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Manufacturing Law Blog

Another Mandate for Manufacturers/Distributors: Conflict Minerals Disclosure

Posted in Best Practices, Supply Chain

In 2010, the U.S. Congress passed a law called the “Dodd-Frank Wall Street Reform and Consumer Protection Action of 2010 (the Dodd-Frank Act).”  The Dodd-Frank Act is generally known as the legislative response to the financial crisis that existed from 2007-2010 and it included widespread changes to the regulation of financial institutions.

So you might ask:  why are we writing about it in the Manufacturing Law Blog?

The answer is that “buried” in the Act itself is a mandate requiring the Securities and Exchange Commission (SEC) to develop a rule that impacts countless manufacturers/distributors in either a direct or indirect way.  That rule, which was adopted in 2012, requires all publicly traded companies to publicly disclose their use of “conflict minerals” that orginated in the Democratic Republic of the Congo or an adjoining country.  Examples of the “conflict minerals” are tantalum, tin, tungsten, and gold.

Does this Rule Impact Publicly Traded Companies?

YesAccording to the SEC, if a company files a report under the Exchange Act, it is required to disclose its use of conflict minerals if those minerals are “necessary to the functionality or production of a product” manufactured by those companies.  Click here to see the SEC form.  As with any regulatory mandate, the analysis that goes into the filing of this report can be complicated so seeking legal advice from both in-house lawyers or your manufacturing counsel is essential.  In addition, if you have not done so, you should consider whether to develop a “Conflicts Mineral Policy” to distribute to those in your supply chain.

Does this Rule Impact Privately Held Companies?

Most Likely.  Although privately held companies are not regulated directly, that does not mean that they are not impacted by the SEC rule.  Simply stated, if you operate inside a supply chain that involves the manufacture of products that use conflict minerals, it is likely that you will be asked to provide documentation supporting your compliance with the SEC rule at some point.  Indeed, the SEC rule requires “due diligence” for the reporting companies and as a result, many entities pass this diligence down the supply chain.  As a result, it is advisable to develop a framework for responding to these requests now instead of later.

TSCA Reform and Its Implications for Manufacturers

Posted in Environmental Compliance & Permitting, Industry Outlook, Product Development, Supply Chain

Even if you’re well-versed in environmental statutes, one you might not spend a lot of time thinking about is the Toxic Substances Control Act, or TSCA.  That’s because, with a few notable exceptions (PCBs being a good example), TSCA currently focuses on regulating new chemicals as they are introduced into commerce, or on significant new uses for existing chemicals, issues that are not generally of concern to manufacturers.   That may soon change.

TSCA has not been updated since it was passed in 1976.  There have been efforts at reform, spurred on by both the chemical industry, which feels that TSCA is stymieing innovation, and from those concerned about the extent of possible harmful and unregulated chemicals in the marketplace, who would like TSCA to more robustly regulate existing chemicals.   For many reasons, not the least of which is these competing interests, TSCA has not changed.  But TSCA reform has gotten more attention recently, and adoption does seem possible.

The Frank R. Lautenberg Chemical Safety for the 21st Century Act was introduced this week in the Senate by Senator David Vitter (R-LA) and Senator Tom Udall (D-NM).  This is clearly a bipartisan bill, co-sponsored by 8 Republicans and 8 Democrats. The bill itself is lengthy, and as a rewrite of an existing law, dense.  That said, here are a few key takeaways, excerpted from the Vitter press release.

  • Strengthens the Safety Standard by mandating that EPA base chemical safety decisions solely on considerations of risk to public health and the environment.
  • Mandates safety reviews for new and existing chemicals
  • Strengthens Protections for the Most Vulnerable – specifically infants, children, pregnant women and the elderly
  • Creates additional requirements and sets reasonable limits on Confidential Business Information claims
  • Preserves Existing Private Rights of Action
  • Balances State and Federal Regulations

We’ll be watching the progress of TSCA reform, and considering how this bill, if passed, will impact manufacturers. As a minimum, by changing the way we regulate chemicals in the US, it may result in the removal of certain chemicals from commerce, as too dangerous, and will require anyone who uses chemicals in any process to reevaluate their use.

