By James L. Curtis, Mark A. Lies, IIMatthew A. SloanAdam R. Young, and Craig B. Simonsen

Seyfarth Synopsis:  Recently the U.S. House of Representatives passed a bill with bipartisan support that would require the Department of Labor to promulgate an OSHA standard specifically aimed at protecting healthcare and social service workers from workplace violence.

The “Workplace Violence Prevention for Healthcare and Social Service Workers Act,” HB 1309, is the most significant step to date by the federal government to address the rise of workplace violence episodes in the healthcare and social service industries.  In 2018, for example, there were 14.8 nonfatal injuries from assaults for every 10,000 full-time workers across the private health-care and social assistance industry in 2018, according to Bureau of Labor Statistics data.  This was a significant increase from 2014, that rate was only 8.2 for every 10,000 full-time workers, still 4 times higher than the rate for workers in the private sector overall.

If passed by the Senate, the U.S. Secretary of Labor would have one year to implement an OSHA standard requiring employers in the healthcare and social service industries to develop and implement comprehensive workplace violence prevention plans to protect their workers from workplace violence.  A new standard would provide specific regulation requirements for employers.  Currently, Federal OSHA regulates workplace violence via the General Duty Clause, which broadly requires employers to take affirmative steps to protect their employees from hazards.  For more information on how Federal OSHA uses the General Duty clause in healthcare and social service workplace violence context, please visit our March 2019 blog post, titled “Commission Decisions Confirm that Employers Must Take Action to Protect Employees from Workplace Violence.”

The Federal OSHA standard proposed in HR 1309 would require employers to develop a workplace violence prevention plan that would include:

  • The individual responsible for implementation of the plan;
  • A risk assessment for each work area or unit at the facility;
  • Security controls such as security and alarm systems, adequate exit routes, monitoring systems, barrier protection, established areas for patients and clients;
  • Reporting, incident response, and post-incident investigation procedures;
  • Procedures for emergency response; and
  • Training for employees on workplace violence hazards.

California’s state plan already has a specific standard that requires employers in the healthcare and social service industries to create and enforce workplace violence prevention plans.  We previously blogged about these California regulations at “CA Nears Adoption of New Workplace Violence Regulations for Healthcare Employers, Home Health Providers, and Emergency Responders.”

The efforts of the House of Representatives track the increased interest by state and federal agencies in the prevalence of workplace violence in healthcare and social service settings over the last five years.  In addition to the aforementioned California legislation, we have noted that “OSHA Issues “Strategies and Tools” to “Help Prevent” Workplace Violence in the Healthcare Setting.”  We have also blogged that “OSHA Updates Workplace Violence Guidance for Protecting Healthcare and Social Service Workers.”  Moreover, in 2016, Federal OSHA considered whether to commence rulemaking proceedings on a new standard for preventing workplace violence in healthcare and social assistance workplaces perpetrated by patients and clients.  Prevention of Workplace Violence in Healthcare and Social Assistance, 81 Fed. Reg. 88147 (December 7, 2016).

The House bill, backed by National Nurses United, passed with the support of a bipartisan group of representatives.  However, the bill faces significant opposition from the healthcare industry and its allies in the U.S. Senate and the White House.  Senate Majority Leader Mitch McConnell has pigeon-holed more than 300 pieces of legislation passed by the Democratic house, and the White House Office of Management and Budget has urged the President to oppose the bill.  We will follow the legislative process closely.  Irrespective of this new legislation, many healthcare employers are already developing workplace violence prevention plans.  In developing an effective plan, healthcare employers should consider their history of workplace violence and consider contacting outside counsel to advise and develop a program.

For more information on this or any related topic, please contact your authors, your Seyfarth attorney, or any member of the Workplace Safety and Health (OSHA/MSHA) Team or the Workplace Counseling & Solutions Team.

By Pamela Q. Devata and Jennifer L. Mora

Seyfarth Synopsis: After six years of litigation, on November 18, 2019, the Equal Employment Opportunity Commission (EEOC) announced a multi-million settlement with a national employer, which resolved litigation that claimed the employer’s use of criminal history had a disparate impact on minority job applicants. The announcement is a reminder to employers to carefully draft and implement their screening policies as they relate to use of an applicant’s criminal history.

Criminal history information can be a crucial tool in the employment decision process. During the past few years, state and local governments have been limiting employers’ use of criminal history information in the employment process through regulation, litigation, and legislation. In 2012, the Equal Employment Opportunity Commission issued guidance in an effort to limit employers’ options with respect to their use of this tool.

The EEOC has brought several high-profile lawsuits against national employers over their use of criminal history information, with some cases resulting in employer victories. Most recently, on November 18, 2019, the EEOC announced in a press release that a nationwide retailer settled a race discrimination lawsuit brought by the EEOC, which challenged the employer’s use of criminal history for employment purposes. Specifically, the EEOC had alleged that the employer’s use of criminal history resulted in a disparate impact against minority workers, especially African Americans who had been excluded from jobs at higher rates than non-minority applicants. The EEOC gave as an example an applicant denied a position for having a six-year-conviction for possession of a controlled substance, which fell within the employer’s 10-year exclusionary rule for this type of conviction.

