This week, we wrap up our forecast of annual trends with a focus on environmental, health, and safety issues that we expect many manufacturers may face this year.

1.  ESG Developments

Last year, we reported on the SEC’s Proposed Rule on Climate-Related Disclosures. The SEC is expected to finalize this rule in 2023, perhaps as early as March. The proposed rule is based in part on existing (but not mandatory) frameworks for climate-related disclosures, such as the recommendations of the Task Force on Climate-Related Disclosures, which some manufacturers might be familiar with – but not all. The proposed rule would require disclosures related to:

  • Governance of climate-related risks and relevant risk management processes;
  • How any climate-related risks identified by the registrant have had or are likely to have a material impact on its business and consolidated financial statements ( in the short, medium, and long term);
  • How any identified climate-related risks have affected or are likely to affect the registrant’s strategy, business model, and outlook; and
  • The impact of climate-related events and transition activities on the line items of a registrant’s consolidated financial statements.

Most notably, however, covered companies will be required to report greenhouse gas emissions metrics, both those generated by their own company and, for some, those generated from upstream and downstream activities in their value chain. If this requirement remains in the final rule, it will impose significant data gathering obligations that some companies are already grappling with despite the proposed nature of the rule. 

Meanwhile, the SEC has stepped up scrutiny of climate-related and environmental disclosures under its existing rules and guidance. The SEC has issued letters to registrants asking for more information on filings and has even filed lawsuits against registrants based on alleged ESG deficiencies. All signs point to increased activity in 2023.

As has consistently been the case, the European Union seems to be a few steps ahead of the United States in requiring ESG-related disclosures. As an example, in late 2022, the EU passed the Corporate Sustainability Reporting Directive (CSRD), which will require covered companies to report on a variety of ESG topics, such as pollution and climate change. The CSRD will apply not only to companies in the EU, but also to non-EU companies with a significant presence there (annual generation of $150 million or more). And, while companies may use foreign sustainability reporting standards as a stand-in for the CSRD standards, the reporting requirements in the SEC proposed rule will not likely suffice.

In the midst of all of these reporting obligations, government agencies and the public alike will continue to scrutinize corporate greenwashing claims. Many companies have found themselves in the crosshairs – and the courtroom – when they can’t back up their environmental or sustainability claims. Greenwashing claims are having real consequences on companies in the form of reputation, litigation, and reporting risk. And while all of these new reporting standards are aimed, at least in part, to curtail greenwashing, with ever-increasing stakeholder awareness of ESG issues, greenwashing issues are likely to remain on the minds of manufacturers for the foreseeable future.

2.  Increased OSHA Enforcement

Manufacturers can expect OSHA to increase inspections and enforcement in 2023. One noteworthy change that took place at the end of 2022 was an expansion of OSHA’s Severe Violator Enforcement Program (SVEP). Under this program, OSHA prioritizes – and publicizes – certain employers for inspections and enforcement based on criteria regarding the severity of their safety record. In late 2022, OSHA expanded the SVEP to cover even more employers. Now, an employer may find itself on the severe violators list if it meets at least one of the following criteria: 

  • A fatality or catastrophe inspection where OSHA finds at least one willful or repeated violation or issues a failure-to-abate notice if directly related to an employee death or three or more hospitalizations;
  • An inspection where OSHA finds at least two willful or repeated violations or issues failure-to-abate notice based on a high gravity serious violation; or
  • Egregious situations (e.g., extensive violation history, bad faith, intentional disregard for health and safety).

Employers that find themselves in the SVEP will be subject to follow-up inspections at the facility in question. OSHA will also conduct inspections at related worksites if it has reason to believe that there could be a broader pattern of non-compliance.

Once an employer is part of the SVEP, it will remain on the list for at least three years. However, if an employer will agree to an enhanced settlement that includes, among other things, implementation of a safety and health management system, it may be able to exit the SVEP after two years.

Expansion of the SVEP is just one way we can expect to see increased OSHA activity in 2023. Companies that find themselves outside the SVEP may also see increased inspection and more aggressive enforcement as we move through the year, and beyond.

