This week we are pleased to have a guest post from Emilee Mooney Scott, a member of Robinson+Cole’s Environment, Energy + Telecommunications practice group.  Emilee focuses her practice on environmental transactional and compliance matters, with a particular focus on the management of hazardous and toxic substances.

The Toxic Substances Control Act (TSCA) has long provided EPA with authority to review new chemical substances in a gatekeeper role as such substances enter U.S. commerce. Through amendments in 2016, EPA was also given the authority to evaluate selected existing chemical substances using a three-step framework (explained in further detail here). There are a few dozen substances in the pipeline now, with the first ten substances almost at the end of a long process that will culminate in substance-specific rules. Around the fifth anniversary of the TSCA amendments later this year, the first round of risk management rules should be proposed. These risk management rules could have significant impacts on manufacturers that use the substances in question, and will provide insight on EPA’s approach to such rules going forward. Continue Reading Chemical “Risk Management Rules” on the Horizon for 2021

Earlier this year, I provided our 2021 Corporate Compliance and Litigation Outlook for Manufacturers. I noted that even though we had been counseling a lot of manufacturers on force majeure events (i.e., the ability to suspend performance) “there has not been a lot of litigation outside of what you hear about in the commercial real estate space.”

Five days after my outlook, a lawsuit was filed in California federal court by a metal manufacturer (G&H Diversified Manufacturing LP) against a “green technology” firm (Regreen Technologies, Inc.) that sells industrial machines. The facts alleged in the lawsuit are complex, but essentially, they involve a manufacturing relationship wherein G&H had to purchase a $1.6 million machine from a third party, “reverse engineer it,” and construct a master 3D drawing for Regreen. Once that was done, G&H would be paid.

In short, G&H claims that it was never paid and that Regreen now argues that it should not have to pay pursuant to a force majeure clause in the contract. In its complaint, G&H argues that the clause is not applicable because it “does not address epidemics or pandemics, ‘only acts of God, acts of war, riot, fire, explosion, flood or sabotage.'”

We will be following this lawsuit closely because one of the common issues facing manufacturers before COVID-19 was that their force majeure clauses did not expressly state that they applied to epidemics or pandemics. There are arguments to be made on both sides, and a lot depends on the law of the jurisdiction that governs the contract.  Stay tuned for further developments.

This week, we continue our 2021 outlook series with a focus on labor and employment. With the new Presidential administration this year, we anticipate a number of changes in labor and employment laws on the federal level. The following are a few of the issues that may impact manufacturers in 2021.

Federal Government Involvement in COVID-19 Response

We expect the new Presidential administration will increase the level of federal government involvement in the COVID-19 response, which may impact the role of states and municipalities. An overview of the new administration’s plans is available in the Biden Plan to Combat Coronavirus (COVID-19) and Prepare for Future Global Health Threats. Under his plan, Biden focuses on increasing the availability of free COVID-19 testing, requiring paid leave for individuals affected by COVID-19, ensuring that federal workers will receive workers’ compensation for exposure to COVID-19 and encouraging states to do the same, and offering emergency paid sick leave and caregiver leave, among other initiatives.  The Biden/Harris administration has also revealed plans for two major spending initiatives, the first of which includes provisions for increasing the federal minimum wage to $15 per hour and increasing federal unemployment insurance benefits, and the second of which addresses longer term goals, such as job creation.

Federal Minimum Wage and Paid Leave

We expect that a key focus of the new administration will be increasing the federal minimum wage as well as the leave and benefits that employers must provide employees. Over the last few years, there have been numerous attempts to increase the federal minimum wage (currently $7.25 per hour), but it has not been increased since 2009.  President Biden has called for increasing federal minimum wage to $15 per hour as well as increasing the salary threshold for exempt employees (currently $35,568 per year). With regard to leave, the new administration is likely to focus on implementing paid leave policies, including paid sick leave and paid family and medical leave, in addition to its plans to increase paid leave related to COVID-19. Under the Biden Administration, the definition of “employee” may be expanded to include additional workers, including those that may previously have been classified as independent contractors.

