Baker's Choice: March 2008

Rick's back in town after his annual pilgrimage to Scottsdale (don't ask his opinion on the "new" Giants), so we're ready to announce our spring line-up of executive comp and employment links. On the roster: the fate of San Francisco's health care ordinance, golden parachutes, more on Reid v. Google. Plus, the ninth (!) edition of my book. Happy Tax Season!

• San Francisco tries to fix the health care system -- results not in yet. With health care one of the main topics of the presidential election campaign, San Francisco's 2006 Health Care Security Ordinance -- mandating that employers with more than twenty employees provide health insurance (or health savings plans) to those employees -- is a matter of national interest. As everyone expected, the city was immediately sued in federal district court to prevent the ordinance from going into effect, and the plaintiffs won at that level (i.e., the judge said the ordinance was invalid). And as everyone expected, the city immediately appealed the district court's decision to the Ninth Circuit. But then, to everyone's surprise, on January 9 the Ninth Circuit wrote a robust statement staying the district court's decision pending its own review of the case (oral argument scheduled for April 17). Given the language of the statement, the San Francisco ordinance may well end up being the first one of its kind in the country to be upheld by a federal court. We suspect that means it (and others like it) will be headed to the U.S. Supreme Court. More about Golden Gate Restaurant Association v. City and County of San Francisco, including what it means for those contemplating alternative health care solutions, in our article on this interesting turn of events.
  


• IRS finds new ways to deflate a golden parachute: Like a small child, the IRS just hates to lose our attention. The minute the furor over the Section 409A amendments finally died down, the IRS reversed its long-held position on Section 162(m) deductibility of certain accelerated payments made to top public company execs on involuntary termination (including resignation for good reason). The IRS slipped the change into a January private letter ruling, then followed up in February with Rev. Rul. 2008-13. The details of the new interpretation have been well reported, but the takeaway for our clients: any severance agreement that includes acceleration of non-equity performance-based comp (such as target bonuses) will need to be carefully drafted to avoid problems under Section 162(m).
  


• Just in case he wasn't old enough when they fired him. . . .In our last e-letter, we reviewed Reid v. Google, Inc., the age discrimination case in which the (then) 54 year-old Reid claimed to have been fired from Google for, among other things, being "too old to matter." At that time, a California Court of Appeals had reinstated the case and sent it back to trial on the merits after reversing the lower court's summary judgment decision in favor of Google. Unfortunately for Mr. Reid, the case is now before the California Supreme Court on an evidentiary issue that Rick thinks is of great interest to litigators but little interest to anyone else. Rick highlights the issues for you here -- and we can't help but wonder just how old Mr. Reid will be by the time his case is finally resolved!
  


• And now the news. . . Good news: the Rule 144 amendments proposed by the SEC last July (among other things, shortening the one year holding period to 6 months) went final on December 7, 2007. . . effective January 28, 2008 the Family and Medical Leave Act has been amended to broaden the leave rights of families of military personnel. . . No news: we're still awaiting the California Supreme Court decision in Edwards v. Arthur Andersen LLP (regarding post-employment noncompetes). . . L&B News: if you're in Chicago next week, stop by the NCEO/Beyster Institute Annual Conference to say hi. I'll be speaking about trends in equity compensation on April 3 . . the ninth edition of The Stock Options Book, replete with 409A updates, is now available online.