3.  PFAS

Are you sick of hearing about per-and polyfluoroalkyl substances (PFAS) yet? I hope not. The theme for PFAS in 2023 is more everything – more science, more investigation, more regulation, more litigation. More from the federal government, the states, the courts, the community, and your counterparts in a transaction. A couple of noteworthy highlights – first, EPA proposes to designate PFAS as a national enforcement initiative for fiscal years 2024-2027. This addition signifies that there will be increased focus on holding polluters responsible for investigating and remediating PFAS contamination, as well as preventing future releases. As part of the designation, EPA would develop a policy regarding enforcement and settlement of PFAS matters under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as Superfund.

Speaking of CERCLA, EPA has proposed to designate two PFAS compounds –perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS), –  as hazardous substances. 2023 is the year this rule will likely become final. This designation will have broad impacts across the regulated community. First, as CERCLA hazardous substances, the government and private parties alike will have a clear pathway towards cost recovery and other actions related to PFAS contamination. Most manufacturers know from experience that Superfund sites typically implicate a wide variety of parties, some of whom may have had a very minimal contribution to the contamination at issue. This wide net will be of particular concern for sites with PFOA and PFOS contamination, given their ubiquitous use, presence in the environment, and ability to detect at miniscule concentrations. The designation may also result in the reopening of investigations at Superfund sites where PFOA and PFOS could be an issue but has not yet been addressed.

We continue our annual tradition of covering legal trends and outlook for this year, focusing this week on employment and labor.  Following several years of pandemic-focused legislation, we are now seeing a significant uptick in new employment legislation and emerging work-related trends across the country.  The following are a few of the issues and trends that might impact manufacturers in 2023:

  1. Restrictions on Noncompete Agreements: The Federal Trade Commission (FTC) has become increasingly focused on noncompete agreements, having recently proposed a federal regulation that would broadly prohibit employers from requiring employees to execute such agreements.  The FTC has also taken legal action recently against companies, including two manufacturers, for their use of “harmful” noncompete agreements.  States are also continuing to pass laws curbing the right of employers to use such post-employment restrictions. In 2023, we expect this will be a hot topic and will prove to be a serious challenge to manufacturers seeking to protect their business interests.
  2. Right-Sizing or Rebalancing: Following recent economic and business forecasts and a tumultuous several years, manufacturers may be focusing on right-sizing, restructuring, or rebalancing their operations.  Among the critical levers in such discussions are labor allocation, workplace structure, and evaluation of skills and abilities; such discussions may result in layoffs, reductions-in-force, transfers, or redeployment of skills.  In 2023, there is likely to be an increased focus on right-sizing and rebalancing, which could necessitate a multi-disciplinary approach involving legal, human resources, and operations.
  3. Recreational Marijuana’s Impact on Workplace: In 2023, manufacturers will likely continue to face the challenge of managing their employees and workforces in safety-sensitive environments in states in which recreational marijuana is now legal (which includes nearly half of all states).  The legalization of recreational marijuana created significant tension for manufacturers across the country that seek to balance employee off-duty rights in light of this societal shift with the critical need to maintain safety in the workplace. 
  4. Transparency in Employment: Over the last year, there have been numerous state and local laws passed that impose pay transparency and disclosure requirements on employers.  Such laws impact manufacturers’ strategies around remaining competitive and leveraging pay and benefits, especially in a tight labor market.  These laws are part of a larger trend toward greater transparency in the workplace, which has gained traction in the last several years following a focus on closing the wage gap; the #MeToo movement; and the significant impact of social media on the workplace.  We expect that in 2023, laws will continue to be passed regarding transparency in pay, limiting the use of non-disclosure provisions following discrimination and harassment claims, and providing employees with greater rights to information, among other legislation consistent with this trend. 
  5. Diversity, Equity, Inclusion & Belonging (DEIB): In 2022, there were numerous new laws passed that expand civil rights protections for employees and which tackle more nuanced and specific issue areas. For example, many states enacted laws protecting hair styles and textures and providing more specific rights for employees who are breastfeeding.  Additionally, employers have been focusing on training leadership and employees on sensitivity in the workplace, etiquette, and DEIB, in an effort to foster a stronger and healthier workplace culture, improve communication, and limit legal risks.  We expect this trend to continue in 2023.
  6. Artificial Intelligence in the Workplace: Employers, including manufacturers, are turning toward artificial intelligence and algorithm-based technologies for recruiting, hiring, and other human resources-related functions.  Recently, such systems have received more scrutiny from agencies, including the Equal Employment Opportunity Commission, and lawmakers, who seek to ensure that such systems are free of bias.  In 2023, we predict these tools will continue to be a primary focus of enforcement agencies and legislatures.
  7. Union Organizing: Under the Biden Administration, there has been a significant focus on expanding employee rights to engage in union-organizing activity, among other protected activity.  There have also been highly-publicized, successful campaigns in the news, including in the manufacturing industry, in facilities across the country.  Manufacturers should continue their vigilance in 2023 as it relates to union organizing, including monitoring the issue, training supervisors on labor laws, and seeking counsel if necessary.

