Labor Board Showing Valentine’s Love to . . . A Labor Union?

I think by now regular readers of this column know I embrace my inner geek.  I read decisions when they are issued in areas where I am trying to identify trends, anticipate future events, and give clients and friends some insight they may not get from others.  And you know that I have been keeping tabs on the National Labor Relations Board now that it is being led by a unanimous Republican-led, Trump-appointed group of decision-makers.

You might imagine my surprise when I read a recent unanimous decision where the Board reversed the administrative law judge and held that the firing of a union advocate was illegal.  The case is called  Rhino Northwest, LLC, 369 NLRB No. 25 (Feb. 6, 2020) and it is an interesting read.

Employees at this Company would be assigned jobs based on a referral list.  Rhino Northwest had a written policy that if an employee did not accept an available assignment for 90 days, she or he would be “deactivated” from the list and would not be referred jobs in the future.  An  employee who was “deactivated” could be “reactivated” on request.

Following  a union organizing campaign, which the union won, an employee was “deactivated” from the list.  The employee happened to be a big union supporter and ran a competing business.  During the election campaign, senior management made a good deal about the fact that this union supporter ran a competitive business and questioned whether that competitor had a union contract.  (The employee asserted, somewhat proudly I think, that he was a union company.)

Once the election was over, Rhino Northwest deactivated the employee.  The HR director said he was deactivated because he had not worked in 90 days.  Others testified it was because he ran a competitive business, which was against another written policy.

After a full trial, the administrative law judge found the discharge to be lawful.

The NLRB did not agree.  Stressing that the issue was not whether Rhino Northwest could have fired the employee for running a competitive business, but whether the company’s stated reason was the true reason, the Labor Board examined the record and rejected the Company’s defense.  A key part of the decision centered on the fact that other managers had known about the employee’s competition for a long time and even referred work to him, without issue.  The Board was also troubled by the fact that the reasons for the actions were not consistent.  People could not get their story straight.

I do not think this signals a “softer” or more “employee-friendly” NLRB.  Perhaps the Board just could not reconcile the facts to the Company’s theory.  Or, perhaps, the Board was just showing some Union love around Valentine’s Day.

 

The U.S.-Mexico Patent Prosecution Super-Highway

This week, we are pleased to have a guest post from John L. Cordani, Jr.  John is a member of Robinson+Cole’s Manufacturing Industry Team and regularly counsels clients on intellectual property issues involving patent procurement, licensing, and litigation.

For the past several years, the patent offices in the United States and Mexico have operated under a type of patent examination fast-tracking and work-sharing agreement known as a Patent Prosecution Highway (PPH). This agreement between the United States Patent and Trademark Office (USPTO) and the Mexican Institute of Industrial Property (IMPI) was set to expire in June of this year, and the status of the program going forward was uncertain.

But on January 28, the Offices announced a new agreement that promises to improve upon the PPH system by creating an even “more streamlined approach” to obtaining a Mexican patent once a corresponding U.S. patent is granted than that presently offered under the PPH. Read the full article on IPWatchdog.com

IoT Manufacturers – What You Need to Know About California’s IoT Law

This week we are pleased to have a guest post from Deborah George, a member of Robinson+Cole’s Data Privacy + Cybersecurity Team. Attorney George focuses her practice on data privacy and security, cybersecurity, and compliance with related state and federal laws, advising clients on the development of privacy and security plans, including WISPs, policies and procedures to comply with state and federal data privacy and security laws and regulations, and website and mobile app privacy policies and terms of use.

California has another privacy law that took effect on January 1, 2020 and it’s not the California Consumer Privacy Act (CCPA). This privacy law regulates Internet of Things (IoT) connected devices. SB 327 was enacted in 2018 and became effective on January 1, 2020. The California IoT law requires manufacturers of connected devices to equip the device with a reasonable security feature or features that are all of the following:

  • appropriate to the nature and function of the device;
  • appropriate to the information the device may collect, contain, or transmit; and,
  • designed to protect the device and any information contained therein from unauthorized access, destruction, use, modification, or disclosure.

So which manufacturers must comply with this new law and what is considered a connected device?