The three-year consent decree requires that the employer not only pay $6 million (to be distributed to aggrieved individuals) but also, if the employer elects to continue considering criminal history pre-employment, hire a criminologist to develop a new criminal background check based on certain factors including: (a) the time since conviction; (b) the number of offenses; (c) the nature and gravity of the offense(s); and (d) the risk of recidivism. Once the consultant provides a recommendation, the employer is not allowed to use any other pre-employment criminal background check. Until the criminologist provides a recommendation, the employer must continue to conduct individualized assessments.

The settlement also enjoined the employer from discouraging people with criminal histories from applying, engaging in retaliation, and otherwise discriminating on the basis of race in implementing a criminal history check. The employer also is now required to advise conditional hires of its background screening processes and state that having a criminal history is not an automatic bar to employment. In addition, the settlement requires the employer to update its process when a rejected applicant requests that the company reconsider its decision. As part of this process, the employer is required to clearly communicate to disqualified applicants that they may provide additional information to the employer to support reconsideration of the adverse decision. Finally, the employer must provide reports to the EEOC regarding its implementation of any new criminal history checks and its reconsideration process.

The employer remained steadfast in its position that its screening policies were lawful, and the settlement should not be viewed as any admission by the retailer of any wrongdoing.

Employer Considerations

Employers in all jurisdictions should consider an attorney review of their pre-employment and hiring practices by experienced counsel. Setting aside the EEOC’s guidance, many states and localities have their own laws concerning “job relatedness” requirements for an employer’s use of criminal history information, including California, New York, Pennsylvania, and Wisconsin, among many others. Further, subject to narrow exceptions, some states, counties and cities do not even permit employers to inquire about criminal history information on the initial written application form or before a conditional offer, including ordering a criminal background check report from a consumer reporting agency. Against this backdrop, and based on an individual employer’s operations, a company might consider the following best practice recommendations, including:

  • Eliminating policies or practices that exclude people from employment based on a bright-line rule, for example, any criminal record or any felony.
  • Training managers, hiring officials, and decision-makers about the numerous laws that impact use of criminal history information.
  • When asking questions about criminal history information, limiting inquiries to records for which exclusion would be job related for the position in question and consistent with business necessity.
  • Keeping information about applicants’ and employees’ criminal history information confidential and only using it for the purpose for which it was intended.

In addition, employers continue to be targeted in Fair Credit Reporting Act (FCRA) class action lawsuits over the process they use to obtain and make decisions based on background check information obtained from a consumer report agency. As a result, employers are well advised to consider evaluating their use of criminal history information and any other background check information to ensure compliance with the FCRA, similar state fair credit reporting statutes and substantive employment laws.

By Tonya M. Esposito and Renee B. Appel

Seyfarth Synopsis:  In its largest mass enforcement action involving cannabidiol (CBD) yet, the U.S. Food & Drug Administration (FDA) announced on November 25 the issuance of 15 warning letters to various companies for illegally selling products containing CBD.  In addition to the letters, the FDA published a revised Consumer Update detailing safety concerns about CBD products more broadly.  Notably, the FDA commented that it “plans to provide an update on its progress regarding the agency’s approach to these [CBD] products in the coming weeks.” 

Previously, the FDA had indicated it would generate a report by this Fall.  Finally, the FDA reiterated that “[i]t is currently illegal to market CBD by adding it to a food or labeling it as a dietary supplement.”  Unlike hemp derivatives– hulled hemp seed, hemp seed protein powder, and hemp seed oil–which were added to the FDA’s Generally Recognized as Safe (GRAS) inventory, the FDA also confirmed that, at this time, CBD is not generally recognized as safe for use in human or animal food.

The latest series of letters signal that while the FDA is continuing its work to develop a regulatory framework, it is still regularly monitoring the market.  As FDA Principal Deputy Commissioner Amy Abernathy remarked, the FDA will “take action as needed against companies that violate the law in ways that raise a variety of public health concerns.”  Of critical concern to the FDA, “[m]isleading, unproven, or false claims associated with CBD products may lead consumers to put off getting important medical care, such as proper diagnosis, treatment, and supportive care.”  In the warning letters, the FDA makes familiar scolding that the recipient cannot make claims about CBD’s ability to cure or treat a disease on product labels, company websites, Facebook, Instagram, and YouTube.  The letters also explain that because CBD is an active ingredient in the epilepsy drug, Epidiolex, products containing CBD are therefore outside the definition of a dietary supplement and cannot be added to food products.

Implicated in the letters is an array of CBD products, including oils, tinctures, balms, gummies, lotions, roll-on gels, caramels, soaps, face masks, pet products, water, sprays and creams.  While a majority of the letter recipients reside in California, other companies in Texas, Oklahoma, Colorado, Oregon, New York, Florida, North Carolina, Arizona, and Kentucky also received warning letters, demonstrating that the unauthorized sale of CBD products is a growing national problem.  The FDA has requested responses from the warning letter recipients within 15 working days stating how they plan to correct these violations, with serious legal ramifications on the line should they fail to comply.

