By Dion L. Beatty and Erin Dougherty Foley

Seyfarth Synopsis: In affirming summary judgment in favor of AutoZone, the Second Circuit rules that a sales associate did not provide enough evidence to satisfy her burden of proof for sex discrimination, retaliation and hostile work environment. This decision is significant because the court agreed that it was proper for a judge to exclude the former employee’s flawed deposition testimony as evidence.

Can an employer terminate someone for making crude comments made to a co-worker? In the Second Circuit thankfully the answer is still “Yes.” In Bentley v. AutoZoners, LLC, AutoZone Northeast, LLC, Case No. 18-2441, the Second Circuit affirmed the district court’s grant of summary judgment against a former AutoZone employee’s state law claims of sex discrimination, retaliation, and hostile work environment.

The plaintiff worked as a sales associate and was fired after an investigation revealed that she had made very crude comments to another employee. There was no dispute over the comments she made, which were against company policy. She had also claimed that the employee she made the crude comments to had sexually harassed her and also that he was her supervisor. Both she and the co-worker were terminated. The court rejected the argument that he was her supervisor, eliminating the claim that AutoZone had vicarious liability for his actions. In a summary judgment motion, Bentley argued that her deposition testimony created a dispute of facts that should be tried in court.

The district court judge granted summary judgment in favor of AutoZone on the grounds that her deposition testimony was so contradictory and flawed that it essentially could not be used for evidence to dispute facts and that absent the deposition, she could not meet her burden to show discrimination.

The Second Circuit affirmed the lower court’s decision and held that all of plaintiff’s claims failed on the merits, and that her deposition testimony could not be used as evidence to create a factual dispute. The Second Circuit also held that Bentley’s claims failed because she could not demonstrate that her firing was pretextual, she could not show a hostile work environment because the employee who made the comments to her was not a “supervisor” and there was no evidence that the employer knew about these comments before its investigation one month before her firing and following the investigation they promptly fired the employee who made the comments to her. The court also found that plaintiff’s deposition testimony could not be used as evidence that AutoZone knew about sexist comments being made to her before its investigation because it was too contradictory and inconsistent.

Here are some key takeaways from this case:

  • In the Second Circuit, deposition testimony that is contradictory and inconsistent can be excluded as evidence in considering summary judgment.
  • Proving pretext requires more than just questioning the timing of a discharge or the severity of the misconduct that warranted the discharge.
  • The burden for what qualifies as a “supervisor” is much higher than directing an employee’s work. That person must have the ability to make tangible employment actions against an employee.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Workplace Policies and Handbooks or Labor & Employment Teams.

 

By Benjamin D. Briggs, Joshua M. HendersonPatrick D. JoyceAdam R. Young, and Craig B. Simonsen

Seyfarth Synopsis:  The Nanotechnology Research Center (NTRC), part of the National Institute for Occupational Safety and Health (NIOSH), has identified new safety hazards from the expanding nanotechnology industry.

We have previously blogged on future issues related to the safety of automation and technology in the workplace, including, National Safety Council Congress: Executive Forum Industry 4.0 – EHS in the Future of the Workplace, Future Enterprise – Workplace Safety Compliance Comes to the Forefront for Expanding Healthcare IndustryA Global Perspective on the Future of Wearable Technology, and Robotics, Automation, and Employee Safety for the Future Employer.

One of the potential safety issues facing employers relates to the use of nanomaterials and processes involving nanotechnology in the workplace. In a recent publication  (NIOSH Publication Number 2019-147, August 2019), the NTRC summarized its research aimed at understanding the potential effects on human health of exposure to engineered nanomaterials and seeking to develop methods to control or eliminate exposures.

According to NIOSH, nanoparticles are extremely small particles (between 1 and 100 nanometers, 10-9 m) that are designed to have certain new or unique characteristics, like strength, elasticity, or reactivity.  The concept is that these new and unique characteristics or properties make advanced materials and products possible.

The U.S. Occupational Safety and Health Administration (OSHA) has published a Fact Sheet, Nanotechnology: Working Safely with Nanomaterials (OSHA FS-3634 – 2013) to educate the public on safety hazards related to nanomaterials.  The Fact Sheet indicates that “workers who use nanotechnology in research or production processes may be exposed to nanomaterials through inhalation, skin contact, or ingestion.  The “fact sheet” provides basic information to workers and employers on the most current understanding of potential hazards associated with this rapidly-developing technology and highlights measures to control exposure to nanomaterials in the workplace.”

The OSHA Fact Sheet notes that “some examples of workplaces that may use nanomaterials include chemical or pharmaceutical laboratories or plants, manufacturing facilities, medical offices or hospitals, and construction sites.”

The NTRC Publication focuses on these areas from an occupational safety and health perspective to assist industry in preparing for the future by:

  • Increasing understanding of potential health risks to workers making and using nanomaterials.
  • Preventing occupational exposures to nanomaterials.
  • Evaluating potential worker health risks from advanced material and manufacturing processes.

