There are two provisions in nearly every commerical contract that I tend to be asked about more than others. These provisions are: (1) indemnification clauses; and (2) “forum selection” clauses. Most manufacturers and distributors are familiar with the first. Not as many are familiar with the second.
Fundamentally, an indemnification clause is typically designed to provide protection to a party in the event a lawsuit or claim is filed against it by a third party. For instance, a distribution agreement will typically have an indemnification clause that states that if the distributor is sued by an end user of a product, the distributor can seek indemnification from the manufacturer. Similarly, a manufacturer may have a supply agreement that states that it can seek indemnification from its suppliers to the extent that the raw materials do not meet certain agreed upon standards. For that reason, it is important to review these clauses periodically with your legal counsel particularly because these clauses can take on many forms. For instance, some clauses allow the party that is sued to pick their own legal counsel and also control the litigation while other clauses may not.
The other type of clause that is less known is the “forum selection” clause. This clause generally is contained at the end of the commerical agreement and may not stand out. This clause typically addresses a situation wherein two commerical parties have a dispute about a contractual agreement. A forum selection clause typically answers two questions. First, will the dispute be resolved in court or through arbitration? Second, if a lawsuit is filed, where must it be brought (i.e., what state or country in some situations)? In Connecticut, for instance, the law on forum selection clauses can be confusing, but what is clear is that certain language (a.k.a. “magic words”) often needs to be used for these clauses to acheive their purpose. For that reason, it is also important to review these clauses with your counsel as well on a periodic basis.
When it’s my turn to write the blog post, if I don’t already have a topic ready to go, I visit the EPA and OSHA websites, to see what’s “new” there. This is how why I found myself on EPA’s “Small Business Innovation Research” or “SBIR” page. This was after following a link to EPA’s announcement that 21 small businesses in 14 states will receive funding to “develop and commercialize innovative, sustainable technologies to address current environmental issues,” to use EPA’s words.
To give some examples, here are the companies in Connecticut and Massachusetts that are receiving funding in FY 2014:
- Precision Combustion, Inc., North Haven, Conn., for Low-Cost, Regenerable Air Filter for Efficient Gaseous Pollutants Removal
- EnChem Engineering, Inc., Newton, Mass., for Enhanced Decontamination of Wetted Pipe Material
- Aspen Products Group Inc., Marlborough, Mass., for High Flux Nanofiltration Membrane for Emerging Contaminant Control
- Reactive Innovations LLC, Westford, Mass., for Micro-Channel Electrochemical Production of Dimethy Carbonate
It turns out that EPA is only one of 11 agencies involved in the federal government’s SBIR initiative. Here are the others. You can get to their SBIR pages through the SBIR webpage, sbir.gov.
- Department of Agriculture
- Department of Commerce – National Institute of Standards and Technology
- Department of Commerce – National Oceanic and Atmospheric Administration
- Department of Defense
- Department of Education
- Department of Energy
- Department of Health and Human Services
- Department of Homeland Security
- Department of Transportation
- National Aeronautics and Space Administration
- National Science Foundation
SBIR’s mission is to “support scientific excellence and technological innovation through the investment of Federal research funds in critical American priorities to build a strong national economy.” There is a special emphasis on manufacturing. Executive Order 13329 requires SBIR agencies to give high priority within the SBIR programs to manufacturing-related research and development (R&D). “Manufacturing-related” is defined as “relating to manufacturing processes, equipment and systems; or manufacturing workforce skills and protection.”
The goals of SBIR are:
- Stimulate technological innovation
- Meet Federal research and development needs.
- Foster and encourage participation in innovation and entrepreneurship by socially and economically disadvantaged persons.
- Increase private-sector commercialization of innovations derived from Federal research and development funding.
Funding is disbursed in 2 phases: proof of concept (Phase I) and to continue R&D (Phase II). Phase III would be commercialization; this is not funded through SBIR.
For purposes of participating, here’s the definition of a “small business:”
a for-profit organization with no more than 500 employees. In addition, the small business must be independently owned and operated, at least 51 percent owned by U.S. citizens or lawfully admitted resident aliens, not dominant in the field of operation in which it is proposing, and have its principal place of business in the United States.
FYI 2015 Phase I Funding from EPA is now open, closing September 11, 2014. Other agencies also have funding rounds open now. Companies need to register at FedConnect.
As virtually every HR professional will tell you, the Family and Medical Leave Act (FMLA) is one of the most confusing and complicated employment laws to administer. While providing job-protected leave for employees with serious health conditions or other qualifying events, it also presents the opportunity for misuse—or blatant abuse—by employees who want to mask attendance or performance problems, or who simply want more time off from work than otherwise would be allowed.
