By 

Seyfarth Synopsis: As previously reported here, on February 22, 2021, New Jersey Governor Phil Murphy signed A21, the “New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act” (CREAMMA), which is enabling legislation for the amendment to the New Jersey Constitution making lawful the recreational use of marijuana in the state.

While the new law, among other things, allows employers to conduct numerous forms of drug testing for marijuana, the law limits an employer’s ability to rely on a positive marijuana test result in making employment decisions.  The law requires that a drug test include both a “physical evaluation” and “scientifically reliable objective testing methods and procedures, such as testing of blood, urine, or saliva.”  The “physical evaluation” must be conducted by an individual certified to provide an opinion about an employee’s state of impairment, or lack of impairment, related to the use of marijuana. The law tasked the Cannabis Regulatory Commission with adopting standards for a “Workplace Impairment Recognition Expert” (WIRE), who must be trained to detect and identify an employee’s use or impairment from marijuana or other intoxicating substances and to assist in the investigation of workplace accidents.

On August 19, 2021, the Commission published its “Personal Use Cannabis Rules,” which say virtually nothing about employer drug testing practices.  That said, according to the Commission, until it “develops standards for a Workplace Impairment Recognition Expert certification” in consultation with the Police Training Commission, “no physical evaluation of an employee being drug tested in accordance with [the new law] shall be required.”

It remains to be seen when the Commission will issue another set of regulations and whether they will clarify some of the law’s unanswered questions, most importantly how the law impacts employers with employees in safety-sensitive positions. Until then, New Jersey employers should consider working with experienced employment counsel to determine whether to (a) modify their drug testing practices, including the possibility of eliminating marijuana testing either pre-employment or for certain types of positions, (b) provide training to managers tasked with making reasonable suspicion determinations, and (c) determine the best person to serve as the employer’s WIRE.

We will provide an update once the Commission adopts additional regulations.

By James L. CurtisAdam R. Young, and Craig B. Simonsen

Seyfarth Synopsis: Labelling the Delta-variant surge as the “Pandemic of the Unvaccinated,” on August 26, 2021, Illinois Governor J.B. Prtizker announced that Illinois residents must wear masks indoors, and that school and health care staff must be vaccinated.

Cook County and the City of Chicago both had mask mandates in place for “indoor public settings.” On August 26, 2021, Illinois Governor J.B. Pritzker issued Executive Order 2021-20providing that that:

All individuals in Illinois who are age two or over and able to medically tolerate a face covering (a mask or cloth face covering) shall be required to cover their nose and mouth with a face covering when in an indoor public place. Illinoisans should also consider wearing a mask in a crowded outdoor settings and for activities that involve close contact with others who are not fully vaccinated. Face coverings may be removed temporarily while actively eating or drinking (including in bars and restaurants), and may be removed by workers at workplaces where they can consistently maintain six feet of distance (such as when workers are in their office or cubicle space).

The requirement is effective Monday August 30, 2021. The governor also announced a COVID vaccine mandate for health care, schools, higher education, and state-owned or operated congregate settings.

As we have blogged with regard to CDC and OSHA guidance, the new Illinois EO does not define an indoor “public” place, which appears to give employers in non-public facing environments continued discretion in enforcing mask requirements for vaccinated employees. The Governor’s press release of August 26, 2021 explains the mask mandate to cover all vaccinated and unvaccinated individuals entering workplaces, all adults and children two years old and older, and “all indoor settings.”  Accordingly, the Governor’s office appears to be taking an expansive view of an indoor public place.

The Governor noted that due to the Delta variant, that the number of new cases, including children, is of increasing concern. He explained that Illinois hospitals were facing rising levels of COVID hospitalization, with admissions made up almost entirely (98%) of the unvaccinated. He reiterated a push for vaccination, and requires it of those employed in healthcare and schools.

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) Team.

By Benjamin J.Conley and Diane V. Dygert

Seyfarth Synopsis: As employers continue to struggle with strategies for safely re-opening their workplaces, we have previously discussed the possibility of mandating a vaccine or providing incentives for getting the vaccine. See Did You Get Your Vaccine Yet… Your Employer May Offer You an Incentive, and Employers’ Mandating the COVID-19 Vaccine for Temporary Workers, and Other Issues for Employers’ Consideration. As employers shift their focus toward the cost of COVID hospitalizations (which studies show are a much greater risk for unvaccinated individuals), employers are increasingly considering imposing a premium differential between vaccinated and unvaccinated covered participants. Imposing such a premium differential is doable, but likely creates a group health plan wellness program, which implicates both HIPAA (under rules issued by HHS), and the ADA and GINA (governed by the EEOC) wellness program rules.

