The National Law Forum

Big Labor Got Bigger in 2023

While union numbers on the whole generally declined in 2023, some of the biggest American unions were able to augment their numbers in spite of the downward trend.

According to a recent report from Bloomberg, “Many of the nation’s largest unions including the Teamsters and West Coast dock workers saw membership gains last year, signaling potential for new organizing even as the labor movement struggles to tighten its grip on the workforce, according to new federal data.

“The numbers paint a more optimistic portrait of unions’ ability to recruit new members, particularly in the service and manufacturing sectors, even in the face of declining density nationwide. Two dozen groups added members in 2023, a year marked by high-profile strikes and labor stoppage threats across industries. The additions overcome losses from seven other peer unions, according to a Bloomberg Law analysis of disclosures filed with the US Department of Labor last week.”

For context, union membership rates across private and public sector workers overall dropped to 10 percent in 2023, down from 10.1 percent in 2022. For comparison, when this data first became available in 1983, that number was at 20.1 percent – or double where unions are now. In the private sector, only 6 percent of those workers now belong to unions as of 2023.

Nevertheless, this report showing gains by some of the nation’s largest labor organizations, combined with historic union organizing numbers and the seemingly growing number of union election successes, may move those union membership percentages upward by the close of 2024. In addition, recent changes by the National Labor Relations Board to the union election process may further help unions bolster their ranks. We’ll see how this all shakes out by year’s end. Stay tuned.

CTP Releases New 5-year Strategic Plan

On December 18, 2023, Dr. Brian King, the Director of FDA’s Center for Tobacco Products announced the Center’s new five-year strategic plan which outlines the Center’s programmatic and workforce initiatives and includes five goals, ten outcomes, and several corresponding objectives.

The new strategic plan incorporates recommendations from the Reagan-Udall Foundation report published in December 2022. The Reagan-Udall Foundation report provided fifteen recommendations for CTP which included improving transparency regarding the Center’s approach to Premarket Tobacco Product Application (PMTA) reviews and compliance and enforcement. The report highlighted industry concerns with the CTP’s framework for approaching PMTA reviews, particularly after FDA issued Refuse To Accept (RTA) letters, Refuse to File (RTF) Letters, or Marketing Denial Orders (MDOs) for millions of deemed tobacco products. The five-year plan seeks to address the issues of transparency, enforcement, and education.

The five goals are:

Develop, advance, and communicate comprehensive and impactful tobacco regulations and guidance;
Ensure timely, clear, and consistent product application review;
Strengthen compliance of regulated industry utilizing all available tools, including robust enforcement actions;
Enhance knowledge and understanding of the risks associated with tobacco product use; and
Advance operational excellence.

To achieve these goals, CTP plans to develop and implement several guidance documents to ensure that regulations are clear and accessible. Furthermore, CTP will develop new processes to review PMTA efficiently and to communicate the review process and marketing decisions transparently. CTP also plans to pursue more robust enforcement actions by collaborating with other federal and state agencies.

CTP highlighted the importance of promoting education surrounding the risks of tobacco product use, particularly for preventing youth initiation, and educating adults on the benefits of cessation, including the relative risks of different tobacco products. The fifth and last goal regards CTP’s operational goals by supporting its workforce and operating efficiently.

In conjunction with this strategic plan, CTP also published the Center’s policy agenda of rules and guidance documents. The policy agenda provides guidance documents in development, including current and long-term priorities for the Center.

The Center’s current priorities include:

The ultimate goal of the strategic plan is to reduce harm caused by tobacco product use and to work with regulated industries in a manner that demonstrates a commitment to science, health equity, stakeholder engagement, and transparency.

Fee Hikes Give U.S. Employers Chance to Rethink Immigration Strategies

The cost of running an immigration program at a U.S. company just went up — a lot.

On Jan. 31, U.S. Citizenship and Immigration Services published a final regulation to raise immigration filing fees — and high-skilled categories saw some of the biggest increases. On April 1, the fee for an H-1B petition increased from $460 to $780 (70%), and the fee for an L-1 intracompany transfer petition increased from $460 to $1,385 (201%). All of that is before a new $600 Asylum Program Fee ($300 for small employers) is added on for each employment-based nonimmigrant or immigrant filing. Analysis from the BAL Government Strategies team shows that a typical small- or medium-sized company may see the amount they spend on filing fees more than double.

None of this is good news.

