A Tale of Two Trends


James Madison groupies rejoice!  All others can share my confusion.

Called the “Father of the Constitution,” scholars credit Mr. Madison for his significant role in the fundamental design of the United States Constitution, where power was distributed between the states and the federal government, and power within the federal government was distributed among three co-equal branches.  The idea being that these bodies would each independently act as a check on the others, reducing the prospect for the centralization of power and the ultimate loss of fundamental freedoms.

Why do I bring this up?  In the last ten days we have witnessed some key examples of these checks and balances at work.  While the Trump Administration has pressed forward with an agenda to make it easier for manufacturers to navigate in the employment arena, state governments have imposed ever increasing restrictions on them.  Consider the following examples:

On August 1, the National Labor Relations Board announced that it was soliciting briefs from interested parties to review the precedent permitting employees to use a manufacturer’s email systems on non-working time for union organizing or other protected activity.  The announcement has been viewed by many as a signal that the Trump Board will eventually reverse the Board’s 2014 Purple Communications decision.

On July 31, the Massachusetts legislature adopted a sweeping new non-compete statute, banning all non-competes for hourly workers and otherwise severally limiting their use.  You may find the text of the new law here, and I am happy to give full credit to the excellent work of Beck Reed Riden LLP on their Fair Competition Law website.

Most recently, on August 7, voters in Missouri overwhelmingly rejected an anti-labor  “Right to Work” ballot measure – a measure which would have outlawed compulsory union membership in the private sector.

These three events in a very short period of time demonstrate the rapid and sometimes conflicting trends taking place right now.  Manufacturers with multi-state operations would be wise to closely monitor legal developments which impact their work force.


WARNING: New California Prop 65 Regulations Coming Next Month

California Proposition 65 is often viewed as a significant thorn in the side of manufacturers.  As previewed in our 2018 Corporate Compliance & Litigation Outlook, significant changes to California Prop 65 will be effective as of August 30, 2018.  If your company has not developed a plan to address these changes, now is the time.

Here is a checklist of items to consider:

  • Does the law apply to me?
    • As set forth by the State of California, “Prop 65 Businesses are required to provide a ‘clear and reasonable’ warning before knowingly and intentionally exposing anyone to a listed chemical, unless the business can show that the anticipated exposure level will not pose a significant risk of cancer or is significantly below levels observed to cause birth defects or other reproductive harm.”  If you sell a product that might end up in the hands of a California resident, the law applies to you.
  • Do I need to make any changes now?
    • Generally, a manufacturer can follow the old rules and label regulations for products manufactured BEFORE August 30, 2018.  Given the realities of manufacturing products, manufacturers need to start implementing changes if they have not done so already.
  • Should I test my products?
    • Prop 65 does not tell you whether you need to test your products.  Rather, it provides guidance if you determine that your product contains one of the regulated chemicals and the levels exceed the “safe-harbor” (if a safe harbor even exists for a listed chemical).
  • What changes need to be made?
    • It is hard to summarize all of the changes in a blog post.  A good summary of the types of changes that have been made to the warnings required is contained here.
  • What are the risks of non-compliance?
    • The penalties can be severe with up to $2,500 per day for each violation.  There is a sophisticated group of lawyers who dedicate their practices to California Prop 65 so expect significant litigation against manufacturers who fail to comply.




State Officials Investigate Use of Non-Competes – Manufacturers Take Notice

Regular readers know that a good part of my practice deals with the use of “post-employment restrictions” to prevent former employees from using, selling or distributing a company’s most valuable assets – its intellectual property.  In one of my first blog posts on this site, I commented that the “explosion” of litigation in this area has been one of the biggest surprises to me (and I suggested a few steps manufacturers could take to appropriately protect their interests).  See I’m New – And It’s No [Trade] Secret” (Oct. 27, 2014).

Now, the head government lawyers in ten states and the District of Columbia have notified seven (7) national quick dining restaurant chains of an apparently coordinated investigation into the use of agreements to inappropriately restrict employees from seeking better paying jobs.  See Letter.   While heralded as an investigation into the use of so-called “No Poach” Agreements (agreements between competitors not-to-hire the employees of one another), the definition of “No Poach” agreements include any written agreement (including confidentiality agreements, no solicitation agreements, and non-compete clauses) used to limit employee mobility.