On January 5, 2023, Federal Trade Commission (FTC) Chair Lina Khan announced a proposed federal regulation that, if enacted, would invalidate non-competes and similar restrictive covenants that are routinely used by companies to limit a former employee’s professional activities post-employment.  The proposed rule would not only ban the future use of non-compete clauses for workers and independent contractors, the rule would invalidate these clauses retroactively.  Furthermore, the FTC signaled that it would also review non-solicitation clauses to see if they effectively function as non-competes.  Although the FTC’s sweeping proposal is unprecedented at the federal level, the agency is in fact catching up with several states that have already curtailed the bounds of non-compete clauses.

Traditional Principles of Restrictive Covenants

The FTC is targeting restrictive covenants that routinely appear in employment contracts, such as:

  1. Non-compete clauses,which prohibit an employee from working in the same business, industry and/or geographic area as their former employer;
  2. Customer non-solicitation clauses, which prohibit an employee from seeking business from the former employer’s customers, including prospective clients; and
  3. Employee non-solicitation clauses, whichprohibit an employee from trying to hire their former co-workers to work at a competing business.

Traditionally, restrictive covenants have been governed by state law, which is usually stipulated in the employment contract.  Although each state retains autonomy to set its own criteria, most courts have required that restrictive covenants be “reasonable.”  The threshold of reasonableness is not a bright-line rule; it depends on the facts and circumstances of each case.  Many courts, including Delaware, use a test that weighs: (i) the geographic scope and temporal duration of the clause; (ii) the employer’s legitimate economic interest in enforcing the provision; and (iii) a balancing of the equities.  New York courts also consider whether the clause “harms the public,” i.e., underlying policy issues.  If a restrictive covenant is deemed unenforceable, some courts will “blue pencil” or edit the clause to make it “reasonable” rather than completely striking it. 

The Current “State” of Play

Recently state legislatures and courts have reconsidered the legality of restrictive covenants.  Before 2007, only three states—California, North Dakota and Oklahoma—banned non-compete clauses.  Since then, over 20 states have adopted measures that curb an employer’s ability to enforce these provisions.  This watershed movement shows no signs of abating with approximately 66 bills pending in 25 states.  Among the jurisdictions with the most significant changes are Colorado and the District of Columbia, which have limited non-competes to “high-compensated employees,” and Illinois, which has banned non-competes for workers earning below a certain threshold.  However, most states still permit broad non-solicitation clauses to protect an employer’s confidential and proprietary information.          

What’s Next?

The FTC’s proposed rule is the latest initiative to implement President Biden’s Executive Order on Promoting Competition in the American Economy [view related post]. If adopted, the new rule would make it illegal for an employer to: (i) enter or attempt to enter a non-compete with a worker or independent contractor, whether paid or unpaid; (ii) maintain a non-compete with a worker; and (iii) represent to a worker that they are bound by a non-compete.  The FTC will look at the contract holistically to see if an employer has effectively implemented a non-compete through overly-restrictive non-solicitation clauses.  The requirements would apply retroactively. 

The proposed rule will be open to public comment for a 60-day window before it is published.  The FTC has specifically asked for statements on

  1. Whether franchisees should be covered by the rule;
  2. Whether senior executives should be exempted from the rule, or subject to a rebuttable presumption rather than a ban; and
  3. Whether low- and high-wage workers should be treated differently under the rule.

The new rule would take effect 60 days after final publication in the Federal Registry, and employers would be given 180-days to comply. 

If you have any questions about restrictive covenants and the proposed regulation, or wish to submit a comment to the FTC, please contact us. 

In late 2012, we created the Manufacturing Law Blog with the goal of providing our manufacturing clients with a holistic approach to the unique issues they face in their global operations.  Starting in 2016, we began a new tradition of dedicating our first three posts of the year to a yearly outlook from our different vantage points.

