From the US House of Representative’s passage of a new tax bill to the Centers for Medicare & Medicaid’s issuance of new spousal impoverishment standards and the Department of Labor’s decision not to apply its 2024 final rule on worker classification, we have recently seen significant developments in estate planning, elder and special needs law, and business law.

To ensure that you stay informed of these legal changes, we have highlighted some noteworthy developments and analyzed how they may impact your estate planning, elder law, and business law practice.

Estate Planning

House of Representatives Passes Tax Bill That Would Permanently Increase Gift and Estate Tax Exemption Amount

H.R. 1, 119th Cong. (2025)

On May 22, 2025, the House of Representatives passed H.R. 1, referred to as the One Big Beautiful Bill Act. If enacted, beginning in 2026, it would permanently increase the baseline estate and gift tax exemption to $15 million, indexed for inflation. The 2017 Tax Cuts and Jobs Act, which, among other things, temporarily increased the gift and estate tax exemption to $10 million per person (adjusted for inflation; $13.99 in 2025), is scheduled to expire at the end of 2025. Absent congressional action, exemption amounts will sunset and return to the baseline exemption of $5 million (adjusted for inflation).

Takeaways: If the bill passes without modification, the permanent increase in the exemption amount will eliminate the current urgency for clients to use the higher exemption amount before the scheduled 2026 sunset. WealthCounsel will continue to monitor this evolving situation. 

Estate Tax Closing Letter Fee Reduced

Estate Tax Closing Letter User Fee Update, 90 Fed. Reg. 21439 (May 20, 2025) (to be codified at 26 C.F.R. pt. 300)

On May 20, 2025, the Internal Revenue Service (IRS) released an interim final and proposed rule reducing the user fee from $67 to $56 for authorized persons—a decedent’s estate or other person properly authorized under Internal Revenue Code (I.R.C.) § 6103—who request an estate tax closing letter, i.e., IRS Letter 627. An estate tax closing letter informs the authorized person of the acceptance of the estate tax return and other important information, such as the amount of the net estate tax, the state death tax credit or deduction, and any generation-skipping transfer (GST) tax for which the estate is liable. It aids the executor in dividing and distributing the assets of the estate without incurring personal liability for unpaid estate taxes in making the distributions.

Takeaways: According to the IRS, if the estate tax closing letter request was received before May 21, 2025, the user fee is $67, but the user fee is $56 if the request is received on or after May 21, 2025. Those interested in submitting comments are requested to do so by July 21, 2025. The IRS will continue to offer account transcripts at no charge as an alternative to an estate tax  closing letter. 

Tax Court Finds $300,000 Bequest to Spouse Not Terminable Interest Property and Allows Marital Deduction but Denies Marital Deduction for $2,000,000 Bequest for Failure to Make a QTIP Election

Estate of Griffin v. Comm’r, T.C.M. (RIA) 2025-47 (May 19, 2025)

Martin Griffin created a revocable trust called the Martin W. Griffin Trust in 2012 and executed a second amendment to the revocable trust agreement in 2018. He created the MMC Irrevocable Trust on the same date that the second amendment was executed. The second amendment directed the trustee of the revocable trust to distribute $2 million from the revocable trust to the trustee of the irrevocable trust to be held for the benefit of his wife, Maria Creel, and make monthly distributions to her of a reasonable amount not exceeding $9,000. In addition, the second amendment provided that the trustee of the revocable trust should distribute $300,000 to the trustee of the irrevocable trust to be held as a living expense reserve for Maria, distributed to her in the amount of $60,000 per year ($5,000 monthly) plus earnings on such amount for up to 60 months from the time of the initial funding of the bequest. Undistributed amounts of the $300,000 bequest were to be paid to Maria’s estate at her death.