Please join me and my colleague, Jean Tomasco, for a free Robinson+Cole, LLP webinar on the Family Medical Leave Act (FMLA). It is scheduled to be held on July 17th from noon-1:00 pm ET. The program agenda includes FMLA developments at the U.S. Department of Labor, medical certification requirements and recent cases addressing leave, retaliation and interference.
For more information on the program and to sign up , you can click here or here.
Each year, the American Bar Association (ABA)’s Journal releases its “Annual Blawg 100,” which is a listing of the best legal blogs in the country. In order to be selected, the ABA Journal asks that readers nominate blogs that they read regularly and that they believe other lawyers should know about. Pam, Nicole and I would be honored if some of our readers would be willing to nominate the Manufacturing Law Blog. To submit a nomination click here or go directly to http://www.abajournal.com/blawgs/blawg100_submit.
A lesser known resource for smaller businesses that want to understand their potential safety and health hazards is the OSHA consultation service. Separate and distinct from OSHA’s inspection efforts, which can result in citations and proposed penalties, OSHA’s consultation service is intended to help a business identify potential hazards. Manufacturers have taken advantage of this service more than most, with 35 percent of the FY 2014 consultation visits being at manufacturing facilities. Over half of the visits were to companies with less than 25 employees, with another 34 percent at companies with from 26 to 100 employees.
A consultation visit is much like a regular OSHA inspection – except the employer invites the consultation service OSHA in. The most significant difference is that, before asking for assistance, the employer must agree to correct any deficiencies identified during the visit.
The consultation can be comprehensive, or specific to a particular operation. It begins with an opening conference, includes a walk-through of the facility or the process, and ends with a closing conference. Following the closing conference, the consultant sends a detailed report explaining the deficiencies and confirming abatement periods. The consultant may also provide assistance with developing or maintaining an effective injury and illness prevention program, and can provide training for employees.
A significant benefit for those who use consultation services – a one-year reprieve from OSHA inspections. Smaller businesses that qualify for the Consultation Program’s Safety and Health Achievement Recognition Program or SHARP are given that reprieve for the time their SHARP certification is valid.
Each state has a different consultation service. For example, in Connecticut, the Department of Labor, Division of Occupational Safety and Health, aka “ConnOSHA,” administers the consultation service. In Massachusetts, it’s the Massachusetts Workplace Safety and Health Program in the Department of Labor; in Rhode Island, it is the Division of Occupational Health & Radiation Control in the Department of Health; and in New York, it is the Department of Labor.
Last week, I had the privilege of speaking at ACI’s 2nd Annual Consumer Products Regulation & Litigation Conference in Chicago. During the conference, I moderated a panel of in-house attorneys that worked at General Electric, Williams-Sonoma, Deere & Co., and Nordstrom. One of the issues that always comes up at conferences involving litigation is “e-discovery.” For those of you that have not been involved in litigation lately, e-discovery has placed a significant financial burden on companies. Basically, it means that if you are sued, it is likely that the other party will ask that you produce electronic documents during the discovery process. It is not uncommon for manufacturers to have to hire outside vendors to search their e-mail archives for documents that might relate to the lawsuit. This can cost tens of thousands of dollars.
What can you do?
The simplest way to minimize expense is to ensure that you have a document retention policy in place that establishes when certain documents will be destroyed in the ordinary course of business. Once a lawsuit is filed (and possibly, before), there are obligations that are imposed that require that a company keep documents. Therefore, the time to consider creating or updating your document retention policy is when the seas are calm. We have worked with several manufacturers in updating their policies in the past year and understand that document retention policies need to take into account various certification standards (such as ISO) that might apply. In addition, the retention policies for certain documents are set by state law so it is important to conduct a legal review on a periodic basis.
Actual productive labor is what a manufacturer may think is “work”. No work, no pay. However, courts have interpreted federal and state wage and hour laws much more broadly.
In general, a “workday” means the period between the time on any particular day when such employee commences his/her “principal activity” and the time on that day at which he/she ceases such principal activity or activities. The workday may therefore be longer than the employee’s scheduled shift or production line time. This may appear to be straightforward, but employers continue to get trapped up.
For example, the Connecticut Supreme Court recently clarified the question of compensable work time and relied on federal law to determine whether an employee should be paid when he travels from home to work. In Sarrazin v. Coastal, Inc., the Court held that an employer was not required to pay an employee for carrying company tools in a company vehicle during his daily commute to his jobsite and home. Any time spent after hours picking up tools or equipment from the company’s warehouse was considered compensable and the employee was entitled to overtime pay.
In Sandifer v. United States Steel Corp., the U.S. Supreme Court held that donning and doffing work gear may be compensable and require overtime. However, the Court clarified that employers need to ask whether the time period at issue can, on the whole, be fairly characterized as “time spent in changing clothes or washing.” If an employee devotes the vast majority of that time to putting on and off equipment or other non-clothes items, the entire period would not qualify as “time spent in changing clothes” pursuant to federal law, even if some clothes items were also donned and doffed.