The language used in the letter (notably use of the phrase “our offices” and “we,” along with an assertion of their “common interest”) seems to indicate a coordinated, multi-state investigation.  Media reports identify the targets of the investigation are:  Arby’s, Burger King, Dunkin’ Donuts, Five Guys Burgers and Fries, Little Caesars, Panera Bread, Popeyes Louisiana Kitchen and Wendy’s.  See Article by Courthouse News.

This multi-state investigation is just the latest probe into Jimmy John’s use of employment agreements to restrict the hiring of workers.  In January 2018, Jimmy John’s was hit with a purported class action challenging the broad use of post-employment restrictions.  Butler v. Jimmy John’s Franchise, LLC et al, No. 18-cv-133 (D. Ill) (January 2018).  Jimmy John’s has filed a motion to dismiss the complaint (a motion which remains pending) but the court denied its request to hold off on discovery until the motion was decided.

One thing seems clear, the use of post-employment restrictions by manufacturers and others likely will draw increasing scrutiny in the months and years ahead.  Readers may wish to confer with legal counsel to make sure they do not become the next target.

Climate Change Nuisance Lawsuit Dismissed

This week, a California federal court dismissed a lawsuit brought by two cities against a number of large oil companies seeking to force the companies to fund the cities’ climate change adaptation efforts. The Court held that, while the science behind global warming is real, the problem must be solved by the legislative and executive branches.

The plaintiffs’ claims were based only on the defendants’ sale of fossil fuels. By selling fossil fuels, the plaintiffs alleged that the defendants were setting off a chain of action that would lead to the combustion of those fossil fuels, which would increase carbon dioxide in the atmosphere, which would lead to global warming, which would lead to sea level rise. The defendants knew this would happen, and they should be required to pay for any infrastructure the cities would be required to implement to combat sea level rise.

The court characterized plaintiffs’ theory of liability as “breathtaking.”

Their theory rests on the sweeping proposition that otherwise lawful and everyday sales of fossil fuels, combined with an awareness that greenhouse gas emissions lead to increased global temperatures, constitute a public nuisance.

The court noted that these claims could reach far and wide, potentially imposing liability on every sale of fossil fuels anywhere in the world by anyone who knew that combustion of fossil fuels contributed to global warming.

But while the court acknowledged these issues, it did not directly address them. Instead, the court noted that the issue was far too broad in scope and technical in nature to be appropriately solved by the courts. The issue involves an analysis of worldwide fossil fuel consumption, the benefits of energy use, and the environmental impacts associated with it. That analysis, according to the court, requires the expertise of our environmental agencies, diplomats, our Executive, and the Legislature.

In sum, this order accepts the science behind global warming. So do both sides. The dangers raised in the complaints are very real. But those dangers are worldwide. Their causes are worldwide. The benefits of fossil fuels are worldwide. The problem deserves a solution on a more vast scale than can be supplied by a district judge or jury in a public nuisance case. While it remains true that our federal courts have authority to fashion common law remedies for claims based on global warming, courts must also respect and defer to the other co-equal branches of government when the problem at hand clearly deserves a solution best addressed by those branches. The Court will stay its hand in favor of solutions by the legislative and executive branches.

What the legislative and executive branches choose to do remains to be seen, but that is a topic for a different post…

NLRB General Counsel Rolls Back Aggressive Anti-Manufacturer Handbook Rules

National Labor Relations Board General Counsel Peter Robb issued a June 6 memorandum outlining his views on the legality or illegality of handbook rules in light of recent Trump NLRB decisions.  That guidance, which can be found here, gives an overview of Robb’s interpretation of the law.

Robb’s guidance represents a radical shift away from the Obama NLRB’s aggressive challenge to common workplace rules.  While one might say that memorandum represents “one lawyer’s opinion,” in truth the memorandum gives a roadmap for employers for drafting work rules and policies.  As head of the prosecuting arm of the NLRB, Robb decides which rules to challenge and which to leave uncontested.  The “Gate-Keeper” function will set the NLRB’s tone for the remainder of his term – Robb can serve until his term expires in 2021 and is subject to reappointment should President Trump or another Republican win the 2020 general election.