The FDA also highlighted the issue it has proclaimed since May 2019, when the CBD Policy Working Group held a public hearing–“many unanswered questions and data gaps about CBD toxicity” remain.  Dr. Abernathy cautioned, “[a]side from one prescription drug approved to treat two pediatric epilepsy disorders, these products have not been approved by the FDA and we want to be clear that a number of questions remain regarding CBD’s safety – including reports of products containing contaminants, such as pesticides and heavy metals – and there are real risks that need to be considered.”  In the revised Consumer Update, the FDA seeks to eliminate the concept that CBD “can’t hurt.”  To combat that misconception, the FDA outlines a number of known concerns with CBD, including liver injury, drug interactions, male reproductive toxicity, and side effects.  As to areas that the FDA is “actively working to learn more about”, those include: cumulative exposure, effects on special populations, and CBD use with animals.

Importantly, the FDA’s latest update reminds companies that it is illegal under federal law to market food products that contain CBD or label CBD as a dietary supplement.  With an emphasis on the safety concerns posed by CBD use–both known and unknown–the FDA’s enforcement efforts and consumer publications serve as a plea to manufacturers to exercise patience and let the FDA continue to assess the outstanding safety issues of potential uses of CBD, and develop a sufficient regulatory framework for non-drug uses accordingly.  Until the FDA issues its much-anticipated CBD policy, we can expect the FDA to continue sending warning letters to manufactures that simply are not listening to regulators and instead heeding consumer demand.

Additionally, class actions continue to populate the federal docket based on third-party testing revealing that CBD supplements are not as advertised, only bolstering the FDA’s safety concerns.  See, e.g., Gaddis v. Just Brands USA Inc., et al., Case No. 0:19-cv-62067-RS, in the U.S. District Court Southern District of Florida; Darrow v. Just Brands USA Inc., et al., Case No. 1:19-cv-07079, in the U.S. District Court Northern District of Illinois; Kathryn Potter v. PotNetwork Holdings Inc. et al., case number 1:19-cv-24017, in the U.S. District Court for the Southern District of Florida.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Cannabis Law Practice or Workplace Policies and Handbooks Team.

By Matthew J. Gagnon

Seyfarth Synopsis: As we look ahead to the end of the year, and Seyfarth Shaw’s annual analysis of trends and developments in EEOC litigation (see here for last year’s publication), we can begin to see how the EEOC has shaped equal pay litigation in the federal courts in 2019. For years, the Fourth Circuit has been a hotbed for equal pay cases, and FY 2019 continued that trend. Employers should be mindful of this Circuit’s litigation as a trend for things to come across the country.

Since 2012, the EEOC has included equal pay protections as one of its six substantive area priorities in its Strategic Enforcement Plan (SEP). The SEP guides the EEOC’s enforcement activity in terms of the types of lawsuits it brings and the theories of law that it champions and pursues.

The EEOC reports – and our yearly analysis has consistently confirmed – that the six priorities identified in the SEP are lightning rods for increased EEOC litigation, and are more often the subject of the agency’s conscious, directed development of the law. For that reason, we believe that employers are well advised to understand how the EEOC interprets and applies its enforcement priorities, as they tend to be a reliable guide to the types of employers, industries, and business practices that the EEOC is actively targeting. This post will describe the legal developments in FY 2019 within the EEOC’s equal pay priority.

EEOC Litigation Developments In 2019

Equal Pay Act cases are often highly fact-driven and therefore notoriously difficult for employers to scuttle with pretrial motions. Several recent decisions arising out of EEOC-initiated litigation are illustrative of this trend.

For example, in EEOC v. Enoch Pratt Free Library, No. 17-CV-2860, 2019 WL 5593279 (D. Md. Oct. 30, 2019), the District Court for the District of Maryland denied the EEOC’s and the employer’s cross-motions for summary judgment. With respect to the motion filed by the EEOC, the District Court found that genuine issues of material fact persist regarding elements of the EEOC’s prima facie case. Id. at *5. In particular, the District Court held that the evidence showed that employees within the charging party’s position, library supervisors, perform a wide variety of job duties across various library branches: “Overall, the branches generally have varying responsibilities in light of their different physical plants, different clientele, and different community resources. . . . A factfinder should therefore assess whether the duties performed by [supervisors] are sufficiently similar to establish a prima facie case of unequal pay for equal work.” Id.