Workers’ Rights to Organize

Throughout its campaign, the Biden/Harris team has made it clear that strengthening workers’ rights to organize will be a key focus and has detailed its plans in the Biden Plan for Strengthening Worker Organizing, Collective Bargaining, and Unions. This plan outlines a number of initiatives aimed at making corporations and individuals accountable for interference with union organizing, encouraging and incentivizing union organizing and collective bargaining, and making it easier for employees to organize, including shortening the time period from the filing of an election petition to voting (thereby shortening the union election campaign timeline), among other changes.

Equal Employment Opportunity

During its campaign, the Biden/Harris team made equal opportunity, diversity, equity, and inclusion a focus of many of its initiatives across a number of policy areas; this is detailed in the Biden Plan to Build Back Better By Advancing Racial Equity Across the American Economy. While the plan covers a number of initiatives, several are specific to equal opportunity, diversity, and inclusion in the workplace. One such initiative is to double the funding to the Equal Employment Opportunity Commission (EEOC), the federal agency tasked with enforcing federal anti-discrimination laws, which would allow the agency to increase the investigations that it initiates and to expand its ability to collect information from employers, including data regarding earnings gaps that may exist based on race and gender.

Federal Contractors

Major changes are expected with regard to employment laws that apply to employers doing business with the government including affirmative action compliance. Among those changes are increased requirements regarding diversity and inclusion training of employees, disclosure of labor law violations, the consideration of workplace conditions as a factor in awarding government contracts, signing of neutrality agreements whereby employers pledge not to interfere with union-organizing, multi-year debarment for employers who engage in wage theft or other labor law violations, disclosure of requirements practices for attracting women, minorities, and individuals with disabilities, among other changes.

This week, we continue with our 2021 outlook series with a focus on environmental, health, and safety. This year brings a new Presidential administration, and with it will come a host of new programs, as well as some new takes on established programs. The following are a few initiatives that could impact manufacturers in 2021.

Focus on Environmental Justice

The Biden/Harris team has made it clear that environmental justice issues will be a priority across a number of platforms. The new administration is expected to focus on the disproportionate environmental impacts felt by low-income communities and communities of color by increasing data collection and communication, remediation, and enforcement. Details are contained in The Biden Plan to Secure Environmental Justice and Equitable Economic Opportunity and include:

  • Reestablishing the White House Environmental Justice Advisory Council and the White House Environmental Justice Interagency Council to develop a detailed framework to ensure that environmental justice concerns are being addressed government-wide;
  • Mandating additional data collection in frontline and fenceline communities and developing a community notification program;
  • Targeting clean energy investment in environmental justice communities; and
  • Establishing an Environmental and Climate Justice Division within the Department of Justice to, among other things, increase enforcement in environmental justice communities.

Increased OSHA Activity Related to COVID-19

Since the pandemic took hold almost a year ago, OSHA has issued a number of guidance documents related to COVID-19. It has, however, refused to adopt any specific standard related to COVID-19, and inspections and enforcement related to COVID-19 have been fairly minimal. The Biden/Harris team released a 4-Point Plan for our Essential Workers, which criticizes the Trump administration for failing to protect workers, and recommends:

  • Creation of an Emergency Temporary Standard with specific, enforceable information related to COVID-19;
  • Adoption of a permanent infectious disease standard;
  • Doubling the number of OSHA investigators; and
  • Coordination with state safety and health agencies, state and local governments, and unions to ensure frontline workers are protected.

Climate Change

Anyone who heard the Biden/Harris team on the campaign trail knows that climate change will be a primary focus of the new administration. The overall goal is a 100 percent clean energy economy and net-zero emissions by 2050. But what does that mean in practice? There will likely be a number of energy and emissions reducing legal and policy initiatives related to climate change, including:

  • Investment in clean energy, sustainable transportation, and biofuels;
  • The development of incentives for building efficiency improvements, including retrofits and clean energy generation;
  • Establishment of an “enforcement mechanism” to achieve net-zero emissions based on the principle that polluters must bear the full cost of their carbon pollution; and
  • Requiring public companies to disclose climate risks and greenhouse gas emissions in their operations and supply chains.