At the same time, the fee increases present an opportunity for companies to take stock of their immigration programs and reassess whether they are doing everything they can to take advantage of policy improvements that the Biden administration has made.

The fee increases are the first since 2016, and USCIS has said it will put the additional revenue to good use — not only by helping them meet the challenge of expanded humanitarian programs but also by improving processing times and reducing backlogs for employment-based filings. While the business community was clear that it would have liked to see USCIS implement additional efficiencies before raising fees, the administration has shown good faith by working to streamline programs with its current funding level. Consider:

Improvements to the H-1B program: Just days after it published the regulation to raise fees, USCIS published a separate regulation to overhaul the H-1B registration and selection process. The big change is a switch from a petitioner- to a beneficiary-centric lottery, so that each H-1B beneficiary may be selected only once, no matter how many registrations are submitted on his or her behalf. This change is designed to eliminate incentives for bad actors to submit multiple H-1B registrations for the same individual — and has the potential to reduce the overall number of registrations and boost the H-1B selection rate. The change enjoys broad support in the business community. So do the introduction of online H-1B filings and a new pilot program that allows some H-1B holders to renew their visas in the U.S. without going abroad.
Extended employment authorization: In September 2023, USCIS increased the maximum validity of Employment Authorization Documents (along with Advance Parole travel documents) to five years for employees with pending green card applications. This change did not draw as much attention as the H-1B overhaul but has proved to be a boon to employers. Previously, green card applicants had to renew their employment authorization every two years. The longer validity saves not only time and money but also adds predictability. Improved EAD processing times are an additional benefit.
Flexibility in the green card process: With the labor certification process (PERM) becoming increasingly difficult, employers continue to turn toward national interest waivers as a green card strategy. This trend is due in part to the increased difficulty of the PERM process when employers have had layoffs. The administration published new guidance on national interest waivers for EB-2 visas in January 2022 and made EB-2 visas a priority in an executive order on intelligence published last fall. The Department of Labor has also asked for public input on whether to revise its list of Schedule A job classifications that do not require labor certification. This list has not been updated since 2004.
Improved visa processing abroad: The U.S. State Department issued more than 10.4 million nonimmigrant visas in the last fiscal year. This figure was nearly a record and the highest total since 2015. It also highlights a marked turnaround in visa processing efficiency at U.S. embassies in consulates following years of reduced staffing and delayed wait times. State Department fees also went up last spring. And while the State Department and USCIS are different agencies with different challenges, the success in improving visa processing abroad is consistent with the Biden administration’s broader overall efforts to improve immigration services.

Understandably, we have heard plenty at BAL from employers frustrated with how dramatically fees increased. What we have not heard, however, is that employers plan on dramatically cutting back their immigration programs. This is good news — and not only because it means companies will continue to recruit top workers to help keep them competitive.

Despite higher fees, there is ample evidence that it is a good idea to invest in foreign workers now, at a time of generally favorable policies. Take the H-1B program as one example. The H-1B registration fee has increased from $10 to $215 for next year’s cap registration, which gave employers an incentive to put eligible employees in the lottery this year if they were able to do so. On top of that, for beneficiaries that were not selected, employers have more favorable options for H-1B alternatives now than they previously did. The administration has added new qualifying fields of study to its STEM Designated Degree Program List, making more recent graduates eligible for extended Optional Practical Training. Officials also provided clarifying guidance on O-1 “extraordinary ability” visa criteria, making this category an increasingly common option.

None of the administration’s immigration programs are ensured to continue under future administrations. In the current political environment, there is no telling how long they will last.

Donald Trump has emerged as the Republican Party’s presumptive nominee for president. Whatever you think of Trump’s politics, it is plainly true that when he was in office, it was harder to recruit and retain high-skilled foreign workers. H-1B denial rates skyrocketed and processing backlogs ballooned at understaffed agencies. COVID-19 only made the problems worse.

Nobody knows what Trump may do if he wins this year’s election, but it certainly seems unlikely he would decrease immigration fees. Employers could be stuck with higher rates for reduced services.

The adage “never let a crisis go to waste” is instructive as employers face higher costs and uncertainty about the future of favorable immigration policies. While no one enjoys paying higher fees, employers should review their immigration strategies to take advantage of easier processes now before it’s too late.