Robb’s predecessor, Obama-Appointed General Counsel Robert Griffin, had issued his own interpretive guidance in 2015.   The different approaches taken by the two very different agency prosecutors are striking.

For example, while Griffin’s 2015 memorandum declared unlawful rules requiring employees to be “respectful to the company, other employees, customers, partners and competitors,” Robb’s 2018 memorandum makes clear that employees can be punished for violating rules prohibiting ”rude,” “discourteous,” or “unbusinesslike” behavior.   Similarly, Griffin’s approach found unlawful rules prohibiting employees from making “fraudulent,” defamatory,” or “otherwise inappropriate” statements to co-workers, while Robb’s approach holds such requirements to be lawful and appropriate.

Robb properly cautions, however, that so-called neutral rules adopted or used to suppress the exercise of protected rights by employees would still be held to be unlawful.

For at least the next few years manufacturers will have the opportunity to adopt clear rules and policies to govern worker conduct.  Manufacturers may wish to review with their in house or outside counsel the implications of this important development.

EPA to Rethink Cost-Benefit Analyses During Rulemaking Process

This week, EPA announced that it is considering developing regulations to optimize the use of cost-benefit analyses when it is taking regulatory action. Many environmental statutes require the consideration of costs and benefits to evaluate the impacts of policy choices. EPA is seeking public comment on whether and how these analyses can be made more consistent, reliable, and transparent.

In announcing the Advance Notice of Public Rulemaking, EPA Administrator Scott Pruitt said:

Many have complained that the previous administration inflated the benefits and underestimated the costs of its regulations through questionable cost-benefit analysis. This action is the next step toward providing clarity and real-world accuracy with respect to the impact of the Agency’s decisions on the economy and the regulated community.

EPA is specifically seeking comment on a number of topics, a few of which are listed below:

  • Should certain cost-benefit terms be defined across statutes?
  • How should EPA address benefits from reductions in pollutants that are not directly regulated?
  • How should EPA address costs or benefits that are known, but that cannot be scientifically quantified or monetized?
  • Should EPA consider the cumulative regulatory costs and benefits of multiple regulations?
  • Would a requirement for systematic retrospective review of regulations help identify necessary revisions and guide future rulemaking efforts?
  • What are the potential concerns with issuing regulations governing EPA’s use of cost-benefit analyses when certain statutes may not specifically reference the need to consider costs along with benefits?
  • How can EPA document its cost-benefit analyses to make them more transparent?

Once the Advance Notice of Public Rulemaking is published, the public will have 30 days to offer comments to EPA.

Manufacturing Law Best Practices for Contracting With Machine Shops

Almost all industrial manufacturers deal with machine shops in some form or another.  A typical scenario is that a manufacturer will provide their print (or that of their customer) to a machine shop to fabricate a component or sub-component.  In the manufacturing law world, business to business disputes with machine shops outnumber those up the supply chain.

For that reason, I was particularly interested in a recent blog post by Peter Zelinski, who is Editor-in-Chief of Modern Machine ShopThe blog post, “10 Reasons Why Machine Shops Vary So Much in Quoted Pricing,” is an interesting read as it identifies factors as to why there is a variation in quotes from machine shops for identical machining work.  Two of the factors identified that I thought were interesting were entitled “interpretation” and “qualification.”  First, that one machine shop might quote a higher price because of their interpretation of the job (which another shop might interpret differently).  Second, one machine shop might quote a higher price in an effort to recoup costs associated with qualifying for a certain industry.

From a manufacturing law perspective, here are a few best practices for dealing with machine shops.

First, like everything else, you often get what you paid for.  A “low bidder” mentality – particularly if you are in a highly regulated space like aerospace – can lead to problems down the line particularly when the machined parts are out of specification.  Do your terms and conditions have audit / inspection rights?  How long do you have to complain about parts being out of specification and what is your relief?