Martin passed away in 2019, survived by Maria. At his death, Martin resided in Kentucky. Christopher Griffin, the executor of Martin’s estate, also lived in Kentucky. In October 2020, a Form 706, United States Estate (and Generation- Skipping Transfer) Tax Return, was filed on behalf of the estate. Schedule M, Bequests, etc., to Surviving Spouse, listed a specific bequest of $2.3 million to Maria but did not list any property from the estate as qualified terminal interest property (QTIP). In 2023, the IRS sent a Notice of Deficiency to Martin’s estate, which determined that the $2 million and the $300,000 bequests were includible in Martin’s estate and that the estate owed an estate tax deficiency of $1,047,398 and an accuracy-related penalty of $184,000. The estate filed a petition in the US Tax Court, and the parties filed cross-motions for summary judgment.

The Tax Court noted that the value of property passing from a decedent to their spouse is generally deductible in computing the decedent’s taxable estate but is included in the estate of the surviving spouse. However, under the terminable interest rule, the marital deduction is not allowed for terminable interest property passing from the decedent to the surviving spouse. A terminable interest is one that passes to the surviving spouse but will end on the lapse of time or on the occurrence (e.g., death of the surviving spouse) or nonoccurrence of an event or contingency. Under the terminable interest rule, the marital deduction is not allowed if (1) the interest passing to the spouse is a terminable interest, (2) an interest in the property passes from the decedent to someone other than the surviving spouse for less than full and adequate consideration, and (3) after the termination or failure of the interest passing to the surviving spouse, a third party will possess or enjoy the property. 

The court further noted that the QTIP regime is an exception to the terminable interest rule that permits application of the marital deduction even if the surviving spouse only receives an income interest and has no control over the ultimate disposition of the property (i.e., at the death of the surviving spouse, the property passes to beneficiaries designated by the first spouse to die) as long as the surviving spouse includes the QTIP in their estate at death or pays gift tax on it during their lifetime. There are three requirements for terminable interest property to qualify as QTIP: (1) the property must pass from the decedent, (2) the surviving spouse must have a qualifying income interest for their lifetime, and (3) the executor for the estate of the first spouse to die must affirmatively elect to designate the property as QTIP in a Form 706.

The parties agreed that the $2 million bequest was a terminable interest and did not qualify for the marital deduction unless it was QTIP. The court found that the estate did not make a valid QTIP election on Form 706 for the $2 million and that as a result, it was not QTIP; thus the bequest did not qualify for the marital deduction and was includible in Martin’s estate rather than Maria’s. 

With respect to the $300,000 bequest, the IRS asserted that it was a terminable interest under state law and thus did not qualify for the marital deduction. The estate argued that it was not a terminable interest and did qualify for the marital deduction. The parties agreed that Kentucky law governed the dispute and that whether the $300,000 bequest was a terminable interest depended upon whether the requirement that any undistributed amount of the $300,000 would be paid to Maria’s estate was void under Kentucky law. The estate contended that the provision created an estate trust separate from the irrevocable trust and that the $300,000 would qualify for the marital deduction. The IRS asserted that the $300,000 bequest would not pass to Maria’s estate because the second amendment’s provision governing distribution of any unused portion after Maria’s death conflicted with the terms of the irrevocable trust. Allowing the second amendment’s provision to control would effectively modify the irrevocable trust—an action the IRS argued was impermissible and should be deemed invalid.

The court determined that the question of whether the $300,000 would go to Maria’s estate at her death depended on whether the bequest created a new trust separate from the irrevocable trust. Under Kentucky law, a trust is created if (1) the settlor has capacity to create it, (2) the settlor indicates an intent to create it, (3) the trust has a definite beneficiary, (4) the trustee has duties to perform, and (5) the same person is not the sole trustee and sole beneficiary. The court held that the only requirement disputed by the parties was the second requirement: whether the $300,000 bequest in the second amendment indicated an intention to create a new trust. The court agreed with the estate that the bequest did indicate an intention to create a new trust based on the use of the phrase living expense reserve because the distribution provision was a clear distinction from the provisions of the existing irrevocable trust. Thus, the court found that Martin intended to create a separate trust with the $300,000 bequest that was to be administered by the same trustee who administered the irrevocable trust. 