There are myriad intricacies to consider when setting up a wellness program. We will hit some of the highlights here:

HIPAA Wellness Programs

HIPAA’s rules divide the world of wellness programs into two main categories:

(1)        Participation-only programs. These are programs that do not require any conditions for receiving a reward and have very few requirements associated with them, except that they must be available to all similarly-situated individuals.

(2)        Health-contingent programs. These are programs that base rewards on satisfying a standard related to a health factor, which are further subdivided into

(i) activity-only, and

(ii) outcomes-based programs

While at first blush it may seem like getting a vaccine is participation-only as a person simply needs to get the shot, and does not need to remain free from COVID-19, there is some thought that it may actually be health-contingent  because not everyone can get the vaccine due to underlying health conditions.

Most practitioners do not believe such a program is a health-contingent “outcomes-based” program, as the reward does not depend on staying COVID-19-free. However, at least one consultant has taken the position that this type of program could even be outcomes-based if having simply received the vaccine is considered a “health status”.

Although HHS has not provided any direct guidance here, we think it is more likely that such a program would be a health-contingent “activity-only” program. In general, a health-contingent activity-only wellness program must meet the following requirements:

  • Incentive Limit:
    • Limit the incentive to 30% of the cost of coverage (this limit is increased to 50% if the program includes a tobacco cessation component);
    • The limit is based on the overall cost of coverage — i.e., the COBRA rate — applicable to the value of coverage elected — i.e., self-only, family, etc.;
    • This incentive would need to be combined with any other “health contingent” wellness program offered under the plan when determining whether the incentives exceed the limit (except that if any incentive is linked to smoker status, the limit is increased to 50%).
  • Reasonable Alternative:
    • A reasonable alternative must be offered to persons who cannot get vaccinated because it is medically inadvisable or, as a result of the overlay of Title VII, due to a sincerely held religious belief.
    • Participants must be notified of the availability of the reasonable alternative in all materials substantially describing the program.
  • Annual Opportunity to Qualify:
    • Provide an opportunity to qualify for the reward at least once per year;
  • Be uniformly available to all similarly situated individuals; and
  • Not be a subterfuge for discrimination.

(Note: There are additional requirements for health contingent wellness programs that are outcomes-based programs.)

EEOC and the ADA

The EEOC has modified its wellness program rules a few different times in the last few months. Ultimately, we read the current loosening of the EEOC’s wellness program rules as the administration’s attempt to not discourage incentives.

If the wellness program is for a health-contingent activity-only program, the EEOC is okay if the plan meets the HIPAA/HHS standards. (The new EEOC wellness program rules will also allow an incentive for participatory programs that is not overly large (i.e., considered coercive). )

Similarly, recent EEOC guidance has indicated that vaccine status alone is not a “medical exam or disability-related inquiry” under the ADA. So, if an employer simply requests proof of vaccination status but does not require the employee to get the vaccine directly from the employer (or its contractor), the program is arguably outside of the scope of the EEOC’s wellness guidelines entirely.

Affordable Care Act

For ACA purposes, if the “incentive” is structured as an increased premium, the employer must treat all employees as if they failed to get vaccinated and were required to pay the increased amount for purposes of determining the affordability of coverage, regardless of whether that’s the case. However, there are ways for plan sponsors to mitigate this concern. For instance, the employer could design its “penalty” as a deductible increase rather than a premium increase, which would not impact affordability. (It would impact minimum value, but the employer likely has more flexibility there.)  Similarly ,because the ACA only requires that employers offer one affordable option, the employer could link the incentive only to its higher-cost benefit options (leaving untouched its lower-cost, “affordable” option.

*           *           *

While beyond the scope of this legal update, employers should also be cautious of how they structure the program considering collective bargaining obligations, HIPAA privacy concerns and Section 125 requirements (for mid-year implementations). We will continue to monitor trends in this space with an eye toward any agency indications as to whether they intend to regulate these types of programs.

