A series from our seasoned and successful Boston L&E Trial Team will explore the latest trends in jury trials in a time of explosive verdicts, Reptile tactics, polarization, and an election year. We’ll offer practical strategies on how to maximize your chance of a total defense verdict, despite these headwinds, based on our experience navigating trials in this environment. We will cover specific strategies for a range of claims, including discrimination, harassment, retaliation, and wage-and-hour. 

Part 1, Apr. 30, 2024 : Trying Cases in a Polarized Environment

How to pick a jury, and frame a trial narrative, in a polarized time. Together with jury consultant Claire Luna of Jury Impact, we’ll discuss strategies for voir dire and trial defense in a time of heightened tensions around issues around race, national origin, gender and religion. We’ll offer practical strategies for how to handle generational divides (including Gen Z jurors!) and rising distrust in institutions. 

Speakers
Dawn Solowey, Partner, Seyfarth Shaw LLP
Lynn Kappelman, Partner, Seyfarth Shaw LLP
Claire Luna, Partner/Senior Vice President, Jury Impact

Cost – There is no cost to attend, but registration is required.

REGISTER HERE

Tuesday, April 30, 2024
12:00 p.m. to 1:00 p.m. Eastern
11:00 a.m. to 12:00 p.m. Central
10:00 a.m. to 11:00 a.m. Mountain
9:00 a.m. to 10:00 a.m. Pacific

If you have any questions, please contact Brooke Janeczek at bjaneczek@seyfarth.com and reference this event.

This program is pending CLE approval in CA, IL, and NY. Credit will be applied as requested but cannot be guaranteed for TX, NJ, GA, NC and WA. The following jurisdictions may accept reciprocal credit with our accredited states, and individuals can use the certificate they receive to gain CLE credit therein: AZ, AR, CT, HI and ME. The following jurisdictions do not require CLE, but attendees will receive general certificates of attendance: DC, MA, MD, MI, SD. For all other jurisdictions, a general certificate of attendance and the necessary materials will be issued that can be used for self-application. Please note that attendance must be submitted within 10 business days of the program taking place. CLE decisions are made by each local board and can take up to 12 weeks to process. If you have questions about jurisdictions, please email CLE@seyfarth.com.

Please note that programming under 50 minutes of CLE content is not eligible for credit in NJ, and programming under 60 minutes of CLE content is not eligible for credit in GA. Programs that are not open to the public are not eligible for credit in NC.

Registration Coming Soon:

Part 2: Throw Out the Old Litigation Playbook

In an era of explosive verdicts – and with some judges in Massachusetts reluctant to grant summary judgment – more cases are going to trial. The old litigation style that focused on summary judgment doesn’t cut it anymore. We’ll talk about the new playbook including how to use depositions as a pre-trial tool; when to write your jury instructions and opening statement (not right before trial!); and practical tips for bulletproofing your pre-trial preparation. 

Wednesday, May 22, 2024
12:00 p.m. to 12:45 p.m. Eastern
11:00 a.m. to 11:45 a.m. Central
10:00 a.m. to 10:45 a.m. Mountain
9:00 a.m. to 9:45 a.m. Pacific

Speakers:
Molly Mooney, Partner, Seyfarth Shaw
Rob Fisher, Partner, Seyfarth Shaw

Part 3: The Contingency Plan

While the goal is always to win a complete defense verdict at trial, we’ll discuss how best to preserve issues for post-trial motions and appeal in the event of an adverse verdict.  

Wednesday, August 14, 2024
12:00 p.m. to 12:45 p.m. Eastern
11:00 a.m. to 11:45 a.m. Central
10:00 a.m. to 10:45 a.m. Mountain
9:00 a.m. to 9:45 a.m. Pacific

Speakers:
Barry Miller, Partner, Seyfarth Shaw
Chris Kelleher, Associate, Seyfarth Shaw
Christina Duszlak, Associate, Seyfarth Shaw

Part 4: The Flip Side

A candid discussion with some of our favorite opponents from the Plaintiffs’ bar about employment trial trends and strategies on both sides of the “v.” 

Wednesday, September 25, 2024
12:00 p.m. to 12:45 p.m. Eastern
11:00 a.m. to 11:45 a.m. Central
10:00 a.m. to 10:45 a.m. Mountain
9:00 a.m. to 9:45 a.m. Pacific

Speakers:
Dawn Solowey, Partner, Seyfarth Shaw LLP
Lynn Kappelman, Partner, Seyfarth Shaw LLP
TBD (Plaintiff’s Counsel)

Special guests to be determined from the Plaintiff’s bar.

By Adam R. Young and Aaron M. Gillett

1. A Nightmare Acquisition

Your Company has recently acquired a small logistics company with a strong business reputation.  Eighteen days after the acquisition was finalized, you receive a call that there has been a tragic forklift accident in a warehouse operated by a subsidiary of the newly acquired target company.  An employee of a staffing agency was struck by a forklift and is in intensive care.  Federal OSHA has cited the subsidiary four years ago for forklift violations in another state, and is onsite considering willful citations the forklift operator was untrained and uncertified.  The Company faces hundreds of thousands of dollars in civil OSHA citations.  If the employee passes away, new operations and safety management may face potential criminal liability punishable with six months in federal prison and a $250,000 personal fine.  The Company also faces a multi-million dollar tort claim from the worker’s estate, as he is not bound by the worker’s compensation system. 

2. Overview of Potential Legal Liabilities from an Acquisition

Ill-informed M&A lawyers often overlook the liabilities posed by occupational safety and health risks.  Employers face numerous risks and liabilities, a few of which were described in the scenario above.  Unaddressed safety hazards can injure or kill employees. Employers face civil OSHA citations, including “per instance” violations that can be assessed into the millions of dollars.  Because business partners track safety records through third party tracking services, OSHA citations and poor safety records can jeopardize business relationships.  Fatal accidents can result in referrals to the USDOJ or state prosecutors for criminal prosecution of employer representatives: operations, safety, and executive management.  Poor safety records can tarnish the reputations of affiliated entities.  A strong reputation for safety can be quickly and rebuilt painstakingly slowly.

3. Key Review Elements and Red Flags

A prospective buyer should review safety records and safety-related documents, engaging qualified outside counsel and safety professionals where necessary to aid the process and ensure effective due diligence.  Key indicators to review include:

a. Severe Violators Enforcement Program

OSHA maintains a Severe Violators Enforcement Program (SVEP), a log of employers with significant alleged OSHA violations.  Inclusion on this log can be indicative of a significant OSHA citations and allegations of willful safety and health violations, or violations that resulted in a fatality or catastrophe (injuring three or more employees).  Inclusion on the SVEP log can trigger additional OSHA inspections and scrutiny. Inclusion in SVEP can be damaging to the business reputation of the employer.  Employers can be stuck in SVEP for a minimum of three years.   

b. OSHA Establishment Search and OSHA Record

Prospective buyers should review any OSHA citations, settlements, and open inspections.  Open inspections may result in citation.  Settlements and accepted citations mean that the employer has OSHA violations “on their record,” predicate violations that OSHA can use for future Repeat violations.  Repeats are significant classifications that will be reputationally damaging and will carry five or ten times the standard penalty, for each alleged violation. 

