The 80/20 Rule is Here: CMS Finalizes HCBS Care Worker Payment Requirements

In May 2023, the Centers for Medicare and Medicaid Services (“CMS”) proposed a series of rule changes intended to help promote the availability of home and community-based services (“HCBS”) for Medicaid beneficiaries. Chief among these proposals was a new rule that would require HCBS agencies to spend at least 80% of their Medicaid payments for homemaker, home health aide, and personal care services on direct care worker compensation (the “80/20 Rule”). Intended to help stabilize the HCBS workforce, the proposal faced immediate backlash from HCBS providers and Medicaid agencies, who expressed concern that the 80/20 rule would harm HCBS providers by mandating specific allocations to worker compensation and bogging down providers and Medicaid agencies with burdensome reporting requirements.

After reviewing thousands of comments, CMS released an advance copy of the final rule this week. Defying stakeholder anticipation that the 80/20 Rule would be relaxed, or updated to provide more flexibility for providers, CMS finalized the 80/20 Rule largely as originally proposed, including the following key requirements:

  • HCBS providers must spend at least 80% of Medicaid payments on direct care worker compensation;
  • HCBS providers will have six years (increased from four) from the effective date of the final rule to demonstrate compliance with the 80/20 Rule;
  • States must begin collecting and tracking data on direct care worker compensation within four years of the effective date of the final rule; and
  • States are permitted to establish different standards for smaller HCBS providers and to establish hardship exemptions – in both cases based on objective and transparent criteria.

Under the broad mandate of the 80/20 Rule, there are a number of key definitions that HCBS providers must consider as they evaluate these new requirements:

Direct Care Workers

Because the 80/20 Rule was adopted largely to stabilize the HCBS workforce, a key component is whose compensation qualifies for inclusion. CMS’s proposed definition encompassed almost any person with a role in providing direct care to patients (e.g., RNs, LPNs, individuals practicing under their supervision, home health aides, etc.). Under the final 80/20 Rule, CMS clarified that “direct care workers” also include those whose role is specifically tied to clinical supervision (e.g., nurse supervisors).

Compensation

Compensation of direct care workers means:“[s]alary, wages, and other remunerations as defined by the Fair Labor Standards Act and implementing regulations; [b]enefits (such as health and dental benefits, life and disability insurance, paid leave, retirement, and tuition reimbursement); and [t]he employer share of payroll taxes for direct care workers delivering services authorized under section 1915(c) of the Act.” CMS clarified that “compensation” also includes:

  1. Overtime pay;
  2. All forms of paid leave (e.g., sick leave, holidays, and vacations);
  3. Different types of retirement plans and employer contributions; and
  4. All types of benefits: CMS intentionally used the phrase “such as” to indicate the list of benefits was non-exhaustive, and indicated technical guidance to states on this subject is forthcoming.

Excluded Costs

CMS expressed concern that HCBS providers would include training costs for direct care workers as “compensation,” and that calculating compensation in this way could result in negative outcomes, such as diminished training opportunities. To address these concerns, CMS created the concept of “excluded costs,” which are excluded from the percentage calculations under the 80/20 Rule. See § 441.302(k)(1)(iii) (“costs that are not included in the calculation of the percentage of Medicaid payments to providers that are spent on compensation for direct care workers.”). Excluded costs are limited to:

  1. Costs of required direct care worker training;
  2. Direct care worker travel costs (mileage, public transportation subsidy, etc.); and
  3. Personal protective equipment costs.

Medicaid Payments

CMS largely adopted its expansive view of what qualifies as a “Medicaid Payment” for purposes of 80/20 Rule calculations. CMS clarified that the 80/20 Rule encompasses both standard and supplemental payments and applies regardless of whether HBCS services are delivered through fee-for-service or managed care delivery systems. CMS also declined to create a formal carve-out for value-based care or pay-for-performance arrangements, despite recognizing their value.

What Comes Next?

HCBS providers and state Medicaid agencies have six years to sort out their compliance with the 80/20 Rule (though data tracking and reporting begins after year three). On the provider side, this means carefully evaluating the business and economic impacts of compliance with the 80/20 Rule and monitoring CMS and state-level guidance on implementation as it develops over time. For multi-state providers, this process becomes even more complicated, as there is a high likelihood that states will choose to implement the 80/20 Rule in different, and potentially contradictory, ways.