A View From the Foxhole: The Practical Side of the NLRB’s New Election Rules

Posted in Labor Relations

Having recently completed my latest National Labor Relations Board (“NLRB”) post-election representation hearing, I found myself contemplating the impact of the NLRB’s new election rules (which some have dubbed the “Quickie Election Rules”). Whether you love them (as most labor unions and labor practitioners seem to do) or hate them (which seems to be the universal response from employers and the management bar), this practitioner predicts that the new election rules will challenge all parties in unexpected ways. Manufacturers would be well served to contemplate the “new world” created by the “new rules.”

Old Rules

The current election rules call for the prompt processing of union representation cases. Generally, if the parties are able to agree on the issues involved in an election, a union representation election will be held with 42 days (6 weeks) of the filing of the petition. Any post-election challenges to the election must be filed within 7 days of the election and the evidence supporting the election objections must be filed within an additional 7-day period. If the NLRB orders a hearing on the objections, the hearing generally will be held within four weeks of the election. Post-hearing briefs must be filed with 7 days of the close of the hearing, with an additional (discretionary) 7 days which can be granted on a showing of “cause.”

Because a union organizing campaign usually takes place in secret, as a practical matter, a manufacturer seeking to present an alternative to the “vote yes” message of organized labor has about six weeks to organize and present its side. Six weeks may seem like a great deal of time, but in the context of an organizing campaign, that time always goes by quickly. Once the election is held, any party challenging the fairness of that election (i.e., whether a union or a manufacturer that claims that the employees did not have a fair opportunity to express their choice) has a reasonable period of time to present arguments and evidence before a neutral fact-finder.

The pace of the current process has been questioned by labor professionals on both sides of the debate. Because manufacturers do not know when an election petition is about to be filed (union campaigns being by their nature secret), often the speed by which the current process moves requires both the employer and its counsel to “drop everything” to focus on the representative election. Getting ready to take the sales team to that long-planned and hard-to-arrange pitch meeting? Sorry, your presence is required elsewhere. Celebrating your child’s wedding at a remote location? Hold on, there are legal proceedings afoot. Annual shareholders’ meeting next week? Well, maybe you can appear by video-conference.

New Rules

While the old election rules generally required the parties to drop everything, the new election rules will require them to move at warp speed. With an April 15, 2015 effective date, the new election rules will require elections to be held within 15 days of the filing of the petition (and if the union consents, within 10 days of the petition). If the parties are unable to agree on all the legal issues involved, a hearing will be held on those issues within 8 days of the filing of the petition and a position statement regarding the issues must be filed one day prior to the hearing. (Failure to file a position statement results in the waiver of all legal issues which could have been raised.) Election objections will still be due within 7 days of the election, but now all evidence in support of those objections must be filed at the same time.

The NLRB has provided a comparison of some of the differences between the old and new rules.

Practical Impact

The practical effect of the new election rules will be to penalize manufacturers and others that are either unaware of union organizing efforts or fail to react quickly when a case is filed. The pace of the NLRB’s processes require key decision-makers and their counsel to be on “speed dial” at the first sign of an organizing campaign or lose the right to present an alternative view. Paradoxically, the rules may also reward manufacturers that more closely monitor the union sentiments of their employees, as those aware of an organizing effort from the beginning will have a distinct advantage over others. In the view of many, the new election rules elevate speed over every other consideration – including employee free choice and fundamental due process.

Time will tell whether the NLRB will be able to match the rapid pace it expects from the parties in a representation election. With no disrespect intended to the women and men who serve the NLRB, the NLRB’s new election process would be ill-served if it requires the parties to “hurry up” only to find NLRB decisions tied up in the seeming endless decision-making process. In this respect, “only time will tell.”

How Will The Commercial Use of Drones Impact Manufacturers/Distributors?