The last five years of a company’s OSHA record should be publicly available on OSHA’s Establishment Search website.  Though the Establishment Search may sometimes be factually inaccurate, this website will provide an additional resource on any open inspections, closed inspections, and citations OSHA has issued.  The status of those citations, including appeals and settlements, will be recorded as well. 

c. OSHA Logs and Loss Runs

Employers in more hazardous industries are required to record work-related injuries and illnesses that meet certain criteria on a yearly OSHA Form 300 log; the logs must be maintained for five years.  Prospective buyers should request and review these logs from all worksites that maintain them.  This review should be supplemented with a review of the worker’s compensation loss run, which may include additional injuries that did not meet the OSHA recording criteria.  This data should help identify trends with regard to employee injuries and illnesses, and perhaps reflect recurring hazards.

d. Written Safety Programs

Most employers are required to maintain written safety and health programs to address potential hazards at their worksites. An employer’s use of an overarching program, a Safety and Health Management System (SHMS) (also called an Injury and Illness Prevention Plan (IIPP) or Accident Prevention Program (APP)) can indicate the employer’s  implementation of a safety-based (rather than just compliance-based) program. 

Written programs on applicable safety hazards will also indicate compliance with OSHA standards.  Key programs for serious hazards include fall protection, powered industrial trucks (forklifts), lock-out tagout, confined space, heat illness, and workplace violence.  Programs should address the hazards identified in the job hazard assessments (JHAs).  Reviewing these programs and JHA documents will provide diligence that an employer is meeting the requirements of the OSHA standards and implementing a safety program to protect employees and other workers. 

4. Transaction Terms and Risk Allocation

Counsel and safety professionals should also carefully review the purchase agreement to ensure adequate disclosure of matters identified during due diligence.  In particular, the representations and warranties contained in the purchase agreement should include comprehensive statements of fact and assurances related to the target company and its employee health and safety record.  These representations and warranties serve as the foundation for a post-closing indemnification claim in the event of a breach and a critical risk allocation function for buyers.

5. Conclusion

The leading indicators identified in this article can help prospective buyers assess target companies, the risks they pose, and the opportunities they may present for creating a safer workplace.  Of course, the absence of a serious accident or injury does not disprove the existence of a hazard.  And all the best written safety programs may be ineffective and preventing accidents where an employer has not established a strong safety culture.

For more information on occupational safety and health in due diligence and M&A transactions, please contact Adam R. Young (ayoung@seyfarth.com), Aaron M. Gillett (agillett@seyfath.com) or other members of Seyfarth’s Workplace Safety & Environmental and Mergers & Acquisitions teams.

Adam R. Young is a partner in the Workplace Safety and Environmental Group in the Chicago office of Seyfarth Shaw LLP. Mr. Young focuses on occupational safety and health, OSHA inspection management, employment, and OSHA retaliation. Mr. Young can be contacted at ayoung@seyfarth.com (312) 460-5538.

Aaron M. Gillett is a partner in the Mergers & Acquisitions Group in the Chicago office of Seyfarth Shaw LLP. Mr. Gillett focuses his practice primarily on M&A transactions, as well as corporate governance and commercial contracts. Mr. Gillett can be contacted at agillett@seyfarth.com (312) 460-5992.

By J. Marc Fosse and Ameera Salem

Seyfarth Synopsis:  As reporting companies prepare their Pay Versus Performance (PVP) disclosures for their upcoming proxy statements, they should take into consideration the most recent guidance on the topic in Securities and Exchange Commission’s (SEC’s) Compliance & Disclosure Interpretations (CD&Is).

The PVP disclosure rules (Item 402(v) of SEC Regulation S-K) require public reporting companies to disclose (for fiscal years ending on or after December 16, 2022) the relationship between executive compensation actually paid and the companies’ financial performance. To assist companies in navigating these rules, the SEC has issued a series of CD&Is (found here.) This blog post summarizes the most recently issued/updated PVP CD&Is published by the SEC on November 21, 2023.

Peer groups used to determine total shareholder return (TSR):

Use of more than one published industry or line-of-business index. If a company uses multiple published industry or line-of-business indices for purposes of the stock performance graph under Item 201(e)(1)(ii), it may choose which index it uses for purposes of its PVP disclosure. For purposes of clarity, the company should include a footnote disclosing the index chosen. With respect to changing the published industry or line-of-business index used from that used in the immediately preceding year, companies must footnote the reason for this change and compare its cumulative TSR using the old and new peer group. (C&DI 128D.24).

Adding or removing entities from a peer group. Companies that use a peer group other than a published industry or line-of-business index as its peer group under Regulation S-K, are required to (1) include a footnote that explains the reasons for the change in the composition and (2) compare its cumulative TSR return using the old and new peer group. Recalculation of the TSR using the old peer group is not required if changes to the peer group are because the entity omitted is no longer in the peer group or due to the application of pre-established objective criteria. (C&DI 128D.27).

No broad-based equity index peer group.  If a registrant discloses in its Compensation Discussion and Analysis (CD&A) that it determines relative TSR for equity vesting based on a broad-based equity index, the registrant may not use a broad-based equity index as a peer group for determining TSR for purposes of the PVP disclosure. (C&DI 128D.25).

Peer group market capitalization weighting. For purposes of the PVP disclosure rules, the returns of each entity in the peer group must be weighted according to the company’s stock market capitalization only when a custom peer group is used that is not a published industry or line-of-business index. (C&DI 128D.26).

TSR peer group. Instruction 1 to Item 402(v) states that in a registrant’s first filing in which it provides PVP disclosure, the disclosure may be for three years, instead of five years, and may provide disclosure for an additional year in each of the two subsequent annual filings in which this disclosure is required.  In the revised C&DI, the SEC clarified that for a 2024 proxy statement, if a registrant uses the same peer group for 2023 as it used for 2022, then the most current peer group should be used to calculate TSR for all prior years in the table. If the peer group TSR in 2023 and in subsequent years changes, companies must (1) include a footnote to the PVP table that explains the reason for the change and (2) compare the company’s cumulative total return with that of both the newly selected peer group and the peer group used in the immediately preceding fiscal year. (C&DI 128D.07, Revised).

Calculation of compensation actually paid (CAP):

Equity Awards Vesting on Retirement.  For purposes of calculating compensation actually paid (CAP), equity awards with retirement eligibility as the sole vesting condition should be considered vested on the retirement eligibility date. However, if retirement eligibility is not the sole vesting condition, then those other conditions must be considered. The revised CD&I provides examples of such conditions, which include a market condition or a condition that results in vesting upon the earlier of the holder’s actual retirement or the satisfaction of a requisite service period. (C&DI 128D.18, Revised).

Dividends paid prior the vesting date should be included in CAP. The amount of dividends or dividend equivalents paid on awards prior to the vesting date (and not otherwise included or reflected in another component of total compensation) should be included in the CAP for each of the years represented in the PVP table. This would mean that the fair value of awards should reflect the prior dividends paid during that year and must be included not to understate the CAP.  (C&DI 128D.23).

Multiple Principal Financial Officers (PFO). If two (or more) individuals served as a registrant’s PFO during a single covered fiscal year, then each must be included individually in the calculation of average compensation amounts for NEOs in the PVP table. For purposes of providing clarity to investors, companies should consider additional disclosures on the impact of inclusion of such individuals on the calculation. (C&DI 128D.30).

Transition Relief

Companies losing their SRC or ECG status.A smaller reporting company (SRC) that loses its SRC status as of January 1, 2024, is permitted to use scaled PVP disclosures in the 2024 proxy statement. In the future, however, such a company will need to provide the full non-scaled PVP disclosures. (C&DI 128D.28). An emerging growth company (EGC) that loses its EGC status is required to include PVP disclosures in its proxy statement immediately upon losing status. Some relief is available to companies that lose their EGC status and are newly subject to the rules, and such companies may provide PVP disclosures for three years of initial disclosure, instead of five years. (C&DI 128D.29).

Conclusion

The newest SEC CD&Is provide important answers to companies’ questions about the content and form of PVP disclosures. These and other CD&Is, along with SEC comment letters, should be reviewed and followed as companies prepare their initial or continuing PVP disclosures.