Providers also need to work with the state agencies to address the adequacy of HCBS rates generally. CMS recognized the important role that the underlying rates play in HCBS sustainability but declined to mandate specific payment rates or methodologies. As a result, positive momentum on the rates themselves must come from state initiatives.

United States | Labor Department Posts Final H-2A Regulation

The U.S. Department of Labor announced a final H-2A regulation Friday, saying the rule was crafted to target the “vulnerability and abuses experienced by workers under the H-2A program that undermine fair labor standards for all farmworkers in the U.S.”

The H-2A program allows employers to hire temporary agricultural workers when there is a lack of “able, willing and qualified” U.S. workers. The new rule includes sections:

  • Adding new protections for worker self-advocacy.
  • Clarifying “for cause” termination.
  • Making foreign labor recruitment more transparent.
  • Ensuring timely wage changes for H-2A workers.
  • Improving transportation safety.
  • Preventing labor exploitation and human trafficking.
  • Ensuring employer accountability.

The final rule is scheduled to take effect on June 28; however, H-2A applications filed before Aug. 28, will be processed according to federal regulations as is in effect as of June 27. Applications submitted on or after Aug. 29, 2024, will be processed in accordance with the provisions of the new rule.

Additional Information: The 600-page rule is scheduled to be published in the Federal Register on Monday, April 29. A pre-publication version is available here.

FTC Moves to Strike Most Noncompetes: Considerations for Cannabis Companies

As Bradley previously reported, the Federal Trade Commission at the beginning of last year issued a notice of proposed rulemaking to effectively ban employee noncompete provisions as an unfair method of competition in violation of Section 5 of the FTC Act. Following a 16-month administrative process that drew more than 26,000 public comments, the FTC on April 23, 2024, issued its final rule that will, according to the FTC, “promote competition by banning noncompetes nationwide, protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.”

Key Features of the Final Rule

Key features of the final rule include:

  • Defining “noncompete clauses” as a term or condition of employment that either “prohibits” a worker from, “penalizes” a worker for, or “functions to prevent” a worker from (a) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (b) operating a business in the United States after the conclusion of the employment that includes the term or condition.
  • Treating existing noncompetes differently depending on the category of worker.
    • For “senior executives,” existing noncompetes may remain in force. The term “senior executive” refers to workers earning more than $151,164 who are in a “policy-making position.” As so defined, the FTC estimates that senior executives represent less than 0.75% of all workers.
    • For all other categories of workers, existing noncompetes will be unenforceable following the effective date (i.e., 120 days following its publication on the Federal Register).
  • Banning new noncompetes for all workers following the effective date.
  • Requiring employers to provide “clear and conspicuous notice” to workers who are not senior executives and are subject to existing noncompetes that such provisions are no longer enforceable. The FTC included model language in the final rule that satisfies the notice requirements.
  • Excluding banks but not bank affiliates. Because the FTC does not have regulatory authority over banks, it does not apply to banks. The rule does apply to bank affiliates however as those entities are within FTC jurisdiction.
  • Excluding nonprofit entities. The final rule does not apply to nonprofit entities, such as nonprofit hospitals, as they fall outside of the jurisdiction of the FTC Act. The FTC notes, however, that not all entities that claim tax-exempt status in their tax filings are automatically outside of the scope of the final rule. Rather, the FTC applies a two-part test to determine whether the purported nonprofit is within the scope of the FTC Act, focusing on the source of the entity’s income and the destination of the income.
  • Excluding noncompetes in the sale of business context. The final rule generally does not apply to business owners upon the “bona fide” sale of a business. The final rule expanded the sale of business exception found in the proposed rule.
  • The final rule does not apply where a cause of action related to a noncompete accrued prior to the effective date of the final rule.

What Does the New Rule Mean for the Cannabis Industry in Particular?

The FTC contends that the final rule will benefit the U.S. economy by, among other things, increasing worker earnings, reducing healthcare costs, spurring new business formation, and enhancing innovation. But what will it mean for the U.S. cannabis industry specifically?

