of freedom of speech online, the layers continuing to build as technology develops.

As the internet and social media grow in power, a recent case from Australia’s Supreme Court examines the role of free speech when it comes to social media platforms. And while not in the United States, in the end, a new precedent was set for media outlets being held liable for comments on their Facebook page. Let’s take a closer look.

Fairfax Media Publications Ltd v Dylan Voller; Nationwide News Pty Limited v Dylan Voller; Australian News Channel Pty Ltd v Dylan Voller

Across the globe in the land down under, Australian courts recently faced a case related to freedom of speech and social media. In this case, the Australian Broadcasting Corporation (ABC) had aired an investigative report about the mistreatment of a young man named Dylan Voller while he was in a youth detention center. Voller was a troubled youth in and out of juvenile detention since he was 11 years old for car theft, robbery, and assault. During his time at one of these correctional centers, footage of Voller in a restraining chair and wearing a spit hood was aired on an ABC TV program Four Corners. The footage led to an investigation into youth detention facilities. Media companies published additional stories about Voller’s life after this initial coverage and published links to their stories on their public Facebook pages.

In the comment sections of the media companies’ Facebook pages, many Facebook users who read the stories countered that Voller had indeed committed violent crimes and said that he beat a Salvation Army officer, causing him serious injury. Voller disputed the allegations and sued the three media companies involved for defamation, alleging that they were publishers of third-party Facebook comments. The media companies included Nationwide News, Fairfax Media Publications, and Australian News Channel.

The Supreme Court of New South Wales found in 2020 that the media companies could be considered publishers of comments left by third-party users on their public Facebook pages. The Court reasoned that the media companies had the capability to moderate and hide vulgar comments but chose not to do so. The High Court of Australia (the highest court in Australia) upheld this ruling in 2021, staring that the outlets that post links to their articles on social media are liable for comments that they invite by posting on social media platforms.

This decision is significant for media companies with public social media pages where there are often thousands of comments posted by others. This ruling has already inspired change all over the world with Facebook recently allowing publishers to switch off comments and encouraging teams to monitor their comments section more rigorously.

Indeed, the Australian government is now proposing a new bill directly in response to this decision that would hold media companies liable for defamatory comments. The only way to avoid liability would be to make sure trolls can be identified and disclosed to victims as well as any defamatory comments removed.

Bringing It Back Home

So what does this mean for the United States? It all comes back to Section 230 of the Communications Decency Act. While Facebook itself cannot currently be held liable for the content that users post on their platforms due to Section 230, perhaps the future will see media outlets held liable in the United States as well. Indeed, the COVID-19 pandemic has thrust this issue into the limelight as misinformation has spread rampantly through social media platforms. 

Several bills have already been introduced with the goal of addressing COVID-19 misinformation and stripping away social media platforms’ Section 230 liability shield. One such bill is the Health Misinformation Act. Introduced by Senator Klobuchar in late 2021, the bill seeks to amend Section 230 to hold social media outlets such as Facebook and Twitter liable for the promotion of health misinformation related to any existing public health emergency, such as the COVID-19 pandemic.

It remains to be seen if and when Section 230 will be amended, but the legislation is starting to garner more and more attention as social media and free speech issues clash. In the meantime, the United States should look at the Australian decision and the outrage at public health misinformation for what it is: a warning of what’s to come as the web of social media and First Amendment rights continues to tangle.

The information contained in this article is provided for informational purposes only and is not and should not be construed as legal advice on any subject matter. The firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship.

The First Amendment, Social Media, and Off-Campus Speech: SCOTUS Weighs In

Posted: February 9th, 2022

By: Joe Campolo, Esq. email

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What is going on in Pennsylvania? In November 2021, the Supreme Court of Pennsylvania affirmed the Commonwealth Court’s conclusion that a school district had improperly expelled a student, J.S., after J.S. had accused another student on social media of being a school shooter – outside of the school day and off school property. While the school district claimed that J.S.’s posts substantially disrupted the school environment, both the Commonwealth and Supreme Courts of Pennsylvania concluded that J.S.’s speech was protected under the First Amendment.