If you have questions regarding the new CD&Is or other executive compensation disclosure matters, please contact a member of Seyfarth’s executive compensation practice group. Learn more about our Executive Compensation practice here.

By Lotus Cannon and Minh Vu

Seyfarth Synopsis: SDNY Judge Mary Kay Vyskocil dismisses with prejudice a website accessibility lawsuit with vague allegations about plaintiffs’ standing.

The U.S. District Court for the Southern District of New York (SDNY) has been a highly favored venue for serial plaintiffs bringing website accessibility lawsuits for years – at least in part because many judges have refused, at the outset of a case, to dismiss complaints with boilerplate allegations about a plaintiff’s standing to sue.  However, last year, we saw one decision from SDNY Judge Colleen McMahon that conducted a more rigorous standing analysis in website accessibility cases, and last week another SDNY Judge Mary Kay Vyskocil took a similar approach.  Judge Vyskocil dismissed with prejudice a website accessibility complaint for lack of standing after a meaningful analysis of the plaintiffs’ boilerplate complaint.

The plaintiffs – two self-described testers who are blind – sued an online retailer, claiming that  the retailer’s website violated the ADA and the New York State Human Rights Law because of various technical barriers that the plaintiffs allegedly encountered.  The plaintiffs had previously filed multiple lawsuits against operators of various commercial websites.

The Complaint allegations were vague but similar to those that some other SDNY judges have considered sufficient to establish standing at the outset of a lawsuit.  The plaintiffs alleged that they visited the website for the purpose of purchasing products, goods, and/or services and that each encountered various technical barriers, such as “redundant links” and “improperly labeled headings.”  As to their intent to return to the website, the plaintiffs alleged that they were “highly interested” in purchasing Defendant’s products and intended to purchase certain goods and services in the future, and intended to return to the website once the alleged accessibility barriers were removed.

The Court held that Plaintiffs’ conclusory allegations failed to establish an injury in fact to confer standing.  The Court noted that Plaintiffs each alleged only a single visit to the website and alleged no facts supporting their interest in the products or services on the website, such as how they learned of the website, what piqued their interest in the website, what particular products they viewed or were interested in purchasing, and whether they searched for comparable products elsewhere.

The Court pointed to the plaintiffs’ other “carbon-copy complaints,” nine of which were filed on the same day as the Complaint at issue, as further evidence that Plaintiffs did not suffer an injury in fact, referencing the Second Circuit’s Calcano decision blasting “Mad-Libs-style” complaints.

Notably, while dismissals based on lack of standing are typically without prejudice, the Court issued the decision with prejudice and denied Plaintiffs’ leave to amend. The Court justified its decision with Plaintiffs’ refusal to amend the Complaint even after the defendant pointed out all the pleading deficiencies in its pre-motion letter to the Court.

The Court also dismissed Plaintiffs’ NYSHRL claim based on lack of standing, rather than following the usual course of declining to exercise subject matter jurisdiction over state law claims. 

This decision suggests that some SDNY judges may be fed up with the volume of “cut and paste” complaints in their courts and actually requiring Plaintiffs to plead facts, as opposed to boilerplate conclusions, to establish standing.  Let’s see if this becomes a trend.  Edited by John W. Egan

By Ameena Y. Majid, Giovanna A. Ferrari, and Matthew Catalano  

Seyfarth Synopsis: On March 6, 2024, the SEC announced its long-awaited adoption of final rules regarding climate-related disclosures by public companies and in public offerings (the “Climate Rules”).[1] The SEC dialed back the more prescriptive nature of the previously proposed climate rules (the “Proposed Rules”)[2] in favor of allowing public issuers to assess the degree and content of disclosure in accordance with the Climate Rules through the SEC’s materiality lens.

Background of the Climate Rules

The Climate Rules become effective sixty days following publication in the Federal Register,[3] bringing a close to this chapter of watching how the SEC will craft its climate-disclosure rules amidst the ESG pendulum swinging from investors’ calls for more transparency to facing challenges by a chorus of anti-ESG voices in a divisive US political environment. Since Commissioner Allison Herren Lee’s March 15, 2021 request for public input on climate disclosures[4] and the SEC’s March 23, 2022 Proposed Rules,[5] the SEC has been outpaced in its rule-making by other US states and international bodies that have been shaping the content of climate focused narrative for companies. Notably, the SEC does not recognize disclosure with other alternative disclosure regimes as being in compliance with the SEC disclosure rules. With such a patchwork of ESG/sustainability disclosure frameworks from standard setters like ISSB and TCFD to states and regulators like California and the European Union, consistency with other jurisdictions’ rules would likely be a welcome evolution to the SEC rules as the story unfolds. Each framework is guided by a desire for “consistent, comparable, decision-useful information”[6] but the patchwork of the frameworks reveals differences on the scope of information needed to have such information.

Much of the immediate reporting on the Climate Rules has focused on the fact that they are less burdensome than the Proposed Rules, with reports characterizing the Climate Rules as “weaker” or “scaled back.”[7] And indeed, the Climate Rules do soften several aspects of the Proposed Rules, perhaps most notably in removing any requirements for “Scope 3” greenhouse gas disclosures, which would have required certain companies to disclose emissions along their “value chain” such as production and transportation of goods purchased from third parties, employee commutes, and the use of the company’s products by third parties.[8] That said, the Climate Rules still set forth an extensive reporting structure, and compliance with the Climate Rules will still be a costly and labor-intensive endeavor, anticipated to encompass 15% of a company’s overall SEC disclosure costs.[9]

SEC Chair Gary Gensler characterized the rule as upholding the “basic bargain” of federal securities laws, which is to provide disclosures that allow investors to decide the risks they take in investing.[10] Chair Gensler referenced the SEC’s long history of updating disclosure requirements, including those relating to environment and the climate making particular note that the SEC does not have a role as to climate risk.[11] Rather, he cited the increased focus on investors using climate as a risk factor in investment decision-making.

The divisiveness of the Climate Rules was on full display in the statements made by Commissioners despite Chair Gensler’s framing of the Climate Rules. Commissioner Crenshaw, who voted in support of the Climate Rules, voiced her view that the Climate Rules do not go far enough, stating “this is not the rule I would have written. While these are important steps forward, they are the bare minimum.”[12] In contrast, the two Republican-appointed Commissioners, Peirce and Uyeda, both issued scathing dissents.[13] Commissioner Peirce, questioning the need to replace “our current principles-based regime with dozens of pages of prescriptive climate-related regulations,” predicted that “[t]he resulting flood of climate-related disclosures will overwhelm investors, not inform them.”[14] Commissioner Uyeda argued that in passing the Climate Rules, “the Commission ventured outside of its lane and set a precedent for using its disclosure regime as a means for driving social change.”[15]

The Climate Rules were also almost immediately subject to legal challenges opening a new and expected chapter in the ESG tug-of-war around the role of climate as a factor in investment decision making. State attorneys general have filed petitions for federal appellate review in both the Fifth and Eleventh Circuits (and civil litigation has also been filed in the Fifth Circuit by companies subject to the Climate Rules), arguing that the adoption of the Climate Rules exceeds the SEC’s statutory authority and was arbitrary and capricious.[16] We are in a wait-and-see mode as to whether the SEC will be challenged on whether the rule did not go far enough. Press releases by the US Chamber of Commerce and the Sierra Club have both signaled they may use litigation to challenge the Climate Rules, with the Chamber of Commerce threatening to sue “to prevent government overreach” and the Sierra Club, conversely, threatening to sue based on the SEC’s scaling back of the final Climate Rules from the Proposed Rules, leaving the SEC in an apparent no-win situation on whether it struck the appropriate balance between the Proposed Rules and Climate Rules.[17]

While it is unknown whether these legal challenges will be successful, companies should in the interim continue to proceed to prepare to meet the Climate Rules as-drafted.