Second, it is important to protect your intellectual property (read:  processes, know-how, etc.).  Manufacturers should ensure that their terms and conditions are clear on who owns the intellectual property being provided to a machine shop.  While that might seem simple when it comes to a print, it becomes less clear when you are talking about processes – particularly when the machine shop wishes to adopt those processes for other customers.

Finally, read the fine print if the machine shop has its own terms and conditions.  What happens if your customer cancels the order?  Can you then cancel the order placed with the machine shop?  Do you have to pay a termination fee?  This is where a manufacturer is faced with the dreaded “battle of the forms” (we have written several blog posts on this) where your T&Cs are in conflict with that of your supplier.



Expanding Limits on Applicant Salary History Questions

Manufacturers in Alaska, Arizona, California, Connecticut, Hawaii and Vermont face new limits on the use of an employee’s salary history.

The state legislatures in Connecticut and Vermont have both adopted laws banning manufacturers from asking about an applicant’s prior salary.  Those laws are expected to be signed by the Governors of those states and will take effect on January 1, 2019.  The provisions allow manufacturers to ask applicants about their salary or wage expectations, so long as the manufacturer does not ask about an applicant’s prior salary or pressure an applicant to disclose salary history.  Both laws allow salary history inquiries when required by other federal or state laws.  A similar law has been introduced in the New York legislature by Governor Andrew Cuomo.  Its prospects are not certain as of this writing.  New York City banned inquiries about and the use of salary history effective October 2017.  See prior blog post “New York City’s Salary History Ban Takes Effect October 31.”

Meanwhile, in Rizo v. Yovino (April 9, 2018), the Ninth Circuit Court of Appeals held that an employee’s salary history could not be used to defend a claim under the Equal Pay Act.  The court rejected the contrary views of both the EEOC and several sister Courts of Appeal to the effect that prior salary along with other factors could be used in making compensation decisions.  The Ninth Circuit covers manufacturers in Alaska, Arizona, California and Hawaii.

In light of these developments, part of a growing trend across the United States, manufacturers may wish to review their employment applications and interview guidelines to limit inquiries into salary history in these jurisdictions and continue to watch this space for updates.

California Transparency in Supply Chains Act: What Manufacturers Need To Know

This week, we are pleased to have a guest post from Kevin Daly.  Attorney Daly is a member of Robinson & Cole’s Manufacturing Industry Group and also its Trade Compliance Team.

In 2010, California enacted the California Transparency in Supply Chains Act (the “Act”).  The goal of the Act is to curtail human trafficking and slavery by requiring certain manufacturers and retailers doing business in California to disclose publicly the extent of their efforts to prevent such abuses in their supply chains.

While the law does not require companies to take any affirmative steps to curtail human trafficking, it does require covered companies to disclose on their websites whether and to what extent they undertake certain efforts to investigate and reduce the risk of human trafficking.  Manufacturers or retailers currently doing business in California or planning to expand to California need to assess whether they are covered by the law and, if so, take steps to ensure that they comply with the disclosure requirements.


In order to be covered by the Act, a company must:

  1. Have annual worldwide gross receipts exceeding $100 million;
  2. Be identified as a retailer or manufacturer on the company’s California tax returns; and
  3. Be doing business in California.

For retailers and manufacturers who meet the $100 million threshold, even relatively minimal contacts with California can classify the company as doing business in California.  A company is considered to do business in California if it is organized under California law, domiciled in California, or if it meets certain minimum thresholds for California sales (the lesser of $500,000 or 25% of company’s total sales), California property holdings (the lesser of $50,000 or 25% of company’s total property holdings), or compensation paid in California (the lesser of $50,000 or 25% of company’s total compensation paid).  In 2015, the California Office of the Attorney General estimated that the Act covered approximately 1,700 companies at that time.