For instance, the NTRC prioritizes the growing number of engineered nanomaterials for laboratory and field research, focusing on the ones that have the greatest potential for exposure and harm to workers.  NTRC conducts field investigations and epidemiological studies for a realistic understanding of exposure and risks to nanomaterial workers.  It also issues recommendations on how to use engineering controls and personal protective equipment to mitigate exposure to engineered nanomaterials, along with providing nanomaterial businesses with “guidance” on how to keep workers safe.

In that continuing effort, the NTRC recently published its “Continuing to Protect the Nanomaterial Workforce: NIOSH Nanotechnology Research Plan for 2018-2025.” (NIOSH Publication Number 2019-116, January 2019).  This Plan seeks to be “a roadmap to advance (1) understanding of nanotechnology-related toxicology and workplace exposures and (2) implementation of appropriate risk management practices during the discovery, development, and commercialization of engineered nanomaterials along their product lifecycle.”

Employer Takeaway

As we continue to move boldly into the future of nanotechnology, industries must make sure employees are knowledgeable and trained to work safely with these materials and the related processes and machines.  Company policies and training materials must be updated to adjust to these new hazards.

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 Workplace Policies and Handbooks Teams.

By Michael Tamvakologos and Elizabeth Tan

Seyfarth Synopsis: An enforceable restraint of trade can be a key business asset, giving an employer time to recover when a senior employee has left the business for a competitor. Like a good insurance policy, it’s a big relief to have it when you need it.

Australian law regarding restraints of trade has its history in 19th Century England and the prevailing concerns of that time.  Of course the law has developed incrementally since then. However, by and large, an employee restraint protects certain interests within defined geographical boundaries such as a city, state or country.  This made sense in a bricks and mortar world of commerce, but how can employers protect their interests in the modern digital economy?

We have worked with a range of clients to protect their interests across borders. Novel thinking is required to draft employment restraints so that they are effective within the established legal framework.  Our Australian Partners have litigated hundreds of restraint of trade cases and have developed a deep understanding of the issues and what it takes to win.  We share some thoughts below:

  1. Ensure restraints protect the right cyber micro-markets

Cyber-markets can be broken down into many possible divisions: by country location, product or service, individual seller/retailer website, personal characteristics of the consumer (age, gender, occupation, hobbies) among other things. What this means is there are sections within any market which a departing employee may lawfully target which will not affect an employer’s current business.  Say, for example, an employer operates an online gambling business for rugby and AFL which serves clients in Australian capital cities but does not offer services for online horse racing in the UK.  A departing employee might be able to set up a competing website, also operating geographically from Australia, to offer online gambling in UK horse racing. The cyber micro-markets are different, so the two companies are not competing in that market.  But there is room for a restraint to work in areas of overlap subject to the terms of the restraint covering the correct cyber micro-markets.

  1. Confining an employer’s cyber-trade interest to its client list

Where an employer provides a range of services in a cyber micro-market, the most efficient and clear way to protect its interests – for example, the legitimate interest of client connections, may be naming particular clients in a market, along with other appropriate terms.  This type of drafting can be effective to protect relationships built with particular clients situated within defined boundaries.

  1. Enforcing cyber-market restraints where an employee engages in cyber-trading within the boundaries of an enforceable geographic restraint

Essentially, this means that an employer who reasonably restrains employees by geographical restraints is to be entitled to have this capture cyber-business within the geographical restraint.  For example, an employer can protect its interest in client connections regarding their telemedicine counselling services provided to public and private hospitals in, say, Sydney and Melbourne against former employees providing competing services to customers in these locations for a certain period of time, but would not be entitled to restrain a former employee from providing the same services to patients in aged-care homes in Perth, Adelaide or the United States.  A restraint will be effective so long as it is well drafted and ensures that providing services to clients through the internet within this geographic boundary is prohibited.

The above framework for drafting restraints supports the following public policy benefits:

  • Ensuring a level of trade and (not unfair) competition while offering reasonable protection of an employer’s legitimate interests; and
  • Allowing markets to grow and prosper for the benefit of consumers.

Keep enforcement front of mind where cross-border litigation is a possibility

A cyber-restraint, like the internet itself, is a global construct.  But courts are country and state based and their jurisdiction is usually limited by geography.  That made sense when most trade was local but can be problematic when trying to enforce a restraint across borders.

A 2017 decision of the Western Australia Supreme Court provides an example.  Naiad, a U.S. employer sought an interlocutory injunction to restrain a defecting employee from operating a competing business in Western Australia. After grappling with the applicable law and jurisdiction, the Court concluded that the reasonableness of the restraint was governed by US (Connecticut) legal principles (given particular terms of the contract) but the grant of an injunction was governed by Western Australian law.