With respect to the employer’s motion, the District Court applied the reasoning of a recent decision out of the Fourth Circuit, EEOC v. Maryland Insurance Administration, 879 F.3d 114, 124 (4th Cir. 2018). The EEOC alleged that the employer paid three former female fraud investigators less than it paid four former male fraud investigators with comparable credentials and experience. The Fourth Circuit held that the EPA requires “that an employer submit evidence from which a reasonable factfinder could conclude not simply that the employer’s proffered reasons could explain the wage disparity, but that the proffered reasons do in fact explain the wage disparity.” Id. at 129. The employer argued that it could not have discriminated against the charging parties because it used the state’s Standard Salary Schedule, which classifies each position to a grade level and assigns each new hire to a step within that grade level. The Fourth Circuit rejected this defense because it found that the employer exercised discretion each time it assigns a new hire to a specific step and salary range based on its review of the hire’s qualifications and experience.

In Enoch Pratt Free Library, the employer had also argued that any wage differential was due to a factor other than sex, rather than due to discrimination, based on its use of a facially neutral salary scale, the Managerial and Professional Society Salary Policy (MAPS), to determine compensation for newly hired library supervisors. 2019 WL 5593279, at *6. The District Court held, however, that that policy did not necessarily compel any specific salary to be awarded to a new hire because it left open the possibility that the employer could apply discretion with respect to setting starting salaries. Id. Applying Maryland Insurance Administration, the District Court concluded that “[the EEOC’s comparator] was hired at a rate not only higher than the female [library supervisors] represented by the EEOC, but also significantly above the salary he had received during his first tenure at [employer]. Given these facts, combined with the inherent discretion within the MAPS policy, genuine factual questions exist about how defendants arrived at [the comparator’s] salary.” Id. at *7.

An employer’s burden at the motion to dismiss stage is even higher. For example, in EEOC v. George Washington University, No. 17-CV-1978 (CKK), 2019 WL 2028398 (D.D.C. May 8, 2019). the District Court for the District of Columbia denied an employer’s motion to dismiss even though the complaint at issue did not explicitly allege how the positions at issue were equal with respect to skill, effort, and responsibility. In that case, the EEOC had brought a lawsuit on behalf of a female university Director of Athletics, who alleged that a male colleague was treated more favorably and given greater opportunities because of his sex. Id. at *1. The University allegedly advertised a new position in its athletics department, but plaintiff had been informed that the job was off-limits to her because the University had already decided to hire her male coworker. Id. at *2. The position paid far more than plaintiff’s position.

The University moved to dismiss the complaint. The District Court held that the complaint “straightforwardly pleads that [plaintiff] was paid less as Executive Assistant than [comparator] was paid as a Special Assistant for substantially the same job responsibilities.” Id. at *4. The Court held that there was no reason for the complaint to get into the equal skill, effort, and responsibility, or other similar working conditions of those two positions, because at the motion to dismiss stage, a court cannot dismiss a complaint even if the plaintiff did not plead the elements of a prima facie case.

Implications For Employers

As these cases demonstrate, employers face considerable hurdles when trying to dispense with an equal pay claim early in the litigation. The fact-dependent nature of those claims often block an easy win at the motion to dismiss or summary judgment stage. When coupled with the increased stakes that come with litigating against the EEOC, these developments are yet another reminder that employers should be proactive about identifying and addressing pay equity risks. Even a facially neutral compensation policy may not be enough to save employers from expensive, protracted litigation if and when the EEOC comes knocking.

Our annual comprehensive analysis of trends in EEOC litigation will be published at the end of the calendar year. As always, we will continue to monitor EEOC litigation, including as it relates to equal pay issues, and keep our readers apprised of developments. We look forward to sharing lessons learned from FY 2019 at the beginning of 2020!

For more information on this topic, please contact the author, your Seyfarth Attorney, or any member of Seyfarth Shaw’s Labor & Employment Team.

 

The Employment Law Lookout blog is taking a holiday break this week, but will resume delivering insightful discourse and updates on the day’s most pressing workplace issues next week.

As a reminder for employers we have previously posted these blogs on holiday safety topics and behaviors: Have Yourself a Safe, Undistracted, and Accident Free Holiday, Don’t Let Too Much Eggnog Ruin Your Office Holiday Party: Tips to Limit Employer Liability at Company Parties , and Ring in the New Year, But Don’t Invite the Constable.

In the meantime, we want to wish all of our readers, contributors, and editors a safe and happy (and warm) Thanksgiving holiday.  We hope you are able to spend time with family, friends, and loved ones and rest assured knowing that we’ll be on the lookout for more management insights to bring you as we move into the year end and into 2020.

Thank you and Happy Holiday.

By Condon McGlothlen, Adam R. Young, and Craig B. Simonsen

Seyfarth Synopsis: The Illinois General Assembly passed SB 1557, revising the language of the Recreational Cannabis Law to reduce but not completely eliminate employer liabilities.

As we previously blogged, the Illinois Cannabis Regulation and Tax Act (410 ILCS 705) (the “Legalization Act”) will legalize recreational cannabis for Illinois adults starting January 1, 2020. The Legalization Act specifically allows Illinois employers to enforce “reasonable zero tolerance or drug free workplace policies, or employment policies concerning drug testing, smoking, consumption, storage, or use of cannabis in the workplace or while on call provided that the policy is applied in a nondiscriminatory manner.” The Act permits employers to prohibit employees from being under the influence of or using cannabis in the employer’s workplace or while on call. Further, the Act (i) allows employers to discipline or terminate an employee who violates the employer’s workplace drug policy, and (ii) specifically insulates employers from liability for disciplining or terminating employees based    on the employer’s good faith belief that the employee was either impaired at work (as a result of using cannabis) or under the influence of cannabis while at work.