By Brent I. ClarkJames L. CurtisBenjamin D. BriggsMark A. Lies, IIAdam R. YoungA. Scott HeckerIlana MoradyPatrick D. JoyceDaniel R. BirnbaumMatthew A. Sloan, and Craig B. Simonsen

Seyfarth Synopsis: Today the FDA approved Comirnaty (COVID-19 Vaccine, mRNA), previously known as Pfizer-BioNTech COVID-19 Vaccine, to prevent COVID-19 disease in individuals 16 and older.  This could be big news for those on the fence about getting vaccinated, and for employers contemplating their COVID-19 vaccine programs.

The Pfizer vaccine has been administered under Emergency Use Authorization for more than nine months, but now has been fully approved by the FDA. Some vaccine-hesitant individuals may now change their opinions about whether to get vaccinated based on the FDA’s full approval of Comirnaty. And for employers refraining from mandating vaccination, reduced employee resistance to and improved employee confidence in a fully-vetted vaccine may remove one barrier to requiring vaccination.

Of course, how vaccines can best be deployed remains a shifting conversation, with the Biden Administration now pushing for boosters. Those who have been defined by federal, state, and local government requirements and guidance as “fully vaccinated” may no longer meet that definition should it change to require the proposed booster. The OSHA COVID-19 Healthcare Emergency Temporary Standard (“ETS”) defines fully vaccinated as “two weeks or more following the final dose of a COVID-19 vaccine.” But will the ETS definition be modified to require three doses? Which definition might carry over to any permanent COVID-19 or infectious disease standard promulgated by the Biden Administration? Employers will need to stay on top of these and other COVID-19 vaccine concerns as science and society continue to adjust to the ongoing pandemic.

Please refer to our analyses of other COVID-19 vaccine issues in prior blog entries, including: President Biden to Require Federal Workers, Contractors to Provide Vaccine Attestation or Mask, Distance, and Test Multiple Times Per Week, Employers Do Not Need To Record Adverse COVID-19 Vaccine Reactions on their OSHA Form 300 Log, and OSHA Issues Updated Protecting Workers Guidance on Mitigating and Preventing the Spread of COVID-19 in the Workplace.

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) Team.

By Jennifer L. Mora and Jeffrey A. Berman

Seyfarth Synopsis: With a new President comes a shift in the balance of power at the National Labor Relations Board. To start, shortly after President Biden took office in January, the NLRB’s sole Democrat, Chairman McFerran, issued several dissents that provided a window into what the future would look like  under a Biden Board.

Those dissents addressed confidentiality in arbitration agreements (here), implementation of employee handbooks (here), investigative confidentiality rules (here), standards for determining whether a party has engaged in bad faith bargaining (here), and policies prohibiting recordings in the workplace (here).

On August 12, 2021, the NLRB’s top lawyer, General Counsel Jennifer Abruzzo, issued a memorandum instructing regional offices to send cases relating to certain issues to her office for consideration. Nobody should be surprised at Abruzzo’s desire to overturn several important Trump Board decisions, as this happens each time a new NLRB majority is established.  However, the memorandum, which includes all of the issues flagged by Chairman McFerran in her dissents, goes much further.

The GC’s memorandum highlighted more than 40 Trump-era decisions that are up for reconsideration, based on Abruzzo’s view that they overruled legal precedent and are not consistent with the basic purpose of the National Labor Relations Act to foster unionization. They include, among many others:

  • The Boeing Co. (2017) and the appropriate standard for determining the legality of workplace/employee handbook rules. This will include any Trump Board decision that analyzed a rule or handbook provision under the Boeing As we previously reported, Chairman McFerran espouses a return to the analytical framework in Lutheran Heritage Village-Livonia — the mere maintenance of a neutral work rule will violate the Act if employees would reasonably construe the rule to prohibit union and other protected concerted activity.
  • Baylor University Medical Center (2020), which found lawful separation agreements containing confidentiality and non-disparagement provisions, in addition to Trump-era decisions addressing confidentiality rules relating to workplace investigations and confidentiality provisions in arbitration agreements. In recent dissents, McFerran has been highly critical of any confidentiality provisions, opining that they require employees to “suffer in silence at work.”
  • Various decisions discussing the appropriate standard for determining whether an employee has engaged in Section 7 protected activity. Importantly for employers, a desire to return to Purple Communications will likely mean protecting more than just communications in emails, but also other electronic communications and videoconferencing platforms.
  • Decisions addressing the standard to prove violations of the Act under Wright Line.
  • Tobin Center for the Performing Arts (2019) — the extent to which property owners can deny access to third parties seeking to engage in Section 7 activity.
  • Valley Hospital Medical Center (2019) — the right of an employer to cease deducting union dues upon expiration of a labor agreement.
  • MV Transportation (2019), which abandoned the clear and unmistakable waiver standard to determine whether an employer’s unilateral action was permitted, and instead adopting a “contract coverage” standard, under which unilateral action is permitted if it falls within the compass or scope of certain contractual language in the labor agreement.
  • SuperShuttle DFW, Inc. (2019) — the standard for determining whether an individual is an independent contractor. The memorandum also suggests that the simple act of misclassifying a worker as an independent contractor can be an unfair labor practice. A shift in precedent relating to this issue ups the ante for companies operating in the gig economy.

