The Boeing 737 MAX is Back – What is the Impact for Manufacturers?

It is hard to move the news cycle beyond vaccine updates, but this week brought such news. The aerospace industry received the announcement that many were expecting for a long time. The FAA has decided to allow Boeing to resume deliveries and commercial flights of the 737 MAX by the end of the year.

What is the impact? From an aerospace supply chain perspective, the distribution of a vaccine and the 737 MAX are connected because they each relate to the eventual return of people getting on airplanes, both for business and personal reasons. From a long-term perspective, the fundamentals of the aerospace industry remain solid and there will be a recovery.

However, I have heard some in the media and in the manufacturing industry try to suggest that the return of the 737 MAX will fix the problems in the industry in the short term.

I agree with many of the reactions set forth in a recent article published by Reuters, which attempts to “pump the brakes” on the immediate impact of the 737 MAX. Industry leaders such as Kevin Michaels and Richard Aboulafia underscore the stark reality.

Aboulafia states:

“The market really won’t need new-build planes for a few years, since there are 387 737 MAX’s waiting to return to service, and 450 already-built 737 MAX’s waiting to be delivered.”

Michaels concurs:

“This is great news but . . . It will take several years (for the 737 MAX supply chain) to get back to full production, maybe as many as three years.”

At the end of the day, the return of the 737 MAX is good news in the long-term for Boeing and for the aerospace supply chain. But, the short term challenges remain, as Boeing and Airbus expect that their suppliers will use this time of relatively-low demand in commercial airspace to invest in their businesses. Easier said than done.

“Georgia On [Manufacturers’] Minds”

Regular readers of this blog know that I have been cautioning manufacturers about what I expect will become a significant “snap back” in federal workplace regulations because of Joe Biden’s election as president.  It may be time to consider the changes which may lay ahead.

During his first term, President Biden will be able to appoint a majority of the National Labor Relations Board (Chairman Ring’s term ends in 2022, Member Emanuel’s term ends in 2021, and there is a current vacancy) and its “top cop” (General Counsel Robb’s term ends in 2021).  President Biden will also be able to appoint a majority of EEOC Commissioners (Chair Dhillon’s term ends in 2022, Commissioners Samuels and Burrows terms end in 2021 and 2023 respectively, with Vice Chair Sonderling’s term ends in July 2024) and the General Counsel (whose term ends in 2023).  And let’s not forget the United States Department of Labor, with Senator Bernie Sanders making an overt pitch to become the next Secretary of Labor.

Of course, all this puts Georgia in the spotlight.  It appears the two United States Senate runoff campaign will determine whether the Senate ends up in the hands of the Biden Administration or whether the GOP can stop extreme candidates from being placed at these key agencies.  Some people (and I confess to being one of them) believe that extremes in either direction negatively impact business.  The “back-and-forth” from one administration to another make it difficult to plan over the long term.

As we come into our year-end, all eyes will be fixed on Georgia.

OSHA COVID-19 Update

As COVID-19 cases have continued to rise across the United States, so have COVID-related OSHA complaints and investigations. OSHA has been tracking statistics on COVID-related complaints, referrals, inspections, and citations on a daily basis and posting the results posting the results on its website.

Federal OSHA has initiated over 1,000 investigations related to COVID-19. As of October 22, 2020, OSHA had issued just under 150 COVID-related citations. As we have previously reported, OSHA has not developed standards specific to COVID-19, but it is applying existing OSHA standards to COVID-related concerns. Some of the more frequently cited standards in these citations tend to fall into similar categories:

  • Respiratory protection: employers have been cited for lack of a written respiratory protection program, failure to perform fit testing and provide a medical evaluation to determine an employee’s ability to use a respirator, lack of adequate training.
  • General PPE requirements: employers have been cited for failure to assess the workplace to determine if hazards are present that require the use of PPE and failure to train employees on proper PPE use.
  • Recordkeeping and Reporting: employers have been cited for failure to properly record work-related COVID illnesses and report work-related COVID hospitalizations.
  • General Duty Clause: employers have been cited for failure to provide a work environment “free from recognized hazards that are causing or are likely to cause death or serious physical harm” as required by the General Duty Clause of the OSH Act.