As we’ve written about before, there’s a significant amount of proprietary information that may give players in the cannabis space a competitive edge – e.g., customer lists, grow processes, or unique cannabinoid extracts, plants, and products. Because marijuana is still a Schedule I substance under the Controlled Substance Act, however, there are open questions about whether an entity engaged in marijuana-related commercial activity can avail itself of federal law protections, such as U.S. patent and trademark laws. If an entity cannot avail itself of those federal law protections, the ability to turn to state contract law becomes even more important to protect its investments. That’s where noncompetes could come in — going a long way to protect an individual from taking and utilizing a company’s or individual’s investments. The FTC final rule largely would put an end to the ability to use noncompete protections, save for the exceptions outlined above. That may be an even bigger blow to the cannabis industry as compared to other industries who can readily utilize federal law protections. On the other hand, the cannabis industry is largely transient and collaborative, and many cannabis companies and individuals in the industry may be willing to take the good with the bad when it comes to the absence of noncompete rules.

What’s Next?

First, the final rule is not yet in effect. It will go into effect 120 days after its publication in the Federal Register.

Second, we expect there will be significant legal challenges and efforts to halt the implementation of the rule.

The final rule was issued following a 3-2 vote by the commissioners, with the two newly appointed Republican commissioners – Melissa Holyoak and Andrew Ferguson – voting against the rule. In their prepared remarks, the dissenting commissioners questioned the FTC’s legal authority to take such sweeping action.

The final rule has already prompted a legal challenge. Shortly after the FTC’s public meeting approving the final rule, the U.S. Chamber of Commerce released a statement indicating its intent to “sue the FTC to block this unnecessary and unlawful rule and put other agencies on notice that such overreach will not go unchecked.” True to its word, the Chamber filed yesterday a Complaint for Declaratory Judgment and Injunctive Relief in U.S. District Court for the Eastern District of Texas (Chamber of Commerce of the United States of America v. Federal Trade Commission, Case No. 6:24-cv-00148 (E.D.Tex. filed April 24, 2024)). The lawsuit mounts a number of legal challenges to the final rule.

Protect Yourself: Action Steps Following the Largest-Ever IRS Data Breach

On January 29, 2024, Charles E. Littlejohn was sentenced to five years in prison for committing one of the largest heists in the history of the federal government. Littlejohn did not steal gold or cash, but rather, confidential data held by the Internal Revenue Service (IRS) concerning the United States’ wealthiest individuals and families.

Last week, more than four years after Littlejohn committed his crime, the IRS began notifying affected taxpayers that their personal data had been compromised. If you received a notice from the IRS, it means you are a victim of the data breach and should take proactive steps to protect yourself from fraud.

IN DEPTH


Littlejohn’s crime is the largest known data theft in the history of the IRS. He pulled it off while working for the IRS in 2020, using his access to IRS computer systems to illegally copy tax returns (and documents attached to those tax returns) filed by thousands of the wealthiest individuals in the United States and entities in which they have an interest. Upon obtaining these returns, Littlejohn sent them to ProPublica, an online nonprofit newsroom, which published more than 50 stories using the data.

Under federal law, the IRS was required to notify each taxpayer affected by the data breach “as soon as practicable.” However, the IRS did not send notifications to the affected taxpayers until April 12, 2024 – more than four years after the data breach occurred, and months after Littlejohn’s sentencing hearing.

TAKE ACTION

If you received a letter from the IRS (Letter 6613-A) enclosing a copy of the criminal charges against Littlejohn, it means you were a victim of his illegal actions. To protect yourself from this unprecedented breach of the public trust, we recommend the following actions:

  1. Consider Applying for an Identity Protection PIN. A common crime following data theft involves using a taxpayer’s social security number to file fraudulent tax returns requesting large refunds. An Identity Protection PIN (IP PIN) can help protect you from this scheme. After you obtain an IP PIN, criminals cannot file an income tax return under your name without knowing your identification number, which changes annually. Learn more and apply for an IP PIN here.
  2. Request and Review Your Tax Transcript. The IRS maintains a transcript of all your tax-related matters, including filings, payments, refunds, extensions and official notices. Regularly reviewing your tax transcript (e.g., every six to 12 months) can reveal fraudulent activity while there is still time to take remedial action. Request a copy of your tax transcript here. If you have questions about your transcript or need help obtaining it, we are available to assist you.
  3. Obtain Identity Protection Monitoring Services. Applying for an IP PIN and regularly reviewing your tax transcript will help protect you from tax fraud, but it will not protect you from other criminal activities, such as fraudulent loan applications. To protect yourself from these other risks, you should obtain identity protection monitoring services from a reputable provider.
  4. Evaluate Legal Action. Data breach victims should consider taking legal action against Littlejohn, the IRS and anyone else complicit in his wrongdoing. Justifiably, most victims will not want to suffer the cost, aggravation and publicity of litigation, but for those concerned with the public tax system’s integrity, litigation is an option.