Posted in Industry Outlook

The Federal Aviation Administration (FAA) has issued a series of proposals for the use and regulation of drones (i.e., Unmanned Aircrafy Systems (UAS)) for commercial purposes.  In conjuction with these proposals, the White House released a memorandum that attempts to ensure the privacy of data obtained by drones.  Note that it may take 2-3 years for these proposals to become final and they may face strong opposition from the civil rights community and also from commercial airline pilots, among other groups.  Much of the discussion thus far has been on whether Amazon will be able to deliver packages via drones.

Yet, manufacturers and distributors should keep track of drones as things develop for several reasons:

  1. Diversification Into New Markets:  If drones are able to be used widely in the commercial realm, the growth of the drone manufacturing industry may explode.  If that occurs, component part manufacturers (particularly, those in aerospace markets) may benefit.  As many of our clients look for ways to diversify, these developments are worth watching.
  2. Impact on Distribution:  The use of drone technology could have a significant impact on the delivery of goods as exemplified in Amazon’s interest in the subject.  In addition, there has been discussion about the use of drones within a warehouse.
  3. Surveillance:  There have been a number of news stories over the last several years that have claimed that companies should be concerned about government agencies and other third parties who may use drone technology to “spy” on private property.  We will continue to monitor the legal developments in this area, but needless to say, manufacturers and distributors should be aware that it is possible that drones could be used in ways that can be adverse to a company’s interests.

When Bad Things Happen at Good Facilities (Hazardous Air Pollutant Edition)

Posted in Environmental Compliance & Permitting, Environmental Enforcement, Industry Outlook, Litigation

(Many thanks to my colleague and source of all info air related, Brian Freeman, who wrote today’s post.)

Malfunctions happen, even at a well-managed facility.  When they happen, they can cause a facility to deviate from emission limits or other standards regarding (among other things) hazardous air pollutants.  Furthermore, through several court rulings and EPA responses, former “safe harbors” for malfunctions under hazardous air pollutant rules have been removed, and a compliance deviation due to a malfunction – even unavoidable – can be subject to enforcement and penalties.  This post briefly summarizes the issue, and offers a few suggestions for minimizing your enforcement exposure regarding malfunctions.

How we got here

As originally adopted, EPA hazardous air pollutant rules (“National Emission Standards for Hazardous Air Pollutants,” or “NESHAPs”) and numerous state analogs typically provided a conditional exemption from otherwise-applicable requirements for a “malfunction.”  The conditions essentially were that the “malfunction” had to be unavoidable:  sudden, unforeseeable, and not caused by lack of maintenance or other care.

But several years ago, a court challenge by environmentalist NGOs struck down that approach as overbroad.  In brief, the court ruled that the federal Clean Air Act requires regulation of hazardous air pollutant emissions “on a continuous basis” – no exceptions.  EPA then advised states that the conditional exemption could be converted to an “affirmative defense,” meaning that a compliance deviation due to a malfunction would be considered a violation subject to enforcement, but the facility might avoid penalties if it could show that the “malfunction” was unavoidable.

Last year, another legal challenge struck that approach down as well.  Under a proposal issued last fall, EPA is now moving to get affected federal and state air regulations revised accordingly.

So what can a manufacturer do in the meantime?

In light of these developments, here are some actions to consider for hazardous air pollutant emissions from your facility:

1.  Beware obsolete protections in your existing permit. If your facility’s air permit, an applicable NESHAP or a state analog has a conditional exclusion or an “affirmative defense” for malfunctions, check whether these provisions have any legal life left in them at this point.  Likely they don’t.  Ensure that environmental compliance staff, plant-floor operators and relevant others are aware of this.

2.  Develop malfunction-specific terms in any new or reissued permit.  To provide  continuous regulation of hazardous air pollutant emissions at your facility, develop appropriate emission standards for periods of malfunction, with a goal of providing standards that recognize the limits of available control technology and are sufficiently robust to withstand potential legal challenge.  Work with your EPA or state air permit writer to get these terms included in the permit.

3.  Keep working on prevention.  Continually assess whether any changes or upgrades to operations, monitoring or compliance management systems could further minimize the potential for malfunctions that could cause hazardous air pollutant-related compliance issues.

And beyond that, keep alert as to how EPA and relevant states are proposing to change their rules regarding malfunctions. Make your voice heard in those processes in an effort to secure workable, appropriate standards.