A few weeks later, in January 2022, the Commonwealth Court concluded that a Pennsylvania school district’s decision to expel a student, G.S., violated his constitutionally protected right to free speech. This expulsion resulted from the school district’s determination that G.S. posted a harassing and terroristic threat on the social media platform Snapchat in the form of violent song lyrics (“Everyone, I despise everyone! F*** you, eat sh*t, blackout, the world is a graveyard! All of you, I will f***ing kill off all of you! This is me, this is my, snap!”) that disrupted the school environment.

These cases came on the heels of another Pennsylvania case in which a school district suspended a student based on off-campus speech on social media. In this case, a cheerleader, B.L., essentially cursed out her high school on social media when she didn’t make the varsity team and was suspended from the junior varsity team as a direct result. Sound familiar? This case broke headlines last summer due to the perceived oddity of the Supreme Court weighing in on a cheerleader’s suspension. And while the case may seem utterly ridiculous at first blush, its impact on off-campus student speech remains important, especially as 2022 gets underway.

Tinker v. Des Moines Independent Community School District

To understand the First Amendment cheerleader case, Mahanoy Area School District v. B.L., it’s necessary to first address the 1969 landmark decision Tinker v. Des Moines.[1]

Tinker stemmed from a group of Des Moines public school students who wore black armbands to school to show their support for ending the Vietnam War. After the students were sent home for wearing the armbands, they sued the school district for violating their First Amendment rights. The District Court dismissed the case, holding that the school district’s actions were reasonable to uphold school discipline. The U.S. Court of Appeals for the Eighth Circuit affirmed.

When the case reached the Supreme Court, the Court decided that public schools could regulate student speech that “materially disrupts classwork or involves substantial disorder or invasion of the rights of others.” However, in their decision, the Supreme Court pointed out that students do not lose their First Amendment right to freedom of speech when they step onto school property. A school cannot take action to limit a student’s freedom of speech out of fear of possible disruption rather than any actual interference.

Since then, in Hazelwood v. Kuhlmeier[2] in 1988 and Morse v. Frederick[3] in 2007,the Supreme Court has held that student speech can be regulated when indecent speech is uttered on school grounds, promotes illegal drug use, or that others may reasonably perceive as “bearing the imprimatur of the school” such as in a school-sponsored newspaper. These instances of regulation combined with the ruling that schools can regulate speech that rises to disorder, such as in Tinker, create a set of characteristics that gives schools additional license to regulate speech that takes place off-campus.

Mahanoy Area School District v. B.L.[4]

The Supreme Court ultimately revisited the issue in the April 2021 “cheerleader case.” Pennsylvania high school student B.L. tried out for her high school’s varsity cheerleading team as a freshman. After learning that she made only the J.V. team, B.L. posted a Snapchat story while she was at a local store (not at school) with the caption: “F*** school f*** softball f*** cheer f*** everything.” After B.L.’s friends on Snapchat and members of the cheerleading team saw the post, the message spread to the coaches and school administration, and the school ultimately decided to suspend B.L. from cheerleading for the upcoming year.

B.L. and her parents subsequently filed suit against the school district in the Middle District of Pennsylvania. The District Court found in B.L.’s favor, finding that her speech was made outside of school and did not cause substantial disruption as outlined in Tinker. The Court ordered the school to reinstate B.L. to the J.V. team. On appeal, the Third Circuit[5] affirmed the District Court’s conclusion that the school district’s punishment violated B.L.’s First Amendment rights; however, the Third Circuit added that Tinker did not apply because schools cannot regulate student speech occurring off campus. The school district then filed a petition for certiorari with the Supreme Court, asking the Court to decide “[w]hether [Tinker]…applies to student speech that occurs off campus.”

When news of this case first broke, many people scratched their heads and wondered how a high school cheerleader’s case about being kicked off the team made it all the way to the Supreme Court. Well, the Supreme Court decided in 1969 in Tinker that schools can regulate on-campus speech if it involves substantial disorder. Now, with this case, the Supreme Court could have made history by addressing a public school’s involvement in regulating off-campus speech. (Not so frivolous, after all.)

In the Court’s June 2021 opinion written by Justice Breyer, the Court noted that three features of off-campus speech often block a school’s efforts to regulate it. These features include that (1) a school rarely stands in loco parentis (in place of a parent); (2) off-campus speech combined with on-campus speech means all the speech a student utters during the full 24-hour day; and (3) since America’s public schools are “the nurseries of democracy,” schools should have an interest in protecting a student’s unpopular expression.