In fact, litigation against the IRS is already underway. On December 13, 2022, Kenneth Griffin, the founder and CEO of Citadel, filed a lawsuit against the IRS in the US District Court for the Southern District of Florida after discovering his personal tax information was unlawfully disclosed to ProPublica. In his complaint, Griffin alleges that the IRS willfully failed to establish adequate safeguards over confidential tax return information – notwithstanding repeated warnings from the Treasury Inspector General for Tax Administration and the US Government Accountability Office that the IRS’s existing systems were wholly inadequate. Griffin is seeking an order directing the IRS “to formulate, adopt, and implement a data security plan” to protect taxpayer information.

The future of Griffin’s lawsuit is uncertain. Recently, the judge in his case dismissed one of his two claims and cast doubt on the theories underpinning his remaining claim. It could be years before a final decision is entered.

Although Griffin is leading the charge, joining the fight would bolster his efforts and promote the goal of ensuring the public tax system’s integrity. A final order in Griffin’s case will be appealable to the US Court of Appeals for the Eleventh Circuit. A decision there will be binding on both the IRS and taxpayers who live in Alabama, Florida and Georgia. However, the IRS could also be bound by orders entered by other federal courts arising from lawsuits filed by taxpayers who live elsewhere. Because other courts may disagree with the Eleventh Circuit, taxpayers living in other states could file their own lawsuits against the IRS in case Griffin does not prevail.

Victims of the IRS data breach who are interested in taking legal action should act quickly. Under the Internal Revenue Code, a lawsuit must be filed within two years after the date the taxpayer discovered the data breach.

What the FTC’s Rule Banning Non-Competes Means for Healthcare

The FTC unveiled its long-awaited final rule banning most non-compete agreements during a live broadcast of a Commission meeting on April 23, 2024. The proposed rule, which was first announced in January 2023, underwent an extensive public comment process in which approximately 26,000 comments were received. According to the FTC, approximately 25,000 of these comments supported a total ban on non-competes. While there was some expectation that the final rule would be less aggressive than the proposed rule, that turned out not to be the case. By late summer 2024, most employers, except for non-profit organizations, will not be able to enforce or obtain non-competes in the U.S. except in extremely narrow circumstances. The new rule will take effect 120 days after it is published in the Federal Register. Assuming the rule is published this week, we can expect it to take effect by late August. That is, of course, if a court does not enjoin the rule first. Shortly after the rule was announced on April 23, the U.S. Chamber of Commerce stated its intention to sue the FTC. U.S. Chamber to Sue FTC Over Unlawful Power Grab on Noncompete Agreements Ban | U.S. Chamber of Commerce (uschamber.com) The first lawsuit challenging the new rule was filed on April 23, Ryan, LLC v. Federal Trade Commission, Case No. 3:24cv986 (N.D. Tex. Apr. 23, 2024). Among other relief, the Ryan suit seeks to have the rule vacated and set aside. There are significant legal questions concerning whether the FTC has the authority to take this action by rulemaking or whether this is best left to the legislative process. While some U.S. states have banned non-competes, many U.S. states have not banned them.

As written, the rule will have profound effects on virtually every industry, especially health care, where non-competes are common in physician and mid-level practitioner employment agreements. As several Commissioners indicated during the April 23 meeting, they are particularly concerned about non-competes in health care and believe this rule will save approximately $74-194 billion in reduced spending on physician services over the next decade.

Following is Nelson Mullins’ quick take on what health care employers need to know:

  1. The rule does not apply to non-profits. The basis for the rule making is Section 5 of the FTC Act, which doesn’t apply to non-profits. So, a non-profit health system that has non-competes with physicians or other workers is not impacted by the rule. Be aware, though, that the FTC may be looking to test whether some non-profit health systems are really operating as true non-profits. Tax exempt status alone will not be enough. We believe, however, that given significant and quantifiable charitable benefits that most non-profit systems provide, the FTC may be hard pressed to find a good test case within the non-profit health care industry.
  2. For all others, the rule bans all non-compete agreements for any worker, regardless of title, job function, or compensation, after the effective date. Thus, a for-profit health system or for-profit physician practice that uses non-competes will be significantly limited. The only non-competes that will be allowed to remain in force are non-competes for “Senior Executives” that were entered into before the rule becomes effective.
  3. The rule will take effect 120 days after it is published in the Federal Register. This will likely occur this week, so we expect the effective date to be approximately August 20, 2024.
  4. The rule rescinds existing non-competes for all workers who are not “Senior Executives.”
  5. “Senior Executive” is a narrowly-defined term meaning:
    1. a person in a policy making position; and
    2. who was paid at least $151,164 in the prior year.
  6. Existing non-competes for Senior Executives are not rescinded. New non-competes with Senior Executives entered into prior to the effective date are still allowed. However, no new non-competes with Senior Executives may be entered into after the effective date.
  7. “Policy-making position” means: President, CEO, or equivalent, or other person who has policy making authority, i.e., decisions that control a significant aspect of a business entity. Most clinicians will not meet the definition of “Senior Executive.”
  8. Non-senior executives who are now under a non-compete must be given notice by the effective date that their non-compete will not be, and cannot legally be, enforced. Model language for the notice is in the rule.
For more news on the Implications of the FTC Noncompete Ban on Healthcare, visit the NLR Health Law & Managed Care section.

How Lawyers Can Effectively Leverage Their Published Articles

Writing and publishing articles or blog posts can be a powerful branding and business development tool for lawyers. Not only do they demonstrate your expertise in your practice area, but they also significantly enhance your visibility and credibility.

However, your work doesn’t end once the article is published – in fact, it’s just beginning. Here are some tips to maximize the value, reach and impact of your published work.

1. Optimize for Online Search First and foremost, ensure your article is search engine optimized (SEO). This means incorporating relevant keywords that potential clients might use to find information related to your legal expertise. SEO increases the visibility of your content on search engines like Google, making it easier for your target audience to find you.

2. Share on Social Media Utilize your personal and professional social media platforms to share your article. LinkedIn, Twitter and even Facebook are excellent venues for reaching other professionals and potential clients. Don’t just share it once; periodically repost it, especially if the topic is evergreen. Engage with comments and discussions to further boost your post’s visibility.

3. Incorporate Into Newsletters If you or your firm sends out a regular newsletter, include a link to your article. This not only provides added value to your subscribers but also keeps your existing client base engaged with your latest insights and activities. This approach can help reinforce your position as a thought leader in your field. Also, consider launching a LinkedIn newsletter. LinkedIn’s platform offers a unique opportunity to reach a professional audience directly, increasing the potential for networking and attracting new clients who are actively interested in your area of expertise.

4. Speak at Conferences and Seminars Use your article as a springboard to secure speaking engagements. Conferences, seminars and panel discussions often look for experts who can contribute interesting insights. Your article can serve as a proof of your expertise and a teaser of your presentation content, making you an attractive candidate for these events.

5. Create Multimedia Versions Expand the reach of your article by adapting it into different formats. Consider recording a podcast episode discussing the topic in depth, or creating a short-form video for LinkedIn and YouTube. These formats can attract different segments of your audience and make the content more accessible.

6. Network Through Professional Groups Share your article in professional groups and online forums in your field, as well as alumni groups (law school, undergrad school and former firms). This can lead to discussions with peers and can even attract referrals. Active participation in these groups, coupled with sharing insightful content, can significantly expand your professional network.

7. Use as a Teaching Resource Offer to guest lecture at local law schools and use your article as a teaching resource. This not only enhances your reputation as an expert but also builds relationships with the upcoming generation of lawyers who could become colleagues or refer clients in the future.

8. Repurpose Content for Blogs or Articles Break down the article into smaller blog posts or develop certain points further into new articles. This can help maintain a consistent stream of content on your website, which is good for SEO and keeps your audience engaged over time.

9. Monitor and Engage with Feedback Keep an eye on comments and feedback from your article across all platforms. Engaging with readers can provide insights into what your audience finds useful, shaping your future writing to better meet their needs. It also helps in building a loyal following.

10. Track Metrics Utilize analytics tools (web, social media and email) to track how well your article performs in terms of views, shares and engagement. This data can help you understand what works and what doesn’t, guiding your content strategy for future articles.

11. Leverage the Power of Content Repurposing Content repurposing can significantly extend the life and reach of your original article. By transforming the article into different content formats—such as infographics, webinars, slide decks or even e-books—you cater to various learning styles and preferences, reaching a broader audience. This strategy not only maximizes your content’s exposure but also enhances engagement by presenting the information in new, accessible ways. Repurposing content can help solidify your reputation as a versatile and resourceful expert in your field.

