Thank you to my colleagues Jonathan Schaefer and Abby Warren for their contributions to this post.

We take a break from our regularly scheduled “2022 outlook” programming to bring you breaking news on the seesaw that is the enforcement of OSHA’s Emergency Temporary Standard (ETS) regarding COVID-19 vaccination or testing. As we previously reported, it was on, then it was off. Then it was on, and now it is off again. Yesterday, the United States Supreme Court reinstated the stay of OSHA’s ETS, ultimately sending the rule back to the Sixth Circuit to await a full review on the merits.

In the 6-3 opinion, the Supreme Court held that, while OSHA has the authority to regulate “occupational dangers,” it does not have the authority to regulate “public health more broadly.” The Supreme Court held that, while COVID-19 might be present in workplaces, it is not necessarily an occupational hazard in most. “Permitting OSHA to regulate the hazards of daily life—simply because most Americans have jobs and face those same risks while on the clock—would significantly expand OSHA’s regulatory authority without clear congressional authorization.”

While the ultimate fate of OSHA’s ETS will continue to play out in the courtroom, U.S. Secretary of Labor Marty Walsh released a statement urging employers to require workers to get vaccinated or tested weekly.  Secretary Walsh also referenced OSHA’s existing COVID-19 guidance as a resource for employers to keep workers safe from COVID-19. Secretary Walsh concluded by saying:

“Regardless of the ultimate outcome of these proceedings, OSHA will do everything in its existing authority to hold businesses accountable for protecting workers, including under the Covid-19 National Emphasis Program and General Duty Clause.”

Manufacturers should continue to monitor the fate of the OSHA ETS as it heads back to the Sixth Circuit. In addition, the Executive Order related to COVID-19 vaccination/testing for federal contractors that we previously summarized, while currently stayed, may be reinitiated as well. Manufacturers should continue to monitor legal developments related to the Executive Order.

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 2022:

  1. Reshoring – Hype or a fundamental change? Yes, there will be reshoring, but I am not convinced that this trend will explode in 2022 as there are significant challenges for doing so particularly when the manufacturing involved is labor-intensive.  That said, I do believe the attitude towards manufacturing domestically has changed throughout the supply chain during the COVID era.
  2. “Buy American” – Efforts to require manufacturers to buy domestically have been around for many years. Other countries are imposing “protectionist” laws to require more investment.  I expect to see more foreign direct investment into the United States for this reason.
  3. Force Majeure – This legal phrase was the “word” of 2020-2021 as it offers a basis to excuse contractual performance. We are starting to see some of these cases work their way through the courts, and we will be watching closely to see if any of them has a lasting impact on manufacturers.  You don’t need to be a lawyer to predict that the word “pandemic” will be in all force majeure clauses going forward.
  4. Acquisition Activity – There is no shortage of potential buyers of manufacturing companies, including strategic buyers and private equity buyers. There has been an increase in so-called proprietary deals (i.e., where one buyer negotiates exclusively) as opposed to auctions.  I think this will continue in 2022.
  5. Creative Solutions to Supply Chain Issues – Everyone wants to talk about the supply chain crisis that is impacting both consumers and industrial companies. In 2022, I will be working with companies as they develop creative solutions to these issues.  As an example, some companies are trying to find alternative ports of entry.

 

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.

On December 21, 2021, the U.S. Supreme Court took its first step into the fray over federal vaccine mandates. As we have previously posted, legal challenges to the Biden administration’s various vaccine mandates have been working their way through the courts since November. Most recently, the U.S. Court of Appeals for the Sixth Circuit ruled last Friday that OSHA’s Emergency Temporary Standard (ETS) for COVID-19, which includes a vaccine-or-testing mandate, could continue after it was halted by another court the day after it went into effect. In an unusual move, the Supreme Court announced it will hold a special hearing on January 7 to hear arguments on both the ETS and a regulation from the Centers for Medicare and Medicaid Services (CMS) requiring vaccines for health care workers. The Supreme Court has not yet issued any rulings to stay either requirement. Both requirements are set to go into effect in January.

The January 7 hearing will occur just before the Supreme Court is set to begin its regularly scheduled term. The hearing also moves these legal challenges from the so-called “shadow docket,” which has been subject to criticism lately. The Supreme Court has repeatedly upheld state-implemented vaccine mandates in a variety of circumstances. However, the future of OSHA’s ETS and the federal contractor vaccine mandate will likely turn on whether Congress authorized the executive branch to institute these types of requirements. While the Justices’ questions during the January 7 hearing will likely give some insight into how they may rule, the date of a ruling on the future of these requirements is not known.