So, what did the Supreme Court decide? The Court found that the school district violated B.L.’s First Amendment rights in suspending her from the team. However, while this decision affirmed the Third Circuit decision, the Supreme Court clarified that schools can regulate some off-campus speech including serious or severe bullying, threats, and breaches of school security devices including material maintained within school computers. Even with this clarification, the Supreme Court declined to set forth a list of what constitutes as off-campus speech or a test to identify it.

Justice Breyer wrote, “We hesitate to determine precisely which of many school-related off-campus activities belong on such a list. Neither do we now know how such a list might vary, depending upon a student’s age, the nature of the school’s off-campus activity, or the impact upon the school itself. Thus, we do not now set forth a broad, highly general First Amendment rule stating just what counts as ‘off campus’ speech and whether or how ordinary First Amendment standards must give way off campus to a school’s special interest to prevent substantial disruption of learning-related activities.” The Court clearly believes that context matters when determining what qualifies as off-campus speech.

Sure, context matters. For instance, consider G.S. from the opening of this article. Was he just posting song lyrics, or was he posting violent threats that he would later carry out? And was J.S. bullying a fellow classmate by suggesting the classmate looked like a school shooter, or was he pointing out legitimate harm that the fellow student posed? It’s a thorny subject, one the Supreme Court nimbly dodged by suggesting that each individual case should be considered “in context.”

One of my previous SCOTUS blogs examined how individual Supreme Court justices use their published opinions and dissents to ask for a case that would challenge a precedent set by a prior case. The Supreme Court used Mahanoy to do something similar by inviting other litigants to come forward with cases in which the Court would be able to set forth a First Amendment rule clarifying what counts as off-campus speech. The Court’s decision highlights how they really used this case as an example, leaving it to future cases “to decide where, when, and how” off-campus speech can be regulated by school districts in connection with the First Amendment.

As Justice Alito put it in his concurring opinion (and as cited in the Supreme Court of Pennsylvania Middle District in the J.S. case), “If today’s decision teaches any lesson, it must be that the regulation of many types of off-premises student speech raises serious First Amendment concerns, and school officials should proceed cautiously before venturing into this territory.”

Lessons Learned

Turns out that a case about a cheerleader being kicked off her team due to a vulgar social media outburst opened the door to much more. Mahanoy had the power to force the Supreme Court to decide on the constitutionality of a public school’s right to regulate off-campus student speech. And while the Court determined that the school had violated B.L.’s First Amendment rights, the Court did not use the case to set a precedent on student speech made off-campus…and via social media.

This isn’t the last time a case will force courts to consider and reconsider Tinker as it applies to off-campus student speech. And as technology develops, it’s only a matter of time before the Supreme Court confronts the intersection between off-campus school speech and social media again. As Pennsylvania’s courts have already seen, more school districts will be facing the crossroad between taking action against students and their off-campus speech while at the same time not violating their First Amendment rights.

And while some of the school districts discussed here seemed perhaps a bit too eager to suspend or expel their students, the fact remains that school districts are often stuck in a difficult spot when balancing their students’ First Amendment rights with legitimate concerns about protecting students from bullying and potential violence.


[1] Tinker v. Des Moines Sch. Dist., 393 US 503 (1969).

[2] Hazelwood Sch. Dist. v. Kuhlmeier, 484 U.S. 260 (1988).

[3] Morse v. Frederick, 551 U.S. 393 (2007).

[4] Mahanoy Area School District v. B. L., 594 U.S. ___ (2021).

[5] B.L. v. Mahanoy Area Sch. Dist., 964 F.3d 170 (3d Cir. 2020).

The information contained in this article is provided for informational purposes only and is not and should not be construed as legal advice on any subject matter. The firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship.

Mergers and Acquisitions Primer: Capital Gains vs. Ordinary Income Tax

Posted: February 1st, 2022

By: Christine Malafi, Esq. email

This article is for informational purposes only. For tax advice or guidance, please consult your accountant directly.

The most common forms of businesses include sole proprietorships, partnerships, C-corporations, and S-corporations. When a business entity is sold, there is a tax impact based on the capital gain and ordinary income realized from the sale. When a business owner sells their business, the capital gain is generally the difference between the adjusted basis and sale price, and the ratio of capital gain v. ordinary income tax depends on the type of business and assets being sold. Let’s take a look at some considerations for different entity types – enough to make conversations with your accountant slightly less taxing.

