EEOC Retaliation Guidance Ups the Stakes for Manufacturers

I ended my January 21 “employment law predictions” post by writing, “One thing I can count on as these ‘Years of Change’ continue, [I]  expect something unexpected.”  The EEOC made that prediction come true the same day when it published for comment a wholesale revision of its policy guidance on retaliation claims under federal civil rights statutes.  Read the EEOC press release and the Guidance here.

The comprehensive 73-page draft is an impressive work product, summarizing hundreds of federal cases in 222 footnotes and explanatory text, offering 32 examples of permitted and prohibited conduct, and outlining fifteen “best practices” for manufacturers.  Along the way, the EEOC’s Guidance expands the reach of the anti-retaliation provisions of the statutes the agency enforces.  While not binding on litigants or the courts, the Guidance likely will be broadly cited for its expansive interpretation of the law.

Among its more significant provisions, the Guidance:

  • Reminds manufacturers that internal complaints of poor or unfair treatment by employees, even if vaguely worded, may nevertheless constitute protected activity.
  • Cautions that even if an employee makes a complaint in bad faith or for an improper purpose, a manufacturer acts at its peril if it takes action against that employee.
  • Suggests that an employee engages in protected activity by making public statements against a manufacturer’s practices, merely accompanying a co-worker to human resources so the co-worker can lodge a complaint, or refusing to follow instructions or orders which are reasonably believed to be unlawful.
  • Advises manufacturers that any conduct which discourages employees from exercising their rights (regardless of its tangible impact on the employee) could be found to be unlawful, such as making disparaging comments about the employee, refusing to invite the employee to attend a company lunch or providing a negative employment reference.
  • Cautions employees that their unlawful acts would not be protected regardless of the motivation for those acts.

Among the list of “best practices,” the EEOC Guidance urges manufacturers to adopt comprehensive “anti-retaliation” written policies (akin to the now common anti-harassment policies and complaint procedures), train managers and supervisors on the manufacturer’s policies, create an avenue to support and encourage employee complaints, and proactively communicate with employees and others whenever an EEO charge or investigation is launched to aggressively remind individuals of the manufacturer’s policies against retaliation.

While reasonable people may legitimately argue over the scope of the EEOC’s recommendations and legal interpretations, the Guidance clearly signals the agency’s intent to make “retaliation” a “hot topic” for 2016 and beyond.

 

Legal Issues for Manufacturers To Consider When Selling Into New Markets

Manufacturers continue to look for ways to increase sales revenue without a massive infusion of capital.  Many companies have been successful in adapting current products for new uses and markets.  For instance, a company that makes aerospace components might use certain core competencies to develop products that can be sold in other markets without investing significant resources in a re-design.  As a general principle, this is good business and the legal risks can be managed with proper planning.

The following are some considerations when doing this type of business planning:

  1. Product Development:  Don’t be overconfident.  Just because a product has had a perfect safety and/or quality record in one line of business does not mean that such results will follow when the product is used in a different way.  It is important to review the designs to ensure that there is no additional testing that needs to be done to account for these new uses.
  2. Document Such Analyses:  Even if no new testing needs to be done, it is useful to document the process that is undertaken prior to the product hitting the market.  If something does go wrong, both the regulators and the plaintiff’s lawyers will be looking for evidence that the manufacturer considered certain risks that were associated with selling products that would be used in a different way than originally intended.
  3. Review Warnings/Instructions/Warranties:  Often, when it is anticipated that the design/product will be used in a different manner, the warnings and/or instructions need to be changed significantly.  There may be new risks that had never arisen before.  In addition, the failures may be different and might require different oversight from the quality department.
  4. Research the Regulatory/Litigation Landscape:  Not suprisingly, there are certain uses of products that are more dangerous and/or risky than others.  If you are selling products in a heavily regulated space (e.g., aerospace or transportation), it is important to consider whether the costs of regulatory compliance outweigh any potential revenues.  In addition, if competitors in these markets are constantly involved in litigation, it is important to assess the risk and expense of that particularly when it relates to insurance coverage.

In sum, all of these considerations can be overcome with sound business / legal advice.  The key is to perform due diligence up front as opposed to when the first lawsuit arrives.

Environmental, Health & Safety – What to Watch in 2016

To round out our series on industry and legal outlooks for 2016, I have compiled some of the many things for manufacturers to be aware of in the Environmental Health & Safety world for 2016.

