‘Tis especially the season this year for company holiday parties.  Manufacturers may have avoided hosting large group gatherings over the last few years, including parties, and may be seeking ways to engage workers and increase morale in the workplace at this time of year; to that end, hosting holiday or festive lunches, parties, and gatherings may be on the “to do” list this fall for manufacturers.  In order to have a successful gathering, it is important that such employers carefully plan the gathering in a manner that ensures it is fun, inclusive, safe, and avoids common legal risks.  The following are some key questions manufacturers should be answering as they sit down to plan such gatherings.

Who should be invited?  Depending on the workforce and the goal of the gathering, it may make sense to consider whether to invite only employees, employees and their significant others, or employees and their families.  There are reasons to limit and expand the list of invitees but the key consideration is – what impact will limiting or expanding the list have on the dynamics of the gathering and will it be positive or negative?

Should alcohol be served?  If so, are there ways to mitigate any associated health and safety risks?  This is a key question and will depend on the workforce, the venue for the gathering (e.g., manufacturing floor versus restaurant), and other factors.  Generally, serving alcohol can create risks to health and safety and depending on applicable state laws, could create liability to the employer if there is resulting harm to people or property.  For that reason, employers who are serving alcohol at such gatherings should consider implementing procedures to limit excessive or inappropriate consumption of alcohol including: serving non-alcoholic beverages in addition to alcoholic (e.g., festive mocktails), limiting alcohol per person such as using a ticket system (e.g., 1 or 2 tickets maximum), limiting the type of alcohol served, engaging bartenders to serve alcohol (and ensuring they will be contractually liable for issues that arise as a result of such service), ensuring that alcohol or the bar area is not the focus of the gathering, serving lunch or dinner, ensuring managers and supervisors are generally monitoring employees (e.g., observing if anyone is visibly intoxicated), among other actions.  Employers may wish to determine, with their insurance carrier, if they could be liable for alcohol or other issues related to such gatherings.

What is the goal of the gathering and how can that be accomplished?  It is important to remember that the party should support the goal.  For example, if the goal is to create comradery and positive team dynamics, it may make sense to include activities in the agenda (e.g., trivia, games, etc.) rather than general networking.  If the goal is for employees to meet each other who may not have met, it may be helpful to provide name tags, assign the seating, and schedule activities that foster interactions.

How will we remind employees of the company’s expectations for conduct when attending such gatherings?  Typically, gatherings are held in a more informal and relaxed environment; even so, employees will need to comply with company policies and expectations which may necessitate a reminder ahead of the gathering.  To that end, employers should consider sending out a reminder email the day before which references key policies that remain in effect such as sexual harassment, professionalism and respect in the workplace, dress code, and others.

Who will supervise the gathering?  This question is critical, as employers have a duty to exercise ordinary and reasonable care in supervising such gatherings.  Therefore, employers should ensure managers understand their role in supervising and circulating during the gathering.

Should attendance be mandatory or voluntary?  This depends on the gathering.  Assuming that this is a holiday or festive gathering that occurs after hours, it may make sense to make attendance voluntary.  First, not all employees may celebrate the holidays and may not feel comfortable attending.  Second, mandatory attendance may increase the likelihood that the employer is liable for any issues that arise such as workplace injuries (i.e., workers’ compensation).

How do you know if it was a good party?  Hopefully, employers receive positive feedback about the gathering!  That being said, it is important to ask employees and managers about the gathering and solicit feedback for an important reason – if anything occurred that may be problematic, employers will want to know as soon as possible so the issues can be promptly addressed.

Manufacturers who are planning holiday or festive gatherings should consult competent counsel with any questions regarding applicable laws and best practices.  A thoughtful and well-planned gathering can certainly make the holidays bright!

The State of California has always been a leader in regulating chemical ingredients contained in products sold in the state (think Prop 65), and it has turned its sights towards per- and polyfluoroalkyl substances (PFAS). There are already laws on the books banning the sale or distribution of PFAS-containing food packaging and children’s products, and requiring disclosure of PFAS in cookware. California recently added to the list of products that must be PFAS-free within its borders, passing two new laws banning the use of PFAS in certain textiles and cosmetic products.