A manufacturer is defined as the person who manufactures, or contracts with another person to manufacture on the person’s behalf, connected devices that are sold or offered for sale in California. This seems clear enough, if you manufacture a connected device that is sold or offered for sale in California, the California IoT law applies.

What is a connected device?

A connected device means any device or other physical object that is capable of connecting to the Internet, directly or indirectly, and that is assigned an Internet Protocol address or Bluetooth address. Smart phones, watches, speakers, wearable devices, televisions, thermostats, doorbells — the list is almost endless — are all examples connected devices.

What is a reasonable security feature?

The law states it shall be deemed a reasonable security feature if either of the following requirements are met:

(1) The preprogrammed password is unique to each device manufactured; or
(2) The device contains a security feature that requires a use to generate a new means of authentication before access is granted to the device for the first time.

California joins Oregon as one of two states that require reasonable security features for IoT devices. For more information on the Oregon IoT law, see a previous post from the Data Privacy + Cybersecurity Insider blog here. Both of these laws mean that manufacturers must incorporate these security measures into connected devices. As a practical matter, these security features mean that IoT devices will be less vulnerable to attack since they will no longer work with the “generic” default password set by a manufacturer.

A Look Back and Ahead: 2020 Employment Law Predictions

Our tradition includes using our first January post to make predictions about “what’s to come” in the year ahead. But first, let’s see how I did over the last year. “Time for 2019 Manufacturing Law Predictions: Drum Roll Please!” (Jan. 9, 2019).

I boldly predicted that on the federal level the government would continue to roll back the aggressive enforcement policies of the Obama administration and that some states (at least the 13 states where Democrats control by the governorships and legislatures) would continue to expand enforcement and employee protections. I agree that I was not going out on much of a limb with those predictions. And not surprisingly, they both came true.

The National Labor Relations Board (NLRB) overturned case precedent at a stunning rate, adopted and implemented revised election rules in record time, and otherwise pumped the brakes on “anti-business” practices. See U.S. Government Agencies’ Fast Track Changes to Legal Standards (Part 1)” (April 12, 2019). The Department of Labor also got in the act by adopting new rules for overtime pay and a new rule validating business arrangements that might otherwise result in a “joint employer” finding. See “For Manufacturers, ‘It’s Déjà Vu All Over Again!’” (Sept. 19, 2019).

Speaking of “joints,” a record number of states either decriminalized or outright legalized medical or recreational marijuana. Pot is now legal for recreational or medical reasons in over 32 states. See Legal Pot = Manufacturing Storm Clouds (the Refrain)” (Oct. 31, 2019) and “Legal Pot = Storm Clouds for Manufacturers” (May 29, 2019). The states also flexed their muscles with respect to non-compete and other post-employment restrictions. See Protecting a Manufacturer’s Competitive Advantage: Recent Developments in Post-Employment Restrictions” (Oct. 10, 2019). And New York State decided to compete with California to see which could claim the title of “most employee-friendly” or “least business-friendly.” SeeManufacturers Face New Discrimination Rules” (June 28, 2019). (I think California still holds that title, but it is getting to be a closer contest.)

I could go on, but I think I made the point. What can we expect in 2020? The same thing, only more of it.

With another presidential election on the horizon, putting the entire of House of Representatives and one-third of the Senate in play, we can expect both sides to retreat to their political bases. In Washington, the Trump Administration will push through as many regulatory changes as possible, hoping to prevent the next administration (whether in 2021 or 2025) from overturning their own overturning of the other side’s precedent. Meanwhile, at least in those states controlled by the “other party,” we can expect increased regulation of the employment landscape. I see more minimum workplace standards, increased paid sick and child care leaves, and a closer look of private agreements used to circumvent the will of the state governments. (Pay close attention to laws like those introduced in several legislatures targeting arbitration agreements.)

Manufacturers, particularly with operations in multiple states, should remain vigilant in regard to these contrasting trends. Remember, now is not the time to panic. We have plenty of time to panic.