EPA Issues Final Rulemaking on Clean Water Act Hazardous Substance Facility Response Plans

Key Takeaways

What Is Happening? On March 14, 2024, The U.S. Environmental Protection Agency (EPA) signed a final rule requiring certain facilities to develop Facility Response Plans (FRPs) for a potential worst-case discharge of Clean Water Act (CWA) hazardous substances, including planning for the threat of a worst-case discharge. Existing EPA regulations require FRPs where certain thresholds of oil are exceeded; the new rule extends the FRP requirement to cover CWA hazardous substances, among other changes. The rule takes effect on May 28, 2024, and has a 36-month implementation period. We anticipate challenges to the rule, but unless a court issues a stay, affected facilities should plan to implement the rule’s new requirements in this timeframe.
Who Is Impacted? Affected industries include many industrial and commercial sectors and facilities that handle hazardous substances at or above current reportable quantity thresholds. These may include manufacturing and chemical plants and storage operations located near navigable waters that have an inventory of CWA-listed hazardous substances at or above threshold amounts. Facilities associated with oil and gas extraction, mining, construction, utilities, crop production, animal production and aquaculture, and support activities for agriculture and forestry, among others, could also be affected.
What Should I Do? Facility owners and operators potentially affected by the rule should assess whether they are subject to the rule and then begin developing their facility response plans.

The rule requires Facility Response Plans for worst-case discharges of CWA hazardous substances from onshore non-transportation-related facilities that, because of their location, could reasonably be expected to cause substantial harm to the environment by discharging into or on the navigable waters, adjoining shorelines, or exclusive economic zone. Facilities already subject to requirements for Spill Prevention, Control Countermeasure Plans, or FRPs for oil under 40 CFR Part 112 should anticipate that they will fall within the scope of the new rule and plan for compliance.

Background

The final rule is EPA’s response to the settlement of a 2019 lawsuit brought by the Natural Resources Defense Council and others. The lawsuit asserted that EPA failed to meet its statutory duty to issue regulations “requiring non-transportation-related substantial-harm facilities to plan, prevent, mitigate and respond to worst-case spills of hazardous substances.”

The Consent Decree required EPA to take final action on a rule addressing worst-case discharge plans for hazardous substances by September 2022. This final action represents EPA’s final action under the consent decree.

Applicability Criteria

EPA set forth a two-step process to determine whether the new rule applies to a facility. See 40 CFR 118.3. Specifically, the owner or operator of a covered facility must assess two screening criteria and, if both criteria are met, then assess the ability of the facility to cause substantial harm to the environment through the application of the substantial harm criteria. If an owner or operator determines that the covered facility meets one of the substantial harm criteria, the owner or operator must prepare a hazardous substance FRP in accordance with the new regulations.

Initial Screening. These screening criteria are to be assessed concurrently, with no implied order of priority:
1. Facility has a maximum quantity onsite of 1,000x the Reportable Quantity of CWA Hazardous Substances. The RQs published in 40 CFR Part 117 are based on a level of release of a hazardous substance that could potentially cause harm to waters. EPA’s decision to set the threshold criteria at 1000x rather than the initially proposed 10,000x the RQ represents a potentially significant expansion of the scope of the new rule.
2. Facility is within 0.5 miles of navigable water or conveyance to navigable water.

If a facility meets the two screening criteria, it must undergo an evaluation to determine whether it meets the substantial harm criteria.

Substantial Harm Criteria. If the two screening criteria are met, the next step is a substantial harm evaluation, which includes determining whether the facility meets one of the following four substantial harm criteria:
1. Ability to adversely impact public water system.
2. Ability to cause injury to fish, wildlife, and sensitive environments.
3. Ability to cause injury to public receptors.
4. Has experienced a reportable discharge of CWA hazardous substances that reached navigable water within the last five years.

These criteria are easily triggered under the FRP process for oil, which preexisted the new rule. For instance, an “injury” means any measurable adverse change, either long- or short-term, in the chemical or physical quality or the viability of a natural resource resulting either directly or indirectly from exposure to a discharge or exposure to a product of reactions resulting from a discharge. 40 CFR 112.2.

If both screening criteria and one or more substantial harm criteria apply, the facility must prepare and submit an FRP to EPA that includes information on each CWA hazardous substance above the threshold quantity onsite. The owner or operator must assess all substantial harm criteria.