But the memorandum goes beyond evincing an intent to overturn the Trump Board’s precedent – it also “identifies other initiatives and areas that, while not necessarily the subject of a more recent Board decision, are nevertheless ones I would like to carefully examine.” Those include:

  • Two issues relating to Weingarten rights: their application to non-union workforces and whether an employer must provide the union with its interview questions in advance of the interview.
  • Information requests when an employer intends to relocate its operations.
  • The right of an employer to withdraw recognition after the third year of a contract of longer duration.

Abruzzo’s memorandum also signals a critical modification to the existing card check rules- requiring regional offices to send to her office cases where an employer refuses to recognize and bargain with a union if the employer has either engaged in unfair labor practices or cannot “explain its reason for doubting majority status in rejecting the union’s demand.” If adopted, this standard would make it more difficult for an employer to insist on an election rather than bargain with a union in the face of a showing of majority support.

The fact that the new General Counsel has requested that regional offices forward cases raising certain issues to her does not automatically mean that the Board will either reverse a decision of the Trump Board or extend the protections of the NLRA further than they currently exist.  However, given the makeup of the newly-constituted Biden Board, there is little question what the future holds.

By Ana CidLaurence Harvey Wood, and Gabriella Long

Seyfarth Synopsis: We have seen the benefits of technology in keeping us connected in the new remote working environment and the flexibility that it provides, but how does this impact employees’ ability to disconnect from their work?

During the Covid-19 pandemic, working from home has become the new norm, and this doesn’t seem set to change, with many large employers stating they do not plan to bring staff back to the office full-time.

Although many have enjoyed the shift to greater flexibility and more frequent working from home, simultaneously, many have found it difficult to create a distinction between home and work life. Further, in the absence of normal daily activities, socializing, and holidays, some people filled their time with working around the clock. This has led to a number of issues such as employees working longer hours, suffering from stress/fatigue/burnout, and solidification of the “always on” culture.

In light of these issues, we are seeing several countries outside of the US, issuing new regulations to allow effective disconnection from work and work-related communications outside of normal working hours to protect employees’ health and improve work/life balance.

Take up of the right to “disconnect.” What are the options?

Some European countries including France, Spain, Belgium, and Italy have already established a statutory “right to disconnect” for employees, and similar legislation has also been implemented in jurisdictions outside of Europe, including the Philippines, Argentina, and India.

Other countries have proposed or considered adopting such a right including the Netherlands, Luxembourg, and the federal government of Canada.

In Ireland the right was recently introduced through a new Code of Practice, making it one of the first countries to introduce such a measure post-Covid-19. The Code encourages employers to create a culture of good work/life balance and alleviate employees from the expectation of responding to messages out of hours. It is not legally binding but was built on the foundations of existing legal obligations in Ireland, such as the 48-hour week, health and safety obligations, and the right to a statement of key terms setting out working hours.

In the UK, Prospect, the trade union for professionals such as engineers, scientists, and civil servants, has been particularly active in urging the UK government to include legislation on the right to disconnect in the upcoming Employment Bill, but the government currently does not appear to have plans for a specific legal right to disconnect.

Interestingly, some large companies have voluntarily put in place “disconnect from work” policies to stop email servers from sending emails to employees during off hours in a bid to combat the above-mentioned issues.

Sweden has taken a different approach to achieve a similar aim with reduced work hours and more leisure time, which has led to a marked reduction in absenteeism and improved health and productivity.