The situation is complicated because some countries (for example, Australia and the United Kingdom) have arrangements in place to recognise each other’s Court judgments and orders meaning that international litigation encounters less problems.  But this is not so as between many other countries.  The upshot is that it is important to consider how a restraint term will be enforced up front. Otherwise, there may be a right but no real way to achieve a remedy.

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

By Benjamin D. Briggs, Brent I. ClarkIlana R. Morady and Craig B. Simonsen

Seyfarth Synopsis: The U.S. Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) published this week a notice of proposed rulemaking (NPRM) on changes to “hours of service” (HOS) rules to “increase safety on America’s roadways.”  84 FR 44190 (Aug. 22, 2019).  The proposal, if adopted, would update existing regulations for commercial motor vehicle (CMV) drivers.  

FMCSA’s proposed rule– which is designed to alleviate “unnecessary burdens” placed on drivers while maintaining safety — suggests five “key revisions” to the existing HOS rules:

  • The Agency proposes to change when drivers need to take their 30-minute break. Instead of requiring the break in the first eight hours of on-duty time, the agency has proposed requiring the break within the first eight hours of drive time, offering drivers more flexibility in its use.
  • The Agency proposes to modify the sleeper-berth exception to allow drivers to split their required 10 hours off duty into two periods: one period of at least seven consecutive hours in the sleeper berth and the other period of not less than two consecutive hours, either off duty or in the sleeper berth. Neither period would count against the driver’s 14‑hour driving window.  The proposal provides this illustration: a driver could decide after taking a 3-hour break (or any off-duty or sleeper berth break of at least 2 consecutive hours) [and] pair it with a sleeper berth break of 7 hours, (thus totaling 10 hours off duty).
  • The Agency proposes to allow one off-duty break of at least 30 minutes, but not more than three hours, that would pause a truck driver’s 14-hour driving window, provided the driver takes 10 consecutive hours off-duty at the end of the work shift.
  • The Agency proposes allowing drivers to extend their 14-hour on-duty period by up to two hours in the event of adverse conditions, such as weather or congestion.
  • The Agency proposes a change to the short-haul exception available to certain commercial drivers by lengthening the drivers’ maximum on‑duty period from 12 to 14 hours and extending the distance limit within which the driver may operate from 100 air miles to 150 air miles.

The public comment period will be open for 45 days, until October 7, 2019.

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) TeamWorkplace Counseling & Solutions Team, or the Workplace Policies and Handbooks Team.

By Linda C. Schoonmaker and Brian A. Wadsworth

Seyfarth Synopsis: In affirming summary judgment in favor of the defendant in an Family and Medical Leave Act (FMLA) interference and retaliation case, the Fifth Circuit reinforced the importance of documenting performance issues and following internal policies. This case serves as a good reminder for employers to continue to document performance issues and follow or, if necessary, revise internal company policies.

In Tatum v. Southern Co. Svcs, Inc., Cause No. 18-40775, the Fifth Circuit affirmed the district court’s grant of summary judgment against a former employee’s claims of interference and retaliation under the FMLA.

Plaintiff Brandon Tatum worked as an operations technician at Defendant Southern Co. Svcs. Inc.’s biomass power generation facility. As early as 2013, Southern began noting issues with his work performance. Namely, his lack of professionalism in interacting with his supervisors and colleagues. Over a number of years, Southern documented Tatum’s inappropriate behavior, which included the use of profanity, repeatedly interrupting safety meetings, and making sarcastic comments to his co-workers. When Tatum’s behavior reached a crescendo, Southern’s plant manager warned Tatum that a future confrontation with a co-worker could lead to his termination. Southern’s plant manager also contacted human resources to “discuss escalating Tatum’s discipline level.”

After this censure, Tatum attended a doctor’s appointment. Tatum learned that his blood pressure was dangerously high and his doctor instructed him to cease work until his blood pressure returned to normal. Tatum informed Southern of this instruction. Later that day, Tatum also informed Southern that he had observed a co-worker create a potentially fatal safety risk approximately one month earlier and included pictures of this risk. Tatum had previously boasted to a co-worker that these photographs of a potentially fatal security risk constituted “[j]ob security” for Tatum.

Southern subsequently informed Tatum that he was eligible for FMLA leave, but then terminated him for his failure to reform his behavior or to timely report the safety concern he raised and documented with photographs.

In affirming summary judgment in favor of Southern, the Fifth Circuit found that Southern had stated a legitimate, nondiscriminatory reason for his termination and that Tatum did not present evidence of pretext. The Court noted that Southern had provided Tatum with “years of counseling and coaching by his supervisors,” but that his behavior did not improve. In addition, he also delayed in reporting a potentially fatal safety risk for more than a month. Similarly, Tatum could not demonstrate pretext based on an assertion that two promotions during his tenure with Southern controverted Southern’s documenting of his improper behavior. To the contrary, the Court found that Southern “unsurprisingly fired him” when he “refused to correct his behavior … [or] disclose a safety concern in a timely manner.”