Publishing an article or blog post is just the beginning. By strategically promoting and leveraging your published works, you can enhance your visibility, establish yourself as a thought leader and attract more clients. Every article has the potential to open new doors; it’s up to you to make sure it does!

U.S. EPA Finalizes Designation of Two PFAS Chemicals as Hazardous Substances Under CERCLA

On April 19, the U.S. Environmental Protection Agency (EPA) released its long-awaited final rule designating perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS), including their salts and structural isomers, as “hazardous substances” under Section 102(a) of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA” or “Superfund”) (the “Final Rule”). The designation, which takes effect 60 days after the final rule is published in the Federal Register, will provide expanded investigation and remediation authority to EPA, will provide a powerful tool for private actions under CERCLA, and will trigger additional release reporting requirements. It will also expand enforcement authority in states that regulate CERCLA-designated hazardous substances.

Hazardous Substance Designation of PFOA and PFOS Has Broad Implications for Cleanups and CERCLA Liability

PFOA and PFOS are two specific chemical compounds within a broad group of thousands of manmade chemicals known as per- and polyfluoroalkyl substances (PFAS). EPA focused its regulatory efforts on these two PFAS; however, the vast majority of PFAS remain unregulated under CERCLA even after issuance of the Final Rule.

Designating PFOA and PFOS as hazardous substances triggers numerous requirements. The primary impact of the Final Rule is that it incorporates PFOS and PFOA into CERCLA’s strict, joint and several liability framework. This change grants EPA the power to investigate releases of PFOA and PFOS and compel potentially responsible parties (PRPs), including owners and operators of a property or facility, to remediate releases of PFOA and PFOS through the specific CERCLA enforcement provisions. PRPs also now have a clear private right of action under CERCLA to pursue cost recovery and contribution actions. Additionally, when the Final Rule becomes effective, facilities will be required to immediately report releases of PFOA and PFOS above their designated “reportable quantities,” (currently one pound within a 24-hour period), to the National Response Center and relevant state or tribal authorities.

Furthermore, many states include CERCLA hazardous substances under their cleanup statutes, meaning these states will now be able to require remediation of PFOA and PFOS under state law.

Listing PFOA and PFOS as “hazardous substances” under CERCLA does not make PFOA or PFOS contaminated waste a “hazardous waste” or a “hazardous constituent” under the Resource Conservation and Recovery Act. However, this designation does require the U.S. Department of Transportation to designate PFOA and PFOS as “hazardous materials” for purposes of transport under the Hazardous Materials Regulations.

While the PFOA and PFOS CERCLA Listing is Final, Questions Remain

As noted in our prior article on the proposed rule, EPA’s designation of PFOA and PFOS as “hazardous substances” leaves several questions unanswered.

  • How will EPA’s CERCLA enforcement discretion policy really play out in practice? 

    Concurrently with the publication of the Final Rule, EPA also released a PFAS Enforcement Discretion and Settlement Policy under CERCLA. This enforcement policy captures EPA’s current position that it does not intend to pursue PRPs under circumstances where “equitable factors” do not support doing so. Enumerated circumstances in the policy include so-called “passive receivers” of PFAS, including community water systems and publicly-owned treatment works, publicly-owned municipal solid waste landfills, publicly-owned airports and local fire departments, and farms where PFAS-containing biosolids are applied to the land. However, EPA’s enforcement policy—which is not binding upon the agency and is subject to change at any time—should be viewed with a healthy dose of skepticism among regulated industries, considering the sheer breadth of potential CERCLA liability for these substances, as well as continued Congressional proposals to codify exemptions for passive receivers within the CERCLA statute itself. Notably, the agency’s enforcement position does not in any way prevent private parties from initiating cost recovery or contribution actions under CERCLA.