Sole Proprietorships

In a sole proprietorship, a sale is treated as if each asset is sold separately. Most assets trigger capital gains taxes, but the sale of some assets, such as inventory and unrealized receivables, are taxed at ordinary income tax rates. It’s important to check with a tax advisor regarding the types of assets that incur ordinary income tax compared to capital gains tax.

Partnerships

For a partnership, the sale of a partnership interest generally results in capital gain or loss treatment to the selling partner. However, any part of the gain or loss from unrealized receivables or inventory items is subject to ordinary income tax rates.

C-corporations

When selling a C-corporation, the choice between structuring the sale as a stock or asset sale impacts the taxes levied. Since C-corporations are not pass-through entities, the company pays taxes on its income, and all income from C-corporations is treated as ordinary income. This means that C-corporations are taxed at ordinary corporate income tax rates as compared to capital gains tax rates.

Stock sale proceeds are taxed at the capital gains rate (single taxation) while asset sale proceeds are taxed at ordinary corporate income rates and then again at the individual level upon distribution to the shareholders (double taxation).

Sellers should be aware that shareholders will be taxed at different rates depending upon the type of distributions that the shareholders receive. For instance, ordinary, non-qualified dividends mean ordinary income rates while qualified dividends that meet certain requirements could mean capital gains rate. This could also be taxed as a liquidating distribution which is taxed at capital gains rates (it may seem like the same thing as a qualified dividend, however, if the individual has capital losses, they could be used to offset such gains).

S-corporations

When selling an S-corporation, both a stock and asset sale generally result in single taxation at the shareholder level. The U.S. Tax Code allows buyers and sellers of the stock of an S-corporation to make a section 338(h)(10) election so that a qualified stock purchase will be treated as an asset purchase for federal income tax purposes.

This election is made jointly by the target shareholders and the purchasing corporation and treats the transaction as if it were an asset sale rather than a stock sale. Although the shareholders sell stock to the buyer, they pay taxes as if they sold the company’s assets.

Since the company itself does not pay taxes on the sale of its assets, the income from the sale of its assets passes through to the shareholders, who are responsible for paying taxes.

Asset sales are calculated individually for each asset. If the company that sells the assets is an S-corporation that was a C-corporation within the last five years, then the S-corporation’s asset sale could trigger corporate-level taxes.

Goodwill

The goodwill of a business, the value of the reputation of the business, is taxed as capital gain income.

Non-Compete Agreements

Most of the time, the owner of a business being sold will agree not to compete with the business being sold for a period of time (and perhaps within a certain geographic area), and a value/portion of the repurchase price will be allocated to this agreement, the value of which will be taxed as ordinary income.

When working with clients on tax issues stemming from the sale of their business, always work with a tax advisor to avoid IRS-related issues regarding capital gains vs. ordinary income taxes.

Thank you Alan R. Sasserath, CPA, MS for his contributions to this article.

The information contained in this article is provided for informational purposes only and is not and should not be construed as legal advice on any subject matter. The firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship.

What Employers Should Know About Employee Non-Compete Agreements in 2022

Posted: January 28th, 2022

By: Vincent Costa, Esq. email

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Employers want to know: will 2022 mark the end of the employee non-compete agreement?

Federal Efforts

In July 2021, President Biden signed an executive order aimed at promoting competition in the U.S. economy. The executive order encourages the Federal Trade Commission (FTC) to ban or limit employee non-compete agreements. According to the Biden administration, this FTC-directed crackdown on non-competes is meant to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” In his remarks last summer, President Biden noted that non-competes not only affect highly paid executives but also tend to unfairly target low-wage earners who should be free to take a better job if given the opportunity.

A non-compete agreement is essentially a contract wherein an employee agrees not to work for or otherwise engage with competing businesses, and/or not to use information learned during employment, when their current employment ends. The purpose of these types of agreements (also known as restrictive covenants) is to avoid competition for an agreed-upon period of time after an employee leaves.