The Court also disagreed with Tatum’s claim that Southern denied him the same opportunities as other employees. The two other employees who also witnessed the potentially fatal safety risk only received training, not termination. Unconvinced by Tatum’s argument, the Court noted that Southern did not have to be objectively correct in assessing whether Tatum was purposely dishonest about his delay in reporting the safety violation, it only had to have a good-faith belief that dishonesty existed. Southern met this standard when one of its employee’s testified that Tatum claimed that he kept the photographs of the violation for “[j]ob security.”

Lastly, the Court looked at Southern’s internal policies and disagreed with Tatum’s argument that Southern failed to follow such policies by not “hearing his side of the story.” The Court found that there was no internal “policy guaranteeing an employee the right to be heard before termination.” To the contrary, Southern’s policies provided that it could terminate an employee “at any time for serious infractions ….” Thus, Southern did not violate any of its policies in terminating Tatum.

Takeaways

While the Fifth Circuit does not break any new ground in Tatum, it does reinforce a few key issues that employers should remain cognizant of:

  • Always document performance issues, even if they are not significant enough to warrant immediate action.
  • Follow relevant internal company policies and, if they are not consistent with the manner in which the company conducts business, revise and update those policies to accurate reflect the way in which the company conducts business.

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

By Lennon B. Haas and Kevin M. Young

Seyfarth Synopsis: In Sellars v. CRST Expedited, Inc. Case No. C15-117-LTS (July 15, 2019), the Northern District of Iowa held that employer responses to sexual harassment complaints need not deter harassment by other employees, where the employer lacks notice that those other employees might engage in harassing behavior.

Background

CRST Expedited, Inc. is a long-haul trucking company with more than 3,000 drivers. Two drivers staff each truck. One person drives while the other rests. When drivers join CRST, “lead drivers” train rookies, who become “co-drivers” after completing training. At new driver orientation, CRST provides new drivers copies of its written policies prohibiting sexual harassment and retaliation and trains them on those policies. Those policies also outline available reporting mechanisms, and detail how CRST will respond to complaints.

The three women who filed the case worked for CRST as drivers. Each alleged that she experienced multiple episodes of harassment from multiple different lead drivers. Each complained to CRST. When they did so, CRST followed its policy by, among other things, assigning them to work with a new lead driver who had not been accused of harassment and ensuring that the alleged harasser would not be paired with another female driver. The eventual plaintiffs alleged, however, that some of the new lead drivers with whom they were paired harassed them as well.

All three women ultimately left CRST and later joined together to sue on behalf of similarly situated female truck drivers. They asserted hostile work environment, retaliation, and constructive discharge claims on behalf of the class and as individuals. Because it decertified the class in a previous order, the Sellars court only addressed the individual plaintiffs’ claims.

The Court’s Analysis

The three Plaintiffs file suit under Title VII, which prohibits sex-based discrimination that creates a hostile or abusive work environment. To prevail on such a claim, a plaintiff must establish five elements. This case turned on the element requiring a plaintiff to show that her employer “knew or should have known of the harassment and failed to take prompt and effective remedial action.”

Plaintiffs first tried to show that CRST had constructive knowledge of their harassment by pointing to prior sexual harassment lawsuits against the Company, and one employee’s suggestion that CRST install cameras on its trucks. The court rejected this argument, reasoning that past harassment complaints cannot speak to an employer’s knowledge of current incidents unless the past and current occurrences involve the same alleged harassers. Employers need not foresee employee misconduct, the court noted, absent some indication it would occur.

Plaintiffs also argued that CRST’s response to their complaints was inadequate because the Company failed to prevent future harassment. The court disagreed, finding it significant that after Plaintiffs complained, CRST followed its policy by (1) promptly removing them from the truck with the alleged harasser ; (2) marking the alleged harasser as “male only”; (3) paying for any necessary lodging and return fares; and (4) pairing Plaintiffs with new lead drivers who had never been accused of harassment. That response, the court observed, prevented the alleged bad actor from harassing the Plaintiff or any other women and quickly addressed the immediate circumstances surrounding the harassment.

In reaching this conclusion, the court rejected the Plaintiffs’ reliance on Ninth Circuit precedent that requires an employer’s remedial responses to deter future harassers. Instead, the court concluded that imposing liability on CRST would punish the Company for failing to respond to an employee action that had not occurred and that CRST had no reason to suspect would happen. That, said the court, “is liability without end” and exceeds Title VII’s requirement that employers have knowledge of the harassment and respond reasonably. Measuring CRST’s response instead by what it knew at the time of the complaints and how it acted in response, the court found CRST was entitled to summary judgment.