Supreme Court Strikes Down Presumption of Lifetime Retiree Medical Benefits

Posted in Benefits, Class Actions, Labor Relations, Litigation

The New Year holiday is barely over and 2015 has delivered its first significant development affecting manufacturers and their labor unions.  On January 26, 2015, in M&G Polymers U.S.A. v. Tackett, a unanimous United States Supreme Court took the Sixth Circuit Court of Appeals to the woodshed with the wholesale repudiation of its thirty-year old Yard-Man doctrine, giving employers a new weapon to control the costs of retiree medical benefits.

A Little Background

Many collective-bargaining agreements between employers and the unions representing their employees have traditionally provided for post-employment benefits, most notably pensions, medical and life insurance for retirees, and other benefits.  But most collective-bargaining agreements have relatively short terms, usually between two and five years.  When that contract expires, the employer and the union meet to negotiate new terms.  Any newly negotiated or lawfully implemented changes to post-employment benefits will take effect with the new agreement, unless those benefits have vested. 

Here is where the Sixth Circuit’s Yard-Man Doctrine comes into the picture.  Unlike employee pension plans which are subject to mandatory vesting under ERISA, an employee’s rights under a retiree medical plan do not vest unless and until the employer specifies that they vest.  In Yard-Man, the Sixth Circuit created a presumption that in the absence of an express statement to the contrary, retiree medical benefits were presumed to vest immediately when the employee retired.  In other words, once an employee retired under a collective-bargaining agreement which provided for cost-free medical benefits, the employer could not take away those benefits for the life of the retiree and her or his covered dependents.

As the cost for providing medical benefits to retirees soared, manufacturers sought to shift or eliminate those costs.  In response, retirees sought to prevent those changes through litigation.  In every other Circuit Court outside of the Sixth Circuit, the litigation focused on whether the parties intended such benefits to vest or not.  In the Sixth Circuit, however, vesting became the presumption.

The Supreme Response

M&G Polymers was typical of such litigation.  When the company sought to require retirees to contribute to the cost of their health insurance, a group of retirees sued to prevent the change, arguing that the company had promised lifetime, contribution free medical benefits to them.  The district court dismissed the action finding that the collective-bargaining agreement was unambiguous and did not grant such benefits for life.  Relying on Yard-Man, the Sixth Circuit reversed and sent the case back to the district court for trial.  After a bench trial, the district found for the retirees and issued a permanent injunction preventing the company from changing retiree medical benefits.  The Sixth Circuit affirmed.

A surprisingly unified Supreme Court rejected the Sixth Circuit’s reasoning and with it the Yard-Man Doctrine.  The Court held that the presumptions created by Yard-Man and its progeny were not grounded in traditional principles of contract interpretation.  Writing for the Court, Justice Clarence Thomas wrote, “Yard-Man violates ordinary contract principles by placing a thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements.  That rule has no basis in ordinary principles of contract law.  And it distorts the attempt to ‘ascertain the intention of the parties’.”  [Citations omitted.]

Impact

The Supreme Court’s rejection of the Yard-Man presumption gives manufacturers a clear road to seek to ease the burden presented from the staggering costs of retiree medical insurance.  For those manufacturers in the Sixth Circuit previously barred from changing post-employment medical benefits, the door is now open to negotiate changes to their bargaining agreements or modify their retiree medical plans.  For others, the Supreme Court has made it clear that the intention of the parties governs the decision.

Manufacturers seeking to implement such changes, however, should be mindful that their individual circumstances govern.  The Supreme Court’s M&G Polymers decision makes clear that no presumptions will determine whether changes may or may be made.  But this should not be read to say that an employer may make those changes in all cases.  As the Court stated, the work of the court in such litigation will be to “ascertain the intention of the parties.”  This will necessarily require examination of the parties’ contract language and negotiation history over the life of the parties’ relationship.