  • How will regulated industries manage the costs of PFOA and PFOS cleanup?PFAS contamination can be wide-ranging due to several factors unique to the chemicals themselves. Further, unlike remediation technologies for other well-studied contaminants, existing remediation technologies for PFOA and PFOS are nascent at best and are expensive at a large scale. It is therefore often difficult to even estimate accurate cost ranges for PFOA and PFOS cleanups, but costs can easily run into the millions of dollars at complex sites. Although EPA has published interim guidance on PFOA and PFOS disposal methods, and the recently passed Infrastructure Investment and Jobs Act provides $3.5 billion over five years for Superfund cleanups, the methods and money may not go as far as planned if cleanup costs for PFOA and PFOS sites end up exponentially higher.
  • How will EPA handle potential PFOA and PFOS contamination at closed Superfund sites?In response to comments seeking clarification on whether designating PFOA and PFOS will lead to the reopening of closed Superfund sites, EPA stated that the final rule “has no impact” on EPA’s authority to list PFOA and PFOS sites as Superfund sites. EPA’s question-and-answers page—which we note is not a binding statement from the agency—also states that “[d]esignation will not change EPA’s process for listing and/or deleting [National Priorities List (NPL)] sites or evaluating remedies’ protectiveness through five-year reviews, and it will not require PFOA and PFOS sampling at NPL (final or deleted) sites.” While the final rule does not require PFOA and PFOS sampling at closed sites, it does not prevent EPA from ordering sampling at these sites. PRPs who may have long ago stopped budgeting for remedial costs at existing or legacy locations that were remediated years and even decades ago, may find that they are required to revisit these sites where PFOA and PFOS may be present.
  • What cleanup standards will govern PFOA and PFOS remediation?There is a current patchwork of state regulatory standards relating to PFAS, ranging from binding cleanup levels, advisory guidance, or no PFAS standards at all, which may lead to similarly patchwork cleanup standards depending on which standards are applied as an appropriate “applicable or relevant and appropriate requirement” (ARAR) at a specific site. In addition, on April 10, 2024, EPA issued a final rule setting Maximum Contaminant Levels (MCL) for PFOA and PFOS in drinking water at 4.0 parts per trillion (ppt), individually. While these drinking water standards are separate from EPA’s final rule listing PFOA and PFOS as “hazardous substances” under CERCLA, the “hazardous substances” rule notes that the MCL may be an appropriate ARAR for cleanup efforts under CERCLA.
  • What other PFAS will EPA next target under CERCLA?As noted above, PFOA and PFOS are two specific PFAS among thousands of others currently and historically used. Much of the science on the potential health effects of PFAS (both individual chemical compounds and as a class) continues to evolve. In the meantime, EPA has moved to regulate additional types of PFAS under other statutes. For example, as we noted in a previous client alert, EPA recently published a proposed rule listing seven other PFAS compounds as hazardous constituents under RCRA. Some or all of these PFAS may eventually be targets of future CERCLA rulemaking efforts.

Next Steps

The Final Rule will take effect 60 days after it is published in the Federal Register. Affected parties should consider their portfolio of planned, active, and in some cases, closed remediation sites for potential implications, and companies may consider reviewing and updating their hazardous substance reporting and transportation protocols to address PFOA and PFOS as applicable.

FTC Approves Non-Compete Ban

On Tuesday afternoon, April 23, the Federal Trade Commission (FTC) voted 3-2 along party lines to approve its new rule on non-competes. The new rule, which will take effect in 120 days, essentially bans non-competes for all workers, finding them “an unfair method of competition – and therefore a violation of Section 5 of the FTC Act.”

Notably, a non-complete clause is broadly defined as a “contractual term or workplace policy that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment or operating a business in the United States after the conclusion of the employment.”

The new rule applies retroactively to prior agreements, other than those for senior executives earning more than $151,164 a year in a “policy-making position.” Employers must provide notice to other workers subject to non-compete agreements that they are no longer enforceable.

Not limited to employees, the non-compete ban extends to independent contractors, externs, interns, volunteers, apprentices, and sole proprietors who provide a service to a person. It does not include non-competes entered into pursuant to a bona fide sale of a business entity or in a franchisor-franchisee relationship.

While the rule is final, expect legal challenges to follow. For example, the U.S. Chamber of Commerce, the nation’s largest business lobby, told reporters it plans to sue over the rule, claiming the FTC is not authorized to make this rule, that non-competes are not categorically unfair, and the rule is arbitrary. The Chamber’s thoughts were echoed by the opposing Republican FTC voters, who cited concerns about the FTC’s authority (as compared to the merits of such a rule).

While employers’ protectable interests are often a concern, it is important to note that this rule does not ban non-disclosure and confidentiality agreements.

“…it is an unfair method of competition – and therefore a violation of Section 5 of the FTC Act – for employers to enter into noncompetes with workers after the effective date.”
For more news on FTC’s noncompete ban, visit the NLR Labor & Employment section.