Amendments from the Proposed Rule

In the final rule, the Agency determined that a 1,000x RQ multiplier, instead of the proposed 10,000x, will more appropriately screen for covered facilities that could cause substantial harm to the environment from a worst-case discharge. In response to comments, EPA indicated that the screening criteria, in conjunction with the substantial harm criteria, will appropriately target covered facilities that could cause substantial harm to the environment from a worst-case discharge of a CWA hazardous substance into or on the navigable waters. This change in scope from the proposed rule will likely significantly broaden the number of locations that must now complete the new assessment process for CWA hazardous substances.
As the basis for assessing risk to the environment, the new rule requires the use of the volume by the maximum quantity onsite inventory of hazardous substances above RQs, rather than the maximum onsite container capacity. EPA made this change in the final rule based on its view that this approach will more accurately reflect the hazard posed and is consistent with how oil is measured and regulated.
Once a facility determines it meets one of the substantial harm criteria, the owner or operator must now develop an FRP for all, not just one, of the CWA hazardous substances onsite above the threshold quantity. EPA made this adjustment by recognizing that the response and/or recovery actions may vary widely depending on which substance is released. Thus, the FRP must include information on each hazardous substance onsite that is above the threshold quantity.
EPA added § 118.4(a)(6) to the final rule, which requires a covered facility owner or operator to review and recertify their plan Agency every five years. EPA decided that this will ensure the FRPs remain up-to-date and owners or operators remain informed of their responsibilities. This requirement is consistent with oil FRP requirements.
EPA also added § 118.4(a)(7), requiring a facility owner or operator to evaluate or re-evaluate operations whenever EPA adds or removes a CWA hazardous substance from the list at 40 CFR 116.4 or adjusts relevant RQs as found in 40 CFR 117.3. EPA reasoned that such adjustments are made through a formal notice and comment rulemaking procedure; thus, regulated entities will have notice of these changes prior to them becoming final and effective.

Implementation and Enforcement

Facility Response Plan preparation, submission, and implementation timelines are subject to the effective date and an initial 36-month implementation period. EPA included this implementation period to allow covered facilities time to familiarize themselves with the rule requirements and prepare their plans.

Initially-regulated covered facilities. The owner or operator of a non-transportation-related onshore facility in operation on November 30, 2026, that satisfies the applicability criteria must implement the requirements of the new regulations by June 1, 2027.
Newly-regulated covered facilities. The owner or operator of a non-transportation-related onshore facility in operation after November 30, 2026, that satisfies the applicability criteria must comply within six months.
Newly-constructed covered facilities. Covered facilities starting operations after June 1, 2027, must comply prior to the start of operations, including a 60-day start-up period adjustment phase.

Appeals

Similar to current regulations for Oil FRPs, a facility that believes it is not subject to the new rule may appeal a decision by the EPA Regional Administrator determining the potential or threat of substantial harm or significant and substantial harm from a facility or, in the case of an FRP that has been prepared, the Regional Administrator’s disapproval of a CWA hazardous substance FRP. If warranted, that decision can then be appealed to the EPA Administrator.

Petitions

The public and other government agencies may also petition EPA to determine whether a CWA hazardous substance-covered facility should be required to submit an FRP to EPA. Given the breadth of the new rule relative to the long list of hazardous substances and the 1000x RQ threshold, this public participation opportunity is a significant consideration for facilities that may already be under community scrutiny for other reasons.

The SEC Speaks–And Fails to Defend Mandatory Climate Disclosures

During the opening remarks of the two-day SEC Speaks Conference, Chairman Gensler failed to express any statement of support in connection with the SEC’s recently promulgated rule on mandatory climate disclosures. (Instead, his speech focused on a number of other topics, including clearinghouse rules and proposed regulations.) In contrast, Republican SEC Commissioner Uyeda devoted the entirety of his speech to offering critiques of the SEC’s newly enacted mandatory climate disclosure rule.

While most of Commissioner Uyeda’s criticisms had been previously voiced on other occasions, certain legal arguments achieved greater prominence in these remarks. In particular, Commissioner Uyeda emphasized the concept of materiality, noting that “[t]he significant changes in the final rule reflect a recognition that no disclosure rule that veers from materiality is likely to survive a court challenge,” and opining that “changes to selected portions of the rule text intended to mitigate legal risk do not necessarily convert a climate change activism rule to a material risk disclosure rule.” There was also a focus on procedural concerns, including a potential violation of the Administrative Procedure Act due to “the failure to repropose the rule” since “the changes were so significant,” and that “the fail[ure] to consider [the] rule’s economic consequences [renders] the adoption of the rule arbitrary and capricious.” Finally, Commissioner Uyeda compared the climate disclosure rule to the previously enacted conflict minerals rule (which was mandated by Congress), stating that “public companies and investors are stuck with a mandatory disclosure rule that deviates from financial materiality but fails to resolve the social purpose for which it was adopted.” Each of these arguments should be expected to feature in the upcoming litigation in the Eighth Circuit concerning the legality of the SEC’s climate disclosure rule.