Increased Attention on PFAS

In 2019, the EPA rolled out its PFAS Action Plan, which we reported on at the time and updated  you (and updated you again) on the status of implementation. The Biden/Harris team has criticized the slow implementation of this Plan and has promised to take more swift action to regulate PFAS. Specific plans seem to involve many of the action items called for in the current PFAS Action Plan, such as designation of certain PFAS compounds as a hazardous substances, development of enforceable limits under the Safe Drinking Water Act, and accelerating studies and research. However, we can expect the Biden/Harris Administration to move towards these goals more quickly than the prior administration.

2021 Corporate Compliance & Litigation Outlook for Manufacturers

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 facing manufacturers that operate globally. Starting in 2016, we made sure our first three posts of the year are dedicated to providing a yearly outlook from our different vantage points.

This year, I’m starting us off by addressing corporate compliance and litigation issues that manufacturers will face in 2021.

COVID-19 / Force Majeure 

We can’t talk about 2021 without mentioning COVID-19. In the commercial world, the phrase “force majeure” became the rage last year in manufacturing law as scores of companies attempted to suspend their performance under contracts. We counseled a number of companies (particularly in the aerospace supply chain) on both sides of the fence, but as I anticipated, there has not been a lot of litigation outside of what you hear about in the commercial real estate space. If you look at the history of force majeure over the past 100 years, you will not find a lot of reported cases between industrial companies. I think that is because at its core, suppliers, vendors, etc. need each other and, like most things, the temporary suspension passes.

Supply Chain Optimization

Force majeure and supply chain optimization often go hand in hand. A number of manufacturers got a really close look at their suppliers last year, and some of them did not like what they saw. There has been a lot of talk about re-shoring supply chains and/or moving them out of places like China. There has been some movement there, but not as much as it might be reported in the media. Ultimately, what I expect is that manufacturers will continue to diversify their supply chains and also evaluate their contractual arrangements. From a legal standpoint, we have always done a lot of work on the sales side, wherein we develop playbooks and/or trainings for manufacturers so they can mitigate any legal risks. Over the past few years, we have been asked to help out even more on the procurement side as that world has shifted somewhat from long, historic relationships in which there were no written contracts to more established relationships, especially amongst smaller companies. I expect that to continue in 2021.

The Biden Administration / Trade 

I have an easy prediction that I know will come true. There will be no shortage of articles by commentators predicting what impact the Biden Administration will have on manufacturers. One area that bears watching is tariffs. The president-elect has already indicated that he is not going to make any sudden moves on tariffs when he comes into office. I will be watching the aerospace industry closely, as there was a lot of press in the past week after the U.S. placed tariffs on aerospace parts from the European Union in a long-running trade dispute over aircraft subsidies involving Boeing and Airbus. In addition to tariffs, a new administration always creates a new opportunity to assess whether the enforcement of various federal regulatory regimes will continue, including Conflict Minerals, anti-corruption (FCPA) and false claims. If you haven’t looked at your policies and/or training in a few years, now is the time to do so.

Foreign Direct Investment in the United States

In 2019, we saw a number of international clients invest in U.S. operations. While we expected this to continue in 2020, COVID-19 clearly made it more difficult as travel to the United States from abroad became next to impossible. I expect that as the vaccine is widely distributed, the activity will pick up again if business immigration also becomes easier. Typically, the first things advisors talk about with international companies are tax planning and corporate structures. While those are important, we always try to talk first about where a company’s customers are located and ways to integrate the U.S. operations so it is not a silo.

Strategic Growth / Exit from Manufacturing 

Last month, I participated in a great program that covered a broad range of issues, including the various options for manufacturers that wish to access capital needed to grow, including debt and equity investments such as from family offices, private equity, and the like. We also covered considerations for owners looking to sell manufacturing businesses. There is no shortage of interest from both strategic and private equity buyers. The takeaways from the program can be found here. I expect the M&A activity to increase substantially in 2021, although I expect the activity to remain relatively modest in the commercial aerospace supply chain aside from some strategic consolidations and distressed deals.

I am pleased to join as one of the regular contributors to the Manufacturing Law Blog. I am a labor and employment lawyer and I will be providing insights from that vantage point, which Matt Miklave has so ably contributed over the past several years. Matt is retiring from Robinson+Cole and we wish him well as he opens his own firm.

After months of countless updates on the status of the COVID-19 vaccine weaving its way through the regulatory approval process, the vaccine has arrived! Now many employers are grappling with a key question – what type of vaccination program can employers implement?