Lessons Learned

CRST escaped liability despite some evidence of persistent sexual harassment issues involving its lead drivers. Key employer takeaways include:

  • It is important to develop, implement, and consistently enforce written sexual harassment policies that swiftly address reports of harassment; remedy the circumstances that lead to complaints; and prevent future abuse by credibly accused harassers.
  • It is equally important to ensure that new employees receive those policies, receive training on the policies, and that all employees receive periodic reminders about the policies.
  • Finally, it is advisable to periodically review and revise policies, particularly when a complaint serves in some way as notice of a potential deficiency in your existing response.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Workplace Policies and Handbooks or Labor & Employment Teams.

By Nicholas De Baun and Tara Ellis

Seyfarth Synopsis:  In Toomey v. U of Arizona, No. 19-35 (D. Ar. June 24, 2019), the Magistrate Judge determined on a motion to dismiss that Title VII does not prohibit discrimination based on a person’s transgender status.  However, she decided that the plaintiff had adequately alleged that the health plan exclusion for gender reassignment surgery disadvantaged a “suspect class”, justifying a heightened level of scrutiny, and that defendants had failed to argue that the exclusion would survive this level of scrutiny. 

Plaintiff Russell Toomey, a transgendered male, filed suit in early 2019 against his employer, the State of Arizona, after the self-funded health plan provided by the State of Arizona denied Toomey’s request for medical preauthorization for a total hysterectomy.  The Plan generally provides coverage for “medically necessary care”, and Toomey’s doctors contended that the hysterectomy was medically necessary, but the Plan denied authorization under an exclusion for “gender reassignment surgery.”

Toomey’s complaint contends that the Plan’s denial of authorization for a hysterectomy was sex discrimination under Title VII and a violation of the Equal Protection Clause.  In March 2019, the State of Arizona and two individually named defendants employed by the State of Arizona filed a motion to dismiss Toomey’s complaint.

Magistrate Judge Bowman issued her Report and Recommendation on the motion to dismiss on June 24, 2019.  Judge Bowman recommended granting the motion to dismiss on Toomey’s Title VII claim on the grounds that Toomey could not show that the decision to deny his request for surgery under the Plan exclusion for gender reassignment surgery would have been different if his sex were different.  In reaching this conclusion, Judge Bowman noted that “[d]iscrimination based on a person’s status as a transsexual without more is not discrimination based on gender” under Title VII.

Judge Bowman recommended denying the motion to dismiss on Toomey’s Equal Protection claim.  She concluded that Toomey had adequately alleged that the Plan exclusion disadvantaged a “suspect class”, justifying a heightened level of scrutiny, and that defendants had failed to argue that the exclusion for gender reassignment surgery would survive this level of scrutiny.

After the parties filed Objections to the Report and Recommendation, District Judge Rosemary Marquez scheduled oral argument on the Motion to Dismiss and Report and Recommendation for September 16, 2019.

The question of whether the protections of Title VII apply to transgender individuals is also before the Supreme Court for oral argument on October 8, 2019.  Given the timing of the argument, it is an open question how and whether the Supreme Court’s decision will impact Toomey’s claims.

We will continue to watch this case, and will keep you posted of any developments.

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

By Tonya M. EspositoRenee B. Appel, and Jonathan Huie

Seyfarth Synopsis: CBD is “thriving” in the current regulatory environment, but is it doing so illegally?

As former U.S. Food and Drug Administration (FDA) Commissioner Scott Gottlieb opined last week, “the CBD craze is getting out of hand. The FDA needs to act.” Since the passage of the Farm Bill in December of 2018, there has been a marked uptick in interest in the cannabidiol (CBD) space from businesses and users alike. Congress explicitly preserved the FDA’s authority to regulate CBD-containing products to ensure that they are safe and that their claims are valid. Current federal law expressly allows for the distribution of hemp-derived CBD products that contain 0.3% tetrahydrocannabidiol (THC) or less to be sold, with certain caveats.

The FDA has provided clarity that hulled hemp seed, hemp protein powder, and hemp seed oil can be legally used in foods. Other CBD products, however, are still subject to various state law regulations as well as the U.S. Food, Drug, and Cosmetic Act (FD&C Act), which requires FDA pre-market approval for drug products. Currently, the FDA treats CBD products aimed at human or animal consumption as drugs and therefore they cannot be distributed without prior approval or a rulemaking exception (more on this below). The following is a brief update on recent developments within the federal regulatory regime of CBD products.

FDA’s Regulatory Efforts

In light of the enactment of the Farm Bill, along with growing activity and interest in CBD products, the FDA has taken initial steps toward exercising greater oversight—with a goal of devising a more robust regulatory regime. In March of 2019, the FDA established a Working Group to determine the possible legislative pathways to regulate CBD. Specifically, the group aims to “make recommendations” on CBD legislation to Congress.