However, the Act raised questions about new potential liabilities for Illinois employers. First, the Legalization Act amended the Illinois Right to Privacy in the Workplace Act, which prohibits discrimination against employees for their use of “lawful products” outside of work (defined as lawful products under state law), including cannabis and marijuana. This created a potential cause of action for applicants who test positive on a for marijuana at the post-offer, pre-employment stage. Because the applicant has not started working, such a test could only detect marijuana use outside the workplace. Return-to-duty drug testing presented similar liabilities, typically detecting off duty drug use during a leave.

Employers who test current employees, e.g., post-accident or based on reasonable suspicion, faced new exposure if a discharged employee claimed the employer lacked a “good faith belief” that the employee had been impaired by or under the influence of cannabis. For example, if the employer discharged some employees who tested positive but not others, a discharged employee could claim the employer lacked a “good faith belief” regarding impairment. Alternatively, because there is no legally or medically accepted definition of what constitutes his or her “impairment” (or being “under the influence” of marijuana), the employee could assert he was not in fact impaired at work, and that a positive test result alone cannot prove otherwise.

With the January 1, 2020 deadline approaching, Illinois business community representatives raised numerous concerns with lawmakers. The Illinois Chamber of Commerce proposed revising the Act to clarify permissible drug testing and to limit possible causes of action against employers. Both Houses have passed SB 1557, a bill which amends and clarifies many portions of the cannabis-related laws. The Act as amended would say:

Nothing in this Act shall be construed to create or imply a cause of action for any person against an employer for:

(1) actions taken pursuant to an employer’s reasonable workplace drug policy, including but not limited to subjecting an employee or applicant to reasonable drug and alcohol testing, reasonable and nondiscriminatory random drug testing, and discipline, termination of employment, or withdrawal of a job offer due to a failure of a drug test.

SB 1577 Sec. 705-10(50)(e)(1). This new provision is separate and apart from the Act’s safe harbor for employer decisions based on the employer’s good faith belief that an employee was impaired or under the influence of marijuana while performing his or her job duties.

For post-accident, random, or other forms of current employee testing, the Legalization Act now more effectively limits employer liability by expressly limiting causes of action based on discipline or termination on account of a failed drug test. However, the language regarding an employer’s “good faith belief” remains in the statute. Employees may therefore still pursue litigation alleging such a belief is required for lawful termination, and that the employer lacked this requisite belief in discharging the plaintiff.

With regard to pre-employment, post-offer testing, revisions to the Legalization Act seemingly eliminate employer liability for revoking offers due to failed drug tests. The Legalization Act as amended would explicitly permit “withdrawal of a job offer due to a failure of a drug test.” Section 705-10(50)(e)(1). While the original law amended the Illinois Right to Privacy in the Workplace Act to allow for discrimination claims founded on the use of “lawful products” (e.g. cannabis) outside work, the Right to Privacy in the Workplace Act specifically invokes 705-10(50)(e)(1) of the Legalization Act. Consequently, employer liability for withdrawing offers to applicants who test marijuana-positive – under either the Legalization Act or the Right to Privacy in the Workplace Act – has been effectively eliminated.

Governor Pritzker has not yet signed the bill into law. The Governor has sixty days in which to sign or veto or veto the bill; otherwise it becomes law effective January 13, 2020 – twelve days after the Legalization Act’s January 1, 2020 effective date. We do not know whether Governor Pritzker will take action on the amendments before the New Year. Regardless, we do not anticipate courts enforcing the Legalization Act as regards employment during early January with the amendments potentially taking effect two weeks later. We will continue to monitor developments in this area closely, and will keep employers informed.

For more information on this or any related topic, please contact the authors, your Seyfarth attorney, or any member of the Workplace Safety and Health (OSHA/MSHA) or Cannabis Law Practice Teams.

By Tonya M. Esposito and Renee B. Appel

Seyfarth Synopsis: Businesses should take note of recent developments in the CBD space. Consumer protection regulatory agencies issued another joint warning to a company selling CBD products making allegedly unsubstantiated claims. And, the FDA continues to stick to its public position that it is working toward both understanding the impact of CBD on users and crafting an effective regulatory framework. Despite this activity, Congressional leaders are still nipping at the heels of the FDA. Senator Chuck Schumer called on the FDA to issue and implement its CBD regulatory framework as soon as possible, and to report back to his office on its progress to date. In the interim, businesses will be left wondering what the rules of the road are.

Joint Warning Letter

Issued on October 10, 2019, the FDA and FTC partnered together to issue a joint warning to Rooted Apothecary LLC (“RA”), of Naples, Florida, for illegally selling unapproved CBD products that claim to solve a variety of health issues. RA has been accused of, among other things, claiming on its website that its products treat pain in infants, autism, attention-deficit/hyperactivity disorder (ADHD), as well as Parkinson’s and Alzheimer’s disease.