Under the newly passed AB 1817, beginning on January 1, 2025, “no person shall manufacture, distribute, sell, or offer for sale in the state any new, not previously used, textile articles that contain . . . PFAS.”  Textile articles include, among other things:

  • Apparel
  • Furnishings
  • Towels
  • Napkins
  • Shower curtains
  • Handbags and backpacks

Manufacturers of textile articles must use the “least toxic alternative” when removing PFAS from these products, including using an alternative design. Manufacturers will also be required to provide a “certificate of compliance” to persons selling or distributing their products within the state, which must be signed by an “authorized official of the manufacturer,” stating that the textile article does not contain PFAS.

AB 1817 exempts “outdoor apparel for severe wet conditions” from the PFAS ban; however, if such products contain PFAS, they must be labeled “Made with PFAS chemicals,” including in any online listings for sale.

In addition to textile products, California also recently banned the use of PFAS in cosmetics. Under AB 2771, beginning on January 1, 2025, “no person shall manufacture, sell, deliver, hold, or offer for sale in commerce any cosmetic product that contains intentionally added PFAS.” Cosmetic products include any article intended to be applied to the human body for “cleansing, beautifying, promoting attractiveness, or altering the appearance.”

PFAS is considered to be “intentionally added” when a manufacturer adds PFAS for functional or technical effect on the product, or when PFAS are an intentional breakdown product of another added chemical.

With these two new laws, California is continuing the trend in regulating, requiring reporting, or outright banning products containing PFAS. Manufacturers should continue to take notice of these laws and how they might impact their products – both in the State of California and potentially beyond.

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.

On October 7, 2022, the U.S. Department of Commerce announced a series of new export controls designed to curtail China’s access to certain advanced semiconductor chips and technology, integrated circuits, and advanced computing technology. The new regulations continue a trend of export controls aimed at curtailing certain sectors of the Chinese economy that touch on military and national security interests. Exporters in virtually any industry that export to China may be affected, thus reinforcing the importance of know-your-customer diligence for transactions with China.

            There are four key takeaways:

  • First, certain semiconductor equipment, advanced computer chips, computers containing such equipment, and related manufacturing equipment have been added to the Commerce Control List and now require a license for export to China.
  • Second, a new license requirement has been imposed for exports of any items subject to EAR, the Export Administration Regulations  (even items classified as “EAR99,” which often do not require a license for export to China) relating to supercomputing, semiconductor, and integrated circuit uses in China.
  • Third, the new rule expands the EAR’s “foreign direct product” rules to encompass more advanced computing and semiconductor items, thereby increasing the reach of the EAR to regulate transactions that involve some products that are not produced in and never shipped from the United States, but which are the product of U.S. manufacturing and technology.
  • Fourth, the new rule prohibits U.S. persons (U.S. citizens and green card holders) from facilitating the development of certain integrated circuits in China.

The most significant immediate impact of these new restrictions is on the computer chip and semiconductor industries. The prohibition on U.S. persons facilitating development of chip technology in China has had a significant effect. Some chip manufacturers have already announced that they will suspend dealings with China by U.S. personnel and business operations in light of the new regulations. Although foreign companies and foreign subsidiaries of U.S. companies are not considered U.S. companies, their U.S. personnel and U.S parent companies would be subject to the facilitation ban.  

The new regulations are likely to affect a broad array of industries because they impose a license requirement for exports of all items destined for supercomputing, semiconductor, and integrated circuit end uses in China, even those classified as EAR99 that often do not require an export license for export to China. Accordingly, know-your-customer diligence is critical in the new regulatory environment. Companies exporting to China cannot determine their licensing obligations based merely on the nature of product to be exported. The U.S. government expects exporters to identify the end user, end use, and country of ultimate destination for all export transactions. This begins with obtaining that information from the other party or parties to the transaction. (The BIS-711 “Statement by Ultimate Consignee and Purchaser” form is one method for collecting this information). Additionally, the U.S. government expects companies to follow up on and resolve any “red flags” it encounters in the information provided before proceeding with a transaction. For example, discrepancies in the information provided (such as a mismatch between the provided name of the end user and the name of the business actually located at the delivery address) could indicate that the facts of the transaction are different from what was represented. As licensing requirements for exports to China are increasingly determined by the end use and end user and not just the nature of the item to be exported, such know-your-customer diligence takes on increased importance.