This year, I’m starting us off by addressing corporate compliance and litigation issues that manufacturers might expect to face in 2023:

  1. Acquisition Activity:  Inflation significantly impacted M&A both in the United States and globally in 2022.  Corporate buyers – many of which had plenty of cash on their balance sheets – invested in a significant way in 2022.  Many smaller manufacturers were acquired in proprietary deals without large-scale auctions.  Private equity and/or financial sponsors remained interested in buying smaller companies (including in the aerospace sector), but the macroeconomic conditions made such transactions costly.  One thing I will be looking at closely in 2023 is whether the “multiples” for acquisitions return to pre-COVID levels.  Sellers are looking for the right “fit” at this point, as opposed to simply selling to the highest bidder.
  2. Supply Chain Investments:  2022 was a year in which manufacturers invested heavily in diversifying their supply chains and also ensuring that their internal processes were more robust.  I expect this to continue in 2023 as more manufacturers look to us to help them develop internal playbooks and enter more long-term agreements with their suppliers.  Note: There is a way to do this in a business-friendly manner, but the days of handshake agreements are almost behind us. 
  3. More Litigation:  Litigation by and between manufacturers, customers, and suppliers will increase in 2023.  We saw an uptick of disputes and threats in 2022 – particularly with respect to obligations in long-term agreements that were not being satisfied.  Additionally, there were several disputes related to requested price increases as raw material and supply chain costs increased.  Business-to-business disputes do not get reported in the media in the same way as consumer litigation (such as class actions).  So, we often need to rely on what we hear in the marketplace and we expect 2023 to be a year filled with some significant disputes.  How do you protect yourself?  This is a good time to look at your significant contracts, especially those that are up for renewal. 
  4. Protectionist Policies Continue:  As I have mentioned in the past, the United States is not the only country to impose policies designed to ensure more domestic investment.  The parlance in the United States is “Buy American,” along with a litany of other phrases.  We are definitely seeing more interest from foreign manufacturers looking to not only expand their U.S. operations but to build factories as well.  As more factories are built, suppliers will want to  be ready to meet that need. 
  5. Government Enforcement:  Some of our most widely-read posts concern laws that the government often imposes against manufacturers.  These laws include the Foreign Corrupt Practices Act (FCPA), the False Claims Act, and trade compliance laws (ITAR/EAR), among others.  The demand by our clients for our assistance with developing policies and training to address some of these issues has increased significantly and we expect that to continue in 2023.  One area I would watch in 2023 is the U.S. government’s scrutiny of the use of various certifications, including Women Owned Small Business, Minority Owned Business, and others.  These certifications often give suppliers certain advantages with respect to government contracting.  With that said, I am seeing several reports of the U.S. government enforcing the rules surrounding these certifications, and thus it is important to make sure that manufacturers are in compliance with the rules. 

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

As an update to our October 12, 2022 post regarding the deadline for federal contractors and first-tier subcontractors to object to disclosure of their Type 2 Consolidated EEO-1 reports from 2016 to 2020, the Office of Federal Contract Compliance Programs (OFCCP) has provided federal contractors with more information regarding the release of such information.

Specifically, non-objecting contractors began receiving e-mails from the OFCCP as early as November 22, 2022, notifying them of the agency’s intent to release the EEO-1 data beginning on January 2, 2023. The e-mail stated that if the contractors believe the OFCCP sent this message to them in error – for example, if the company filed objections or did not meet the requirements for disclosure during a specific time period – contractors should reach out to the OFCCP as soon as possible, but no later than January 2, 2023.

The OFCCP also appeared to give another opportunity for contractors to object to the release of the EEO-1 data, provided the contractor can explain the delay, even if they did not submit an objection during the designated time period, which ended on October 19, 2022. If the OFCCP finds there was good cause for the lack of an objection filed during the earlier time period, it may consider the substance of the untimely objection. (Notwithstanding, we note that the OFCCP’s rollout timeline does not include any updates after the October 19, 2022 extension.)

In related news, the Center for Investigative Reporting, the group related to the investigative reporter who submitted the Freedom of Information Act (FOIA) request to the OFCCP, filed a lawsuit against the Department of Labor (DOL) in the United States District Court in the Northern District of California. The lawsuit alleges that the DOL violated the FOIA and is seeking an injunction to require the OFCCP to release the EEO-1 data, regardless of whether the contractor filed objections.

For questions regarding objections to the EEO-1 data disclosure or related issues, Robinson+Cole attorneys are able to assist.

‘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.