Minimum Competence - Daily Legal News Podcast
Minimum Competence
Legal News for 4/24 - Boeing Executives Retire With Huge Payouts, TikTok Divestiture Rolls on, and the FTC Bans Non-Compete Clauses (!!)

Legal News for 4/24 - Boeing Executives Retire With Huge Payouts, TikTok Divestiture Rolls on, and the FTC Bans Non-Compete Clauses (!!)

Boeing executives retiring with huge payouts amid quality concerns, TikTok's U.S. divestiture after a Senate bill, and the FTC's ban on non-compete clauses.
Battle of Ypres in World War I, pencil sketch

This Day in Legal History: WWI German Use of Chemical Weapons on Canadian Troops

On April 24, 1915, during the Second Battle of Ypres in World War I, German forces launched one of the first large-scale chemical weapon attacks in history. This attack targeted Canadian troops stationed near the town of Ypres in Belgium. The Germans released chlorine gas, which spread over the Allied trenches, causing widespread injury and death. This marked a grim milestone in the use of modern chemical warfare. 

Initially unprepared for such a method of warfare, the Allies soon developed their own chemical weapons and retaliatory tactics. British and French forces began incorporating gas warfare into their strategies, leading to an escalation of chemical weapon use on all sides. The devastating effects of gas attacks during World War I highlighted the urgent need for regulation. 

Efforts to ban the use of chemical weapons gained momentum after the war. One significant advocate for such measures was the International Committee of the Red Cross, which pushed for international agreements to prohibit chemical warfare. Their advocacy was crucial in shaping public and political opinion on the issue.

This advocacy culminated in the drafting of the Geneva Protocol in 1925. Formally known as the Protocol for the Prohibition of the Use in War of Asphyxiating, Poisonous or Other Gases, and of Bacteriological Methods of Warfare, this treaty marked a significant step forward in international law. Signed on June 17, 1925, the protocol was initially signed by 38 countries. 

The Protocol prohibited the use of asphyxiating, poisonous gases, and bacteriological methods of warfare in conflicts. Despite its limitations—such as not restricting the production, storage, or transfer of these weapons—it represented a key milestone in the efforts to control and eventually eliminate the use of chemical weapons in conflicts. This agreement laid the groundwork for later treaties that aimed to further control or eradicate weapons of mass destruction.

Boeing Co. executives Dave Calhoun and Stan Deal are set to retire with substantial compensation packages totaling approximately $45 million, despite their tenure overlapping with significant manufacturing issues in the 737 series jets. This substantial payout is possible because they are retiring rather than being dismissed, allowing them to avoid the company’s clawback policy which could have otherwise enabled Boeing to reclaim some of their earnings due to negligence or misconduct. Their strategic retirement comes at a time when Boeing is under heavy scrutiny following a safety incident involving a 737 Max 9, which led to a 32% drop in the company's share prices and raised serious quality concerns among stakeholders.

In response to these quality issues, Boeing shareholders are expected to approve new compensation guidelines that tie executive pay more closely to safety and operational performance. This policy change follows a leadership reshuffle initiated two months after the incident, signaling a concerted effort to pivot towards stringent safety measures. The new policy is a shift from the previous model, where operational performance was less significantly weighted compared to financial metrics.

The existing clawback policy at Boeing allows for the recovery of incentive-based compensation in cases of misconduct or negligence that impacts the company’s product safety. However, this policy requires significant misconduct for activation, which has not been pursued in the case of Calhoun and Deal according to the latest reports.

An element of law relevant here is the clawback provision under the Sarbanes-Oxley Act of 2002, enhanced by the Dodd-Frank Act of 2010. These laws were designed to improve corporate governance and accountability, especially in the wake of financial scandals. Under these regulations, public companies can reclaim executive compensation in the event of misconduct that leads to financial restatements or significant failures in corporate governance. This legislative framework is crucial for understanding how companies like Boeing create and enforce policies meant to ensure executive accountability, especially in situations impacting public safety and investor interests. 

Boeing Leaders’ Windfall Predates New Safety Goals Tied to Pay

Boeing to face questions on potential CEO candidates, Spirit talks | Reuters

The U.S. Senate has passed a bill requiring ByteDance, the Chinese owner of TikTok, to divest its U.S. operations within nine months or face a nationwide ban. President Joe Biden intends to sign the bill, initiating a 270-day period for ByteDance to complete the sale, potentially extendable by 90 days. If no sale occurs by then, the fate of TikTok could depend on the incoming U.S. president after the January 2025 inauguration.