State plan states have also been busy inspecting OSHA-related complaints, with over 3,500 inspections to date. While inspections have been taking place all over the country, many of the inspections have been focused in OSHA Region 2 (New York and New Jersey) and Region 5 (Ohio, Indiana, Michigan, Illinois, Wisconsin, Minnesota).

Perhaps not surprisingly, COVID-related OSHA complaints have targeted industries that have remained at work through the pandemic, as well as those with a high potential for exposure. To that end, many complaints have been received in the healthcare industry, but other employers have not been spared. A considerable number of complaints are also being filed for the retail and food industries, courier and delivery industries, and the warehousing and storage industries.

Historic $2.9 Billion Anti-Bribery Settlement Has Important Takeaways for Manufacturers

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.

It would be a mistake to think that the $2.9 billion settlement Goldman Sachs Group Inc. has agreed to pay in order to resolve allegations of widespread bribes to government officials in Malaysia and the United Arab Emirates has no relevance to those in the manufacturing industry. Although the settlement did involve a financial services firm, the underlying facts highlight important considerations for manufacturers with respect to the U.S. Foreign Corrupt Practices Act (FCPA).

The FCPA is the federal law that prohibits U.S. companies from paying, offering, or promising anything of value to a foreign government official in order to obtain or retain business opportunities. The DOJ and SEC share enforcement authority for the FCPA, and it is a major enforcement priority for both agencies. Total FCPA recoveries for the U.S. government total in the hundreds of millions of dollars annually, and in some years exceed $1 billion. The Goldman Sachs settlement is the largest FCPA settlement ever. Continue Reading

Manufacturers Fighting Disruptive Immigration Reform

This week we are pleased to have a guest post from Jennifer L. Shanley, a member of Robinson+Cole’s Immigration Group. Her preparation of temporary and permanent immigration petitions allow manufacturing, chemical, pharmaceutical, and biotechnology companies, including some Fortune 100 companies, to retain key business people, scientists, researchers, and other professionals.

The National Association of Manufacturers (NAM), along with several prominent business organizations, filed a lawsuit in federal court to stop the Department of Homeland Security’s (DHS) regulations governing the H-1B nonimmigrant visa program that would disrupt manufacturers’ ability to hire and retain critical high-skilled talent.

By way of background DHS announced an interim final rule that revises the definition of H-1B specialty occupation to include the requirement of a specific relationship between the required degree field(s) and the duties of the offered position. It also restricts eligibility for the program in several additional ways, including requiring employers to provide contracts, work orders, itineraries or similar evidence to prove employer-employee relationship when sending H-1B workers to third party worksites, ultimately providing the U.S. Citizenship and Immigration Services (USCIS) with the ultimate discretion on who meets the definition of employer and employee. The other rule issued by the Department of Labor increased the wage floor companies are required to pay employees to historically high rates. Continue Reading

3D Printing for Manufacturers Continues to Lag Behind

Back in 2013, I wrote a blog post about 3D printing and whether it was going to be the next “big thing.”  At the time, the commentary within manufacturing circles was mixed, at best, as manufacturing leaders wondered whether 3D printing would remain a specialty process mainly used by large OEMs such as Ford, GE, etc.

Seven years later, not much has really changed.  I recently read an article in Industry Week by Avi Reichental, a CEO of a 3D printing company, that is appropriately titled “Slow and Steady Wins the 3D Printing Race.”

The article still mentions GE’s efforts to use 3D printing along with some other stock examples that you see in many articles. Mr. Reichental then goes on to say: Continue Reading

New York City and State Paid Leave Laws Mean Changes for Manufacturers

 

Effective September 30, the New York State Paid Sick Leave Law (NYSPSL Law) and amendments to the New York City Paid Safe and Sick Leave Law (NYCPSL Law) became effective requiring implementation of new leave accrual, record-keeping and reporting obligations.  Manufacturers with operations in New York State or New York City may need to update policies and records now.