Thank you to Jonathan Schaefer for his contributions to 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.

On Friday, the U.S. Court of Appeals for the Sixth Circuit lifted a stay of OSHA’s Emergency Temporary Standard (ETS) on COVID-19 vaccination and testing for employers with 100 or more employees. As we previously posted, the Fifth Circuit almost immediately issued a stay of the ETS after its release. The Sixth Circuit’s ruling puts the ETS back on track as its January 4, 2022, compliance deadline approaches. Multiple parties have already filed emergency motions with the U.S. Supreme Court to eliminate the ETS entirely. The legal ping-pong match will surely continue into 2022.

Meanwhile, OSHA issued a statement on Saturday that no citations will be issued for noncompliance with the ETS before January 10, 2022. OSHA will also exercise discretion and not issue citations for noncompliance with testing requirements under the ETS before February 9, 2022, if “an employer is exercising reasonable, good faith efforts to come into compliance with the standard.” While OSHA’s statement provides covered employers some breathing room, time is running out to put in place the necessary measures to comply with the ETS. That is, if the Supreme Court does not volley in before January 4, 2022.

A few months ago, I was asked by the U.S. Department of Commerce to join a panel discussion on how to develop relationships with international distributors and representatives.

Most lawyer presentations on this subject begin by suggesting that manufacturers send their international partners one-sided contracts.  These contracts focus on legal terms such as consequential damages, non-solicitation, warranty, etc.  Many lawyers often overlook that some of these standard U.S. law terms may lead to distrust and/or misunderstanding due to differences in laws and cultural norms.  And, they may not even be enforceable.

The bottom line is that no contract, no matter how well written, will eliminate all risk.  There are certain industry realities that one has to grapple with, including that international partners often have just as much leverage as you do.  The objective should be to find a win/win.

So, when I talk to clients I think about two objectives.  The first objective is ensuring accountability.  The second objective is ensuring transparency.

Accountability (on both sides) can be achieved multiple ways, including by ensuring that the payment model is win/win, the margins work for both sides, deciding whether the distributor’s territory is exclusive, and deciding whether the distributor/sales representative is integrated with your business.

Transparency can be achieved through trip reports (note:  build the requirement into the contract) and potentially audit rights, among other things.

The three takeaways from this discussion are:

  1.  Signing them up can be easy.
  2.  Ensuring Win/Win – “Partnership” is just as important.
  3. Accountability and transparency in any contract is critical

Over the last few months, manufacturers have been paying close attention to two COVID-19 vaccination mandates issued by the federal government pertaining to employers.  First, on September 9, 2021, President Biden issued an Executive Order which imposed several COVID-19 safety standards and protocols, including mandatory vaccination, upon certain federal contractors and subcontractors.  Second, at the direction of the White House, the Occupational Safety and Health Administration (OSHA), on November 5, 2021, published an emergency temporary standard (ETS), to minimize the risk of COVID-19 transmission in the workplace which included a mandatory vaccination or COVID-19 testing protocol for employers with 100 or more employees.  What is the current status of these mandates and what, if anything, should employers be doing to prepare for, and comply with, them?

With regard to the Executive Order pertaining to federal contractors and subcontractors, covered contractor employees must be “fully vaccinated” by January 18, 2022, according to guidance issued by the White House’s Safer Federal Workforce Task Force.  Therefore, by that date, such employees must be fully vaccinated and have submitted appropriate documentation to their employer, or requested and been granted a medical or religious exemption from such vaccination. Covered federal contractors and subcontractors must also ensure that all employees and visitors comply with the Centers for Disease Control and Prevention’s guidance on physical distancing and masking while in the workplace, among other measures.  This mandate is currently in effect and the relevant federal agencies have been in contact with a number of covered contractors and subcontractors as it relates to their federal contracts.  Therefore, covered employers should consider implementing policies and procedures to meet these compliance requirements including a process for gathering requests for medical and religious exemptions from vaccination, collecting appropriate vaccination documentation, implementing additional safety measures for unvaccinated employees, among other actions.  It is important to note that under this mandate, there is no COVID-19 testing alternative to mandatory vaccination although testing may be used as an additional safety measure for employees who are granted a medical or religious exemption from vaccination.  Additionally, workplaces that are covered by this mandate are exempted from the OSHA ETS.