This week’s post was co-authored by Robinson+Cole Labor and Employment Group lawyer Kayla N. West.

New York City’s wage disclosure law is set to take effect on November 1, 2022.  New York City is one of several state and local jurisdictions in the United States that have passed such laws recently.  In fact, New York State’s legislature passed its own wage disclosure law in June of 2022, which is currently awaiting Governor Kathy Hochul’s signature.

As we have previously discussed, pay equity has become an increasingly salient issue for employers and lawmakers alike.  As a result, there has been a recent wave of new legislation aimed at establishing equal pay for equal work among employees.  State and local jurisdictions have enacted various pay transparency laws to help tackle the issue.  These laws vary significantly in terms of where, when, how, and to whom the necessary disclosures must be made, as well as the specific information that must be disclosed.  Further discussion on the breadth of these laws can be found here.

New York City’s salary disclosure law is one of the more robust laws that has been passed so far.  The law requires that employers with four or more employees post the minimum and maximum annual salary or hourly wage for every advertisement for a job, promotion, or transfer opportunity that can or will be performed, in whole or in part, in New York City.  As is the case with many pay transparency laws, violating New York City’s salary disclosure law may result in substantial costs for the employer (such as a civil penalty of up to $250,000). 

Manufacturers should remain cognizant of their pay disclosure, notice, and posting obligations, especially if they have employees in different states and localities.  Manufacturers may wish to review and revise applicable hiring and employment documents, materials, procedures, and processes and seek guidance from competent employment counsel to ensure compliance with relevant laws. 

This week we are pleased to have a guest post by Robinson+Cole Labor and Employment Group lawyer Sapna Jain.

In 2019, the Office of Federal Contract Compliance Programs (OFCCP) received an unprecedented Freedom of Information Act (FOIA) request from an investigative reporter (which was later amended), requesting Type 2 Consolidated EEO-1 reports from 2016 through 2020 for federal contractors and first-tier subcontractors.  To provide background, the OFCCP requires contractors with 100 or more employees and federal contractors with 50 or more employees to submit an EEO-1 Report each year, which includes aggregate workforce information, including employee headcount and data on employee race/ethnicity, sex, and job categories.  FOIA is a statute that provides the public with the right to request records from federal agencies, including the OFCCP, with certain exceptions and exclusions.  In the request at issue, the individual requested the Type 2 Consolidated EEO-1 report, which is one of several types of reports that multi-establishment contractors must file annually; contractors with only one establishment are not covered by this request.

Because this FOIA request is so broad and seeks potentially confidential and proprietary information of numerous contractors, the OFCCP created a process to obtain covered contractor objections.  The agency created a portal for contractors to file objections to the disclosure of these records, and is permitting objections to be filed by mail and email, with a current submission deadline of October 19, 2022.  Additionally, the OFCCP stated that it will e-mail contractors that it believes are covered by the FOIA request.

In reviewing the objections, the OFCCP has stated that it will determine whether the information is exempt from disclosure under FOIA Exemption 4, which protects trade secret and commercial or financial information that is privileged or confidential from disclosure.  According to the OFCCP, the agency has not yet determined whether this exemption applies to the requested information, but it will review objections received and evaluate whether that information is protected from disclosure on an independent basis as it relates to each contractor that submits objections.  For contractors filing written objections, the OFCCP’s FAQs suggest the following questions be addressed in the objection:

  • Do you consider information from your EEO-1 Report to be a trade secret or commercial information? If yes, please explain why.
  • Do you customarily keep the requested information private or closely held? If yes, please explain what steps have been taken to protect data contained in your reports, and to whom it has been disclosed?
  • Do you contend that the government provided an express or implied assurance of confidentiality? If yes, please explain. If no, skip to the next question.
  • If you answered “no” to the previous question, were there expressed or implied indications at the time the information was submitted that the government would publicly disclose the information? If yes, please explain.
  • Do you believe that disclosure of this information could cause harm to an interest protected by Exemption 4 (such as by causing genuine harm to your economic or business interests)? If yes, please explain.