Since the executive order in July 2021, the FTC has not initiated any action or rule regarding non-compete agreements. Part of this delay involves a vacancy on the FTC Committee, which is required to have five members. President Biden recently resubmitted a nomination for Georgetown University Law Professor Alvaro Bedoya, but until the vacancy is filled and a fifth Committee member confirmed, the FTC is unlikely to take concrete action on non-compete agreements.

Besides the Biden administration’s executive order, there have been other federal efforts to prohibit non-compete agreements. First introduced in January 2019, Congress’s Freedom to Compete Act amends the Fair Labor Standards Act of 1938 to prohibit an employer from enforcing or threatening to enforce any non-compete agreement in employment contracts with certain entry-level, lower wage workers. The Act is currently stalled in the Senate Health, Education, Labor and Pensions Committee. 

New York State Efforts

As the law currently stands in New York, non-compete agreements are generally permitted as long as they (1) are necessary to protect the employer’s legitimate business interests, (2) do not pose an undue hardship on the employee, (3) do not harm the public, and (4) are reasonable in time period and geographic scope.

Even if the federal rule change does not come to pass, the future of non-compete agreements in New York could soon change regardless. During her first State of the State address in January 2022, Governor Hochul pledged to ban non-compete agreements in New York State for workers making below the median wage in the state.

Several other states have already amended their own laws pertaining to non-compete agreements. Oregon and Illinois recently prohibited non-competes for certain employees earning less than a certain salary per year. The District of Columbia has completely banned employee non-compete agreements – a law that will go into effect on April 1, 2022.

While federal and state changes remain uncertain, it’s still important for employers to make sure that all agreements, including non-competes, are tailored to best meet their goals within the law’s limits. Please contact our labor and employment team for guidance.

The information contained in this article is provided for informational purposes only and is not and should not be construed as legal advice on any subject matter. The firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship.

2022 Changes to Minimum Wage and Overtime Exempt Salary Threshold

Posted: December 21st, 2021

By: Vincent Costa, Esq. email

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As the end of the year is approaching, it is important to remind New York State employers and employees of the increased minimum wages that affect both hourly and salaried employees.

For hourly, non-exempt workers, please see the below chart for basic hourly minimum wage increases that go into effect as of December 31, 2021:

Minimum Wage Increase

Geographic Location / Increase from 2021 2022 Rate
NYC $15.00 per hour (no change)
Nassau, Suffolk, & Westchester / +$1.00 per hr$15.00 per hour
Remainder of New York State / +$0.70 per hr $13.20 per hour

To the extent you or your workforce are paying basic minimum wage, it is important to make sure that the increased wages are reflected as of December 31, 2021.

Tip Credit

New York State also allows employers in certain industries to satisfy the minimum wage by combining a cash wage paid by the employer plus a credit for tips the employee receives from customers. The minimum hourly rates New York employers must pay most tipped employees go into effect as of December 31, 2021:

Service Employees

Geographic Location2022 Rate / Tip Credit
NYC$12.50 / $2.50
Nassau, Suffolk, & Westchester$12.50 / $2.50
Remainder of New York State$11.00 / $2.20

Food Service Employees

Geographic Location2022 Rate / Tip Credit
NYC$10.00 / $5.00
Nassau, Suffolk, & Westchester$10.00 / $5.00
Remainder of New York State$8.80 / $4.40

The “tip credit” rules can be difficult to follow, so it is important to track this information to ensure that tipped employees are receiving at least basic minimum wage, inclusive of tips, when calculating wages.

Increased Salary Threshold for Overtime Exemption

Finally, there are increases in the minimum salary threshold that must be met for exempt employees. As of December 31, 2021, the following minimum salaries must be paid for exempt administrative and executive employees:

Geographic Location2022 Salary Threshold
NYC$1,125.00 p/w ($58,500.00 annually)
Nassau, Suffolk, & Westchester$1,125.00 p/w ($58,500.00 annually)

With the upcoming changes, it is important to update policies and pay practices to stay in compliance.  If you have questions about minimum wage, overtime, or wage and hour exemptions, please contact us here or call (631) 738-9100.

The information contained in this article is provided for informational purposes only and is not and should not be construed as legal advice on any subject matter. The firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship.

Interests vs. Positions: Guidelines for “Getting to Yes” and Avoiding Negotiation Jiu-Jitsu

Posted: November 29th, 2021

By: Joe Campolo, Esq. email

There is a single orange sitting on a kitchen table and two sisters want it. What is the solution to appease both sisters?