As a result, the court granted the IRS’s motion in part and denied the estate’s motion in part. It found that the $2 million bequest was not QTIP because of the estate’s failure to make an affirmative QTIP election on a Form 706 and thus was includible in Martin’s estate. The court granted the estate’s motion in part and denied the IRS’s motion in part, holding that the $300,000 would pass to Maria’s estate upon her death and thus was not a terminable interest. As a result, the bequest qualified for the marital deduction and was not includible in Martin’s estate.

Takeaways: Trust and estate attorneys should exercise care in drafting amendments to trusts and may instead consider restating a trust to incorporate a desired change to avoid creating confusion that could lead to litigation. In addition, it is important to timely make all elections, such as QTIP elections, to avoid penalties and minimize estate taxes. Keep in mind that state law, which governs whether a trust is indeed created, plays a significant role in determining the nature of property interests for federal estate tax purposes.

IRS Grants Extension of Time for Executor to Provide Notice of Intent to Sever Marital Trust into Separate QTIP and Non-QTIP Trusts

I.R.S. Priv. Ltr. Rul. 2025-17-008 (Apr. 25, 2025)

In Private Letter Ruling 2025-17-008, the IRS responded to a request for an extension of time to provide notice of an intention to sever a marital trust into QTIP and non-QTIP trusts. 

A decedent and spouse created a revocable trust providing that the trust would be divided into two trusts, a survivor’s trust and a marital trust, at the death of the first spouse to die. The trustee of the marital trust was required to distribute all of the marital trust’s income to the spouse. After the funds of the survivor’s trust were exhausted, the trustee was permitted to distribute principal of the marital trust for the spouse’s support, maintenance, medical expenses, and emergencies. No distributions from the marital trust were permitted to anyone other than the spouse during their lifetime.

The decedent’s child was the executor of the estate and successor trustee. He hired an attorney to advise him and prepare a Form 706 (United States Estate (and Generation-Skipping Transfer) Tax Return) for the estate. The executor timely filed the Form 706, and on Schedule M, elected to treat a certain dollar amount of the marital trust as QTIP. No QTIP election was made for the remaining balance of the marital trust. The attorney did not inform or advise him to sever the marital trust into separate QTIP and non-QTIP trusts to reflect the partial QTIP election as set forth in Treas. Reg. § 20.2056(b)-7(b)(2)(ii)(A) or to inform the IRS of his intent to sever it. The marital trust was not severed prior to the due date for Form 706, and the executor did not signify an intent to sever it in the return as required under § 20.2056(b)-7(b)(2)(ii)(A). The executor requested an extension of time under Treas. Reg. § 301.9100-3, which provides that an extension will be granted if the taxpayer provides evidence that they acted reasonably and in good faith and that granting the relief will not prejudice the interests of the government. The taxpayer is deemed to have acted reasonably and in good faith if they reasonably relied on a qualified tax professional and the professional failed to advise the taxpayer to make an election. The IRS concluded that the requirements of § 301.9100-3 had been satisfied and granted the estate a 120-day extension to provide notice of the intent to divide the marital trust into separate QTIP and non-QTIP trusts.

Takeaways: Taxpayers may not unconditionally rely upon qualified tax professionals but must review their returns and attachments to identify obvious errors. Attorneys preparing Forms 706 must ensure that they understand the rules for severing QTIP trusts and making QTIP elections and should take care to advise their clients accordingly. In this case, the IRS determined that the executor’s reliance on the attorney hired to advise and prepare the Form 706, who failed to inform or advise the executor to sever the marital trust into separate QTIP and non-QTIP trusts or signify an intention to sever it, was reasonable and in good faith.