1. Expansion of CERCLA Liability

The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) is always a concern for manufacturers who handle hazardous substances because of its broad imposition of liability. Every year brings with it a number of new developments under CERCLA, but one case that stands to shake up the CERCLA legal landscape is Pakootas, et al. v. Teck Cominco Metals Ltd. This case involves the question of whether air emissions that ultimately settle on land or water can be considered a disposal subject to CERCLA liability. A district court in Washington held that they could, but the issue is now before the Ninth Circuit on appeal. The case is set to be argued in April 2016, and, if the district court holding is upheld, it will widen the net of potentially responsible parties under CERCLA to anyone who emits hazardous substances into the air.

2. Revisions to RCRA Generator Rules

EPA published a proposed rule in the Fall of 2015 that would overhaul regulations applicable to hazardous waste generators under the Resource Conservation and Recovery Act (“RCRA”). Public comment on the proposed rule closed at the end of 2015, so we can expect to see a final rule in 2016. If the final rule looks like the proposed rule, hazardous waste generators can expect to see some benefits as well as drawbacks. For example, starting with good news, Conditionally Exempt Small Quantity Generators, which would now be called Very Small Quantity Generators, would be permitted to send waste to Large Quantity Generators under the control of the same person. This move will allow for waste consolidation and efficiencies in managing wastes across properties. The proposed rule also potentially increases the burden on generators, however, particularly with regard to documentation and reporting requirements, directing more specificity in recording the date and materials accumulated and increased reporting for Large Quantity Generators. All hazardous waste generators need to be aware of and tracking the EPA’s ultimate issuance of the final rule.

3. TSCA Reform

2016 may bring a whole new era in toxic substances regulation. The Toxic Substances Control Act (“TSCA”) has not seen reform in almost 40 years , but in 2015, both the House and Senate passed historic bills to reform TSCA. The two bills, which had a number of differences, must be reconciled, but the stage is set for a major overhaul TSCA. Stay tuned.

4. Increased Penalties and Enforcement to Protect Worker Safety

The Occupational Safety and Health Administration (“OSHA”) is doing its best to put more bite in its bark in 2016. With the end of 2015 came legislation that will increase OSHA’s civil penalties by about 80 percent in 2016. In addition, the Department of Labor and the Department of Justice recently announced that they are teaming up to increase criminal prosecution for worker safety violations. These prosecutions are likely to rely on a combination of worker safety and environmental violations, and resources are being deployed to make sure the initiative is carried forward. Employers need to be vigilant in addressing workplace safety, but also in identifying other potential violations as well as behaviors (witness tampering, obstruction of justice) that could allow for criminal penalties.

5. NextGen Compliance

It is 2016, and time to move into the digital age. The Environmental Protection Agency (“EPA”) is in the process of rolling out Next Generation Compliance, or NextGen, in an effort to make its programs more effective and facilitate compliance in the regulated community. We can expect to see increased electronic reporting, but along with that will likely come increased public availability of the data and reporting submitted to EPA. We can also expect EPA to use that data to evaluate industry compliance and ultimately drive enforcement priorities. NextGen brings with it new monitoring techniques, such as fence-line and drive-by monitoring, which will allow EPA (and others) to conduct monitoring more frequently and less conspicuously. And, perhaps most importantly, NextGen is focused on creative enforcement strategies that attempt to expand an alleged offender’s response to a violation. It is important to keep on top of NextGen as EPA continues to formalize and solidify its goals.

Never too Late for Some 2016 Employment Predictions!

 

While we are still saying “Happy New Year” (I checked and was told that January 21 was still “not too late” to wish good tidings for 2016), and as we get ready for the Great East Coast Blizzard of 2016, I thought it would be a good time to add my own predictions for the employment law landscape of 2016.

Having been practicing in the labor and employment field for over thirty years, 2015 marks another year in a recent series of years where the employment law landscape changed beneath our feet.  Courts, legislative bodies and government agencies re-examined once settled doctrine – forcing manufacturers and their professionals to adjust.  As Abraham Lincoln famously wrote, “As our case is new, we must think anew, and act anew.”

My forecast for this Presidential, Congressional and state and local election year is – “More of the Same Change.”

On the federal level, the last year of President Obama’s term will see the Equal Employment Opportunity Commission (“EEOC”), the United States Department of Labor (“DOL”), and the National Labor Relations Board (“NLRB”) continue their efforts to expand protections for workers.

EEOC:  I expect the EEOC to aggressively pursue “systemic cases” challenging perceived adverse treatment of gays and lesbians under the theory that such differentiation on the basis of sexual orientation amounts to “gender-based discrimination” banned by Title VII.  I also expect the EEOC to scrutinize any health benefit plan promoting “wellness” programs or other “bad trait” disincentives under the anti-discrimination provisions of the Americans with Disabilities Act.  Finally, as it has for several years now, the agency will continue to challenge private agreements between manufacturers and their workers under the anti-retaliation provisions of the statutes the agency is charged with enforcing to excise overbroad confidentiality provisions, “no apply/rehire” clauses, and “future cooperation” obligations.