Five 2015 Corporate Compliance / Litigation Issues Manufacturers Need To Keep An Eye On

Posted in Class Actions, Contracts, Crisis Management Counseling, Employment Decisions, Industry Outlook, Litigation, Product Liability, Workplace Accidents

It is our annual tradition at the beginning of each year to report on significant issues that face manufacturers/distributors in the year ahead.  Two weeks ago, Matt reported on significant issues in the labor/employment arena.  Last week, Pam reported on Environmental, Health and Safefy (EH&S) issues

To round out the series, I’ll be writing about issues that I will be watching from a corporate compliance/litigation perspective. 

  1. Data Breach / Cyber Insurance:  Over the last two years, countless high profile companies including Target and The Home Depot have been victims of massive “data breaches.”  Some commentators, such as in Industry Week, have argued that small to mid size manufacturers will be the next target.  As part of this discussion, insurance companies have developed insurance programs to cover data breaches.  There has also been litigation filed over whether data breaches are covered by a company’s typical commercial general liability policy.  I expect that we will get more answers in 2015 to these questions. 
  2. Government Economic Incentive Programs:  Manufacturers and distributors should continue to monitor the slew of economic incentives being offered by both the federal and state government.  From time to time, we tweet out to our Twitter followers notifications regarding these programs and we have lawyers who help counsel clients through these programs.  To follow us on Twitter, click here.  
  3. Temporary Employees / Workplace Safety:  As readers of this blog know, we have written several blog posts about the pros and cons of using temporary workers to make up for the shortage of skilled labor.  From a litigation perspective, the use of temporary employees can lead to workplace accidents that ultimately lead to government investigations and litigation.  The training of these temporary employees by their host companies is of paramount importance because often times the general training provided by the staffing company is far from ideal.  In 2015, we will continue to monitor how government regulators are handling accidents involving temporary workers. 
  4. Terms & Conditions of Sale / Purchase:   In 2014, there was an uptick in concern about terms and conditions of sale or purchase.  As we discussed in prior posts, both sides of a transaction often have their own terms and conditions that conflict with the other.  Often, these conflicts are ignored until a shipment is late or a product is defective.  We continue to develop a streamlined process for reviewing a manufacturer’s terms and conditions and we will be monitoring litigation that arises in 2015.
  5. Class Actions:  Manufacturers continue to face class actions around the country particularly with respect to those companies that sell consumer products.  The trend continues to be that plaintiffs will sue manufacturers and distributors for misleading statements about their products as opposed to claiming that they were injured.  These class actions are not just being filed against the mega companies, but they also are filtering down to the smaller companies, which is something we will continue to watch in 2015. 

Five 2015 Environmental, Health and Safety Issues Manufacturers Need to Keep An Eye on

Posted in Environmental Compliance & Permitting, Industry Outlook, OSHA Compliance, Workplace Accidents

Matt set a pretty high bar last week, summarizing his thoughts for what could be a tumultuous 2015 on the labor and employment front.  Now, it’s my turn to provide some thoughts for 2015 the EHS front.  I’m not sure I’d call all of these predictions, since we know that they’re out there – more like “stuff to watch out for.”

1. New OSHA reporting requirements take effect. As we discussed back in September, OSHA has updated its reporting and recordkeeping requirements. The changes became effective January 2, 2014.    It will behoove manufacturers to make sure they know the new rules, which can be found here.  Any inspections in 2015 will focus on this.

2. OSHA and Temporary Workers.  OSHA continues to emphasize the need for training for temporary workers, citing injury rates that are higher than for permanent employees. We discussed this issue in August.  Again, if you have temporary employees, expect inspections in 2015 to focus on them and their training.

3. Region 1 – Local Emphasis Program focused on Noise.  Falling into the “in case you missed it” category, OSHA’s Region I (ME, VT, NH, MA, RI, and CT) announced in October that it was renewing the local emphasis focused on noise.  Targeted inspections will focus on a variety of manufacturing sectors. Check your program, monitoring, audiometric testing and your training.