Elder Law and Special Needs Law

SSI Properly Reduced Where Recipient Failed to Establish That Income Provided by Family Members Was Bona Fide Loan

Midwood v. Comm’r of Soc. Sec., No. 2:24-cv-1668, 2025 WL 1285729 (E.D. Cal. May 2, 2025)

Jamie Midwood was determined to be eligible for Supplemental Security Income (SSI) in July 2021. In July 2022, the Social Security Administration sent her notice that it had recalculated and reduced her SSI from April 2016 to August 2021 based on income she had received in the form of assistance with food and expenses for shelter. Jamie requested reconsideration of the reduction, asserting that she had promised to repay her parents for assistance they provided her for food and shelter while she waited to become eligible for SSI. However, the administrative law judge (ALJ) issued an unfavorable decision finding that she had received in-kind support and maintenance (ISM) that was not subject to an exception from income because it was not a bona fide loan. The Appeals Council denied her request for review, and she filed an action in federal district court. Jamie and the Commissioner of Social Security filed cross-motions for summary judgment.

The court noted that SSI is available to disabled individuals who do not have an eligible spouse and whose income, including support and maintenance furnished in cash or in kind, does not exceed a specified threshold. Their income does not include an advance the SSI applicant or recipient received as a bona fide loan because it is subject to repayment. There is no loan if money or an in-kind advance is given and accepted based on any other understanding other than that the recipient will repay it. The court looked to the Social Security Administration’s Program Operations Manual System (POMS), which stated that, to qualify as a bona fide loan that is not treated as income for purposes of SSI eligibility, a loan must (1) be enforceable under state law, (2) have been in effect at the time of the transaction, (3) acknowledge the obligation to repay, and (4) establish a plan for repayment, and (5) the loan’s repayment must be feasible.

Jamie asserted that the ALJ applied an improper legal standard under state law in determining whether there was a valid loan contract, asserting that under section 1913 of the California Civil Code, an enforceable loan contract requires only an agreement between the parties to repay a loan. The court rejected her argument, holding that the ALJ’s decision was not based on a finding that the loan was unenforceable under state law. Rather, the ALJ determined that two of the other POMS criteria—an unconditional obligation to repay and a plan for repayment—had not been met. Therefore, the court held that because Jamie had not established that the ALJ relied on a legally erroneous standard, her motion must be denied on that point.

The court also rejected Jamie’s argument that the ALJ’s findings regarding the application of the bona fide loan standard to the facts of the case were not supported by substantial evidence. At her hearing, Jamie testified that she had verbally agreed to repay her father for rent if she received SSI, but she did not know if he kept records of the amount of rent she owed him, and no repayment schedule was established. When Jamie’s father died, her brother and mother calculated the amount of rent owed and reaffirmed that she would repay it if she received SSI. In addition, Jamie’s mother testified that there was a general agreement that Jamie would repay the rent if she was able to in the future. The court found that substantial evidence supported the ALJ’s finding that there was no unconditional repayment obligation and thus, no bona fide loan. The court denied Jamie’s motion for summary judgment, granted the Commissioner’s cross-motion for summary judgment, and ordered the clerk of court to enter judgment for the Commissioner.

Takeaways: Special needs law attorneys should encourage clients who have or plan to apply for SSI to take necessary steps to formalize loan agreements and ensure that they meet the POMS requirements to qualify as bona fide loans that can be excepted from income for purposes of determining their eligibility and amount of SSI. 

Petition to Modify Guardianship of Elderly Family Member Denied Where Evidence Did Not Establish That Current Guardian Was Unsuitable

In re Guardianship of VA, No. 372952, 2025 WL 1077108  (Mich. Ct. App. Apr. 9, 2025)

VA, a 95-year-old woman diagnosed with dementia, lived in an assisted living facility in Michigan. One of her daughters, Karen Bosford, also in Michigan, petitioned the court to be named as VA’s guardian. Karen had previously been named as VA’s attorney-in-fact pursuant to a durable power of attorney and as her patient advocate pursuant to a durable power of attorney for healthcare.