DOL:  The DOL will likely publish for public comment and then implement its long anticipated “Persuader Rule.”  While the formal text is not yet available as of this writing, if similar to the prior version of the rule which was published in 2011 and withdrawn (text here), the Rule could force many professionals to either limit the services they provide to manufacturers or make publicly available detailed financial data.  I also expect the DOL to publish revised overtime regulations, raising the minimum salary to be paid employees to exempt them from overtime pay, indexing that minimum salary to the rate of inflation, and changing the duties tests to narrow the overtime exception.  (The Notice of Proposed Rulemaking can be found here.)

NLRB:  The NLRB will likely continue to advance its efforts to enhance worker protections in non-unionized facilities and we will see more litigation (and appeals) involving employer policies on the use of tape-recording devices, video-cameras and smart phones; employment handbooks; confidentiality policies; workplace investigation practices; and arbitration agreements.  I will go out on a limb here and predict that the NLRB will revisit whether a manufacturer is obligated to bargain over the adoption of pre-employment drug-testing, perhaps in the context of the use of medical marijuana.

On the state level, I expect state legislatures to continue to take action where Congress has been unable or unwilling to do so.  Expect to see more states raise the minimum wage either across-the-board or for blue-collar service workers in selected industries.  I also expect to see the push to expand mandatory paid sick leave to grow as well.  My prediction?  At least 5 more states will raise the minimum wage either by legislative action or voter referendum by December 31, 2016.

For my money, I will continue to watch the Teamsters Central States Pension “Rescue Plan” as it advances through the review process and on to a vote by plan participants.  (See background here.)  As I have previously written, if adopted, the Central States’ Plan will likely become the “model” for other troubled funds to cut the vested benefits of retirees.

Finally, expect to see state government agencies continue to explore the use of independent contractors and subcontractors.  At least one source claims that the misclassification of workers as independent contractors costs the federal government over $15 billion dollars each year.  (See report here.)  If you also included state and local tax revenue lost, the numbers seem sufficient to compel cash-strapped governments to investigate the use of independent contractors more closely.

Only time will tell if these predictions prove to be accurate.  One thing I can count on as these “Years of Change” continue, we can expect something unexpected.

5 Things Manufacturers Should Be Watching In 2016 In The Areas of Corporate Compliance / Litigation

This is the first in a series of posts that provide industry and legal outlooks for manufacturers as we head into 2016.  I will start with corporate compliance and litigation.  Matt will follow with labor/employment.  And, Megan will conclude the series with Environmental Health & Safety (EH&S).

Here are 5 things (of many) that I will be watching in 2016:

1.    Will the Department of Justice Expand Its Efforts To Criminally Prosecute Manufacturing Executives?

As we have highlighted in several previous posts, the Department of Justice (DOJ) has teamed with several federal agencies in 2015 to pursue company officials.  This campaign extended to nutritional supplement companies, food companies, and for violations relating workplace safety (OSHA) to name just a few.  I expect this trend to continue and for that reason, all manufacturers and distributors should review their compliance programs and seek legal advice early in the process.

2.   Will Conflict Minerals Compliance Become More Complicated? 

In 2016, we will be watching to see if the European Union (EU) adopts conflicts minerals regulations relating to the importing of certain materials.  This has the potential to impact scores of European companies.  For background on the U.S. law, see this previous post.  The mere mention of “conflict minerals compliance” often causes a strong reaction among our clients and friends so this will be something to watch.

3.   Will Government Incentive Programs Directed to Manufacturers Continue?  

While the answer to this question is almost certainly yes, I will be watching to see if manufacturers continue to pursue these programs with vigor.  Although there are often promises that these incentives (including loans) can be put in place efficiently that is not often the case.

4.   What will happen to California Proposition 65? 

It seems like there are articles about legislative changes to California Proposition 65 that come out every day.  It is often one of the most misunderstood laws on the books, which is unfortunate given the potential drastic impact it can have on a manufacturer.  One case I will continue to watch is Mateel Environmental Justice Foundation v. California Office of Environmental Health Hazard Assessment, et al., No. RG15754547 (California Superior Court, Alameda County), which seeks to rescind the “safe harbor” for lead.