With regard to the OSHA ETS impacting employers with 100 or more employees, which required covered employers to mandate COVID-19 vaccination or weekly testing of their employees, that standard faced a number of legal challenges after it was issued.  Following the initial challenges, the U.S. Court of Appeals for the Fifth Circuit issued an order to stay implementation and enforcement of the standard on November 12, 2021; after the Court’s order, OSHA suspended any activities related to implementation and enforcement of this standard.  Petitions for review of the OSHA ETS were filed across the country and these petitions were consolidated and will be heard by the Sixth Circuit.  At this time, this standard is not in effect.  At this time, employers with 100 or more employees are not required to comply with this order but should consider collecting documentation of vaccination from employees, even if they choose not to require vaccination, in order to prepare in the event that the OSHA ETS survives the various legal challenges; such employers may also wish to determine how they will comply if this standard survives and the timing and actions that will be required in order to do so.

This issue is changing weekly, if not daily, so covered employers should remain vigilant in following developments, legal changes and guidance, and court decisions that may impact their compliance efforts.  Employers that have questions about the status of the two mandates and their applicability should seek legal counsel.

Thank you to Jonathan Schaefer for his contributions to 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.

Unless you’ve been living under a rock, you know that OSHA issued its long-anticipated COVID-19 Vaccination and Testing Emergency Temporary Standard (ETS) at the end of last week. The ETS requires covered employers to either (1) develop, implement, and enforce a mandatory vaccination policy or (2) allow unvaccinated employees to test regularly and be subject to a mask policy. The ETS also contains COVID-specific recordkeeping, reporting, and training requirements. Most requirements in the ETS were set to go into effect by December 5. But by the time we finished reading the 154-page rule, the Fifth Circuit had stayed its implementation.

There is no doubt the legal landscape surrounding the ETS will have changed by the time you read this post. But regardless of what is happening in the courts, it is important for manufacturers to understand the scope and applicability of the rule. It could be back in effect as quickly as it was stayed, and the compliance timelines, at least in the originally published rule, were tight.

General Applicability

Generally, the ETS applies to all private employers with a total of 100 or more employees at any time the ETS is in effect. There are several exemptions and nuances to this applicability. For starters, any employer already subject to one of the following requirements, is not covered by the ETS:

In counting to 100, it is important to note that all employees are counted across all of the company’s locations in the United States. This includes part-time, seasonal, and work from home employees; those that do not report to a workplace; and those that work exclusively outdoors.

Mandatory Vaccination Policy or Testing/Masking Requirement

As promised, the ETS requires covered employers to either (1) require employees to be vaccinated, or (2) develop a testing program for unvaccinated employees that includes wearing face coverings. Employers choosing the mandatory vaccination option must allow employees to claim exemptions for disabilities, sincerely held religious beliefs, and medical necessity. Employers that opt for the testing/face covering option will be required to track the status of unvaccinated employees and their testing results, monitor face covering compliance, and determine whether the employer is responsible under other laws, regulations, or collective bargaining agreements to pay for the testing.

OSHA’s COVID-19 Vaccination and Testing ETS website has sample templates for both a mandatory vaccination policy and a vaccination or testing and face covering policy.

Regardless of the type of policy put in place, covered employers will be required to determine the vaccination status of each covered employee. Unlike the rules for determining whether you have 100 or more employees, for the vaccination determination requirement, covered employees do not include those that work from home, remotely, or exclusively outdoors.

Employers must provide accommodations for previously unvaccinated employees to get vaccinated, including up to 4 hours paid time, including travel time, at the employee’s regular rate of pay, as well as reasonable time and paid sick leave to recover from any side effects associated with the vaccinations.

Employers that choose mandatory vaccination will likely have a number of employees that qualify for one of the exemptions described above. In those instances, OSHA encourages the employer to find the safest work option, such as remote work. However, OSHA also assumes that many of these employees will be subject to testing to allow their employers to comply with the ETS. If so, an employer that chooses mandatory vaccination to avoid the logistical issues associated with testing might find themselves in that position anyway.

Information Requirements

Covered employers must provide each covered employee with information, in a language and at a literacy level that the employee understands, regarding:

  • the requirements of the ETS;
  • workplace policies and procedures established to implement the ETS;
  • vaccine efficacy, safety, and the benefits of being vaccinated (by providing the CDC document “Key Things to Know About COVID-19 Vaccines”);
  • OSHA’s protections against retaliation and discrimination; and
  • laws that provide for criminal penalties for knowingly supplying false statements or documentation.

Recordkeeping and Reporting

The ETS will also impose specific reporting obligations for COVID-19 fatalities and hospitalizations upon covered employers. These reporting obligations largely track employers’ existing reporting obligations found in 29 C.F.R. § 1904.39, except that, with regard to COVID-19 fatalities and hospitalizations, OSHA has eliminated the requirement that, to be reportable, the fatality must have occurred within 30 days and the hospitalization must have occurred within 24 hours of the work-related incident. Because COVID symptoms can be delayed, OSHA did not feel a temporal reporting restriction was appropriate.