The Climate Rules

Among other things, while the scope of the Climate Rules varied greatly from the Proposed Rules, the Climate Rules still adhere to disclosure requirements around four pillars of governance, strategy, risk management and metrics & targets, just with more materiality judgments to make. The hallmark provisions of the Climate Rules require disclosure of:

Material Climate-Related Risks. The Climate Rules require disclosure of any “material” climate-related risks, meaning any climate-related risk reasonably likely to have a material impact on the company, “including on its business strategy, results of operations, or financial condition.”[18] Climate-related risks include both “acute risks,” such as short-term weather events like hurricanes, floods, tornadoes, and wildfires, and “chronic risks” resulting from “longer term weather patterns, such as sustained higher temperatures, sea level rise, and drought, as well as related effects such as decreased arability of farmland, decreased habitability of land, and decreased availability of fresh water.”[19] It also includes “transition risks,” that is, the risks arising from changes in regulations, technology, or the market to address climate (such as increased costs stemming from climate-related policy changes, reduced sales/consumer behavioral changes with respect to carbon-intensive products, or risk of legal liability and litigation defense costs.[20]

Governance. In addition, the Climate Rules will require a description of how a company’s board of directors oversees climate-related risks, including the identification, if applicable, of any board committee responsible for oversight of these risks and a description of how that committee is informed about the risks.[21] It will also require a description of “management’s role in assessing and managing climate-related risks,” including which management positions (or committees) are responsible for assessing these risks, the relevant expertise of the individuals in these positions or committees, and whether they report to the board.[22]

The discussion around climate disclosure is often heavily focused on verifiable emissions calculations and accompanying efforts to reduce emissions. What is often lost in the discussion is the governance of assessing climate as a financial risk on business strategy, operations, and growth. The scope of governance will necessarily vary depending on industry, but with actors on both sides of the climate disclosure debate ready to litigate in the US as the means to effect any desired change, it bears reminding that officers are recognized as having a Caremark duty of oversight. As public filers ready themselves for disclosure, being able to articulate the role of management and how climate, as a financial risk, is considered and managed is worth assessing through a disclosure lens.

Targets and Goals. The Climate Rules further require companies to disclose any material climate-related target or goal, including how the target is to be measured, the timing by which the target is intended to be achieved, and a qualitative description of how the company intends to meet the goal.[23]

Scope 1 and Scope 2 Greenhouse Gas Emissions (for Certain Large Filers). The Climate Rules require certain large companies (large accelerated filers and accelerated filers[24] that are not otherwise exempted)[25] to make various disclosures relating to greenhouse gas emissions. These include both “Scope 1” emissions (“direct GHG emissions from operations that are owned or controlled by a registrant”) and “Scope 2” emissions (“indirect GHG emissions from the generation of purchased or acquired electricity, steam, heat, or cooling that is consumed by operations owned or controlled by a registrant”).[26] Importantly, however, these Scope 1 and Scope 2 emission disclosures are only required where they are “material,” with materiality not determined “merely by the amount” of emissions, but rather by whether a reasonable investor would consider their disclosure important when making the investment (for example, if the emissions are significant enough to materially impact the company’s business or financial conditions, or are necessary for an investor to understand whether the company has met its stated targets and goals).[27]

Time for Compliance and Safe Harbor

Once the Climate Rules are effective (sixty days after their publication in the Federal Register), companies’ time to comply will be phased in with a compliance date dependent on the status of the registrant, the content of the disclosure, and other accommodations, with the earliest being Large Accelerated Filers having some disclosures required by the Fiscal Year Beginning 2025.[28] Importantly, with respect to Scope 1 and 2 emissions, Large Accelerated Filers will need to make their disclosures beginning in the Fiscal Year Beginning 2026, and Accelerated Filers subject to the rule in the Fiscal Year Beginning 2028.[29]

There will also be a safe harbor by which certain disclosures, such as those pertaining to “transition plans, scenario analysis, the use of an internal carbon price, and targets and goals,” except for historical facts, will be considered a “forward-looking statement” for purposes of the Private Securities Litigation Reform Act,[30] thus providing a layer of protection against securities class action complaints in connection with these disclosures.[31]

Other Regulatory Frameworks

Separate and apart from the Climate Rules, companies must also ensure that they are monitoring and aware of other state and federal regulatory frameworks with respect to climate issues. Of particular note, late last year California enacted an extensive climate disclosure framework impacting both private and public companies (including, for certain large companies, Scope 3 disclosures). [32] Even though California is facing its own set of legal challenges to the law, other states such as Illinois, Colorado, and Minnesota require certain types of companies, such as public pension and retirement investment funds or banks, to make various particular climate disclosures.[33]

Disclosure Readiness

The SEC’s adoption of the Climate Rules reflects the SEC’s continued position that climate is a risk factor that public filers must consider when providing complete disclosures to investors. Despite the longer phase-in period, public filers will need to continue to ready themselves for another disclosure regime.  In this regard, steps to take are:

  1. Use Frameworks as a Check-In: As we note above, most frameworks follow an arc that covers disclosure around four pillars of governance/oversight (at both the board and management level), strategy, risk management and metrics & targets. Sometimes, a couple other items are noted like opportunities and trade-offs per the EU CSRD. Before getting into the weeds of the disclosure rules, take stock of these pillars at a macro-level looking at the industry and then inward to the organization. Current efforts around climate can be used as a check-in on the organization’s focus and assessment of climate risk as well as identify any gaps that may signal areas for opportunity, enhanced risk management, and growth.
  2. Sustainability Practice vs. Financial Risk: Considering whether climate related efforts are a sustainability practice important for certain stakeholders versus a financial risk can be the start to guiding the materiality analysis for SEC disclosure. In addition, for public filers that are also subject to the EU CSRD, the SEC’s focus is on financial materiality (inbound materiality). The EU CSRD has a double materiality standard for evaluating sustainability impacts. In addition to inbound materiality, reporting companies must also assess outbound materiality – generally speaking, impacts on society and the environment. This major difference is expected to also drive different disclosures. Given this difference, it will be important to evaluate the disclosures for consistency between the disclosures.
  3. Evaluating Disclosures: Given the nature of the data and the eventual need for assurance there is heightened focus on the verifiability and credibility of data, typically assessed through an auditor’s lens. The language and context for the data and manner in which is presented should have an equal level of focus.
  4. Become Friends with Operations: Regulatory disclosures are driven by legal counsel, who are increasingly having a role in broader sustainability governance and reporting but may not always be connected to those preparing the broader sustainability reporting and/or the operational teams. The SEC’s materiality lens will shape what is disclosed in the SEC reports versus the sustainability report and likely result in a different scope of published information between the reports, much like in the human capital disclosure space. While sustainability reports carry SEC Rule 10b-5 liability for materially misleading statements, there is now a heightened level of need to be vigilant in reviewing the disclosures for consistency, context and accuracy. Ensuring that both internal and external counsel is well partnered with key individuals that are the source of information for any reporting item is critical for achieving truthful and complete disclosure.  

If you have questions, please reach out to the authors and the Seyfarth Impact & Sustainability team for assistance.


[1] Press Release, SEC Adopts Rules to Enhance and Standardize Climate-Related Disclosures for Investors (SEC, March 6, 2024). The full text of the Climate Rules can be found here.

[2] The Proposed Rules can be found here. Seyfarth’s analysis of the Proposed Rules can be found here.

[3] Climate Rules, supra n.1 at 1.

[4See Lee, Allison Herren, Public Input Welcomed on Climate Change Disclosures (SEC, March 15, 2021).

[5See supra n. 2.

[6] Gensler, Gary, Statement on Final Rules Regarding Mandatory Climate Risk Disclosures (SEC March 6, 2024).