If the OFCCP overrules a contractor’s objections, the agency has stated that it will provide written notice to the contractor with an explanation as to why the objection was not sustained, a description of the information that was disclosed, and a specified disclosure date that is a reasonable time after the notice.  According to the OFCCP, if a contractor does not object in a timely manner, the agency will assume the contractor has no objection and will begin the process of disclosing the records.

Due to the fact that the information subject to this FOIA request may be disclosed and then shared broadly, contractors should thoroughly review their options with key stakeholders and competent legal counsel now, before the current October 19, 2022 deadline.

This week we are pleased to have a guest post by Robinson+Cole Labor and Employment Group lawyers Natale V. DiNatale and Kayla N. West.

Last month, the National Labor Relations Board issued a complaint alleging that Apple, Inc. committed an unfair labor practice by prohibiting union flyers in the breakroom while permitting non-union solicitations and distributions, thus interfering with the staff’s rights to engage in union activity.

While it’s important for manufacturers to maintain lawful non-solicitation policies, it’s equally important that employer practices with respect to those policies don’t violate relevant laws, including the National Labor Relations Act (NLRA).  Section 8(a)(1) of the NLRA makes it an unfair labor practice for an employer to interfere with, restrain, or coerce employees in the exercise of their right to unionize or to join together to advance their interests as employees.

As we have previously noted, union organizing is increasing and people view unions more favorably than they have in more than five decades, when unionization was at an all-time high.  According to a very recent press release, the NLRB has seen the largest single-year increase in cases since 1976, including a 53% increase in representation petitions in the recent fiscal year.  Now, more than ever, manufacturers may want to consider both reviewing their solicitation and distribution policies and practices and appropriate training for their supervisors to avoid learning any lessons the hard way.

While the NLRA provides employees with a right to engage in union activity, including solicitation and distribution in support of a union, employers may generally maintain policies that prohibit solicitation during working time and the distribution of materials in working areas or during working time.  These limitations, which are often intended to maintain an efficient and productive workplace, can be applied, for example, to solicitations by employees to buy a product or service or to sign a union card.

But what happens if a manufacturer allows an employee to promote their side business or sell candy for their child’s fundraiser at school?  Even if a manufacturer’s solicitation and distribution policy doesn’t violate the law, selectively enforcing the policy or otherwise promulgating practices with regard to solicitations and distributions in a discriminatory manner can violate the NLRA.  Thus, where a manufacturer enforces the policy or practice only against union activity, a union can challenge the policy or practice as discriminating against employees based on the exercise of their right to engage in activity protected by the NLRA or otherwise interfering with employees’ right to engage in union activity.  Employers may wish to speak with competent labor counsel regarding the implementation of lawful solicitation and distribution policies and practices.

There are a lot of manufacturers out in the market looking to buy. Many “strategic” buyers are taking advantage of healthy balance sheets that are bolstered by a lot of cash. A few weeks ago, I attended a presentation by an investment banker that cited publicly-available estimates of nearly $3.5 trillion in cash reserves among middle market companies. 

“Multiples” remain high in certain sectors, including aerospace and defense, food and beverage, and other advanced manufacturing. As a result, buyers of all types are looking for transactions that are not the subject of an auction, but rather can be achieved in a private way.

While COVID-19 certainly changed the way transactions and due diligence were performed, in some ways I think it “shrunk” the world, as many of our clients are looking beyond their borders for potential companies to buy. With that said, there have been some shifts on where people are looking to buy.