The NYSPSL law, adopted at the start of the Coronavirus Pandemic in March, requires every manufacturer with employees working in New York to provide paid or unpaid leave to those employees.  The amount of leave and whether paid or unpaid depends on the size and income of the business (summarized below):

Size and Income of Manufacturer Amount of Annual Leave Paid or Unpaid
0 to 4 Employees, < $1,000,000 in annual net income Up to 40 hours Unpaid
0 to 4 Employees > $1,000,000 in annual net income Up to 40 hours Paid
5 to 99 Employees Up to 40 hours Paid
100 or more employees Up to 56 hours Paid

 

Employees begin to accrue leave on the later of September 30, 2020 or their date of employment.  Leave accrues at the rate of 1 hour of leave for every 30 hours of work.  While leave may begin to accrue as early as September 30, employees are not eligible to take leave until January 1, 2021.  Manufacturers may grant employees the full allotment of leave at the start of the calendar year but may not reduce the amount of leave once granted based on the number of hours worked.  Employees may carry over to the next year any accrued and unused sick leave, but a manufacturer may limit the amount of leave taken each year (40 hours for manufacturers of fewer than 100 employees, 56 hours for manufacturers of 100 or more employees).  Manufacturers may grant more leave than the amount required by the law.

Sick leave may be used in any reasonable increment set by the manufacturer.  Employees may use sick leave for a mental or physical illness, injury or health condition of the employee or the employee’s covered family member; for diagnosis, care or treatment of a mental or physical illness, injury or health condition of, or the need for a medical diagnosis for, the employee or the employee’s covered family member; or for an absence due to domestic violence, a sexual offense, stalking or human trafficking, or to avail themselves or a family member of covered services as a result (including civil or criminal proceedings and attendance at victim’s services organizations).

Importantly, the new sick leave benefit appears to be in addition to the Emergency Paid Sick Leave benefits provided by the federal government beginning on April 1, 2021 under the Families First Coronavirus Response Act (FFCRA).  The new sick leave benefits are also in addition to New York Emergency COVID-19 Paid Sick Leave Law adopted in March 2020.  Cumulatively, this means every manufacturer in New York must conform existing leave policies.

While the NYPSL law does not require manufacturers to allow employees to begin using leave until January 1, 2021, manufacturers must begin tracking leave as of September 30.  Upon request, a manufacturer must provide an employee within three  business days with information about her or his leave accrual and use.

New York City Amends Local Law to Conform   

Following New York State, effective September 30, 2020, the New York City Council amended the NYCPSL Law to conform to the New York State law.  In doing so, however, the City Council expanded paid sick leave benefits for domestic workers and imposed additional obligations on manufacturers with respect to their employees located in New York City.

The Amended New York City law requires manufacturers to provide employees either in their paystubs or in a separate document with both the amount of sick time earned and used during the pay period, as well as the current leave balance.  Manufacturers must provide and post written notice of the amended law to all employees within 30 days of its effective date (i.e., by October 30, 2020) or the employee’s date of hire (whichever is later).  This written notice must be posted and provided to employees in English and the primary language of the employee.  Significantly, with the amendment, New York City abolished the requirement that covered employees work in New York City at least 80 hours per year, meaning that manufacturers much track the work hours of even casual or part-time employees.

In addition, the New York City law now provides for up to 40 hours paid sick leave for domestic workers regardless of the number of employees or the manufacturer’s net annual income level.  This change represents a substantial increase in the amount of leave available to domestic workers, as the prior  version of the local law provided two days of paid sick leave per year.  (New York State’s Domestic Workers Bill of Rights provides for up to three days leave for domestic workers, although not specifically for sickness.)

While the amendments became effective in September, a manufacturer need not allow employees to use the extended leave benefits until January 1, 2021.

Unanswered Questions

These new leave laws present a host of unresolved issues for manufacturers.  Neither law addresses the issues presented by manufacturers with operations outside of New York State.  In assessing the amount of leave to provide employees, do employees working outside of New York State or City count toward determining the amount of leave to provide employees?  Furthermore, for employees working both in and out of New York State and City, for leave accrual purposes, do manufacturers count all time worked or only the time spent in the particular jurisdiction.

Many are hopeful that the New York Department of Labor and/or the New York City Department of Consumer Affairs (the agencies with authority to issue implementing regulations) will provide guidance soon.

Given the complex interplay between the federal, New York State and New York City leave laws, employers of New York State or City employees may wish to confer with qualified legal counsel now to comply with notice obligations and harmonize leave policies.