Final Rule Raises Salary Threshold to $58,656 for Employee Overtime Exemptions

The U.S. Department of Labor (DOL) has released a final rule that increases the salary threshold for the white collar overtime exemptions from the current $35,568 yearly minimum to $43,888 on July 1, 2024, and then to $58,656 on January 1, 2025. This means that, beginning January 1, 2025, most employees making less than $58,656 must receive overtime pay—time and a half their regular hourly rate—for any time worked more than 40 hours in one workweek. The changes also raise the salary requirement for what is known as the “highly compensated individual exemption” from the current $107,432 per year to $132,964 on July 1, 2024, and then to $151,164 on January 1, 2025. Notably, the DOL final rule requires automatic updates to the salary threshold every three years.

The DOL initially proposed to raise the overtime exemption to $55,068 and the salary requirement for the “highly compensated individual exemption” to $143,988. The final rule modifies those numbers and now involves incremental increases in a two-step process.

The DOL estimates that this impacts almost 4 million workers who are currently salaried. Employers must face the decision to either increase salaries for many exempt workers to the proposed minimum of $43,888 by July 1, 2024 and then $58,656 by January 1, 2025, or convert those exempt employees falling under the minimum salary to non-exempt hourly workers.

This rule will likely be challenged in the courts. However, it is uncertain whether these challenges will be successful. Therefore, businesses should take steps now to prepare:

  1. Review current exempt employees who earn between $35,568 and $55,656 per year. You can track employees’ actual hours worked now to learn the potential impact of converting them to overtime pay.
  2. Review current compliance. Although the proposed rule changes the salary threshold but not the other factors for an employee to be eligible for the “white collar” federal overtime exemption, the rule may cause employees to scrutinize their exempt classification. Employers should ensure that their exempt employees meet the three exception requirements: (1) paid on a salary basis; (2) paid at least the designated minimum salary; and (3) perform certain duties (which vary based on the exemption.)
  3. Plan to give advance notice to employees and provide training to managers and those workers impacted. If converted to non-exempt status, employees will need to be trained in record keeping requirements, timekeeping procedures, overtime approval policies, and other specifics that may vary from business to business.
For more news on the DOL’s Overtime Salary Threshold, visit the NLR Labor & Employment section.

EPA Designates Two PFAS as Hazardous Substances

On April 19, 2024, the U.S. Environmental Protection Agency (EPA) announced that it was designating two common per- and polyfluoroalkyl substances (PFAS) as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as Superfund. As expected, EPA is issuing a final rule to designate perfluorooctanoic acid (PFOA) and perfluorooctanesulfonic acid (PFOS) as hazardous substances. The pre-publication version of the rule is available here.

Once the rule is effective, entities will be required to report releases of PFOA and PFOS into the environment that meet or exceed the reportable quantity. Reporting past releases is not required if the releases have ceased as of the effective date of the rule. EPA will have the authority to order potentially responsible parties to test, remediate, or pay for the cleanup of sites contaminated with PFOA or PFOS under CERCLA.

Massachusetts established reportable concentrations for six PFAS, including PFOA and PFOS, in 2019. The Massachusetts regulations also contain cleanup standards for PFAS contamination in soil and groundwater.

Under Maine law, these substances also are automatically deemed a Maine hazardous substance regulated under the Maine Uncontrolled Hazardous Substance Sites Law. Maine’s PFAS screening levels are available here.

Solid waste facility operators had expressed serious concerns about the prospect of PFOA and PFOS being listed as hazardous substances under CERCLA and have advocated for a narrow exemption. Landfills can be recipients of PFAS-containing waste without knowing it. Similarly, wastewater treatment plant operators feared liability and increased costs if the rule designating PFOA and PFOS as hazardous substances became final.

EPA’s announcement of the final rule came with a CERCLA enforcement discretion policy [PFAS Enforcement Discretion and Settlement Policy Under CERCLA] that makes clear that EPA will focus enforcement on parties that significantly contributed to the release of PFAS into the environment.

The policy states that the EPA does not intend to pursue certain publicly‑owned facilities such as solid waste landfills, wastewater treatment plants, airports, and local fire departments, as well as farms where biosolids are applied to the land. Firefighting foam (aqueous film-forming foam, or AFFF) is known to contain PFAS, and runoff from the use of AFFF has been known to migrate into soil and groundwater.