  1. You can split the orange in half and give one half to each sister.
  2. The older sister can receive the whole orange.
  3. Flip a coin, and the winning sister will receive the whole orange.

Let’s say you split the orange in half to be fair to both sisters. Now, each sister has half of an orange. The younger sister proceeds to eat her half, but still feels hungry afterward. She throws the peel in the garbage. The older sister uses her half to zest the peel and make an orange cake. She has no use for the orange itself, so she throws it out. In the attempt to make it fair for the sisters by giving them each half of the orange, we’ve just committed a crucial negotiation error: we’ve assumed each sister’s position and incorrectly guessed their interests.

If we asked the older sister what she wanted to do with the orange, she might have said she needed the peel for her cake. If we asked the younger sister why she needed the orange, she might have replied that she wanted a snack. If we had asked these questions, we would have discovered a fourth solution to appease both sisters: one receives the peel, and one receives the fruit itself. A win-win scenario.

Of course, not every negotiation is this simple. However, understanding the difference between a person’s interests and positions could be the difference between negotiation success…or a miserable flop. A win-win negotiation is one in which both parties find alignment between their interests to create value for both sides. A negotiator’s position might be what they want (an orange), but their interest is why they want it (to eat it or use to make a cake).

In one of my previous negotiation blogs, I discussed how to utilize active listening as a powerful negotiation tool to gather information. Now, you can use active listening to gather information, and then determine a solution that aligns with the interests of both parties. Roger Fisher and William Ury outline this in their book Getting to Yes: Negotiating Agreement Without Giving In.

Here are some key considerations to find alignment:

Ask “why” and separate positions from interests

As in the orange example, don’t assume the opposing party’s position to be their underlying interest. Let’s consider an example that Fisher and Ury highlight in their book:

Two men disagree about a window: one wants it open, while the other one wants it closed. They go back and forth on leaving it open, closed, halfway shut, slightly ajar, and so on. Then a third person walks into the room and asks why the first man wants the window open. He replies that he wanted some fresh air. The third person asks the second man why he wants the window closed. He replies that he wanted to avoid the draft. The third person thinks for a moment and then proceeds to open a window in the next room, bringing in fresh air while avoiding the draft at the same time: a win-win.

When you find out the “why,” aka underlying interests, of the parties involved in a negotiation, it’s easier to find what both parties value to create a win-win scenario.

Ditch the “winner vs. loser” mentality

Too often, negotiations are viewed in black and white terms: there is a loser and a winner, and the name of the game is to “win.” Emotions run rampant, and the negotiation plays out with a “you vs. them” undercurrent. When this happens, try to frame issues as an open discussion in which the opposing party feels comfortable with you.

For example, if you’re trying to negotiate with the seller of a building you are buying, try not to get locked into a game of negotiation jiu-jitsu in which there’s a cycle of action and reaction. This happens when the seller names their price, you refuse and go lower, then they refuse and maintain their original price without budging. This mentality creates a situation where you as the buyer think the only way to win is to lock in the low price. Instead, try looking at the bigger picture and address the basic concerns of the opposing party.

Perhaps the building has issues with the roof or needs a structural upgrade. These discussions could be steered toward a suggestion for the current owner in which you imply that they are better off selling the building to you at a lower price than fixing it themselves. By framing it this way, both you and the current building owner could feel like winners.

Have your BATNA ready

We’ve talked about BATNA before on this blog. Fisher and Ury coined the term, which stands for “Best Alternative to a Negotiated Agreement.” Essentially, it’s a Plan B to provide negotiating power and serves as your bottom line in a negotiation. Having a BATNA at the ready helps you avoid doing negotiation jiu-jitsu in which you go back and forth with your counterpart until there is no solution to be found.

Let’s use the example of a car salesman and a would-be purchaser. If the person trying to buy a car wants to spend around $20,000 but would pay no more than $25,000, that means their BATNA is $25,000: the worst-case scenario that would still lead to a successful negotiation and outcome for both parties involved. For the salesman, their goal could be to sell a car for $27,000 but their BATNA could be $22,000. Therefore, if the salesman and the person interested in the car negotiate with their BATNAs in mind, the car could be sold for somewhere between $22,000 and $25,000.