In their joint letter, both regulatory agencies made clear that RA’s purportedly fraudulent acts are illegal under statute. The FTC warned that such acts are illegal under the Federal Trade Commission Act, which makes it illegal to advertise products that can deceive consumers. Moreover, the FTC cautioned that any claims of treatment of diseases in humans must be backed by “competent and reliable scientific evidence.” Meanwhile, the FDA noted that under the Food, Drug, & Cosmetic Act, RA has 15 days to respond to both the FDA and FTC on how it will correct these violations.

In its joint letter, the FDA made clear that it was “working quickly to further clarify our regulatory approach for products containing cannabis and … CBD.” To that end, it has called on the public to report adverse reactions to CBD products to the agency’s MedWatch program. The FDA stated that in evaluating potential regulatory solutions, it holds public health as its prime goal, one that is achieved through “science-based decision-making.” Dr. Amy Abernethy, Principal FDA Deputy Commissioner, previously stated that the FDA would report on its inquiry into the science behind CBD in late summer/early fall of 2019. No report has been issued yet.

Schumer’s Call to Action

Senator Chuck Schumer’s call to action for the FDA stems from the passage of the 2018 Farm Bill. In his public statements last month, Senator Schumer explained that the CBD space, which is already sizeable in New York, is poised to grow into a billion-dollar industry. In light of this, Senator Schumer notes that businesses within his state are eager to join the CBD craze, but cannot act without rules of the road. He indicated that it is “imperative” that regulations be issued and implemented as soon as possible, and that the FDA’s efforts thus far have been “woefully” inadequate. Senator Schumer requested that within 90 days of his letter to Acting FDA Commissioner, Norman Sharpless, the FDA is to provide Senator Schumer’s office an outline of “agency’s current plans for a specific regulatory framework related to CBD along with a timeline for when comprehensive enforcement policies for CBD products will be finalized and implemented.”

Repeated calls to action from various parties (ranging from former FDA Commissioner Scott Gottlieb, to members of the public at large, and now Congressional leadership) have urged the FDA to provide guidance in the CBD space. As Senator Schumer recognized, CBD has the potential to become a billion dollar industry in New York state alone. The importance of this appears not lost on the FDA, but it reiterates the need for adequate scientific data in order to move forward. In the interim, the public and business continue to wait for regulatory clarity and are left trying to navigate muddy waters.

Seyfarth’s Cannabis practice has a deep bench of experienced attorneys who actively counsel clients in this space. Seyfarth will continue to monitor developments and report them as they become available.

By Paul S.Drizner

Seyfarth Synopisis: Illinois recently enacted legislation that changes the rules for withholding income tax from non-resident employees. The new rules replace the current, somewhat more complicated rules with a more straight-forward method that is based on, among other things, the number of working days that an employee spends in Illinois.

Current Withholding Rules

Currently, every employer maintaining an office or transacting business in Illinois that is required to withhold federal tax from compensation paid to a non-resident employee in Illinois is also required to withhold Illinois income tax from such payment. Compensation is considered paid to an employee in Illinois if:

  • the employee’s services for the employer are performed entirely within Illinois;
  • the employee performs some services for the employer outside of Illinois but those services are incidental to the services that the employee performs for the employer within Illinois; or
  • the employee performs some services for the employer within Illinois and the employee’s base of operations or, if the employee has no base of operations, the place from which the employee’s service is directed or controlled is within Illinois.

New Withholding Rules

Effective for tax years ending on or after December 31, 2020, employers are required to withhold Illinois income tax from compensation paid to a non-resident employee if:

  • the employee performs some services within Illinois;
  • the employee’s services that are performed within Illinois are not incidental to services that the employee performs outside of Illinois; and
  • the employee performs services within Illinois for more than 30 working days during the tax year.

The amount of compensation that is considered paid in Illinois under the new rules is the portion of the employee’s total compensation for services performed for the employer during the year which the number of the employee’s working days spent in Illinois during the year bears to the total number of the employee’s working days spent everywhere during the year.

What is a Working Day?

A working day is any day during the year in which the employee performs services on behalf of the employer. Days in which the employee performs no services on behalf of the employer (e.g., weekends, vacation days, sick days and holidays) are not considered working days. Further, a working day is considered spent within Illinois if (i) the employee spends more time that day performing services for the employer within Illinois (without regard to any time spent traveling) than the employee spends performing services for the employer outside of Illinois, or (ii) the only services that the employee performs for the employer on that day is traveling to Illinois and the employee arrives on that day.

A working day does not include any day during a disaster period in which an employee performs services in Illinois solely in response to a request made to the employer by a business or by an Illinois state or local government to perform disaster or emergency-related services in Illinois. Disaster or emergency-related services generally mean repairing, building or performing other business activities related to infrastructure that has been damaged or destroyed by a state or federally declared disaster or emergency event. A disaster period is the period that begins 10 days before the earlier of the date of the Illinois governor’s proclamation or the President’s declaration of a state of emergency or a federal major disaster and ends 60 days after the end of the declared disaster or emergency period.