A company that is subject to the Act must post on its website disclosures regarding the following topics:

  • To what extent the company engages in verification of supply chains to evaluate and address risks of human trafficking and slavery.  (If the verification is not performed by a third party, the disclosure must specify as such).
  • To what extent the company audits suppliers to verify supplier compliance with company standards for trafficking and slavery in supply chains.  (If such audits are not unannounced or independent, the disclosure must specify as such).
  • To what extent the company requires direct suppliers to certify that materials incorporated into the product comply with the slavery and trafficking laws of the countries where they do business.
  • To what extent the company maintains internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking.
  • To what extent the company provides employees and management who have direct responsibility for supply chain management with training on trafficking and slavery (particularly on mitigating risk within the supply chains of products).

The Act does not require that companies undertake any efforts to combat human trafficking or slavery.

It only requires that covered companies disclose the extent of their efforts on each of the required topics.  The company must disclose the extent of its efforts on each topic; providing only a yes/no response as to whether the company undertakes efforts with respect to each topic does not meet the Act’s requirements.  The required disclosures must be posted in a conspicuous link on the company’s internet homepage.  (Companies that do not have a website instead must provide written disclosures within 30 days of the receipt of a request to any consumer who requests them).  Many companies comply with this requirement by maintaining a link on the top or bottom of their home pages.  A resource guide published by California Office of the Attorney General contains examples of what the agency views as adequate disclosures under the Act.


Enforcement of the Act rests exclusively with the California Attorney General.  The sole remedy in an enforcement action by the Attorney General is injunctive relief.

However, some consumers and their attorneys have begun to bring cases under California consumer protection statutes that permit private actions (such as the Unfair Competition Law, the False Advertising Law, and the Consumer Legal Remedies Act) on the theory that a violation of the Act constitutes  a violation of one of the other laws.  So far, courts have not reached the issue of whether violations of the Act are actionable under these other statutes.

Companies subject to the Act must be aware of the Act’s requirements and place a priority on compliance.

First, covered companies not in compliance with the Act likely face a high probability of an inquiry or enforcement action from regulators.  Because the disclosures are required to be publicly posted, any deficiencies are likely to come to the attention of regulators (particularly given the relatively small number of companies subject to the Act).

Second, the risk of private consumer protection lawsuits based on alleged violations of the Act is uncertain at this time because courts have not yet determined whether such suits are permitted.  If any court decisions endorsing such legal theories come forward, the risk of noncompliance will increase significantly as non-compliant companies may find themselves liable for monetary damages and attorneys’ fees in addition to injunctive relief.

New York Adopts New Tools to Fight Gender-Based Harassment

The New York State Legislature and New York City Council adopted broad new requirements to combat workplace gender-based harassment. New York State’s new obligations were signed into law on April 12 and take effect at different times over the next 180 days. New York City’s new requirements take effect on April 1, 2019.

New York State

Passed as part of the 2019 budget, New York State adopted the following new requirements:

Mandatory Arbitration – Banned provisions requiring arbitration of sexual harassment claims or limiting an employee’s ability to bring a sexual harassment claim in any forum.

Protections for Non-Employees – Expanded a manufacturer’s obligations by making manufacturers liable for the harassment of a contractor, subcontractor, consultant, or other person providing services pursuant to a contract if that manufacturer knew or should have known of the conduct and failed to take action.

Non-Disclosure Agreements ­­– Banned any provision in an agreement preventing the disclosure of the underlying facts and circumstances of a sexual harassment claim unless the provision is the plaintiff’s preference. The law requires that to be effective the non-disclosure provisions must be included in the agreement presented to “all parties,” with the plaintiff having 21 days to consider the agreement and 7 days to revoke acceptance of the agreement.

Sexual Harassment Training and Policy – Directed the New York Department of Labor and the New York State Division of Human Rights to develop a model sexual harassment policy and employee training program. Effective October 8, 2018, every manufacturer must adopt the model sexual harassment policy (or a policy which exceeds the model policy) and annually train all employees using the model training program (or a training program which exceeds that model program).

New York City

Under the legislation adopted  by the New York City Council, all manufacturers that employ 15 or more employees must provide anti-harassment training to all employees and interns within 90 days of work and annually thereafter. The City Commission must develop an online training program meeting the requirements of the law.  The training program will be available for use by manufacturers without charge.

Manufacturers may wish to confer with their human resources and legal professionals to update policies and training programs so as to comply with these laws and to be prepared for issues as they arise after employee training.