5.    Will the Scrutiny of Business to Business (B2B) Contracts Continue?

There was a substantial uptick in disputes in 2015 with respect to commercial contracts in the supply chain.  While these disputes almost never end in litigation, manufacturers and     distributors (regardless of their leverage) are ensuring that certain provisions (such as the dreaded “anti-assignment clause”) are reviewed and modified if at all possible.  I expect this to continue in 2016.

DOJ to Increase and Strengthen Criminal Worker Safety Prosecutions

With the new year comes a new focus on increasing criminal prosecutions against employers for worker safety violations.  In the end of December, the Department of Justice (“DOJ”) and the Department of Labor (“DOL”) announced a plan to deter workplace safety violations through more stringent criminal prosecution.  Under the new plan, the DOJ will work with the Occupational Safety and Health Administration (“OSHA”), the Mine Safety and Health Administration (“MSHA”), and the Wage and Hour Division (“WHD”) to prosecute worker endangerment violations.

Criminal penalties under the Occupational Safety and Health Act (“OSH Act”) are fairly limited, with imprisonment capped at 6 months and fines capped at $10,000.  As part of the new plan, DOJ is encouraging all United States Attorneys to charge employers for other violations that occur in connection with OSH Act violations, such as obstruction of justice, making false statements, witness tampering, and conspiracy.  United States Attorneys are also encouraged to consider environmental crimes, which often occur in concurrence with worker safety violations.  These offenses carry more significant periods of incarceration and fines.

Assistant Attorney General John C. Cruden for DOJ’s Environment and Natural Resources Division said:

We have seen that employers who are willing to cut corners on worker safety laws to maximize production and profit, will also turn a blind eye to environmental laws.  Working with our partners in the Department of Labor and law enforcement, we will remove the profit from these crimes by vigorously prosecuting employers who break safety and environmental laws at the expense of American workers.

Many environmental laws contain broad requirements that can easily be tacked on to a case involving worker safety.  For example, the Clean Air Act’s General Duty Clause requires owners and operators of stationary sources to identify hazards that may result from releases of extremely hazardous substances, design and maintain a safe facility taking necessary steps to prevent releases, and minimize the consequences of releases when they do occur.  This general duty is extremely broad, particularly given the fact that “extremely hazardous substances” is not defined.

United States Attorneys will have a designated Criminal Coordinator from the DOL.  United States Attorneys are encouraged to work with this Criminal Coordinator “to increase the frequency and effectiveness of criminal prosecutions of worker safety violations . . . .”

Given the broad scope of environmental laws, identifying ancillary violations to bolster worker safety violations may not be that difficult.  In addition, DOJ has trained OSHA inspectors to recognize other criminal violations.  Given DOJ and DOL’s recently announced focus on increasing criminal penalties, employers should be aware of all possible violations that could be used to bolster worker safety violations.

Breaking News: UAW Wins VW Manufacturing Plant Vote in Tennessee

On Friday, the United Auto Workers claimed victory in its long-running efforts to organize the VW plant in Chattanooga, Tennessee.  Reportedly capturing 71 percent of the vote (108 in favor to 44 against), the election victory represents the first successful organizing campaign of this troubled German car manufacturer in the United States.  The victory comes less than two years after the UAW lost a close election in a “plant wide” bargaining unit of 1,400 employees.

Of special significance, the voting group consisted of a “micro-unit” of skilled workers – a small subset of the larger workforce which voted against representation in February 2014.  The National Labor Relations Board has made this “divide and conquer” strategy infamous in its 2011 Specialty Healthcare Decision and when it adopted a Rule in 1989 permitting up to eight separate bargaining units in acute health care facilities.  Simply speaking, many believe that smaller bargaining units can be organized more quickly than larger, plant-wide units.

When coupled with the expedited time-table between the filing of a representation petition and a scheduled election under the Labor Board’s new election rules, manufacturers could see a steady increase in union activity in unrepresented plants and should prepare accordingly.

OSHA Penalties to Increase in 2016

As a result of the Bipartisan Budget Act of 2015 (Budget Act), the Occupational Safety and Health Administration (OSHA) will increase its maximum civil monetary penalties for the first time since 1990.

The Budget Act requires federal agencies, including OSHA, to annually adjust civil monetary penalties based on the Consumer Price Index.  Because OSHA has not increased its penalties since 1990, it must issue a catch up adjustment and is authorized to increase maximum penalties by up to 150 percent.  Given the difference between the Consumer Price Index in 1990 and today, it is expected that OSHA maximum penalties will increase by about 80 percent.  An 80 percent increase would raise the maximum civil penalty for a serious, other than serious, or failure to abate violation would increase from $7,000 to approximately $12,600.  The penalty for willful and repeat violations would increase from $70,000 to approximately $126,000.  The increased penalties will take effect in August 2016, without the benefit of public notice and comment.