 

2020 Corporate Compliance & Litigation Outlook for Manufacturers

We kicked off our seventh year writing the Manufacturing Law Blog with Megan’s predictions for EH&S and Matt weighed in about labor and employment.  So, now it is my turn:

Sales Growth

You might wonder why I would start a compliance/litigation discussion with a business issue, but for most industrial companies these issues are interrelated.  We have been working with our clients for years in finding ways to develop an approach to sales that will drive revenue while mitigating legal risk.  The most concrete example is encouraging our clients to adopt a contract management system that gives salespeople flexibility while identifying the truly strategic issues that can lead to significant losses.  The secret to success for many manufacturers, particularly those companies that are not “build to print,” is having processes in place at the quotation stage.  How many times have you heard someone say that we should have never taken on a project or that we priced it incorrectly, resulting in many non-recurring expenses that can never be recovered?  With that said, I have seen a lot of manufacturers get control of this process at the outset, and I expect more of the same in 2020.

International Growth

In 2019, we saw a number of international clients invest in their U.S. operations.  I expect this to continue in 2020, due to both a relatively healthy economy and other political forces, such as tariffs.  We have also received a number of calls from international companies that are looking to open up facilities in the United States.  Typically, the first things people would want to talk about is tax planning and corporate structures.  Over the past few years, however, international companies usually want to talk about where their customers are located first, and then delve into issues about building manufacturing facilities and the various regulatory challenges that arise from that event.

Customer/Supply Chain Disputes

We are seeing more business-to-business disputes – particularly in the manufacturing sectors that are struggling.  As a general principle, most manufacturers try to avoid litigation with their customers for obvious reasons.  And the same can be said of suppliers.  There are always bad contracts signed and poor terms and conditions drafted, and if things are going well, companies usually work out their disputes.  In 2020, I would look at a sector like aerospace as a harbinger of things to come.   We all have read about Boeing, but the engine OEMs are also starting to show signs of seeking to renegotiate deals with their suppliers and recover monies owed under long-term agreements.  I expect the supply chain to continue to get squeezed in 2020 and beyond, and I don’t think this will be limited to aerospace.

2020 Environmental, Health & Safety Outlook for Manufacturers

Welcome to 2020! As always, we at the Manufacturing Law Blog are starting the year with our annual forecasts of hot topics. We start the series with our Environmental, Health & Safety outlook.

PFAS

We highlighted per- and polyfluoroalkyl substances, or PFAS, as a hot topic in last year’s 2019 outlook post, saying, “If you haven’t yet heard of PFAS, you will.” This year, we think it is safe to say you’ve probably heard of them. PFAS are getting a lot of attention everywhere you look, state regulations, federal plans, court rooms, around the deal table, and even on the silver screen. PFAS manufacturing facilities may have been the first targets, but landfills and other potential release sites are gaining attention from regulators and plaintiffs alike. States are moving quickly to adopt regulations, or at the very least request information from parties that do have or may have had a connection to PFAS compounds.

With all of this attention, there has been a growing effort to sample water supplies to evaluate potential exposure issues. These efforts are sure to turn up additional PFAS contamination areas, particularly given the lengthy and prolific use of these compounds. As we identify more and more areas of contamination, the network of potentially responsible parties could expand beyond PFAS manufacturers to include landfill operators, property owners, and PFAS users and suppliers, among others.

EPA developed and released its PFAS Action Plan in February 2019, but the process to change federal regulations and standards is, well, slow. Congress is trying to speed up the action, with House bill H.R. 535 requiring time frames for a number of regulatory and other actions under the Comprehensive Environmental Response, Compensation, and Liability Act, Safe Drinking Water Act, and the Toxic Substances Control Act. The Senate and White House vow a fight, but in 2020, it’s safe to say everyone is getting in on the PFAS action.