Tracking Where an Employee Performs Services

If an employer maintains a time and attendance system that tracks where employees perform services on a daily basis, then the information provided by that system is used to determine whether non-resident employees are subject to Illinois tax withholding. A time and attendance system is a system (i) in which an employee is required to contemporaneously record the employee’s work location for every day that the employee works outside of the state where the employee primarily works, and (ii) that is designed to allow the employer to allocate an employee’s wages for tax purposes among all the states in which the employee works.

If an employer does not maintain a time and attendance system, the employer is required to obtain a written statement from its non-resident employees indicating the number of days that the employee reasonably expects to perform services in Illinois during the year. Unless an employer has actual knowledge of an employee’s fraud or gross negligence in preparing the statement, or there is collusion between the employer and the employee to evade tax, the employee’s certification is prima facie evidence of the number of days that the employee spent working in Illinois.

Unfortunately, the law does not explain how an employer should address the situation where it fails to withhold Illinois tax from wages paid to a non-resident employee for the employee’s first 30 Illinois working days if the employee ends up working in Illinois for more than 30 working days and the failure was either because the employee’s statement incorrectly estimated that the employee would work less than 30 days in Illinois or because the employer maintained a time and attendance system but did not begin withholding Illinois tax until after the employee had more than 30 working days in Illinois. Perhaps future guidance will answer this question.

Conclusion

The new rules should make it easier for Illinois employers to determine when they are required to withhold Illinois income tax from wages paid to non-resident employees. Illinois employers with non-resident employees should either implement a time and attendance system by January 1, 2020 or prepare a form statement that non-resident employees can provide to the employer before January 1, 2020 (and before each subsequent January 1) estimating the number of days they reasonably expect to work in Illinois during the year.

For more information on this or any related topic please contact the author, your Seyfarth attorney, or any member of the Seyfarth Shaw’s Labor & Employment Group or the Workplace Policies and Handbooks Team.

By Anthony Califano, Jennifer Mora, and Frederick T. Smith

Seyfarth SynopsisEmployers are grappling with the wave of marijuana laws sweeping the nation, some of which provide very employee-friendly protections. While no state requires an employer to tolerate employees’ use of marijuana or impairment while they are working, present drug testing methodologies cannot determine whether an employee used marijuana two hours or two weeks ago. That might be changing as companies reportedly are closer to developing technology that will be able to detect recent use, a welcome development for both employers and employees.

Here Are The Problems:

Marijuana causes impairment to people who ingest it. Actually, the psychoactive component of marijuana, THC (tetrahydrocannabinol), is what really causes impairment. It weakens judgment and motor function. If an employee goes to work high, that creates serious safety concerns. It also creates legitimate concerns regarding employee judgement, behavior, work product, and efficiency. Science has confirmed that these concerns stemming from marijuana use are legitimate.

Another problem is that marijuana use is illegal under long-standing federal law, the Controlled Substances Act. To be clear, it is still illegal to use, possess, or distribute marijuana. Many employers take issue with the idea of being required to tolerate their employees’ conduct that is plainly criminal. Understandably, employers may not like the message that condoning marijuana use sends to their clients, target markets, and communities.

Opinions as to whether marijuana should be legal vary. But most would agree that no employer should have to tolerate employees working while high from use of marijuana—whether the use is legal or illegal. This idea is similar to the generally accepted idea that employers need not tolerate employees working while intoxicated from alcohol consumption, which is legal. Indeed, a number of state marijuana laws include provisions reflecting that employers need not accommodate or tolerate marijuana use or impairment in the workplace or while working.

This is the point at which perhaps the most practical problem lies for employers and employees. How can an employer know if an employee is impaired or high from ingestion of THC?

An employer with “reasonable suspicion” that an employee is working while intoxicated from alcohol can rely on science to establish impairment. Blood alcohol tests have generally been accepted to measure impairment from alcohol consumption. Unfortunately, there has been no  scientifically-accepted drug test to show impairment from marijuana use. While most tests show the presence of THC in a person’s system, reflecting use in recent days or weeks before the test, they do not show impairment at or near the time of the test.

New And Improved Testing Methods Could Be A Solution:

Science may be catching up with the times. A number of media outlets have reported that certain companies are developing tests that use breathalyzers to evaluate how recently a person used marijuana. According to reports, these tests are being designed to show if a person used marijuana within the 2-3 hours before the test, which has been reported to be within the peak period of impairment after ingestion of THC.  It is unclear if and when these devices will be available for employment-related testing or the costs associated with such tests.

That said, if new marijuana testing devices and methodologies become generally available, and they are validated as a reliable means by which to determine impairment or recent marijuana use, employers may have a much needed solution to their legal and practical dilemmas. In fact, these marijuana tests could bring employees and applicants peace of mind too. An employee who uses marijuana at home on Sunday evening, in accordance with his doctor’s instructions, may be able to rest easy knowing that, if sent by his employer for a drug test on Monday, the test results will show that he was not impaired while working.