While the timeline to comply with the ETS is in flux, it is important to stay on top of developments to ensure that you have sufficient time to react and be in compliance when and if the ETS takes effect.

This week’s post was co-authored by Robinson+Cole Labor and Employment Group lawyer Emily A. Zaklukiewicz.

As 2021 comes to an end, many employers are preparing to meet record and reporting obligations. For employers with 100 or more employees who are required to file the EEO-1 Component 1 Report (EEO-1 Report) annually, this may involve ensuring that the relevant personnel information is accurate. While the annual deadline for submitting the EEO-1 Report is typically March 31 (subject to change and extension), employers must generally choose a “snapshot” period for their EEO-1 Report by selecting one pay period in the fourth quarter of the relevant survey year (i.e., the year prior to submission). One issue related to reporting obligations that has arisen in recent years is how to properly report employee with non-binary genders on the EEO-1 Report. Continue Reading Reminder to Employers Regarding EEO-1 Reporting Obligations

All manufacturers are generally tired of hearing about supply chain problems. These days companies are looking for ways to mitigate shipping delays (i.e., can we ship to a port other than Long Beach?) and the increased cost for raw materials.

Interestingly, I am starting to see consumer product companies and business-to-business manufacturers use similar language to address these issues.

Consumer Product Example for Shipping Delays:

“We are currently experiencing a high volume of orders and shipping may be delayed as a result.”

B2B Manufacturer Example for Shipping Delays:

“All existing valid quotations may be subject to additional lead time.”

B2B manufacturers are also dealing with the volatility in the cost and availability of raw materials. As a result, some companies are adding language like this to their contracts and terms and conditions of sale:

“Due to the volatility in the price and availability of raw materials, Manufacturer reserves the right to pass along subsequent price increases and surcharges from our vendors without further notification.” 

Our Reaction:

As manufacturing industry lawyers, we understand the objective of adding such language. If you are considering adding such language, you should keep two things in mind:  (1) consider whether the additions are actually in line with basic tenets of contract law (i.e., are you adding additional terms after the contract was accepted by the customer?); (2) consider the optics of telling all your customers in standard language that you may be late. For these reasons, manufacturers should consider managing these issues on a case-by-case basis – with assistance from legal counsel, as needed.

Last week, a shareholder of Danimer Scientific, Inc., filed a derivative suit against the company’s executives and board members, alleging that overstated sustainability claims led to millions of dollars in market capitalization losses.

Danimer manufactures polymers, resins, and plastic alternatives that are used in a number of plastic products. The complaint alleges that the company repeatedly touted the biodegradability of these products, as well as their ability to reduce plastic use and pollution. For one product in particular, Nodax, Danimer claimed that it was fully degradable within 12 to 18 weeks after being discarded. According to a Danimer press release, Nodax is a “100% biodegradable, renewable, and sustainable plastic . . . certified as marine degradable, the highest standard of biodegradability, which verifies the material will fully degrade in ocean water without leaving behind harmful microplastics.” The company made similar representations in an SEC Form S-1 registration statement.

Shortly after these statements went public, The Wall Street Journal published a detailed article refuting Danimer’s biodegradation claims. The article cited experts that were skeptical of whether Danimer’s products could really degrade as quickly as advertised under real-world conditions. The article noted that things like ocean temperature, microorganism variation, and plastic shape and size, will all impact biodegradability and may result in significantly longer timelines for degradation.

The next trading day, Danimer’s stock price dropped by almost 13 percent.

After The Wall Street Journal article was published, Spruce Point published additional reports further supporting the notion that Danimer’s biodegradability claims were too good to be true. The company’s stock price further dropped in the wake of these reports.

Plaintiff, a Danimer stockholder, filed the derivative suit against the company’s CEO and Chairman of the Board, CFO, and a number of the company’s directors. Plaintiff claims that these officers and directors breached their fiduciary duties to the company by intentionally or recklessly allowing these misstatements to occur, which resulted in significant losses. Plaintiff also sued the officers and directors for unjust enrichment, waste of corporate assets, and breaches of the Exchange Act.

While we have yet to see where this litigation will go, the suit itself is another example of how ESG principles are having real consequences on market capitalization—and are finding their way into America’s courtrooms.

The case is Perri v. Croskrey, et al., D. Del., Case No. 1:21-cv-01423.