In terms of the actual implementation of a statutory right to disconnect, in France employers must negotiate an agreement with union representatives on the right to disconnect outside working hours. The law does not impose rules on how employees should “switch off”; instead it requires that companies in which one or more trade unions have set up a “union section” (typically companies with at least 50 employees) must enter into mandatory annual negotiations to define how staff can exercise their right to disconnect, and (if no agreement with the unions is reached) adopt a unilateral “charter” in this respect after consulting their works council. These negotiations must also cover the establishment of “arrangements to regulate the use of digital equipment, in order to ensure compliance with rest and holiday periods and to protect personal and family life.”

Under French law, there are no direct sanctions on companies for not complying with these rules, but employees can sue if they feel their rights have been infringed. For example, an employee at a large pest control company was granted EUR 60,000 in compensation for being “on call,” after a French court found the company had required the employee to “permanently leave his telephone on… to respond to requests from his subordinates or customers” if problems arose outside his hours of work.

In practice, some companies have gone so far as introducing measures including cutting email connection in the evening or on weekends, or even destroying emails automatically that are sent to employees while they are on holiday.

In Belgium, legislation does not grant a general “right to disconnect” but rather a right to address and discuss the issue. Each employer must consult with the Health and Safety Committee about disconnecting and the use of digital communication tools. The measures decided on should then be confirmed in company work rules, in a collective bargaining agreement or a policy.

In Spain, companies are obliged to come up with a policy, to be negotiated with employee representatives, including measures to allow the employees to “digitally disconnect.” While the regulation does not include the specific actions that need to be taken, companies have taken a variety of measures, for example, (i) the right to not respond to email, phone, or instant messages after working hours, unless in exceptional circumstances, and the Company will not impose any disciplinary action for being unavailable during hours of “disconnect”; (ii) that managers must refrain from requesting a response out of working hours or in a time close to the end of working hours, or if sent the recipient can expressly assume that they can respond the following day; and (iii) that meetings must be set up and take place during working hours.

In May this year, the Italian legislator introduced the right for employees working remotely to disconnect from the company tools and systems used to carry out their work. Notably, this only recognizes the right to disconnect for employees on the “smart working” model (i.e., employees alternating between working in the office and remotely as opposed to someone on a teleworking contract and based permanently at home), and there are currently no sanctions for non-compliance in place.

In the US, although some companies have implemented programs like this experimentally, we are not aware of any analyses of the efficacy of these programs.

Potential issues?

While the above measures show what several countries outside the US are doing to try to address employee work/life balance , there are also certain factors to be considered given the current trends in global workplaces:

Will a right to disconnect actually benefit employees?

  • A right to disconnect is not the same as an obligation to disconnect. For example in the UK, it can be argued that working time legislation has little impact on long working hour cultures with many employees opting out and few willing to complain that a right has been breached.
  • Legislation may actually reduce flexibility by introducing rigid working hours and could increase pressure to meet deadlines by a hard stop finish time. Employees may have become accustomed to choosing different working hours every day as a result of the pandemic. Being uncontactable during evenings and weekends may mean employees need to be “always on” during normal working hours, whereas many might favor greater flexibility and autonomy over their own working hours especially when care obligations are triggered.

Global companies: the practical  concerns

  • The idea of employees being able to completely disconnect outside of working hours may be impractical. Certain industries expect employees to work outside of their normal working hours, for example, to service paying clients. Additionally, some employment contracts may even require employees to work “the hours necessary to perform their duties.”
  • Any right to disconnect will need to take into account the global reach of international companies and recognize that employees work across different time zones and legal landscapes. Completely switching off may not be practical and could disrupt business operations.

Although the remote work practices temporarily adopted in response to the Covid-19 pandemic have created an unexpected opportunity to roll out more flexible work arrangements on a permanent basis going forward, the “new normal” reinforces existing concerns over employees being permanently connected. Some countries have taken the view that legislation is needed in order to help employees to “switch off.” Whether this is an effective approach remains to be seen, but in any event, global employers will want to ensure that the benefits of greater flexibility are not jeopardized by excessive working hours and burn-out situations. Finding the right balance will be key.

Ana, Laurence, and Gabriella are part of Seyfarth’s leading International Employment team. To find out more about employees’ right to disconnect and how these new policies might affect your business, please reach out to them or anyone else on our specialist team.