[7See, e.g., Tabuchi, Hiroko et al, S.E.C. Approves New Climate Rules Far Weaker Than Originally Proposed(New York Times, March 6, 2024); Noor, Dharna, US Regulators Approve Significantly Scaled Back Climate Disclosure Rule (The Guardian, March 6, 2024); Frazin, Rachel et al, SEC Finalizes Weakened Rule To Make Companies Disclose Climate Information (The Hill, March 6, 2024).

[8] For a further definition of what the Proposed Rules considered to fall within “Scope 3” emissions, see Proposed Rules, supra n. 2 at 39-40.

[9See Peirce, Hester, Green Regs and Spam: Statement on the Enhancement and Standardization of Climate-Related Disclosures for Investors (SEC, March 6, 2024) (“Although the cost estimates for this rule are dramatically lower than the cost estimates for the proposed rule, my understanding is that, based on our estimates, 15 percent of a company’s annual SEC disclosure costs would be attributable to climate disclosures”) (emphasis added).

[10See Gensler, supra n.6.

[11Id.

[12See Crenshaw, Caroline, A Risk by Any Other Name: Statement on the Enhancement and Standardization of Climate-Related Disclosures(SEC, March 6, 2024).

[13See Peirce, supra n.9; Uyeda, Mark, A Climate Regulation under the Commission’s Seal: Dissenting Statement on The Enhancement and Standardization of Climate-Related Disclosures for Investors (SEC, March 6, 2024).

[14] Peirce, supra n.9.

[15] Uyeda, supra n.13.

[16See State of West Virginia et al v. SEC, Petition for Review (11th Cir., not yet docketed); Press Release, Louisiana Attorney General Liz Murrill’s Office Files Lawsuit Against Securities And Exchange Commission (Discussing petition to Fifth Circuit by Louisiana, Mississippi, and Texas which has not yet been docketed); Liberty Energy Inc. et al v. SEC, 24-60109 (Fifth Cir.).At the same time, several climate groups such as the Clean Air Task Force, the Sierra Club, and Public Citizen have raised concerns the Climate Rules’ omission of Scope 3 disclosures. See Hirji, Zahra et al, Green Groups Decry SEC’s Climate Disclosure Rule as Too Weak (Bloomberg News, March 7, 2024).

[17See Press Release, U.S. Chamber Statement on the SEC Climate Disclosure Rule(U.S. Chamber of Commerce, March 6, 2024); Press Release, SEC Climate Disclosure Rule Represents Important Progress, But Falls Short on Key Metrics of Financial Risk (Sierra Club, March 6, 2024).

[18See Climate Rules, supra n.1 at 89.

[19Id. at 92. Any disclosure should include both risks that are “reasonably likely to manifest” in twelve months (“short-term”) or beyond twelve months (“long-term”). Id. at 103.

[20Id. at 92-93.

[21Id. at 168. Note that unlike the Proposed Rules, the Climate Rules will not require companies to identify specific board members responsible for this oversight or the expertise of board members in climate-related risks. Id. at 169.

[22Id. at 179-180.

[23Id. at 210, 213.

[24] For the Climate Rules’ discussion of whether a company qualifies as a “large accelerated filer” or “accelerated filer,” see id. at 29, ns. 65-66.

[25] That is, that are not Emerging Growth Companies (“EGCs”) or Smaller Reporting Companies (“SRCs”). Id. at 245. For the Climate Rules’ discussion of whether a company qualifies as an SRC or EGC, see id. at 17, ns. 21-22.

[26Id. at 29, n. 67.

[27Id. at 246-247.

[28Id. at 35, 588-592. See Fact Sheet, The Enhancement and Standardization of Climate-Related Disclosures: Final Rules at 3 (“Phase-In Periods and Accommodations”).

[29] Climate Rules, supra n.1 at 589.

[30Id. at 35, 394-402.

[31See 15 U.S. Code § 78u–5 (providing safe harbor for forward-looking statements, with certain exceptions).

[32See Ferrari, Giovanna et al, New California Laws Mandate Climate Disclosures For Both Private and Public Companies (Seyfarth Shaw LLP, Oct. 19, 2023).

[33Id.

By Adam R. Young and Mark A. Lies, II

INTRODUCTION

The Federal Occupational Safety and Health Administration (OSHA) requires employers to report certain serious injuries by telephone within twenty-four (24) hours. Injuries that must be reported include injuries that result in inpatient hospitalization for medical treatment, amputations, and losses of an eye. Work-related fatalities, including those caused by heart attacks, must be reported within eight (8) hours.

Reported injuries and fatalities are among the largest drivers of onsite OSHA inspections.   OSHA receives far more fatality and injury reports than the agency is equipped to investigate onsite.  Initially, OSHA may have the option instead to request that the employer conduct a Rapid Response Investigation (“RRI”) instead of coming onsite, sending a letter and standard RRI form for the employer to complete (or not).

OSHA’S TRIAGE PROCEDURES

OSHA’s procedures require the agency to triage incoming fatality serious injury reports to determine whether they will conduct an onsite inspection or the event will be eligible for sending an RRI instead.  Certain scenarios will always trigger an onsite inspection under OSHA’s procedures:

All fatalities and reports of 2 or more in-patient hospitalizations;
Any injury involving a worker under 18.
The employer has a history of the same or similar hazards or incidents within the past 12 months;
Repeat offenders (history of egregious, willful, failure-to-abate, or repeated citations; and employer on SVEP).
Report of a hazard covered by a local, regional, or national emphasis program.
Any imminent danger.

Employers and reports who do not fit into these categories may receive an RRI instead of an onsite inspection, depending on OSHA’s assessment and available resources.

NOT A SAFE HARBOR

The RRI response is not a “safe harbor.” OSHA will closely evaluate the RRI responses as to whether the matter requires an onsite inspection. Employers must be thoughtful as to what they put on this form, to avoid an “admission” of OSHA liability or other comments which can result in OSHA citation or criminal prosecution. False statements in an RRI response could result in a referral to the United States Department of Justice and a five year prison sentence. Because the RRI responses are not legally privileged, they also are discoverable in civil, third-party litigation.

In a later onsite inspection, OSHA may interview managers and employees to confirm the specific facts or statements made in the response. When confronted with the prior statements, managers may have a difficult time explaining the context of sometimes inadvertent statements that suggest non-compliance or erroneous factual information. Citations can be based on any subsequent management admissions. OSHA estimates that the majority of citations are based in part of on the employer’s admissions of violations: in written statements, documents, and spoken comments to the investigator.

GENERAL RECOMMENDATIONS FOR RESPONSE

When answering the RRI questions, employers should follow some general recommendations:

Be Truthful — First and foremost, your RRI responses must be 100% factually accurate. Do not make any misstatements. The United States Department of Justice regularly prosecutes employers and managers who make material misstatements to federal officials as obstruction of justice or a false statement, both of which are a felony.

Keep it Simple and Short — Employers do not need to provide lengthy responses on the RRI form. Include the minimum amount of essential information to clearly describe what occurred and the Company’s corrective actions taken, if any.

Answer the Questions Asked — Limit responses to the questions asked and do not digress into potential hypothetical situations or events.

Avoid Speculation — The Company only should report what witnesses actually saw or what the Company firmly knows from physical evidence — not what someone thinks “may” have occurred. Speculation on the cause of the accident can create unnecessary admissions, or false statements that align with OSHA’s misconstrued theories. In addition, there is no regulation that requires the employer to conduct a root cause analysis, fishbone analysis, or Swiss cheese analysis in order to complete the RRI form.

In the case of a serious accident, if the employer decides to conduct a root cause analysis, it should consider having its legal counsel involved from the outset to direct the investigation and to create legal privileges for the root cause analysis, which will protect the investigation from disclosure in OSHA proceedings or other litigation. The analysis also does not need to be documented.