On May 31, 2019, the FDA’s Working Group held a public hearing for stakeholders to share their experiences and challenges with CBD products, including information and views related to product safety. The public hearing attracted over 100 speakers and 2000 participants. In addition, the Working Group invited the public to submit written comments (the “Public Docket”), which closed on July 16, 2019. Dr. Amy Abernethy, the Principal Deputy Commissioner and Acting Chief Information Officer and head of the Working Group, recently Tweeted:

We are enthusiastic about research into the therapeutic benefits of CBD products but also need to balance safety. To understand the breadth of issues and gather data on safety we have conducted a public hearing, reviewed the medical literature, and have an open public docket.

Elaborating on this statement, on July 25, 2019, Dr. Abernethy testified before the Agriculture, Nutrition and Forestry Committee where she stated that providing clarity on the regulatory status of CBD products is an FDA priority, but cautioning that based on the FDA’s review of Epidiolex (the first CBD-approved drug), CBD is not risk-free. She stressed that, to the FDA’s knowledge, adequate studies simply have not been done, leaving the FDA without adequate information for science-based decision-making about CBD. The FDA is collecting data to fill these gaps . The Working Group is in the process of reviewing published medical literature and other available information from industry sponsors. In addition, as of July 29, 2019, the FDA received over 4400 comments on the Public Docket, which will add to the Working Group’s active review. The FDA is also meeting with other federal agencies and state counterparts, trade organizations, and patient groups in a quest for data.

The FDA is living up to its previous statement that it would apply both a “rigorous and science-based approach” to formulating its regulations on CBD products. And now, it appears, based on Dr. Abernethy’s public comments, the FDA is primed to roll out a report on its progress later this summer or early fall.

FDA’s Enforcement Efforts

Meanwhile, the FDA is seeking opportunities to provide regulatory clarity wherever possible. In 2019, the FDA issued warning letters to four companies marketing and selling CBD products. In each instance, the companies were selling products with flagrant disease-related claims that the FDA had not approved for the treatment or prevention of any ailments. The FDA has historically been passive in its oversight of CBD products. The recent shift underscores the need for companies to both understand and adhere to federal regulations over such products.

In its most recent warning letter, dated July 22, 2019, the FDA asserted that Curaleaf Inc., (based in Wakefield, Massachusetts) marketed unapproved products that qualified as “drugs” with improper labeling as defined under the FD&C Act. The FDA explained that Curaleaf’s products, advertised both through its online store and on social media sites, were aimed at the “diagnosis, cure, mitigation, treatment, or prevention of disease and/or intended to affect the structure or any function of the body.” The FDA specifically found that Curaleaf marketed its CBD products online with unsubstantiated claims that they treated (among other things) cancer, opioid withdrawal, pain and pet anxiety, and Alzheimer’s disease. For example, on one of Curaleaf’s pages entitled “How to Use CBD Oil for Anxiety,” the company explains that “CBD can successfully reduce anxiety symptoms, both alone and in conjunction with other treatments” and that “CBD oil can be used in a variety of ways to help with chronic anxiety.”

The FDA requested that, within fifteen working days, Curaleaf respond with the specific steps it has taken to remedy the violations. The FDA cautioned that, without prompt action, legal action may follow, including seizure and injunctions. On Friday, July 26, 2019, Curaleaf responded, noting that it has taken steps to review all inaccurate statements about CBD products from their websites and social media platforms. It has since removed from its site the specific offending statements previously identified by the FDA. CVS, one of the nation’s largest drugstore chains, has also removed Curaleaf products (CDB lotion and transdermal patches) from its shelves.

What’s Next?

The Working Group is continuing to collect and review information relevant to the science of CBD, as well as investigating possible pathways for regulating CBD. Under section 331(ll) of the FD&C Act (21 U.S.C. 331(ll)), the FDA prohibits the sale of products containing an ingredient that has been treated as a drug or involved in clinical trials, without prior FDA approval. This requirement is not without exceptions—some of which explicitly apply to CBD or could apply to CBD. One such exemption is that the drug was marketed in food before any approval and before substantial clinical investigations involving the ingredient were instituted. Another exemption exists if “the Secretary, in the Secretary’s discretion, has issued a regulation, after notice and comment, approving the use of such drug or such biological product in the food.”

Accordingly, the Secretary of Health and Human Services could exercise his authority and expedite the pathway for use of CBD in food products; although, any proposed regulation would take time to draft and be subject to public comment. The FDA won’t have to get too creative in finding a legal way to permit the use of CBD in food products, but any such action will have to wait until the Working Group has gathered enough science to inform its decision on the safety of CBD.

In addition to the anticipated FDA regulations and further guidance on CBD, activity at both the state and federal level add another layer of complexity that companies should consider. Both states and Congress are taking active measures to promote increased regulation of cosmetics and, on the other side, seeking to deregulate cannabis, which may consequentially affect CBD products. Increasingly fragmented state laws regarding marijuana and related products will further pressure the FDA to respond to confusion in this space. As for Congress, pending pieces of legislation aim to provide, more generally, stricter guidance on cosmetics and personal care products ingredients, labeling, and testing.