Still, the failure by Chairman Gensler and his fellow Democratic Commissioners to offer a robust public defense of the climate disclosure rule may simply reflect a shifting of priorities now that the rule has been enacted. Notably, just a few days ago–on March 22, 2024–Chairman Gensler forcefully defended the SEC’s climate disclosure rule at a conference hosted by Columbia Law School, where his entire speech advocated the concept of mandatory disclosures and stated that the SEC’s climate disclosure rule “enhance[d] the consistency, comparability, and reliability of [climate-related] disclosures.” Moreover, it is altogether possible that a speech on the second day of the conference might offer a rejoinder to the varied critiques of the climate disclosure rule.

Unlike the conflict minerals rule, which was mandated by Congress, the Commission has acted on its own volition to adopt a climate disclosure rule that seeks to exert societal pressure on companies to change their behavior. It is the Commission that determined to delve into matters beyond its jurisdiction and expertise. In my view, this action deviates from the Commission’s mission and contravenes established law.

https://www.sec.gov/news/speech/uyeda-remarks-sec-speaks-040224

Food for Thought: Serving Up Unique Concerns for Restaurant Leases

Many aspects of commercial leasing are complex, but restaurant leases are a unique species of lease. Counsel to restaurants must be cognizant of operational and logistical issues posed by these hospitality businesses, and be prepared to address these key issues to protect the restaurant. Here are some of the most distinctive issues to be aware of when representing a restaurant tenant:

CONSTRUCTION ISSUES

Restaurant construction is different from other tenants’ fit-out work. It involves several moving parts, all of which come together to facilitate the restaurant’s successful operation. These include utilities, heating, ventilation, and air conditioning, managing odors, grease traps, hot water, and fire suppression systems. While counsel need not have the knowledge of a contractor or architect, one must understand the importance of the size of HVAC systems, design of fire suppression and sprinkler systems, the capacity and location of electrical conduit and electrical service, and sanitary and sewer lines and gas lines. For example, grease traps are imperative for restaurants, and it is important to determine (i) whether a grease trap is separate and external, or shared with other tenants, (ii) if shared, how maintenance responsibility and cost will be allocated among the shared users; and (iii) whether the grease trap’s location is convenient for operations.

Mitigation of cooking odors is another key issue, especially in a mixed-use development, shopping center, or an urban residential neighborhood. Some landlords and municipalities require expensive odor control systems, and negotiation is important in determining the size and scope of such measures, especially given the subjective perception of odors generally. It may also be helpful to include an objective standard of negative pressure for odor control. Noise mitigation is likewise an issue as to which landlords may be sensitive. Restaurants draw crowds of people who are out to enjoy themselves, which leads to loud voices, music, and other noise that emanates from the restaurant in a way that may affect other abutters and neighbors, especially residences or hotels.

OPERATIONAL ISSUES

Hours of Operation: All businesses are sensitive to their hours or operation, but it is particularly important for restaurants to understand the impacts that may come with later hours, which often cause landlords concern (especially if the restaurant serves alcohol). If the restaurant has outdoor seating or a patio area, are those hours the same as for the interior space? Some liquor licenses or municipal regulations may also restrict operations, so it is important to understand and comply with the requirements and rules of governing bodies.
Deliveries: Restaurants receive multiple deliveries daily, often greater than other types of businesses. The logistics of delivering food to the restaurant are critically important. Sometimes landlords desire to limit the hours during which deliveries may be made or the loading docks (if any) that may be used. Counsel should know how deliveries will be made and determine whether any restrictions on same will be troublesome to the restaurant’s operations.
Trash: Restaurants generate a substantial amount of trash, both wet and dry, food and nonfood. The location and adequacy of trash storage as well as the frequency of removal are key issues to specify in the lease. Some landlords also require a cold storage area for food waste; and of course care should be taken to avoid vermin infestations. Where will the tenant need to take its trash? If the common trash room is far from the kitchen, that may pose problems for restaurant staff.
Parking: Vehicle parking is an issue for all tenants, but it is often magnified for restaurants. Counsel should understand where the restaurant’s patrons are expected to park, and if desired seek to negotiate designated takeout parking spaces for the restaurant. If there is to be valet parking, or if a development designates certain areas as approved for ride share drop-off and pick-up and not others, counsel should understand whether those services and areas pose a business risk for the client.