When it Doubt, Seek Advice from Experienced Outside OSHA Counsel — If the employer engages experienced counsel, they can avoid preparing an RRI response that will create unnecessary liabilities.

Shape the Narrative – Employers should be considering their defenses to potential OSHA citations when responding to an RRI. The RRI is an opportunity to shape the narrative with OSHA about the nature of a worker’s work relationship with the Company, or the nature of an accident. For example, the injured worker’s status as an employee of a third party specialty contractor may be a defense to citation. Additional information indicated a non-work-related cause of the incident may also be relevant to include.

SPECIFIC RESPONSES ON THE RRI FORM

We have attached a blank RRI form to this article, also known as an “Attachment A” NON-MANDATORY INVESTIGATIVE TOOL. Please take particular note in answering the following questions:

Section C1: Date and time of the incident

If you do not have eyewitness testimony, do not speculate as to the time of the accident. You can provide a range of dates if the accident occurred in the late evening, and no one knows for sure when it occurred.

Section C3: What was the employee doing just before the incident occurred?

If you do not have reliable eyewitness testimony, do not speculate as to what the employee was doing at the time the incident occurred. A permissible answer would be “Unknown, no eyewitness testimony.” If you want to state your best assessment based on physical evidence as to what occurred, an example could be “Unknown, no eyewitness testimony. The Company believes that the injured employee was loading widgets into the grinder. Investigation continues”

Section C4: What happened?

A simple description of what occurred is sufficient. As stated above, no regulation requires that the employer to do a root cause analysis on the accident and to provide an exhaustive chronology of facts. Likewise, employers do not have to generate written employee statements or photographs to submit with the RRI. Again, if you do not have reliable eyewitness testimony, do not speculate as to what the employee was doing at the time the incident occurred. If you do want to provide basic detail, a proposed answer could be: “Coworkers saw the injured employee remove a machine guard and place his hand in the operational grinder machine.”

Section C5: What was the injury or illness?

Again, a simple statement is appropriate. You are not required to provide a detailed medical description of the injury or illness. If an employee injury or illness has been diagnosed by a doctor, provide that summary diagnosis. If the injury is clear (e.g. finger amputation), provide that description. Otherwise, do not speculate beyond your knowledge, simply state: “The employee injured his finger” or “the employee’s finger was amputated.”

Section C6: What object or substance directly harmed the employee?

Again, if you do not have reliable eyewitness testimony or unquestionable physical evidence, do not guess as to what the employee was doing at the time the incident occurred. Be careful speculating as to what occurred. “The employee was discovered on the floor next to a fallen ladder. It is believed that he was injured and may have fallen. Investigation continues.”

Section D: WHAT CAUSED OR ALLOWED THIS INCIDENT TO HAPPEN?

OSHA’s instructions ask for a full analysis of the equipment, policies, and compliance. Keep the answer short and limited to known facts. If the employee was properly trained and did not comply with his training or use an appropriate tool, practice or safety device, which would constitute employee misconduct and a potential defense to an OSHA violation, describe the misconduct in a factual manner.

Section E: CORRECTIVE ACTIONS TAKEN TO PREVENT FUTURE INCIDENTS

OSHA Area Directors tell us that this is the most important section. OSHA is less likely to conduct an inspection if it believes that the employer has taken appropriate actions to prevent future accidents. Taking corrective action is not an admission of liability for OSHA violations, but it should not be described in terms of an action that the employer “should” have taken before the accident and “failed” to do so, which would be an admission. Employers should specify what actions they have taken following the accident. The most common actions would be retraining employees on proper safety procedures, enhancement of equipment or safety devices, or use of additional tools or personal protective equipment (PPE).

CONCLUSION

We recommend that employers utilize the RRI form to respond, though the employer always has the option of a narrative in letter format. In either event, the response must be factually accurate and not based on speculation, which may not be accurate. Limit the response to known facts about the event and a brief description of any corrective action. In the event of a serious injury or fatality, engagement of experienced OSHA counsel should be considered to create legal privileges.

“Attachment A”

NON-MANDATORY INVESTIGATIVE TOOL

A.    ESTABLISHMENT INFORMATION

1) Name of Investigator:_______________________________________

2) Job Title:­_________________________________________________

3) Name of Company ­­­­­­­­­­­­­­­­­­­­_________________________________________

4) Address: _________________________________________________

5) Contact Phone:  ___________________________________________  

6) Fax___________________________________________

7) E-Mail ___________________________________________

8) NAICS ___________________________________________

9) How many Employees at:  a) Work site______  b) All Locations_______

10) Union : Yes_____   No_____

11) Union Name and Contact Info: ___________________________________________

B.     INJURED EMPLOYEE INFORMATION

1) Injured Employee Name: _______________________________________

2) Age: ______                                   

3) Gender   Male___   Female____

(For additional employees, use continuation section at end of form.)

4) Employee Typical Job Title: _______________________________________

5) Job at Time of Incident: _______________________________________

6) Type of Employment (check all that apply):  ☐Full Time   ☐Part Time   ☐Seasonal  

☐Temporary   ☐Other: 

7) Length of Employment with the Company: _______________________________________

8) Amount of time in current position at time of incident:  _____________________________

9) Nature of Injury: _______________________________________

10) Part of Body: _______________________________________

C.    INCIDENT INVESTIGATION

1) Date and time of the incident: ___________________________________________________

2) Location of incident:  __________________________________________________________

3) What was the employee doing just before the incident occurred? Instructions:  Describe the activity; including the tools, equipment, or material the employee was using.  Be specific.  Example:  “climbing a ladder while carrying roofing materials” and “changing gasket on a chlorine line”.

 

4) What Happened? Instructions:  Provide a detailed description of the incident and how the injury occurred.  Provide details such as measurements, sequence of events, equipment RPMs, trench dimensions, the type of vehicle(s) involved, discuss use of hazard controls such as guards or PPE.  Examples:  “bucket of chemical X spilled on the floor”, “ladder slipped on wet floor”, “worker fell 20ft.”, “employee was sprayed with chlorine when gasket broke during replacement” and “employee was not wearing PPE”.

 

5) What was the injury or illness? Instructions:  Describe the part of the body that was affected and how it was affected.  Be more specific than “hurt”, “painful” or “sore”.  Examples:  “fractured vertebrae” and “chemical burn to the hand”.

 

6) What object or substance directly harmed the employee? Instructions:  Provide the type, brand, size, distinguishing features, condition, or specific part that harmed the employee.  Example: “band saw blade”.

 
D.    WHAT CAUSED OR ALLOWED THIS INCIDENT TO HAPPEN?
Instructions:  What were the underlying reasons the incident occurred – and are the factors that need to be addressed to prevent future incidents? If safety procedures were not being followed, why were they not being followed? If a machine was faulty or a safety device failed, why did it fail?  It is common to find factors that contributed to the incident in several of these areas:  equipment/machinery, tools, procedures and policies, training or lack of training, work environment. If you identify these factors, try to determine why these factors were not addressed before the incident.
E.    CORRECTIVE ACTIONS TAKEN TO PREVENT FUTURE INCIDENTS

1) Hazardous condition(s) identified and corrective action taken by employer.  Instructions:  Describe the immediate measures taken, interim and/or long-term actions necessary to correct hazardous condition(s).  Also, use this section to track the completion of multi-step corrective actions as well as final corrective actions used to abate the hazardous condition.

 

Adam R. Young is a partner in the Workplace Safety and Environmental Group in the Chicago office of Seyfarth Shaw LLP. Mr. Young focuses on occupational safety and health, OSHA inspection management, employment, and OSHA retaliation. Mr. Young can be contacted at ayoung@seyfarth.com (312) 460-5538.