4.  Changes to hazardous waste rules.  EPA published final revisions to the “definition of solid waste” regulations in December 2014.  The definition of solid waste is used to determine whether a material is a “hazardous waste.”  These changes focus on the recycling of “hazardous secondary materials.” I’ll write more about this in my next post, but the key takeaway here is that recyclers of hazardous materials will now be required to have permits. It also changes requirements for generators.  As with all changes to federal hazardous waste regulations, these changes will not become effective in states that have been delegated the hazardous waste program (all New England states have) until those states adopt the changes as well.

5.  Climate Change and Adaptation.  In October 2014, EPA and the regions issued “Climate Adaptation Plans.”  Here are links to the Region 1 and Region 2 plans, as well as link to EPA’s Climate Change Adaptation page, which has program specific plans, as well.  The takeaway for manufacturers is that EPA recognizes that climate adaptation will affect both planning and enforcement – for example, previously unimpaired waters may become impaired, affecting the effluent limits in a permit.

Five 2015 Labor and Employment Predictions for Manufacturers

Posted in Benefits, Employment Decisions, Labor Relations, Litigation

The second half of 2014 was a whirlwind of activity on the labor and employment front, and I expect that trend to continue in 2015 with manufacturers having to navigate the rapids created by these developments.

The United States Supreme Court will be called on to address the Constitutionality of state medical and recreational marijuana laws now that Nebraska and Oklahoma have filed an “original jurisdiction” lawsuit against Colorado.  Under Article III of the United States Constitution, only the United States Supreme Court has jurisdiction over lawsuits between two or more states, so it may be difficult for the Court to duck the issue.  The result could either put the brakes on the “legalization” train or force employers to consider the serious issues presented by marijuana users working in high risk occupations and industries.   Read the Complaint here:  http://www.ok.gov/oag/documents/NE%20%20OK%20v%20%20CO%20-%20Original%20Action.pdf

The National Labor Relations Board’s recent “quickie” election rule and decisions regarding use of emails, deferral to arbitration awards, mandatory arbitration and confidentiality policies likely will result in significant new claims against manufacturers.  Manufacturers will have to consider wholesale revisions to their employment policies or risk litigation.  Read the Final Election Rule here:  http://www.nlrb.gov/news-outreach/news-story/nlrb-issues-final-rule-modernize-representation-case-procedures

Ballot initiatives addressing a plethora of workplace standards – paid sick leave, higher minimum wages, break time, and other workplace protections – will likely find their way onto the ballots in numerous states and localities.  Read the blog entry on this topic here:  http://www.manufacturinglawblog.com/2014/11/the-show-in-2015-pass-the-popcorn-please/

Some multi-employer and single-employer pension plans which face funding challenges will certainly seek to take advantage of the newly enacted 2014 Pension Reform Act.  The complex process required to permit pension reductions for retirees – application to the Department of Labor followed by an election among pension plan participants – likely will postpone actual pension reductions until 2016, but the process to implement those cuts will begin.  Read the Act here:  http://edworkforce.house.gov/uploadedfiles/bill_text_bipartisan_multiemployer_pension_reform.pdf

And while the United States Department of Labor (“DOL”) has been silent so far on the new and more stringent “labor persuader” rule, I would not be shocked to see that rule come out in the Q1 2015 as the Obama Administration heads into its last act.  If adopted as proposed, labor relations professionals and the manufacturers who use their services may have to file detailed financial disclosure reports with the DOL (even if the services do not relate to union avoidance efforts).

All-in-all, the combination of these developments will likely keep the HR and Labor Relations departments of manufacturers pretty busy in 2015.

 

Goodbye, 2014 – Hello, 2015!

Posted in Industry Outlook

We wanted to use this last post of the year to wish all who of you who read Manufacturing Law Blog a wonderful holiday season, and a very happy, safe and healthy New Year!

We will be posting in early January our collective thoughts on the issues that we think will be of interest to manufacturers in 2015.  We see good things on the horizon – the economy seems to picking up, which likely means that orders will be up.

If there are issues you particularly would like us to address in our blog, please reach out to us by posting a comment below, through the “contact us” button above, or by emailing any one of us individually (jwhite@rc.com, pelkow@rc.com or mmiklave@rc.com).    Our goal is to provide information that is timely and useful.

Happy Holidays, Jeff, Pam and Matt