Two key pieces of legislation, one from each chamber of Congress, deserve attention, primarily for topical CBD products. First, Sens. Dianne Feinstein and Susan Collins reintroduced their “Personal Care Products Safety Act” (S. 726) in March of 2019. This Act would amend the 80-year-old FD&C Act in a variety of ways, including, but not limited to: requiring the FDA to review ingredients and other non-functional constituents for safety at a rate of at least five ingredients per year; requiring cosmetic ingredient statements for all cosmetics and fragrances, including the range of possible amounts of each ingredient; requiring ingredients, warnings and statements on professional products; and requiring complete label information (including manufacturer contact information) to be made available online in connection with online sales.

Second, Representative Jan Schakowsky’s pending bill entitled the “Safe Cosmetics and Personal Care Products Act of 2018” (HR 6903) likewise aims to amend the FD&C Act. While the bill is currently under review by several committees, it aims to require disclosure of all ingredients in beauty and personal care products, including fragrances. It also aims to outright ban toxic substances (e.g., carcinogens) from such products. The House, in June of 2019, has also set aside funds to further aid the FDA in setting guidelines for CDB products.

To further complicate matters, there has been a flurry of activity at the state level. Governor Andrew Cuomo of New York, for example, in July of 2019, signed into law a bill decriminalizing marijuana. Hawaii has also done so in the same timeframe. These are just two additional examples of a patchwork of states that have legalized marijuana usage. With such activity at both the state and federal level, CBD finds itself in a unique, complicated legal environment, which we continue to monitor.

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 Christine HendricksonAnnette Tyman, and Rhandi Childress Anderson

Seyfarth Synopsis: On July 31, 2019, the Illinois Governor J.B. Pritzker signed HB0834 into law, amending the state’s Equal Pay Act.  The amendments toughen the state’s pay equity protections and includes a salary history ban, among other provisions.  This adds Illinois to the growing list of states barring employers from inquiring about an applicant’s salary history.  Former Governor Bruce Rauner vetoed previous attempts to prohibit private employers from requesting applicants’ previous pay history, but current Governor J.B. Pritzker had publically pledged to sign the bill into law.  The new law becomes effective September 29, 2019.

Stronger Equal Pay Protections & Tougher Penalties

Since we have been tracking equal pay trends across the country, states, counties, and even cities have enacted more stringent equal pay laws.  (Click here for our 50-State Pay Equity Desktop Reference, which was updated in June.).  Illinois now joins a slew of other states to strengthen its equal pay protections, providing for a robust salary history ban and narrowed affirmative defenses, in addition to protecting wage discrimination on the basis of sex and against African American employees.

The amendments change the Illinois Equal Pay Act’s requirement that employers pay equally for work that requires “equal” skill, effort, and responsibility and instead allows comparisons to those with “substantially similar” skill, effort, and responsibility.  This change broadens the scope of equal pay claims under the Act by expanding the universe of potential comparators, putting Illinois in line with California, Massachusetts, New York, New Jersey and Oregon and other jurisdictions

The amendments also increase the employer’s burden of proof to defeat Equal Pay Act claims by requiring that any differences in pay meet the following criteria:

  • Not be based on or derived from a differential in compensation based on sex or another protected characteristic,
  • Be job-related and consistent with business necessity, and
  • Accounts for the differential in pay.

Violating the Act’s new provisions may now cost employers even more.  Prior to the amendments, an employee who suffers a violation of the Act was only entitled to lost wages and attorney’s fees and costs.  Now that the amendments have become law, violating Illinois’s Equal Pay Act becomes riskier than in the past since the statute will now allow an employee to recover lost wages, compensatory damages, special damages not to exceed $10,000, punitive damages and injunctive relief as may be appropriate.

An employer is also subject to civil penalties that range from $500 for the first offense to $5,000 for a third or subsequent offense, depending upon the size of the employer, for each employee affected.

Pay History Ban

Illinois is now the fourteenth state with a salary history ban that applies to applicants for employment.

The amendments prohibit Illinois employers from: (i) screening job applicants based on their wage or salary history, (ii) requiring that an applicant’s prior wages satisfy minimum or maximum criteria, and (iii) requesting or requiring as a condition of being interviewed or as a condition of continuing to be considered for an offer of employment that an applicant disclose prior wages or salary.

Employers are also prohibited from seeking the salary, including benefits or other compensation or salary history, of a job applicant from any current or former employer, with some exceptions.  This prohibition does not apply if a job applicant’s wage or salary history is a matter of public record or the job applicant is a current employee and is applying for a position with the same current employer.

Employers are free to provide salary information offered in relation to a position and engage in discussions with an applicant about his or her salary expectations.  Additionally, the amendments make clear that an employer does not violate the statute when a job applicant voluntarily and without prompting discloses his or her current or prior salary history.  But unlike many states that allow employers to consider voluntarily provided information, the Illinois law does not permit employers to consider or rely on the voluntary disclosures as a factor in determining whether to offer a job applicant employment, in making an offer of compensation, or in determining future wages, salary, benefits, or other compensation.