Mark A. Lies, II is an attorney in the Workplace Safety and Environmental Group in the Chicago office of Seyfarth Shaw LLP. Mr. Lies is a partner who focuses his practice in the areas of products liability, occupational safety and health, workplace violence, construction litigation and related employment litigation. Mr. Lies can be contacted at mlies@seyfarth.com (312) 460-5877.

By Annette Tyman, Brandon L. Dixon, and Elizabeth L. Humphrey

Seyfarth Synopsis: The Eleventh Circuit recently issued an opinion blocking the enforcement of Florida’s “anti-woke” law. The Court struck down the law on the grounds that the law impermissibly infringes on employers’ free speech rights by limiting the concepts that employers can espouse in mandatory corporate DEI training.

On March 4, 2024, the Eleventh Circuit upheld a federal district court’s ruling that blocked the workplace restrictions of Florida’s “anti-woke” law on the grounds that those restrictions violate the First Amendment. As discussed in our earlier post, Florida amended its employment discrimination laws in 2022 by passing the “Stop the Wrongs to Our Kids and Employees,” or Stop WOKE (the “Act”). The Act prohibits employers from requiring employees to attend meetings where the company seemingly endorses concepts in programs and trainings that members of one race or sex are morally superior to others, are inherently racist or sexist, carry certain privileges,  or should feel guilty about the past actions of their ancestors.

In Honeyfund.com, Inc., et al v. Desantis, et al, opponents of the Act sued the Florida Governor, Florida Attorney General, and several members of the Florida Commission on Human Relations in the Northern District of Florida to challenge the Act.  Honeyfund and several other companies wanting to host mandatory trainings that highlight “diversity, equity, and inclusion” issues alleged that the Act violates their rights to free speech, and that the Act is both vague and overbroad in violation of the Fourteenth Amendment. The Florida Attorney General argued that the Act regulates employer conduct because it bans employers from requiring employee attendance at meetings where certain race-related concepts are taught. Under the State’s theory, the Act does not implicate the First Amendment because it regulates conduct, not speech. The district court granted a preliminary injunction prohibiting enforcement of the Act, reasoning that the mandatory-meeting provision is both unconstitutionally vague and an unlawful content- and viewpoint-based speech restriction.

In upholding the district court’s ruling, the Eleventh Circuit’s decision contained several key takeaways:

  • The Court found that the Act “limits its restrictions to a list of ideas designated as offensive,” and in doing so, “targets speech based on its content.”
  • The Court characterized the Act as one that committed “the greatest First Amendment sin” by directly regulating and penalizing certain viewpoints.
  • The Court explained that the Act is subject to “strict scrutiny” (i.e., must be “narrowly tailored to serve compelling state interests”) because it is a regulation restricting a particular viewpoint. The Court concluded Florida does not have a compelling interest in “creating a per se rule that some speech, regardless of . . . the effect it has on the listener, is offensive and discriminatory.”

Ultimately, the Eleventh Circuit upheld the preliminary injunction banning enforcement of the Act in the workplace. Florida has stated that it intends to explore avenues to appeal the Eleventh Circuit’s decision. In light of this ruling, however, Florida may not enforce the Act to prohibit employers from requiring its employees to attend training that discusses the concepts outlined in the Act, which is a major blow to one of the first legislative attempts to directly regulate private employer DEI efforts. This result may have a chilling effect on other jurisdictions looking to copy Florida’s anti-DEI playbook through similar legislation.

Despite the ruling in this case, employers should remain vigilant about closely scrutinizing the contents of their DEI training materials to ensure the substance and delivery of the trainings do not run afoul of anti-discrimination and anti-harassment laws. Trainings that are unduly critical or harsh towards certain demographic majorities, for example, could be subject to legal challenge under Title VII for creating a hostile work environment. We recognize that the diversity and inclusion landscape is shifting quickly beneath employers’ feet. As such, we are closely following this Act, as well as other similar DEI-related legislation and litigation that are currently on the rise.

Stay tuned for continued updates. For additional information, we encourage you to contact the authors of this article, a member of Seyfarth’s People Analytics team, or any of Seyfarth’s attorneys.

By Grayson Moronta, Daniel I. Small, and Howard M. Wexler

Seyfarth Synopsis: A pending bill in New Jersey’s legislature would significantly lower the standard for establishing harassment claims and require employers to implement anti-harassment training and policies and report complaint data to a government agency.

Earlier this year, New Jersey legislators introduced Assembly Bill 2443 (“AB 2443” or the “Bill”), which if passed, would significantly reduce the standard for harassment claims under the New Jersey Law Against Discrimination (“NJLAD”) and impose significant training, policy, and reporting requirements on employers.

If passed, New Jersey would follow states such as California, Maryland, and New York, who, in the recent years, have amended their anti-discrimination laws to include training requirements and more employee-friendly definitions.

Reduced Harassment Standard:

A stated intent of the Bill is to disavow the interpretation of the NJLAD standard for work environment harassment claims such as highlighted in  (i) Clayton v. City of Atlantic City, a 2013 Third Circuit case in which the court held that an incident in which a supervisor intentionally grabbed an employee’s buttocks did not rise to the level of severe or pervasive conduct, and (ii) Godfrey v. Princeton Theological Seminary, a 2018 New Jersey Supreme Court case that held harassing conduct not directed at or witnessed by plaintiff cannot factor into the analysis of a hostile work environment claim.

The Bill makes clear that “[a] determination of whether the harassing conduct was sufficiently severe or pervasive to create an intimidating, hostile, or offensive work environment shall be based upon the totality of the circumstances” and provides that single incidents of harassment may be sufficiently severe to create a triable issue of fact regarding the existence of an intimidating, hostile, or offensive work environment. Notably, in making the determination of whether harassing conduct is sufficiently severe or pervasive, the proposed standard would include a consideration of whether a reasonable person in the complainant’s protected class would consider the conduct to be sufficiently severe or pervasive to alter the conditions of employment, provided that a complainant’s subjective responses to the harassing conduct shall be considered as part of the totality of the circumstances that are relevant to whether a reasonable person belonging to the same protected class would consider the conduct to be sufficiently severe or pervasive to alter the conditions of employment.

The Bill further provides that harassing conduct need not require physical contact to qualify as severe or pervasive but that it may include threats, abusive or offensive language, damage to or interference with personal property, or offensive written or verbal communications or comments, whether such conduct is of a sexual nature or otherwise.

Additionally, the Bill defines standards for assessing employer liability for hostile work environment harassment pursuant to a negligence theory by proposing that employers be held liable when its agents or supervisors, knew or should have known of the harassing conduct and failed to take appropriate preventive or corrective action and imputing liability to employers for the harassing conduct of non-employee when the employer or its agents or supervisors, knew or should have known of the conduct and failed to take appropriate preventive or corrective action. However, the Bill provides that “in reviewing cases involving the acts of non-employees, consideration shall be given to the extent of the entity’s control and any other responsibility that the entity may have with respect to the conduct of those non-employees.”

Finally, the Bill extends the protections of the NJLAD to cover domestic workers and extends the statute of limitations for filing complaints with the New Jersey Division on Civil Rights (“DCR”) from 180 days to 365 days from the alleged act of discrimination or from the discovery of the alleged act of discrimination.

Training, Written Policy and Reporting Requirement

The Bill also places administrative requirements upon employers.  Covered employers would have to establish a written non-discrimination policy to prevent unlawful discrimination and harassment. The Bill tasks the DCR with developing a model policy that can be adopted by an employer with fewer than 50 employees and a second policy that applies specifically for employers of domestic workers.

The Bill also requires employers to provide interactive anti-discrimination and anti-harassment training to all employees and sets standards for the training. This training would be required within 90 days of initial hire and to all employees every two years.