By Brent I. ClarkJames L. CurtisBenjamin D. BriggsMark A. Lies, IIAdam R. YoungA. Scott HeckerIlana MoradyPatrick D. JoyceDaniel R. BirnbaumMatthew A. Sloan, and Craig B. Simonsen

Seyfarth Synopsis: Today OSHA updated its Protecting Workers Guidance on Mitigating and Preventing the Spread of COVID-19 in the Workplace to adopt recommendations “analogous” to the July 27, 2021 Centers for Disease Control and Prevention (CDC) mask and testing recommendations for fully vaccinated people.

OSHA designed its guidance to assist employers in protecting workers who are unvaccinated (including people who are not fully vaccinated) or otherwise at-risk, and to implement new guidance for workers who are fully vaccinated but located in areas of substantial or high community transmission.

The guidance contains recommendations as well as descriptions of OSHA’s mandatory safety and health standards. OSHA notes that the recommendations are advisory in nature and informational in content and are “intended to assist employers in providing a safe and healthful workplace free from recognized hazards that are causing or likely to cause death or serious physical harm.” The most significant recommendation is that employers follow the CDC’s recent updated recommendations for fully vaccinated people including by:

  • wearing a mask in public indoor settings in areas of substantial or high transmission;
  • choosing to wear a mask regardless of level of transmission, particularly if individuals are at risk or have someone in their household who is at increased risk of severe disease or not fully vaccinated; and
  • getting tested 3-5 days following a known exposure to someone with suspected or confirmed COVID-19 and wearing a mask in public indoor settings for 14 days after exposure or until a negative test result.

In the guidance, OSHA emphasizes that vaccination is the most effective way to protect against severe illness or death from COVID-19. OSHA “strongly encourages” employers to provide paid time off to workers for the time it takes for them to get vaccinated and recover from any side effects. OSHA also suggests that employers consider adopting policies that require workers to get vaccinated or to undergo regular COVID-19 testing – in addition to mask wearing and physical distancing – if they remain unvaccinated.

OSHA reiterates that while the guidance addresses most workplaces, many healthcare workplace settings will be covered by the mandatory OSHA COVID-19 Emergency Temporary Standard. Pursuant to the Occupational Safety and Health Act, employers in those settings must comply with that standard. All employers must comply with any other applicable mandatory safety and health standards and regulations issued and enforced either by OSHA or by an OSHA-approved state plan. In addition, the Act’s General Duty Clause, Section 5(a)(1), requires employers to provide their workers with a safe and healthful workplace free from recognized hazards that are causing or likely to cause death or serious physical harm. Employers who are not covered by the OSH Act (like public sector employers in some states) will also find useful control measures in this guidance to help reduce the risk of COVID-19 in their workplaces.

Employers should be wary of OSHA’s labeling this guidance as “advisory,” particularly where the Agency points specifically to enforcement avenues, including the General Duty Clause. Implementing these recommendations, and following CDC guidance, should provide employers some peace of mind in addressing enforcement exposure.

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) Team.

Tuesday, August 24, 2021

1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific

On July 21, 2021, the US Department of Labor announced a Notice of Proposed Rulemaking (NPRM) to establish standards and procedures to implement and enforce Executive Order 14026, “Increasing the Minimum Wage for Federal Contractors.” The Executive Order and its enacting regulations will increase the minimum wage for workers performing work on or in connection with covered federal contracts to $15 per hour beginning January 30, 2022; continue to index the federal contract minimum wage in future years to an inflation measure; eliminate the tipped minimum wage for federal contract workers by January 1, 2024; ensure a $15 minimum wage for workers with disabilities performing work on or in connection with covered contracts; and restore minimum wage protections to outfitters and guides operating on federal lands.

In this webinar, attorneys from Seyfarth’s Government Contracts, Government Relations and Policy, and Wage and Hour Litigation Practice Groups will provide an overview of the NPRM including its substance, reasoning, timeline and potential impacts on employers.

REGISTER HERE

 

Speakers

Brett C. BartlettModerator, Partner, Seyfarth Shaw LLP
Adam K. Lasky, Partner, Seyfarth Shaw LLP
A. Scott Hecker, Senior Counsel, Seyfarth Shaw LLP
Stephanie B. Magnell, Counsel, Seyfarth Shaw LLP

*This webinar is accredited for CLE in CA, IL, NJ, and NY. Credit will be applied for as requested for TX, GA, WA, NC, FL and VA.  The following jurisdictions accept reciprocal credit with these accredited states, and individuals can use the certificate they receive to gain CLE credit therein: AZ, CT, ME, NH.  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 in other jurisdictions for self-application. If you have questions about jurisdictions, please email CLE@seyfarth.com.