According to guidance issued by the Equal Employment Opportunity Commission (EEOC) on December 16, 2020, employers may implement a mandatory COVID-19 vaccine program for vaccines that have been authorized or approved by the Food and Drug Administration (FDA). As part of that program, employers may inquire as to whether an employee has been vaccinated and request proof of vaccination. That being said, according to the guidance, employers should review requests for reasonable accommodation from employees seeking an exemption from vaccination based on a disability or a religious reason. In reviewing such requests, employers would then determine if an unvaccinated employee would pose a “direct threat” to the health or safety of individuals in the workplace that cannot be reduced to an acceptable level by conducting a case-by-case analysis and taking an approach that is meant to limit potential risks. Continue Reading To Require or Encourage COVID-19 Vaccine. . . That is the Question

There are a lot of programs from service providers that seek to advise business owners on what to do after they have decided to sell their manufacturing business. I equate it to trying to jump on a ship just as it is entering port.

What happens, however, if you don’t know what to do or, more commonly, you don’t have the time to consider all of your options? This week, I had the pleasure of participating in a panel discussion with Tom Heide (CEO, Heide & Company) and Jeff Klaus (Regional President, Connecticut, Webster Bank) on these topics. We covered a broad range of issues, including the various options for accessing capital needed to grow, including debt and equity investments such as from family offices, private equity, and the like. If you are interested in the recording, please contact me at jwhite@rc.com.

Here are some of the takeaways offered by the program panelists:

  1. Know your value / be in control by being realistic; have a clear well-defined strategy and a set of objectives you want to accomplish; evaluate what resources you have and those you need so you can execute on that strategy. The key is in the execution.
  2. As an owner / operator you spend the vast majority of your time “working in” your business because you love it, but not so much time “working on” your business. That’s where the difference in incremental value is gained. If you don’t do that, you’re going to leave a lot of money on the table. That’s just a fact.
  3. Access to all forms of capital (debt, mezzanine, equity) is more widespread than ever for privately-held businesses with under $100 million in revenue.
  4. If you are considering growing your company through acquisition, seek the early advice of a commercial banker who works in acquisition finance to understand what may be possible for financing.
  5. Understand the importance of “recurring revenue,” particularly as it relates to your contracts, because that is where investors will start looking first.

As we previously reported, EPA published a PFAS Action Plan in 2019 designed to enhance and improve data gathering, regulatory development, enforcement, and communication related to per- and polyfluoroalkyl substances (PFAS). EPA continues to make progress implementing the PFAS Action Plan and is working on a more formal framework for addressing PFAS under the Clean Water Act. In the meantime, EPA’s Office of Water recently issued an interim strategy for addressing PFAS in National Pollutant Discharge Elimination System (NPDES) permits.

The interim strategy makes a number of recommendations for the consideration of PFAS in the NPDES permit program. Some of these recommendations involve gathering and sharing information, but others may directly impact permit requirements.

According to the interim strategy, permit writers should consider incorporating requirements for monitoring PFAS at facilities where PFAS are expected to be present in wastewater discharges. Specifically, PFAS may be incorporated into an NPDES permit in the absence of monitoring data if, “because of the raw materials stored or used at the facility, products or byproducts of the facility operation, or available data and information from similar facilities, the permit writer has a strong basis for expecting that the pollutant could be present in the discharge.” Under the interim strategy, NPDES permits may also incorporate best management practices to control or abate a PFAS discharge.

The interim strategy also suggests consideration of PFAS in stormwater permits. In situations where PFAS are expected to be present in stormwater, permit writers may consider monitoring requirements as well as stormwater pollution controls specific to PFAS.

The interim strategy recommends the ongoing information sharing on the development of PFAS requirements in NPDES permits. It also calls for the development of a compendium to compile practices, trends, and developments to address PFAS in NPDES permits around the country.

As of now, EPA has not provided much detail as to what may give it a “strong basis” to expect PFAS to be present in a discharge such that PFAS can be incorporated into an NPDES permit. Based on the language quoted above, however, it appears EPA may use not only information about the actual facility subject to the NPDES permit, but also information from similar facilities to make that determination. We will continue to follow these developments as the interim strategy is rolled out.

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.

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.