In short, employers may not ask about salaries, but employees are free to discuss that information as they see fit.

Expanded Anti-Retaliation Provision

The amendments also expand retaliation protections under the Act.  The Illinois Equal Pay Act has always prohibited retaliation in response to filing a charge related to the Act, giving information in connection with any inquiry relating to any right under the Act or testifying in a proceeding under the Act.  However, it now protects an individual who fails to comply with any wage or salary history inquiry.

Pay Transparency Protected

Finally, the amendments explicitly protects employees’ right to discuss wages, salary, benefits, or other compensation.  Employers are prohibited from requiring employees to sign any contract or waiver of these rights.  Notably, human resource employees, supervisors or any other employee whose job responsibilities require or allow access to another employees’ wage or salary information are exempted from this provision.

What Should Employers Do?

The new law becomes effective September 29, 2019.  Employers should review their job applications and other policies and procedures, make any necessary changes, and consider training hiring managers and human resources employees about the amendments.  Because of the complex risks associated with implementing changes to comply with the Act, we recommend working closely with legal counsel before making these changes.  In addition, employers should consider whether to conduct a comprehensive pay audit as a proactive step in complying with the statute’s protections against discrimination in pay on the basis of sex and against discrimination in pay for African American employees.

Please feel free to reach out to your Seyfarth attorney, members of Seyfarth’s Pay Equity Group, or the Group’s co-chairs Annette Tyman and Christine Hendrickson, with any questions.

By Minh Vu, Kristina Launey, and Susan Ryan

Seyfarth Synopsis: Data from the first six months of 2019 shows a 12%  increase over 2018.

The task of counting the number of ADA Title III lawsuits filed in federal courts grows with the ever-increasing numbers of lawsuits.  For the period from January 1, 2019 through June 30, 2019, our research team counted 5,592 ADA Title III lawsuits filed in federal court, versus 4,965 filed in first six months of 2018.  That’s a 12% increase.

If the lawsuits continue continue to be filed at the current rate, the number of federal ADA Title III lawsuits filed in 2019 will top 11,000 and it will be yet another record breaking year.

[Graph: ADA Title III Lawsuits in Federal Court Jan. 2014 – Jun. 2019: 2014: 4,436; 2015: 4,789, 8% increase over 2014; 2016: 6,601, 37% increase over 2015; 2017: 7,663, 16% increase over 2016; 2018: 10,163, 33% increase over 2017; 2019: Total: 5,592, as of 6/30/19, Projected Total: 11,184, 10% increase over 2018]

California continues to lead the country with 2,444 federal ADA Title III lawsuits in the first six months of 2019, with New York trailing far behind with 1,212 such suits.  Florida is a close third with 1,074 federal suits.  California continues to be a very popular jurisdiction because plaintiffs can add on a state law Unruh Act claim which provides for $4,000 in statutory damages for each incident of discrimination.  This statutory damages provision gives prevailing plaintiffs an automatic payment so they do not even need to prove that they incurred any actual damages, unless they want to recover more.  The 2,444 California federal ADA Title III lawsuit number does not capture the complete picture of disability access suits filed in California because many more access suits are filed in state court, which we do not track.

This holds true in other states as well, but, as we know anecdotally, it would still not put any other states anywhere near California in the number of disability access lawsuits filed in state and federal courts.  Few other states allow recovery of statutory damages for disability access claims; while Title III only allows recovery of attorneys’ fees and costs in addition to injunctive relief.  In stark contrast to California, the federal courts in Idaho, Iowa, Montana, North Dakota, Oklahoma, South Dakota, and Vermont have seen no ADA Title III lawsuits this year.

[Graph: Top 10 States for ADA Title III Federal Lawsuits Jan. 2019 – Jun. 2019: CA 2,444, NY 1,212, FL 1,074, GA 128, TX 126, PA 71, NJ 66, IL 63, MA 55, MI 36]

What are these lawsuits about?  Based on the many cases we see in our practice, most cases concern allegedly inaccessible physical facilities or websites.  However, there have also been a number of lawsuits claiming that hotels are not putting information about the accessibility of their physical facilities on their reservations websites as required by the ADA regulations, and some lawsuits regarding service animals and sign language interpreters.

Businesses feeling under siege are not likely to see relief any time soon.  Attempts to curb this lawsuit tsunami through federal legislation such as the ADA Education and Reform Act passed by the House last year have seen no progress.

Our Methodology:  Our overall ADA Title III lawsuit numbers come from the federal court’s docketing system, PACER.  However, because the area of law code that covers ADA Title III cases also includes ADA Title II cases, our research department reviews the complaints to remove those cases from the count.