Finally, the Bill requires employers with 50 or more employees to collect and annually report data to the DCR about the number of discrimination and harassment complaints received and the protected class or classes that each complainant alleged. The Bill provides that a form will be available for employer’s completion on the DCR’s website.

Key Takeaways for Employers

Though still pending, the proposal of AB 2443 only highlights the increased focus of cultural shifts within the workplace, especially around the #MeToo movement.  New Jersey employers should remain updated on the pending proposal and make sure their harassment policies and training materials are up to date and compliant with New Jersey law.

Seyfarth will continue to monitor and report on developments of the Bill.  In the meantime, please feel free to reach out to the authors of this alert, or your favorite Seyfarth attorney, if you have any questions.

Seyfarth Synopsis: Seyfarth’s Commercial Litigation practice group is pleased to present the fourth annual installment of the Commercial Litigation Outlook, which provides insights on litigation issues and trends to expect in 2024. Since its inaugural publication in 2020, Seyfarth’s Commercial Litigation Outlook has served as a beacon for legal professionals, providing invaluable insights and forecasting emerging trends. 

2024 promises to be one for the history books — a vastly more robust regulatory and litigation landscape, the rise and challenges of ESG, artificial intelligence that will touch almost every level of society, the nature of remote work and all of its risks and rewards, and the tidal wave of commercial loans coming due all present new and different challenges that commercial litigators will be expected to face head on in the coming year.

Trends covered in this edition include: Antitrust, Bankruptcy, Consumer Class Actions, Consumer Financial Services Litigation, eDiscovery & Innovation, ESG, Franchise & Distribution, Health Care Litigation, Insurance, Privacy, Real Estate Litigation, Securities Litigation, and the Trial Outlook.

Click here to download the 2024 Commercial Litigation Outlook


Seyfarth is also excited to announce a three-part webinar series where members of our Commercial Litigation practice group will discuss the key trends outlined above. Dates and details are below.

Part 1 – Charting the Course: AI’s Influence of Legal Practice and IP Protection 

Wednesday, March 20, 2024 at 1:00 p.m. Eastern

  • Explore the transformative impact of AI on legal practice in 2024 and beyond
  • Obtain insights into forthcoming AI regulations and their implications for businesses operating in the US and EU
  • Evaluate risk mitigation strategies to avoid potential liability when using AI platforms
  • Learn how to implement strategies for safeguarding intellectual property rights amidst advancing AI technology
  • Discuss the evolving role legal education in preparing lawyers for an AI-enabled future and the shift towards human-centered AI

Moderator:

Ken Wilton, Partner, Seyfarth Shaw

Speakers: 

Rebecca Woods, Partner, Seyfarth Shaw

Lauren Leipold, Partner, Seyfarth Shaw

Owen Wolfe, Partner, Seyfarth Shaw

Puya Partow-Navid, Partner, Seyfarth Shaw

Part 2 – Guarding Secrets: Navigating Restrictive Covenants

Thursday, April 11, 2024 at 1:00 p.m. Eastern

  • Federal Attempts to Curb Non-Competes: Delve into the proposed FTC rule and the NLRB’s stance, analyzing their potential impacts and the legal challenges they may face
  • State Initiatives: Uncover the latest legislative developments from states like California, Minnesota, and New York, examining how these changes could impact employers nationwide
  • Judicial Scrutiny and Trends: Gain insights into recent court decisions regarding non-competes and confidentiality provisions, and understand their implications for businesses
  • Trade Secret Protection Strategies: Learn essential tactics for identifying, safeguarding, and litigating trade secrets amidst the remote work paradigm and intensified competition

Moderator:

Rebecca Woods, Partner, Seyfarth Shaw

Speakers:

Dawn Mertineit, Partner, Seyfarth Shaw

James Yu, Senior Counsel, Seyfarth Shaw

Part 3 – Commercial Litigation Outlook: Insights and Predictions for Litigation Trends in 2024

Details for the third session will be available in the coming days. Please note that by registering, you are automatically enrolled for all three sessions.Register for the 2024 Commercial Litigation Outlook Webinar Series

By Marlin Duro-Martinez, Christina Duszlak, Joshua D. Seidman, and Renate M. Walker  

Seyfarth Synopsis: With each passing year, the country’s patchwork of mandatory state paid family and paid family medical leave (collectively, “PFML” or “PFL”) laws continues to evolve and expand. Why is this existing patchwork so challenging for employers? Look no further than how varied these laws are in terms of their substantive and procedural components. The below graphic illustrates this complexity by highlighting four key PFML substantive areas – (1) qualifying absences, (2) covered family members, (3) length of benefits and duration of leave, d (4) amount of pay.[1]

(click or tap graphic to enlarge resolution)

American companies provide generous paid leave benefits to millions of employees to help balance work and personal health, caregiving and parental responsibilities. Meanwhile, 13 states, plus Washington, D.C., have enacted a patchwork of inconsistent mandatory paid family and paid family medical leave (collectively, “PFML” or “PFL”) programs, each with differing substantive and procedural requirements. Importantly, not only is there a current patchwork of inconsistent mandatory PFML programs around the country that are challenging to navigate given their many variations, but the patchwork continues to grow as these laws evolve and expand into new locations.

For instance, since the start of 2022, four states have enacted new mandatory PFML programs – Maryland and Delaware in 2022, and Minnesota and Maine in 2023. Several other states – nonexclusively, Colorado, Connecticut, Massachusetts, Oregon, and Washington – plus Washington, D.C., have updated their respective PFML programs through formal amendments, additional rulemaking, or issuing administrative guidance. 2024 appears poised to continue this trend with PFML legislative activity occurring in various states, including but not limited to, Virginia, Hawaii, Michigan, and Pennsylvania. Further adding to the complexity is that other states are enacting voluntary PFML programs or adding paid family leave as a class of insurance. Navigating this patchwork has become a significant burden for multistate and nationwide employers, as well as led to hardships and inequities for their employees.

Why is the existing patchwork of mandatory state PFML programs so challenging? The answer starts with how varied these laws are in terms of their substantive and procedural components. Mandatory PFML programs are comprised of more than 30 substantive, technical requirements, many of which have additional layers, such as definitions, formulas, and administrative standards. When examined, it is clear that many of these measures are mismatched and misaligned.

Deviations across four select key PFML substantive areas – (1) qualifying absences, (2) covered family members, (3) length of benefits and duration of leave, and (4) amount of pay – are reflected in the graphic above.[2] As highlighted, wide variations and nuances exist across each topic.

With the paid leave landscape continuing to rapidly expand and grow in complexity, we encourage companies to reach out to their Seyfarth contact for solutions and recommendations for addressing compliance with paid leave requirements.

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[1] This infographic was prepared by Seyfarth’s Leaves of Absence Management and Accommodations team in conjunction with the American Benefits Council.

[2] Notably, these four topics account for only a small portion of PFML law substantive criteria. Examples of other mandatory PFML conditions include: (5) employee eligibility, (6) employer coverage, (7) treatment of remote, hybrid and mobile workers, (8) benefit year calculation, (9) key definitions, such as “parent,” “child,” “serious health condition,” etc., (10) job protection, (11) funding, (12) waiting periods, (13) intermittent leave, (14) employee notice and scheduling, (15) documentation, (16) medical recertification, (17) interplay with employer-provided leave and time off, (18) interplay with other laws, (19) notice to employees, including new hires, (20) posting, (21) claim filing processes, (22) benefits continuation, (23) employee disqualification, (24) confidentiality, (25) recordkeeping, (26) anti-retaliation, discrimination and interference, (27) reporting and remitting, (28) treatment of union workers, (29) treatment of self-employed workers, (30) written policy requirements, and (31) private plans.