A recent publication by global accounting firm E&Y confirms this point:

According to analysis by EY, the nature of cross-border deals is changing to reflect geopolitical tensions on the world stage. While cross-border transactions levels in H1 have decreased (24% in 2022 vs an average of 30% over 2015-19), the share of cross-border deals among closely affiliated countries has increased (51% in 2022 compared to an average of 42% over 2015-19). The analysis finds that investment from China into the US has fallen from US$27b at the highpoint in H1 2016 to US$1.9b, while North American investment into Europe have increased from US$60b to US$149b over the same period.

This analysis confirms two things I am hearing anecdotally. First, that manufacturers of all sizes are looking at transactions in “friendly” countries. Second, that the interest in Europe has increased for several reasons, including the strength of the dollar. Companies are looking for “deals” in Europe and I expect that to continue. 

As most federal contractors are likely aware, this year marked the first year when covered entities were required to certify compliance with their annual affirmative action plan requirement using the new Contractor Portal of the Office of Federal Contract Compliance Programs (OFCCP). Federal contractors (and subcontractors) that are subject to such requirements now must certify compliance as it relates to covered establishments by June 30 of each year, beginning this year. Over the summer, the OFCCP clarified several important points related to such compliance.

First, the agency explained that while the Contractor Portal remains “open,” the June 30, 2022 deadline still remains and contractors that have not yet registered and certified compliance must do so as soon as possible. Second, the OFCCP clarified that any contractor that requested assistance with registration or certification before June 30, and that is still awaiting such assistance, is deemed to have met the compliance deadline. Third, and most important for contractors, is that: 1) contractors that have not certified (including those that haven’t used the Contractor Portal to do so) are more likely to appear on the OFCCPs scheduling list (of upcoming audits) than those that have certified their compliance, and 2) contractors that have not certified compliance by September 1, 2022, will be included on a list provided to federal agency contracting officers, with the stated purpose being that the agencies then will notify the contractors of their obligations. Therefore, contractors that have not complied with the affirmative action requirements or have complied but not certified such compliance using the OFCCP’s Contractor Portal, should do so as soon as possible. Contractors that have questions about registration, certification, coverage under the law, and similar issues may wish to contact competent counsel.

Thank you to Emilee Mooney Scott for this post.  Emilee is a member of Robinson+Cole’s Environment, Energy + Telecommunications practice group.  She focuses her practice on environmental compliance, transactional and remediation matters, including matters related to emerging contaminants like PFAS.

Last week, the U.S. Environmental Protection Agency (EPA) released a pre-publication version of a Proposed Rule to designate PFOA and PFOS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund). This marks the next step in a trend of increasing regulation of per- and polyfluoroalkyl substances (PFAS), a class of chemical substances to which PFOA, PFOS, and a number of other substances belong. PFAS have been used for a variety of applications, including firefighting foams, stain guards, and non-stick coatings, and are now widely found in the environment.

Under CERCLA, EPA has the authority to require potentially responsible parties (PRPs) to remediate sites contaminated by hazardous substances, and to recover costs from such PRPs for EPA-led cleanups. These provisions do not yet apply to PFAS because they are not CERCLA hazardous substances, but if the Proposed Rule is finalized, these familiar provisions would apply to PFOA and PFOS.  Similarly, the hazardous substance designation would allow private parties that incur costs to investigate and remediate PFOA and PFOS to use CERCLA’s cost recovery and contribution provisions to pursue other PRPs for recovery of associated costs. 

The Proposed Rule, if finalized, could have significant impacts on Superfund sites that are presently undergoing remediation or even where remediation has already been completed.  For sites being remediated now, the EPA-approved remedial plans would have been calibrated to address other hazardous substances (say, solvents) already designated under CERCLA. The addition of PFOA and PFOS as hazardous substances may require a change in plans and/or additional work to address PFOA and PFOS as well as the original drivers. For sites that have already been closed without investigation and remediation of PFOA and PFOS, designation of such substances as hazardous under CERCLA could cause those sites to be reopened and additional remedial efforts to be required.