Finally, a wave of claims have been brought by employees alleging that they haven’t been paid for “off the clock” duties such as logging into computer systems and responding to email and text messages after work hours and on weekends. “Off the clock” time spent oiling, greasing, cleaning or installing machines at the start or end of the workday may also be considered compensable time.
Manufacturers may wish to consider an audit to review their pay policies in these and other areas, including employee time spent on training, business trips, sleeping, on-call hours, and per diem reimbursements calculated on an hourly basis (included in this analysis may be reimbursement for expenses that the employees would normally incur for their own benefit). More information may be found in this U.S. Department of Labor fact sheet.
Manufacturing is an energy-intensive enterprise. Moreover, in the Northeast, energy and electricity are expensive. We are finding that more and more of our manufacturing clients are taking charge (pun intended) of their energy costs by looking at what used to be called “alternative energy.”
Perhaps it’s installing solar on a large, flat roof, to produce electricity for the business. For businesses that have both high heat and electricity demands, it’s combined heat and power (CHP), also called co-generation. Facilities that generate a lot of organic matter can take advantage of advances in anaerobic digestion technologies, whereby microorganisms break down biodegradable material in the absence of oxygen. Anaerobic digestion can help a facility manage its waste while generating renewable energy that can help replace fossil fuels.
In addition to advances in technology, there have been a number of advancements in financing, which make investing in alternative energy and energy improvements more viable. For example, C-PACE (the Connecticut Property Assessed Clean Energy) program allows property owners to repay loans through property taxes, spreading the costs over a much longer time period. Lastly, a number of states are now allowing “net metering,” often described as spinning the meter backward – the utility pays for electricity generated by the “customer.”
For manufacturers in the Northeast interested in energy projects, we suggest checking out the following resources:
Energize CT has a lot of information on financing, types of renewable or other energy projects. There is also a program specifically for manufacturers – Manufacturing Program Improvements. Connecticut is also investing in research; check out the Center for Clean Energy Engineering at UConn.
Mass Save – Savings through Energy Efficiency has programs for businesses, and specifically for manufacturers, that includes incentives, financing, and training.
Rhode Island allows for both distributed generation and net metering – so businesses can produce their own energy through a variety of ways, and get paid for putting some of it back into the grid.
New York also allows for net metering, and is promoting solar, among other technologies.
By now, almost everyone has heard about the atrocious racist rant by Donald Sterling, the owner (soon to be former owner) of the Los Angeles Clippers. Sterling’s public reaction to these comments going viral is just as reprehensible.
On the other hand, the NBA Commissioner’s response was a timely and appropriate corporate response:
The views expressed by Mr. Sterling are deeply offensive and harmful; that they came from an NBA owner only heightens the damage and my personal outrage. Sentiments of this kind are contrary to the principles of inclusion and respect that form the foundation of our diverse, multicultural and multiethnic league. I am personally distraught that the views expressed by Mr. Sterling came from within an institution that has historically taken such a leadership role in matters of race relations and caused current and former players, coaches, fans and partners of the NBA to question their very association with the league….
The debate goes on about whether the NBA has authority to act in this situation given that Sterling’s comments were made privately. In today’s society, there are very few conversations that are truly private, especially for someone of Sterling’s stature. Robin Shea of Employment and Labor Insider recently authored a terrific post on the rule about being judicious “when emailing, posting, or tweeting, or having a love spat an[d] argument with the ‘archivist’”.
In the employment context, comments made in private can and do carry over into the workplace. Most racial harassment cases involve harassment by coworkers, vendors, salespeople or other third parties who are known to throw around racist and totally inappropriate comments outside of work. A diligent employer needs to be aware of the potential for racial harassment and make sure that its policies and actions are designed to prevent and correct any harassment on the shop floor and throughout the workplace. If such harassment does occur, a timely and appropriate response is critical. In this regard, the NBA Commissioner was right on the mark.
The Connecticut Business & Industry Association (CBIA) is holding its annual Manufacturing Summit on Friday, May 30 in Cromwell, Connecticut. Our firm is proud to be a sponsor of the event, which will include discussion on topics such as: (1) the aerospace industry in Connecticut; (2) the 2014 Connecticut Manufacturing Workforce Survey; and (3) tax issues and implications for manufacturers. I will be moderating the “Manufacturing Innovations Panel,” where we will hear from manufacturing executives such as Curt Cameron (President, Thomas Hooker Brewery) and Dr. Kelli-Marie Vallieres (President & CEO, Sound Manufacturing/Monster Power Equipment). Paul Marvel from the accounting firm, McGladrey, will also be on the panel. For more information about the Summit and how to register please click here or email me at firstname.lastname@example.org.