OSHA’s assistant secretary, David Michaels, indicated his support for the increase in recent testimony before a federal subcommittee.  Michaels stated:

OSHA penalties must be increased to provide a real disincentive for employers accepting injuries and worker deaths as a cost of doing business.

It remains to be seen whether there will be a reduction workplace injury as a result of the increased penalties.  The increases are on the way, however, and employers may wish to take the time to evaluate their health and safety programs to ensure compliance.

Why The Recent Indictments of Nutritional Supplement Executives Matter To All Manufacturers/Distributors

Our firm has substantial experience in representing nutritional supplement manufacturers.  For that reason, the news that the Justice Department and federal agencies (such as the FTC) is engaged in a nationwide sweep of such companies is newsworthy.  This sweep has consisted of both criminal and civil/regulatory actions that will take years to unravel.

Other manufacturers/distributors might wonder if this government action is relevant to them.  The short answer is “yes” for the following reasons:

  1. This type of sweep is not limited to nutritional supplement companies.  As reported previously in our blog, the Justice Department just recently targeted the food industry in the same manner.
  2. The Justice Department continues to indict individual executives.   In a memo published in September, the DOJ emphasized that it will continue to pursue corporate executives individually for both criminal and civil liability.
  3. The criminal indictments relate in part to the manufacturer’s supply chain.  Although the government claims that the subject of the indictments was engaged in a conspiracy with a Chinese supplier, all manufacturers/distributors are potentially responsible for the actions of their suppliers, particularly those that supply raw ingredients.

 

Manufacturing a Troubling Future Part Two:  Recent Decision

This is the second of two posts regarding the “troubling” state of multi-employer pension plans.  My October post provided an overview of the recently published Teamsters’ Central States Pension “Rescue Plan” and discussed some of its implications.  This post will review the recent  decision of the Ninth Circuit Court of Appeals in Resilient Floor Covering Pension Trust Fund Board v. Michael’s Floor Covering imposing withdrawal liability on a company which had never previously contributed or been obligated to contribute to the pension fund.

When an employer stops making contributions to a multi-employer pension plan, generally ERISA requires the employer to pay its “fair share” of any withdrawal liability.  Often, when the withdrawal liability “bill” exceeds a company’s ability to pay, those costs are absorbed by the plan and ultimately passed on to the remaining employers.

The Resilient Floor Covering case represents a new twist.  In 2009, Studer’s Floor Covering announced it was going out of business at the end of the year.  As business wound down, one of its sales employees formed his own business (Michael’s Floor Covering), negotiated with Studer’s landlord to lease the same building when Studer’s closed, and hired five former Studer’s employees.  Studer’s sold a majority of its equipment and inventory at a public auction, although Michael’s purchased some equipment and inventory, and Studer’s allowed its telephone number to be transferred to Michael’s.

When Studer’s failed to pay $2.2 million in withdrawal liability, the pension fund sued Michael’s under the theory that Michael’s was the legal “successor.”  Applying traditional labor law principles, the district court ruled that Michael’s was not a successor and had no obligation to pay Studer’s liability.  The Ninth Circuit reversed.

In a surprising decision, the Ninth Circuit held that withdrawal liability under ERISA could be imposed on an unrelated company.  The Court held that in determining whether to impose such liability, the “most important” criteria to examine was whether there was a “substantial continuity” between the two entities based on whether the new company served the “same body of customers.”  In short, the Court held that because Michael’s in fact ended up earning a substantial portion of its business from Studer’s former customers, this factor alone was sufficient to find that Michael’s was a “successor” for purposes of withdrawal liability.

Impact

The impact of the Ninth Circuit’s decision remains to be seen.  Arguably, by focusing on whether there is a “substantial continuity” between two manufacturers, a manufacturer seeking to avoid the assumption of another’s withdrawal liability can take steps to make sure there is no such continuity.  But the Court’s focus on whether the new manufacturer ended up serving the same “body of customers” injects substantial uncertainty into this analysis.  In essence, a manufacturer may not be able to plan what its customer base will end up being.  The manufacturer planning to open an entire new market may fall short and the result could be nothing more than the “same old” customer base of the prior company.  That fact alone may serve to impose liability.

Furthermore, there is no telling whether pension funds will seek to impose the new standard retroactively on manufacturers.  One could see a scenario in which funds reassess collection efforts in light of Resilient Floor — seeking to collect what might not have been previously collectible.

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