In 2023, one of VA’s other daughters, Kari Rankin, along with Kari’s husband, moved VA to their home in South Carolina for three months without providing notice to Karen. The Rankins restricted VA’s communication with other family members and transferred some of VA’s funds to a bank account they managed. They had VA execute a new power of attorney, but they also filed a competing petition to be appointed as VA’s guardian, which required an admission that VA lacked capacity, contradicting the assertion that she had the capacity to execute the new power of attorney.

Karen filed an action to obtain VA’s return to Michigan, and in January 2024, VA was returned to Michigan pursuant to a court order. Due to the expense of the legal action, VA could no longer afford the assisted living facility where she formerly lived, and Karen found a facility for her that accepted Medicaid. Karen and the Rankins then stipulated that VA was incapacitated under Michigan law and that Karen should be appointed as VA’s guardian, resolving the parties’ competing petitions. The court subsequently appointed Karen as VA’s guardian.

In June 2024, the Rankins proposed that VA move to South Carolina to live with them instead of in the Medicaid facility. When unsuccessful in convincing other family members to agree, they filed a petition to modify VA’s guardianship. The probate court denied their petition, finding that the Rankins had presented insufficient evidence to demonstrate that Karen was not a suitable guardian. They appealed the probate court’s decision.

On appeal, the Michigan Court of Appeals noted that when the parties resolved their competing petitions, they stipulated Karen’s willingness and suitability to be appointed as VA’s guardian under Michigan law. In addition, Karen, as VA’s attorney-in-fact and patient advocate under the previously executed powers of attorney, was given priority over the Rankins for appointment as VA’s guardian pursuant to Michigan law. The court found that the Rankins had not presented evidence supporting their assertion that Karen was no longer suitable or willing to serve as VA’s guardian. Instead, the evidence established that Karen had enrolled VA in Medicaid, found an extended care facility to provide the care VA required, and allowed free communication between VA and family members. The court rejected the Rankins’ argument that Karen had inappropriately depleted VA’s funds by incurring the legal fees to obtain VA’s return to Michigan, finding that the Rankins had caused the depletion of VA’s funds by improperly moving her to South Carolina. The court affirmed the probate court’s decision, finding that it had not abused its discretion in denying the Rankins’ petition to modify VA’s guardianship because they had not established by a preponderance of the evidence that Karen was unsuitable as her guardian.

Takeaways: The court noted that Karen had diligently carried out her duties as VA’s guardian despite familial conflict, including ensuring that VA received 24-hour-per-day care in a new Medicaid facility. In addition, the court noted that Karen’s payment of legal fees to secure VA’s return to Michigan had been necessitated by the Rankins’ unauthorized removal of VA to South Carolina. Further, VA’s guardian ad litem recommended against modification of VA’s guardianship and instead recommended that Karen continue as VA’s guardian. The Rankins’ evidence demonstrated only their preference for VA to live with them in South Carolina and did not support a finding that Karen was an unsuitable guardian.  Karen is an example of exemplary duty to her fiduciary responsibilities. 

Updated Spousal Impoverishment Standards Released

On May 28, 2025, the Centers for Medicare & Medicaid Services released two updated spousal impoverishment standards, specifically the community spouse’s minimum monthly maintenance needs allowance (MMMNA) and monthly housing allowance, which are annually adjusted in accordance with changes to the federal poverty level. Effective July 1, 2025, the MMMNA will increase from $2,555 to $2,643.75, with Alaska’s and Hawaii’s MMMNA increasing to $3,303.75 and $3,040, respectively. Also effective July 1, 2025, the community spouse monthly housing allowance will increase from $766.50 to $793.13, with Alaska’s and Hawaii’s housing allowance increasing to $991.13 and $912.00, respectively.

Takeaways: Each state determines its own MMMNA figures, which must remain within the thresholds set by the federal figures. The state-specific numbers are generally updated annually in Elder Docx before the end of July. 