In Summary…

Distinguishing what someone wants and why they want it, using win-win tactics, and having a BATNA prepared can help you avoid negotiation jiu-jitsu to gain a favorable outcome for both yourself and your negotiation counterpart. The next time you find yourself locked in a negotiation that seems like it has no end, try to dig deeper and uncover the underlying interests of the person you are negotiating with. You might find a hidden path to “getting to yes.”

NYSDOL Issues New Guidance on Adult Use Cannabis and the Workplace

Posted: November 8th, 2021

By: Arthur Yermash, Esq. email

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Can an employer take action against an employee for using cannabis on the job, prohibit cannabis possession in the workplace, or drug test for cannabis? These are just some of the many questions that employers and employees have been wondering since the legalization of adult-use marijuana in New York State on March 31 via the Marijuana Regulation and Taxation Act (MRTA).

CMM previously reported on the legalization of marijuana in April, taking a look at the new legislation and the workplace concerns of many employers and employees. Now, the New York State Department of Labor (NYSDOL) has issued an FAQ addressing some of these concerns with concrete answers for common situations and questions regarding adult-use cannabis and the workplace. Here are some highlights.

Discrimination

The FAQ reiterates that the MRTA prohibits employers from discriminating against employees based on the use of cannabis outside of the workplace and outside of work hours. However, it’s important to note that employees are only protected if they are over the age of 21 since the sale, use, or transportation of cannabis by individuals under the age of 21 is still illegal in New York State. The law does not explicitly require employers to report or fire employees under the age of 21 using cannabis on the job or discipline them in any way, but an employer can take action if they choose to.

An employer is also permitted to take action against an employee if an employer would be in violation of federal law, lose a federal contract or federal funding, or be unable to provide a safe and healthy workplace as required by state and federal workplace safety laws.

Articulable Symptoms of Impairment

Employers are also permitted to take employment action if an employee has “articulable symptoms” of cannabis impairment that impacts their performance on the job. The FAQ does not provide a list of what “articulable symptoms” of cannabis impairment are, instead describing the symptoms as “observable indications” that an employee’s performance has decreased or lessened. However, the FAQ cautions employers that articulable symptoms should not be confused with a disability protected by federal and state law.

Drug Testing of Employees

The FAQ states that employers are not permitted to test for cannabis unless federal or state law requires drug testing as a mandatory requirement of the position (for example: mandatory drug testing for drivers of commercial motor vehicles).

Also, when it comes to drug testing as a basis for an “articulable symptom” of impairment, a test for cannabis usage “cannot serve as a basis for an employer’s conclusion that an employee was impaired by the use of cannabis, since such tests do not currently demonstrate impairment.” Additionally, employers cannot fire employees for the smell of cannabis alone.

Use at Work or During Work Hours

The FAQ makes it clear that employers are allowed to prohibit cannabis during work hours including paid and unpaid breaks such as lunchtime or when an employee leaves the worksite and then returns. Employers can also prohibit employees from bringing cannabis onto the property including at an employee’s desk or in a locker. If an employee is caught using cannabis on the job, it’s the employer’s decision whether to permit the employee to keep working or to take employment action. For more guidance as the NYDOL continues to develop its Office of Cannabis Management (OCM) and the rules and regulations surrounding the adult-use industry, please contact our Cannabis Law practice area chair, CMM Partner Arthur Yermash.

The information contained in this article is provided for informational purposes only and is not and should not be construed as legal advice on any subject matter. The firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship.

Navigating COVID-Related Commercial Lease Disputes

Posted: October 13th, 2021

By: Patrick McCormick, Esq. email

While the COVID-19 pandemic has not been kind to many business owners who had to comply with temporary closures and declining revenues, commercial tenants have nevertheless faced an uphill battle in Court trying to walk away from their rent payment obligations. While tenants seeking to be completely absolved from paying rent have not met much success in the court system, we have assisted many clients in successfully renegotiating their lease terms without resorting to litigation. Here, a look at the arguments that haven’t worked in Court, illustrating that negotiation is often a better strategy for landlords and tenants alike.