By Marjorie CulverJeremy Corapi, and Dan Waldman

Seyfarth Synopsis: In the world of cross-border mergers and acquisitions, complex human resource and employment considerations arise during the transaction’s due diligence process. Depending on the transaction’s structure, these issues can be diverse and range in topics from immigration requirements to employee benefit matters to employee representative consultation obligations.

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From the purchaser’s perspective, proper human resource and employment due diligence can help structure a transaction’s terms and limit any unwanted surprises after the deal is signed or closes. Conversely, failure to spot key human resource and employment diligence issues can cause business interruptions and liabilities and negatively impact employee morale.

In this short article, we outline some essential human resource and employment items for cross-border transaction due diligence. This is not intended to be an exhaustive list of due diligence matters and, as with any piece of this kind, should not be relied upon as legal advice.

Employee Consultation Obligations and Collective Bargaining Agreements

In many countries, a target company’s employees may be represented by a union, works council, or other employee representative body and covered by a collective bargaining agreement.

Closely analyze employee representative arrangements to assess if there are notification or consultation obligations that must occur before the transaction is signed and/or the deal is closed. It may take anywhere from a few weeks to a few months to satisfy the applicable requirement, so it’s important to build sufficient time into the deal timeline to account for the necessary processes. In some cases, employee representatives may also have co-determination rights, which require the applicable employee representative to consent to the transaction before it proceeds.

Failure to properly observe applicable notification, consultation, or co-determination rights can result in criminal liability. It can also result in litigation and materially delay the transaction’s consummation.

Change in Control and Severance Provisions

To determine whether any meaningful payouts or entitlements will be triggered by the transaction, review key employees’ agreements.

In particular, perform diligence on any agreements containing transaction bonuses, severance provisions, equity acceleration clauses, or so-called “change in control” terms. Assessing this before signing the transaction will help the purchaser determine if new employment agreements should be provided in connection with the transaction (or as a condition of the transaction) to supersede existing entitlements.

If the transaction will trigger such payments or entitlements, this may also result in material tax issues. As a result, tax diligence should also be performed as part of this review.

Pension Schemes

Review employee retirement and pension schemes, and pay particularly close attention to the types of pension plans the target company has in place in any asset purchase transaction or transaction where employees are changing employers outside the US. If the target company participates in or has participated in a defined benefit pension scheme outside the US (as opposed to a defined contribution pension scheme), there may be significant liabilities. In such case, perform robust due diligence before the transaction’s signing to ensure all legal requirements are followed, the transaction agreement adequately protects the purchaser from the target company’s existing liabilities, and the purchaser understands its pension obligations if it moves forward with the transaction.

Independent Contractor Status

Many companies engage individuals as independent contractors, but treat them like employees in practice. Most countries require a company to reclassify an individual as an employee if the individual is being incorrectly categorized as an independent contractor. If the misclassified individual who provides services to the company is not employed by another entity that is properly treating the individual like an employee (e.g. withholding taxes and remitting social security contributions, accounting for overtime, etc.), liabilities for the company can be significant. This is especially true if the company’s relationship with the individual has gone on for a significant period of time at a high pay rate.

Review a global census of the target company’s independent contractor engagements to assess if independent contractor misclassification might be a material issue. If it is, conduct additional diligence to determine if the purchaser should seek a specific compliance representation with a corresponding indemnity in the transaction agreement.

Immigration Issues

Companies that have multinational workforces often employ individuals with visa requirements or other immigration needs. When a change in ownership of the company or corporate structure that sponsors the applicable employee visa or work permit occurs, the change typically requires a filing or notification with the local immigration authority. Failure to adhere to applicable immigration filing and notification requirements can result in stiff fines, the suspension of the sponsored employee’s ability to work, and the inability to sponsor employees in the future.

Assess whether the transaction triggers a change of corporate ownership or employer that will require updates to any employee’s visa or work permit. If updates are required (including obtaining a new visa or work permit), bake sufficient time and terms into the transaction to account for them (e.g., filings and approvals from the local immigration offices). Such authorizations can take several months depending on the country and type of change. Review any immigration restrictions or waiting times that may also be in place due to COVID-19.