Business Law

DOL Will Not Apply 2024 Employer or Independent Contractor Classification Final Rule

On May 1, 2025, the Department of Labor (DOL) issued a field assistance bulletin stating that it will no longer apply its 2024 final rule, Employee or Independent Contractor Classification Under the Fair Labor Standards Act, in determining whether a worker is a contractor or employee under the Fair Labor Standards Act (FLSA, codified at 29 U.S.C. §§ 201–219). The 2024 final rule applied a totality-of-the circumstances test and has generally been viewed as making classification as an employee, rather than as an independent contractor, easier than the now-rescinded rule in effect during the first Trump administration. 

The DOL will instead enforce the FLSA in accordance with Fact Sheet #13 (July 2008) and Opinion Letter FLSA2025-2. Fact Sheet # 13 provides that under the FLSA, an employee, as a matter of economic reality, follows the usual path of an employee and is dependent on the business they serve, in contrast to someone who is engaged in their own business. It further provides the following factors that are significant in determining whether a worker is an employee or an independent contractor:

1. the extent to which the services rendered are an integral part of the principal’s business 
2. the permanency of the relationship 
3. the amount of the alleged contractor’s investment in facilities and equipment 
4. the nature and degree of control by the principal 
5. the alleged contractor’s opportunities for profit and loss 
6. the amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor 
7. the degree of independent business organization and operation

U.S. Dep’t of Labor, Wage & Hour Div., Fact Sheet #13: Employment Relationship Under the Fair Labor Standards Act (FLSA) (July 2008).

Takeaways: The 2024 final rule remains in effect for private litigants. The DOL indicated in the field assistance bulletin that it is reconsidering the 2024 final rule, including whether to rescind it. In light of the change, businesses should reevaluate their relationships with current workers to ensure that they will be classified properly under the new final rule. Note that some states have their own worker classification rules. In the event that federal and state rules conflict, the FLSA provides that employers must comply with the standard that provides the highest degree of protection to workers. 29 U.S.C. § 218. Please see our February 2024 monthly recap for information about the 2024 final rule and our June 2021 monthly recap for a discussion of the now-rescinded Trump administration rule.

FTC Defers Compliance Deadline for Parts of Negative Option Rule

Negative Option Rule, 89 Fed. Reg. 90476 (Oct. 16, 2024) (to be codified at 16 C.F.R. pt. 425) 

On October 16, 2024, the Federal Trade Commission (FTC) issued a final “click-to-cancel” rule generally effective January 14, 2025, that is applicable to negative option arrangements whereby a company automatically charges a consumer for a product or service unless the consumer affirmatively acts to cancel the arrangement. Initially, regulated entities were given until May 14, 2025, to comply with certain provisions deemed to entail a greater level of difficulty for compliance: § 425.4 (Important information), § 425.5 (Consent), and § 425.6 (Simple cancellation (“Click to Cancel”). On May 9, the FTC issued a statement further deferring the compliance deadline for those sections until July 14, 2025.

Takeaways: Regulated entities must be fully compliant with the click-to-cancel rule starting July 14, 2025. For additional information about the rule, please see our November 2024 monthly update.

US Copyright Office Issues Latest Report on Generative AI

In May 2025, the US Copyright Office issued a prepublication version of Copyright and Artificial Intelligence, Part 3: Generative AI Training. The report addresses when the creation and deployment of a generative artificial intelligence (AI) system may amount to prima facie infringement of the Copyright Act, 17 U.S.C. §§ 101–1332, and how the fair use doctrine may apply in the development of artificial intelligence (AI) when copying may occur that implicates the copyright owners’ exclusive rights. The fair use doctrine, 1 U.S.C. § 107, provides that the fair use of copyrighted work is not an infringement of copyright and specifies four nonexclusive factors that should be considered in ascertaining whether a particular use is fair. The Copyright Office indicated that, depending upon the facts and circumstances of each case, some uses of copyrighted works for generative AI training will qualify as fair use and others will not: For example, use for noncommercial research that does not enable portions of the copyrighted works to be reproduced in outputs is more likely to be found to be a fair use, but “copying of expressive works from pirate sources in order to generate unrestricted content that competes in the marketplace” is less likely to be a fair use, especially if licensing is reasonably available. U.S. Copyright Off., Copyright and Artificial Intelligence, Part 3: Generative AI Training 74 (2025). Further, the report addresses forms of licensing that may work best for AI companies and copyright owners, particularly voluntary licensing.