OFAC Issues Advisory on Sanctions for Facilitating Ransomware Payments

On October 1, 2020, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued an advisory “to highlight the sanctions risks associated with ransomware payments related to malicious cyber-enabled activities.”

The advisory acknowledges that the incidents of ransomware attacks on U.S. companies have risen during the COVID-19 pandemic. Although the advisory does not mention that companies have been paying ransoms when they are victimized, it has been publicly reported that companies have paid ransoms, particularly when data has been exfiltrated and the cybercriminals are threatening to post the data online unless a ransom is paid for confirmation of destruction, as is the scheme used by Maze. Continue Reading

OSHA Review Commission Issues Decisions on Machine-Guarding Violations

Thank you to Jonathan Schaefer for this post. Jon focuses his practice on environmental compliance counseling, occupational health and safety, permitting, site remediation, and litigation related to federal and state regulatory programs.

Manufacturing equipment can be dangerous. Hazards associated with manufacturing equipment can come in a variety of forms, such as pinch points, sparks, or flying debris. OSHA regulations require equipment with moving parts to have specific protection mechanisms in place – often referred to as machine guarding. Machine guarding can take many forms, such as barriers, light curtains, and two-hand trips.

In 2019, the last year for which complete data is available, machine guarding violations were in OSHA’s top 10 most cited violations, as well as OSHA’s top 10 list for “serious” violations and for “willful” violations. Of the 1,969 machine guarding violations OSHA issued citations for between October 1, 2018 to September 30, 2019, 1,737 were classified as “serious” and 13 were classified “willful”.

However, not all of these citations become final, or at least not in the form issued. Some employers choose to challenge citations to OSHA’s Review Commission. For those not familiar with OSHA’s Review Commission, it is a three Commissioner panel appointed by the President and confirmed by the Senate. The Commission hears appeals of contested OSHA cases. Contested cases can take a while to work their way through OSHA’s contest case process and receive a decision from the Commission. The three cases discussed below involved citations issued in 2014 and 2016. Continue Reading

DOL Revises Families First Regulations

On Friday, September 11, the U.S. DOL issued revised regulations under the Families First Coronavirus Response Act (“FFCRA”).  Responding to a Federal Court’s August 4 decision invalidating four provisions in the prior regulations (see Post here), the Revised Regulations become effective September 16 and will sunset on December 31, 2020.

Adopted with lightning speed in March 2020 to respond to the Coronavirus Pandemic, the FFCRA established two separate paid leave provisions:  Emergency Paid Sick Leave (capped at 80 hours of paid leave) and Emergency Family and Medical Leave (capped at 12 weeks of leave).  Due to its emergency nature, Congress provided that these two leave provisions expire on December 31, 2o20.  Congress further directed the DOL to adopt implementing regulations with immediate effect.

When the DOL issued the original regulations in April, advocates and others attacked them in large part for being overly “business friendly.”  For example, under the original regulations, intermittent leave could not be taken absent a manufacturer’s consent.  Additionally, the regulations permitted a manufacturer to deny leave to employees for whom no work was available.  Furthermore, the Regulations defined the term “health care provider” broadly, permitting manufactures to exclude a broad array of individuals from coverage.

The Revised Regulations reinstate most of the challenged provisions, with additional explanations and justification.  For example, the Revised Regulations re-affirm that employees are not eligible for leave if no work is available (stressing that manufacturers cannot use the “no available work” defense to subvert employee leave entitlements) and re-affirm that intermittent leave is not available unless the manufacturer consents to it.  Interestingly, and somewhat confusingly, the Revised Regulations assert that when a child’s school requires the child to attend on alternating days, that schedule is not an “intermittent one,” but each day constitutes a “separate” school closing.  Manufacturers must, accordingly, grant leave to the care-giver under those circumstances.

The Revised Regulations do, however, narrow the definition of “health care provider” to more closely align the law to those whose services are directly involved with the provision of health care, even if the employee does not actually interact with the patient.

While ultimately effective for a limited period, the Revised Regulations likely will impact how manufacturers administer their FFCRA leave programs and will live on for quite some time.  Manufacturers may wish to confer with counsel of their choice to implement these new requirements.

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