The unprecedented pandemic led to many commercial landlords and tenants finding themselves in the position of landlord Bay Plaza Community Center and tenant Vistasite Eye Care.[1] This commercial landlord-tenant case stemmed from the tenant’s failure to pay rent from April 1, 2020 (the height of the pandemic) and after. Bay Plaza commenced a suit for back rent and moved for summary judgment. In opposition, Bronx Vistasite sought cover under the doctrines of impossibility and frustration of purpose to excuse its failure to pay rent. The tenant also argued that then-Governor Cuomo’s various orders relating to the pandemic devastated its business, and that the temporary closure of the business due to these orders constituted a “taking” under the lease.[2]

The Supreme Court, New York County (Bluth, J.) disagreed. In granting the landlord’s summary judgment motion, the Court found that Governor Cuomo’s executive orders did not constitute a taking since the case did not involve the government condemning the building or invoking the doctrine of eminent domain. Further, the Court found that the doctrines of frustration of purpose and impossibility “have no place in this case.” The Court contended that a temporary hardship like the one described by the defendant does not excuse a tenant’s obligation to pay rent and therefore ruled in favor of the landlord and plaintiff in the case: Bay Plaza Community Center.

A similar scenario played out between landlord 695 Fifth Owner and tenant Valentino U.S.A.[3]Here, luxury retail and fashion brand Valentino brought suit, contending that the lease of its four-story Valentino Fifth Avenue New York boutique should be terminated, and seeking a determination that Valentino should be entitled to an abatement of any rent claimed due.

The lease had clearly stated that Valentino would be able to operate as a boutique retail store for customers to view and sample their merchandise in a luxurious setting, in addition to experiencing high-quality service and amenities. The lease also provided that Valentino was required to be open for business and continuously operate under the Valentino brand. Because of the COVID-19 pandemic, including the restrictions, social-distancing measures, a lack of consumer confidence, and a prevailing fear of “non-essential” luxury retail boutiques, Valentino claimed that its business had been “substantially hindered, rendered impractical, unfeasible, and no longer workable.”

Given the continuing business restrictions even as the shutdown orders eased, Valentino argued that it would be impossible to operate its boutique as initially envisioned under the Lease. Thus, Valentino contended that their continued operation at that location was impracticable, infeasible, unworkable, and/or impossible. Valentino then gave notice to the defendant landlord that they would vacate and surrender the premises by December 31, 2020.

Despite Valentino’s complaint, the New York County Supreme Court (Borrok, J.) dismissed the case because pursuant to the lease, the parties expressly allocated the risk that Valentino would not be able to operate its business and that Valentino is therefore not forgiven from its performance, including its obligation to pay rent by virtue of a state law.

The fact that the COVID-19 pandemic was not specifically enumerated by the parties does not change the result because the lease was drafted broadly and did not provide that government regulations and events beyond the reasonable control of the party “delayed in performing work” shall excuse the payment of rent. Furthermore, Valentino’s general allegation that the landlord failed to maintain the premises lacks causation since it appears Valentino continued to operate in the store as of July 22, 2020.

The challenges faced by the tenants trying to get out of their obligations in these cases – as well as the challenges faced by the landlords spending time and money in Court – illustrate that commercial landlords and tenants are often better served by negotiating their disputes rather than litigating them. CMM has successfully negotiated countless commercial lease issues since the start of the pandemic.

Please contact us to discuss the path forward.


[1] Bay Plaza Community Ctr. v Bronx Vistasite Eyecare, Inc., 2021 NY Slip Op 31568(U) May 5, 2021 Supreme Court, New York County

[2] Under the COVID-19 Emergency Eviction and Foreclosure Act of 2020, a residential or commercial tenant has the option to submit a “hardship declaration” stating that due to COVID-19, they are unable to pay rent. In that case, a landlord would not be able to evict the tenant until the moratorium is lifted (former Governor Cuomo signed an extension of the act in May, extending the moratorium until August 31, 2021; however, in September, Governor Hochul signed into law a new moratorium which is in effect until January 15, 2022). In the Bay Plaza Community Ctr. v Bronx Vistasite Eyecare, Inc., no such declaration was filed.

[3] Valentino USA v. 693 Fifth Owner LLC, 70 Misc.3d 1218(A) (Sup. Ct. N.Y. Cnty. Jan 27, 2021)

The information contained in this article is provided for informational purposes only and is not and should not be construed as legal advice on any subject matter. The firm provides legal advice and other services only to persons or entities with which it has established an attorney-client relationship.