The near term development and reliability of these testing devices is currently unknown and employers should not expect them to be a panacea to their marijuana woes. Amongst other issues, the devices may not be permitted by state law. Where their use is permissible, we predict their validity and reliability will be challenged by experts and their widespread use by certified laboratories for workplace drug testing programs is not likely to occur any time soon.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Cannabis Law Practice or Workplace Policies and Handbooks Team.

By Thomas F. Howley and Dov Kesselman

Seyfarth Synopsis: The DOL’s ARB rejected an employee’s SOX retaliation claim where he inadvertently provided information to his employer and only “hinted” that he was filing a SOX-protected complaint. The ARB seems unwilling to accept retaliation claims where the employee fails to report to, or actively conceals information from, the statutory entities under SOX.

On October 31, 2019, the United States Department of Labor’s Administrative Review Board (ARB) affirmed the dismissal of a whistleblower retaliation claim under the Sarbanes-Oxley Act (SOX), holding that the employee did not engage in protected activity by inadvertently providing information to his employer or by “hinting” at filing a complaint. Hoptman v. Health Net of California, ARB No. 2017-0052, ALJ No. 2017-SOX-00013 (ARB Oct. 31, 2019) (per curiam). This decision highlights SOX’s goal of encouraging open disclosure.

Background

Complainant was a claims representative for Respondent, a health maintenance organization. He allegedly discovered systematic overpayments by Respondent’s plan members and began texting with a plan member (the “Member”) to expose Respondent’s actions. Complainant asked the Member to fill out a HIPAA release so he could gather information. He also told her he did not have enough money to continue his investigation and suggested that he would share any reward money if she helped. At Complainant’s suggestion, the Member filed a complaint with California’s Department of Managed Health Care (DMHC) about her overpayments and provided the text messages that Complainant sent her.

Complainant later met with one of the Respondent’s HR managers on a separate matter and mentioned that he had read an online article about Respondent owing significant back taxes to the IRS. He hinted that Respondent was “going to be in a lot of trouble” and that he had a “complaint in the works.” Complainant, however, did not mention fraudulent activity or filing a complaint with the SEC during this conversation.

A few days later, DMHC sent Respondent the text messages that it received from the Member. After reviewing them, Respondent suspended and then terminated Complainant for soliciting assistance and possible financial assistance from a client, engaging in private communications with a client on a personal device, misleading a client to sign a HIPAA form for Complainant’s personal use, and offering to share a reward with the Member.

Complainant filed a SOX retaliation complaint alleging that he was terminated because he was about to file a complaint with a federal agency. The Administrative Law Judge (ALJ) granted Respondent’s motion for summary decision, finding Complainant failed to demonstrate that he engaged in protected activity. On appeal, Complainant argued that Respondent should have known from the text messages that he would file a complaint and that his conversation with the HR manager “hinted” that he was about to file a complaint.

The ARB’s Holding

The ARB affirmed the ALJ’s decision, finding that Complainant did not engage in protected activity. SOX protects employees who provide information, or cause information to be provided, to one of three entities: (a) a Federal regulatory or law enforcement agency, (b) any Member of Congress or any committee of Congress, or (c) a person with supervisory authority over the employee. 18 U.S.C. § 1514A(a)(1). SOX also protects employees who file or cause to be filed a proceeding, or assist in such a proceeding, with the employer’s knowledge. 18 U.S.C. § 1514A(a)(2).

It was undisputed that Complainant did not provide information to one of the three statutory entities directly. The ARB also found that his texts to the Member were not sent with any expectation that they would “cause information to be provided” to one of the entities. It emphasized that he “deliberately concealed” the text messages, which “inadvertently reached” Respondent, and that he was “quite surprised” the Member shared his texts with DMHC.

Complainant’s conversation with Respondent’s HR manager also failed to show he was “about to file” a complaint. The ARB found that the manager could not reasonably ascertain SOX-protected content from Complainant’s summary of an online article and vague references to a complaint “in the works.” It further held that, even after Respondent received the texts from DMHC, it did not, in context, establish a genuine issue of material fact as to whether Complainant engaged in protected activity. The ARB concluded that Complainant’s communications were “too attenuated and conflated with other non-SOX protected conduct to convey to a reasonable person that he was about to file a complaint protected under SOX.”

Takeaways

This decision highlights SOX’s and the ARB’s goal of encouraging open disclosure, rather than an employee’s attempt to use a “gotcha” strategy for his or her own benefit. The ARB focused on the fact that the employee deliberately concealed information and that the employer lacked any notice that he engaged in SOX-protected activity. Based on this decision, the ARB seems unlikely to find protected activity where the complainant fails to report to, or actively conceals information from, the appropriate entities under SOX.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Whistleblower & Corporate Internal Investigations, the Workplace Counseling & Solutions Team, or the Workplace Policies and Handbooks Team.