OSHA Inspection Weighting  

In late 2019, OSHA developed new standards for how it prioritizes inspections. Previously, OSHA focused on the length of time an inspection would take and the number of inspections performed. Under the new Enforcement Weighting System, OSHA is prioritizing inspections based on a number of factors with a goal of targeting higher risk activities and establishments. OSHA plans to prioritize inspections in a weighted fashion in the order listed below:

Group A: Criminal and significant cases

Group B:

  • Fatalities and catastrophes
  • Chemical plan national enforcement priority and process safety management covered inspections

Group C:

  • Caught-in hazards, such as trenching, equipment operations, oil & gas
  • Electrical hazards, such as overhead power lines, electrical wiring methods
  • Fall hazards, such as scaffolds, elevated walking working surfaces
  • Struck-by hazards, such as highway work zones, landscaping, material handling

 Group D:

  • Programmed inspections following an established priority of hazards that are time insensitive and a high priority, such as:
    • Amputation
    • Combustible dust
    • Ergonomics
    • Federal agency inspections
    • Heat hazards
    • Non-permissible exposure limit overexposures
    • Workplace violence hazards
    • Confined space hazards
    • Personal sampling
    • Site-specific targeting

 Group E: all other inspections

This weighting system provides good insight into the types of hazards that might attract OSHA’s attention in 2020.

EPA Focus on Air and Water

EPA sets National Compliance Initiatives (NCIs, formerly known as National Enforcement Initiatives) for multi-year periods to focus its compliance and enforcement resources. The newly established NCIs focus on EPA’s bread and butter—air and water. For FYs 2020-2023, EPA plans to focus on reducing air emissions of hazardous air pollutants and volatile organic compounds, particularly when those emissions would contribute to non-attainment with National Ambient Air Quality Standards or would adversely affect vulnerable populations. EPA also plans to reduce significant noncompliance with the Clean Water Act permit program. EPA has identified approximately 11,000 permittees with effluent violations that are significantly noncompliant. EPA plans to cut the incidence of significant noncompliance in half by the end of FY 2022.

PBGC Report Reminds Manufacturers of the Coming Threat

The Pension Benefit Guaranty Corporation released its Fiscal Year 2019 Annual Report and, you guessed it, it was “un-good” (a legal term I think).  The Multiemployer Insurance Program recorded a record-breaking deficit of $65.2 billion.  The PBGC warned that the Multiemployer fund will likely be insolvent by 2025, within 6 years from today.  Without the PBGC insurance fund, the pensions of 10.8 American workers will be at risk.  Read the Report Here.

Regular readers of this space may recall I have blogged about the impending crisis four times over the last five years.  “Teamsters’ Central States Pension Plan: A Saga Becomes a Nightmare?” (Aug. 16, 2016);  See “The Gift-Giving Season? Three “Game-Changing” Employment Developments Impacting Manufacturers” (Oct. 15, 2014); “Teamster Plan to Cut Pensions Presents Significant Issues for Manufacturers” (May 25, 2015); and “A Troubling Future Part One:  Teamsters’ Pension Rescue Plan” (Oct. 22, 2015).  While Congress has held hearings on legislation to attack the problem, time seems to be running out.  Some of the nation’s largest multi-employer pension plans are likely to become insolvent during the next decade.  Without a comprehensive fix, the pensions of hundreds of thousands of retired American workers will be slashed.  The resulting fallout will stress an already fragile social safety net.

We will continue to watch this space and help manufacturers plan for events as they develop.

PFAS Update: EPA Progress Under PFAS Action Plan

Earlier this year, we wrote about EPA’s PFAS Action Plan, the agency’s blueprint for addressing contamination and protecting public health from per- and polyfluoroalkyl substances (PFAS). The PFAS Action Plan, released in February 2019, details a number of actions EPA plans to take with regard to PFAS, including time frames for implementation. EPA has been making some progress towards implementation, albeit not always on the timeline set forth in the Plan. Below are a few updates since February:

Toxics Release Inventory (TRI) Listing for PFAS 

Yesterday, EPA published notice that it is considering a rule to add PFAS compounds to the list of toxic chemicals subject to reporting under section 313 of the Emergency Planning and Community Right-to-Know Act. This listing would require certain industry sectors to annually report releases of these chemicals. The purpose of the TRI program is to provide the public with information, or, as EPA puts it, “A Right to Know, A Basis to Act.”

The published notice seeks comment from the public as to whether PFAS compounds should be included in the TRI. Specifically, EPA seeks input on:

  • which PFAS compounds should be evaluated for inclusion;
  • whether PFAS compounds should be listed individually or in categories;
  • the appropriate reporting thresholds; and
  • the human health and environmental toxicity, persistence, and bioaccumulation of PFAS.