Takeaways: The Copyright Office recommended that, at least for now, the voluntary licensing market for AI training, which has already grown substantially, should be allowed to develop without additional government intervention. For additional coverage of the US Copyright Office’s reports regarding generative AI and relevant case law, please see our April 2023, March 2025, and April 2025 monthly recaps. 

New Developments Regarding Enforceability of Noncompetition Covenants

Lawson v. Spirit AeroSystems, 135 F.4th 1186 (10th Cir. 2025); N. Am. Fire Ultimate Holdings, LP v. Doorly, No. 2024-0023, 2025 WL 736624 (Del. Ch. Mar. 7, 2025); Fla. H.B. 1219 (2025)

Two significant new cases and a new bill passed in Florida address the enforceability of noncompetition covenants:

In Lawson v. Spirit AeroSystems, 135 F.4th 1186 (10th Cir. 2025), the Tenth Circuit Court of Appeals found that, under Kansas law, a noncompetition condition precedent to a former chief executive officer of a company receiving long-term incentive stock awards was enforceable upon his breach without a review for reasonableness. The court affirmed the lower court’s ruling that the noncompetition condition precedent to the receipt of future benefits is merely an incentive to refrain from competing and thus was distinguishable from a noncompetition provision that imposes a penalty upon a party in the event of a breach, which does require a reasonableness review.

In North American Fire Ultimate Holdings, LP v. Doorly, No. 2024-0023, 2025 WL 736624 (Del. Ch. Mar. 7, 2025), the court found that under Delaware law, when an employee executed an incentive unit agreement containing a noncompetition covenant providing for the automatic forfeiture of the units if the employee breached the covenant, the employer could not enforce the covenants after the units were forfeited due to the employee’s breach. The noncompetition covenant was unenforceable because the employer eliminated the sole consideration for the noncompetition covenant when it declared that the employee forfeited the units due to his breach.

Florida’s H.B. 1219, entitled the Florida Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act, was passed in April 2025. Governor Ron DeSantis has not yet signed the bill, but if it takes effect, it would create a presumption of enforceability for garden leave agreements that provide that (1) the employer and employee agree to no more than four years of advance notice before terminating the relationship, (2) the employee will not resign prior to the end of the notice period, and (3) the employer will continue to pay the employee’s salary for the notice period. In addition, it would create a presumption of enforceability for certain noncompete agreements not exceeding a duration of four years. However, the law would apply only to workers who earn more than twice the annual mean wage in the county in which the business is located, or if the business is located outside of Florida, where the worker lives, and it does not apply to healthcare practitioners.

Takeaways: The law addressing the enforceability of noncompetition covenants has been dynamic over the past several years. Multiple states have enacted restrictions on noncompete agreements, and a few—California (Cal. Bus. and Prof. Code §§ 16600, 16600.1), Minnesota (Minn. Stat. § 181.987), North Dakota (N.D. Cen. Code § 9-08-06), and Oklahoma (15 Okla. Stat. § 219A)— have enacted statutes completely banning noncompete clauses in the employment context. However, Kansas recently passed  Kan. S.B. 241, an employer-friendly statute that identifies circumstances in which nonsolicitation agreements are presumed to be enforceable (see our May 2025 monthly recap), similar to the presumptions of enforceability that would be created by Florida’s bill if it becomes effective.