Once the law is enacted, TikTok is expected to file a lawsuit challenging its constitutionality and seek a preliminary injunction to prevent the law's enforcement while the case is considered. This legal strategy mirrors TikTok's successful efforts in Montana, where it obtained an injunction against a state-level ban.

If TikTok secures a preliminary injunction, the sale could be delayed, allowing TikTok to continue operating in the U.S. during the legal proceedings. This situation recalls previous attempts by the Trump administration to ban TikTok and WeChat, which were thwarted by legal challenges, leading to Biden rescinding those orders in 2021.

The outcome of this legislation and TikTok's legal challenges could significantly impact its 170 million U.S. users, although no immediate changes to the app are expected until the divestment period concludes in early 2025.

Regarding international considerations, the divestment of TikTok might require approval from the Chinese government due to export controls on certain technologies, including TikTok's recommendation algorithm.

TikTok ban: What happens next after US Senate passed the bill? | Reuters

The Federal Trade Commission (FTC) has adopted a comprehensive ban on non-compete clauses, which are contractual agreements that limit employees’ ability to switch jobs within their industry. This decision, prompted by an executive order from President Biden three years ago, aims to mitigate the restrictions that roughly 20% of U.S. workers face due to such clauses. FTC Chair Lina Khan highlighted that this rule is about protecting economic liberty and dismissed claims that the FTC lacks the authority to enforce such regulations.

The new rule, passed with a 3-2 vote, will prohibit most new non-compete agreements, including those for senior executives. However, pre-existing agreements for high-earning executives in policymaking positions will remain unaffected. Lower-level employees' existing non-compete agreements will become void six months after the rule is implemented, potentially boosting U.S. earnings by over $400 billion in the next decade. This rule excludes employees of non-profits and franchises.

The rule has significant support from labor organizations like AFL-CIO and the Service Employees International Union, as well as Democratic senators and attorneys general from various states. The public largely favors the ban, as evidenced by the overwhelming majority of supportive comments received during the FTC's consultation period.

Opposition comes from business groups and some FTC members who argue that the rule is too broad and infringes on companies' rights to protect confidential information. Critics, including the U.S. Chamber of Commerce, argue that the FTC oversteps its regulatory bounds and threatens economic micromanagement. This has sparked promises of legal challenges against the rule's enforcement.

The key debate here is over the FTC's rulemaking authority. This aspect is crucial because it underpins the entire legal challenge likely to follow. Opponents argue the FTC lacks the explicit congressional authorization needed to enact such broad economic regulations, a point of contention that echoes recent Supreme Court skepticism towards perceived agency overreach. This legal argument could significantly influence the rule's future and its impact on American labor markets.

FTC Issues Worker Non-Compete Ban as Chamber Lawsuit Looms (2)

U.S. bans noncompete agreements for nearly all jobs

Changpeng Zhao, the founder of Binance, the world's largest cryptocurrency exchange, is facing a proposed sentence of 36 months in prison after pleading guilty to charges related to money laundering violations. U.S. prosecutors have made this recommendation due to the severity of Zhao's infractions, emphasizing that his actions knowingly violated U.S. laws. Although federal guidelines suggest a maximum of 18 months for such offenses, the prosecution argues for a longer sentence given the case's circumstances.

Zhao resigned as CEO of Binance in November following his and the company's admission of these violations, resulting in a staggering penalty of $4.32 billion for Binance. This penalty includes a $1.81 billion criminal fine and $2.51 billion in restitution. Additionally, Zhao has agreed to a personal fine of $50 million and to sever all ties with Binance, which he originally founded in 2017.

Binance itself was found to have failed in reporting over 100,000 transactions suspected of being linked to terrorist groups such as Hamas, al Qaeda, and ISIS. Furthermore, the platform was implicated in facilitating the sale of child sexual abuse materials and processing a significant amount of ransomware payments.

Zhao, who is out on a $175 million bond in the U.S., has consented to these penalties and has opted not to appeal any sentence up to 18 months. His sentencing is scheduled for April 30 in Seattle.

US seeks 36 months' jail for Binance founder Zhao | Reuters

Minimum Competence - Daily Legal News Podcast
Minimum Competence
The idea is that this podcast can accompany you on your commute home and will render you minimally competent on the major legal news stories of the day. The transcript is available in the form of a newsletter at