The public comment period ends on February 3, 2020.

Regulation of PFAS Under the Safe Drinking Water Act (SDWA)

In the PFAS Action Plan, EPA committed to proposing regulatory determinations for PFOA and PFOS—two of the most common PFAS compounds—by the end of 2019. These regulatory determinations are the first step under the SDWA towards the development of Maximum Contaminant Levels (MCLs). EPA is still moving towards this goal, but the draft regulatory determinations are not likely to be released for public comment until early 2020.

Monitoring for PFAS

EPA intends to test for PFAS compounds during the next round of unregulated contaminant monitoring under the SDWA. The purpose of this monitoring is to collect data for contaminants that are suspected to be in drinking water but do not yet have established health-based standards under the SDWA. During the last round of monitoring, EPA tested for six PFAS compounds. EPA may look to expand that list, and it also plans to use newer sampling methods to detect compounds at lower minimum reporting levels than previously possible. The list of contaminants for the next round of testing is expected to be released in 2020.

PFAS Update: EPA Progress Under PFAS Action Plan

Earlier this year, we wrote about EPA’s PFAS Action Plan, the agency’s blueprint for addressing contamination and protecting public health from per- and polyfluoroalkyl substances (PFAS). The PFAS Action Plan, released in February 2019, details a number of actions EPA plans to take with regard to PFAS, including time frames for implementation. EPA has been making some progress towards implementation, albeit not always on the timeline set forth in the Plan. Below are a few updates since February:

Toxics Release Inventory (TRI) Listing for Certain PFAS Compounds 

Yesterday, EPA published notice that it is considering a rule to add PFAS compounds to the list of toxic chemicals subject to reporting under section 313 of the Emergency Planning and Community Right-to-Know Act. This listing would require certain industry sectors to annually report releases of these chemicals. The purpose of the TRI program is to provide the public with information, or, as EPA puts it, “A Right to Know, A Basis to Act.”

The published notice seeks comment from the public as to whether PFAS compounds should be included in the TRI. Specifically, EPA seeks input on:

  • which PFAS compounds should be evaluated for inclusion;
  • whether PFAS compounds should be listed individually or in categories;
  • the appropriate reporting thresholds; and
  • the human health and environmental toxicity, persistence, and bioaccumulation of PFAS.

The public comment period ends on February 3, 2020.

Regulation of PFAS Under the Safe Drinking Water Act (SDWA)

In the PFAS Action Plan, EPA committed to proposing regulatory determinations for PFOA and PFOS—two of the most common PFAS compounds—by the end of 2019. These regulatory determinations are the first step under the SDWA towards the development of Maximum Contaminant Levels (MCLs). EPA is still moving towards this goal, but the draft regulatory determinations are not likely to be released for public comment until early 2020.

Monitoring for PFAS

EPA intends to test for PFAS compounds during the next round of unregulated contaminant monitoring under the SDWA. The purpose of this monitoring is to collect data for contaminants that are suspected to be in drinking water but do not yet have established health-based standards under the SDWA. During the last round of monitoring, EPA tested for six PFAS compounds. EPA may look to expand that list, and it also plans to use newer sampling methods to detect compounds at lower minimum reporting levels than previously possible. The list of contaminants for the next round of testing is expected to be released in 2020.

Conviction of Foreign Employee Reinforces Broad Geographic Reach of FCPA

This week we are pleased to have a guest post from Edward Heath and Kevin Daly. Attorneys Heath and Daly are members of Robinson+Cole’s Manufacturing Industry Team and regularly counsel clients on trade compliance, anti-corruption compliance, and other corporate compliance issues.

 Last week, a jury found a former executive of a French multinational company guilty of violating the Foreign Corrupt Practices Act, money laundering, and conspiracy in connection with alleged bribery in Indonesia. The case is a significant test of the geographic reach of the FCPA because the defendant was a foreign national who was employed by a foreign corporation and never entered U.S. territory during the course of his employment, but he was convicted on the theory that his actions were taken as an agent for his employer’s U.S. subsidiary. Continue Reading

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