EPA’s proposed CERCLA hazardous substance rule follows a significant reduction earlier this summer in EPA’s non-binding health advisory levels for PFOA and PFOS in drinking water. In 2016, EPA had set a non-binding health advisory level of 70 parts per trillion (ppt) for both PFOA and PFOS. In June of this year, EPA issued revised advisory levels of 0.004 ppt for PFOA and 0.20 ppt for PFOS, as well as new health advisory levels for additional PFAS GenX (10 ppt) and PFBS (2000 ppt). The health advisory levels continue to be non-binding, but EPA has signaled its intention to promulgate a final rule setting a maximum contaminant level for PFOA and PFOS, enforceable under the Safe Drinking Water Act, by the end of 2023. The proposed rule is expected later this year. 

Following publication in the Federal Register, EPA will accept public comment on the Proposed Rule for 60 days. The precise text and timing of the final rule is not yet clear and may be impacted by the volume and tenor of public comments. It also remains to be seen whether EPA will propose to designate other PFAS as CERCLA hazardous substances, and if so, which ones.

This week’s post is authored by Andrew Howey, non-lawyer intern. Andrew had a great summer with us and the post below was generated after discussions we had recently with manufacturers about how to exit distributor agreements.  Andrew’s comments were in consultation with other members of our manufacturing team.

When negotiating distribution agreements, sometimes manufacturers overlook the significance of termination clauses. After all, if you are in the process of making an agreement with a new distributor, why take the time to worry about what will happen if the agreement needs to end? Yet this mistake can often prove to be problematic for manufacturers. Frequently, manufacturers later feel the need to terminate the agreement, and must rely on vague or unfocused termination clauses.

Terminating a distribution agreement is never a pleasant process, but what if the distributor is not at fault? There are times when the distributor has upheld its side of the agreement, but the manufacturer simply wishes to find greener pastures, either with another distributor or to distribute the product themselves. When this occurs, it can leave a distributor feeling betrayed and hostile, and with a weak termination clause, this can result in drawn-out litigation that will cost manufacturers an excessive amount of time and money, in addition to killing any chances of future collaboration between the two sides. To summarize, the consequences of a poorly-written termination clause can put a manufacturer in a very bad position.

What can a manufacturer do to terminate a relationship with a performing distributor without creating animosity? Sometimes, a termination for convenience clause will exist that will allow a manufacturer to get out immediately. Oftentimes, however, such a clause will not be present (particularly with distributors that have significant leverage) and the manufacturer has to resort to claiming termination for cause and the prospect of extended hostile litigation. Lawyers that represent manufacturers often focus on the litigation aspects of these terminations by drafting long, drawn-out forum selection (i.e. where the lawsuit will take place) and dispute resolution (i.e. how the litigation will unfold) clauses. Of course, sometimes these clauses have no chance of being held enforceable in the country-at-issue. Yet even if they are enforceable, such clauses rarely function as the be-all, end-all of termination disputes. Arbitration, which is often the preferred course in distributor disputes, is costly and rarely expedient. Mediation, while slightly less adversarial, can have the same impact.

So what can be done to avoid litigation for terminating a distribution agreement when the distributor is not at fault? The key to avoiding hostility and litigation with a distributor is to find ways to disincentivize the distributor from pursuing litigation and leaving the door open to future relationships between the manufacturer and the distributor. This way of thinking about the termination as both a legal and business process will serve to both avoid the hostility that comes with prolonged litigation and to expedite the process of termination.

One method for an expedited resolution is to draft a termination clause that the distributor will view as more ideal than pursuing prolonged litigation. One possible avenue is to include the payment of an expedited resolution fee to the distributor if termination without cause is contemplated. This fee could be equal to compensation for all of the work completed by the distributor up to the date of termination, or it could equal the dollar amount of supplies sold up to the date of termination, or it could be a different number entirely. The main point is that this fee would serve to compensate the distributor for a job well done and speed up the process of resolving the relationship between the manufacturer and the distributor. There are other possible options as well – all designed to put the dispute on a defined path of early resolution. 

In the end, if you can draft a termination clause that both expedites the termination process and is generous enough to a distributor that its stipulations are favorable to prolonged litigation, you can often seamlessly terminate the resolution without the hostility and financial burden that often comes with termination.