If the target company is a company with a moderate US headcount, conduct diligence on the target company’s I-9 compliance. Failure to comply can result in material fines and other criminal penalties.  Performing diligence on this issue will also help the purchaser assess whether it should redo target company employee I-9s within the prescribed post-closing time period to mitigate any legacy liability.

Unique State or Local Requirements

Depending on the transaction type and jurisdictions involved, conduct targeted local due diligence. For example, California has several notable state and local laws on employee privacy, restrictive covenants, paid sick leave, vacation payout, and employee classification that do not apply to many other US states.  If the transaction has a material nexus to California, perform diligence into the target company’s compliance with California specific employment laws. Similarly, depending on the nature of the target company’s business and the transaction’s nexus to the EU, performing due diligence on employee staff leasing, GDPR compliance, and pay equity obligations may be worthwhile.

Conclusion

While there are many other important diligence items that should be reviewed as part of standard human resource and employment due diligence on a cross-border transaction, do not overlook the foregoing items. As a best practice, ensure the purchaser’s deal team has a thorough checklist of all due diligence items it wants to cover as part of the transaction’s due diligence process. As due diligence progresses, hone in on key issues based on the information gleaned from the target company’s diligence responses.  Submit supplemental diligence requests to flesh out any material open issues.

Marjorie, Jeremy, and Dan are all part of Seyfarth’s leading International Employment team who help leading employers navigate global workforce issues. To find out more about cross-border transaction human resource and employment issues, and how they might affect your business, please reach out to them or anyone else on our specialist team.

By Brent I. ClarkJames L. CurtisBenjamin D. BriggsMark A. Lies, IIAdam R. YoungA. Scott HeckerIlana MoradyPatrick D. JoyceDaniel R. BirnbaumMatthew A. Sloan, and Craig B. Simonsen

Seyfarth Synopsis: In light of rising cases of COVID-19, the CDC has recently reversed its prior facemask guidance, and has now required that both vaccinated and unvaccinated individuals wear masks indoors in public spaces in areas where there is significant transmission of COVID-19. Certain local jurisdictions have adopted similar rules that renew requirements for facemasks. In a significant move, OSHA has announced on its website that it has reviewed the latest guidance, science and data on COVID-19, and is not otherwise amending its COVID-19 Emergency Temporary Standard for Healthcare at this time.

OSHA’s June 2021 COVID-19 Emergency Temporary Standard for Healthcare employers provides a clear exception to general mask rules for (1) vaccinated employees (2) in well-defined areas, (3) where there is no reasonable expectation that any person with suspected or confirmed COVID–19 will be present. Accordingly, compliant with the ETS, health care employers are lawfully permitting employees to unmask in office settings where all employees are vaccinated and no COVID+ patients will be present. While the ETS was published at a time when COVID-19 seemed to be receding, data from recent weeks shows that cases are rising in certain parts of the country. The CDC has issued a new facemask recommendation, which advises that individuals wear masks when indoors in public spaces if they are in a county with substantial or high COVID-19 transmission. Accordingly, a healthcare employer who complies with the ETS and allows vaccinated employee to unmask in public spaces, in a county with substantial or high COVID-19 transmission, would potentially run afoul of the CDC’s updated guidance.

Healthcare employers were unclear whether continued adherence to the ETS, and its facemask exceptions, would be permissible given the new CDC Guidance and OSHA’s General Duty Clause, which requires employers to keep a workplace free from any recognized hazard. In terms of the impact the new CDC guidance has on ETS compliance, OSHA has published the following disclaimer on its website:

OSHA has reviewed the latest guidance, science and data on COVID-19 and has consulted with the Centers for Disease Control and Prevention (through the National Institute for Occupational  Safety and Health). DOL has determined that neither CDC’s guidance on healthcare settings nor the underlying science and data on COVID-19 in healthcare settings has materially changed in a way to necessitate changes in the health and safety requirements contained in the ETS released on June 10, 2021. OSHA has determined that no changes to the ETS are necessary at this time, but the agency will continue to monitor and assess the need for changes each month.

Accordingly, OSHA has made it clear that permitting mask exceptions for vaccinated employees will still be permissible for employers, despite the new CDC guidance. It seems that OSHA understands that the data from the pandemic is constantly in flux and will take its time in revisiting the ETS or any requirements for employers, rather than react in a knee-jerk fashion. For employers this is an encouraging sign and indicates that OSHA’s enforcement priorities are not subject to sudden reversals as may have been the case with the CDC’s guidance.

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) Team.