EXCLUSIVE ISSUES

Many types of retail businesses seek exclusives in leases, but restaurants are particularly invested in ensuring that landlords do not lease other space to a competitor restaurant. If the development contains a hotel, the restaurant lease should contain an exclusive which prevents the hotel from operating a similar restaurant.

TIMING ISSUES

If the restaurant is located in a mixed-use project or shopping center, or otherwise not on its own parcel, the restaurant will want to negotiate the ability to determine when construction occurs and when it is obligated to open for business. Timing of construction can be a big risk, as delays and interruptions are expensive and set back the opening. Aside from construction timing, opening requirements may be important, especially in light of whether other tenants in the project are open and operating. Restaurant counsel may seek an opening co-tenancy requirement such that the restaurant will not be obligated to open until the major tenant or a substantial portion of the development is also open.

In summary, restaurant leases are more complicated than other retail leasing; and restaurant counsel should be aware of these unique business issues and strive to fully understand the details of its client’s business in order to set the restaurant on a successful path.

For more information on Restaurant Leasing Issues, visit the NLR Real Estate section.

Navigating the EU AI Act from a US Perspective: A Timeline for Compliance

After extensive negotiations, the European Parliament, Commission, and Council came to a consensus on the EU Artificial Intelligence Act (the “AI Act”) on Dec. 8, 2023. This marks a significant milestone, as the AI Act is expected to be the most far-reaching regulation on AI globally. The AI Act is poised to significantly impact how companies develop, deploy, and manage AI systems. In this post, NM’s AI Task Force breaks down the key compliance timelines to offer a roadmap for U.S. companies navigating the AI Act.

The AI Act will have a staged implementation process. While it will officially enter into force 20 days after publication in the EU’s Official Journal (“Entry into Force”), most provisions won’t be directly applicable for an additional 24 months. This provides a grace period for businesses to adapt their AI systems and practices to comply with the AI Act. To bridge this gap, the European Commission plans to launch an AI Pact. This voluntary initiative allows AI developers to commit to implementing key obligations outlined in the AI Act even before they become legally enforceable.

With the impending enforcement of the AI Act comes the crucial question for U.S. companies that operate in the EU or whose AI systems interact with EU citizens: How can they ensure compliance with the new regulations? To start, U.S. companies should understand the key risk categories established by the AI Act and their associated compliance timelines.

I. Understanding the Risk Categories
The AI Act categorizes AI systems based on their potential risk. The risk level determines the compliance obligations a company must meet. Here’s a simplified breakdown:

Unacceptable Risk: These systems are banned entirely within the EU. This includes applications that threaten people’s safety, livelihood, and fundamental rights. Examples may include social credit scoring, emotion recognition systems at work and in education, and untargeted scraping of facial images for facial recognition.
High Risk: These systems pose a significant risk and require strict compliance measures. Examples may include AI used in critical infrastructure (e.g., transport, water, electricity), essential services (e.g., insurance, banking), and areas with high potential for bias (e.g., education, medical devices, vehicles, recruitment).
Limited Risk: These systems require some level of transparency to ensure user awareness. Examples include chatbots and AI-powered marketing tools where users should be informed that they’re interacting with a machine.
Minimal Risk: These systems pose minimal or no identified risk and face no specific regulations.

II. Key Compliance Timelines (as of March 2024):

Time Frame	Anticipated Milestones
6 months after Entry into Force	Prohibitions on Unacceptable Risk Systems will come into effect.
12 months after Entry into Force	This marks the start of obligations for companies that provide general-purpose AI models (those designed for widespread use across various applications). These companies will need to comply with specific requirements outlined in the AI Act. Member states will appoint competent authorities responsible for overseeing the implementation of the AI Act within their respective countries. The European Commission will conduct annual reviews of the list of AI systems categorized as “unacceptable risk” and banned under the AI Act. The European Commission will issue guidance on high-risk AI incident reporting.
18 months after Entry into Force	The European Commission will issue an implementing act outlining specific requirements for post-market monitoring of high-risk AI systems, including a list of practical examples of high-risk and non-high risk use cases.
24 months after Entry into Force	This is a critical milestone for companies developing or using high-risk AI systems listed in Annex III of the AI Act, as compliance obligations will be effective. These systems, which encompass areas like biometrics, law enforcement, and education, will need to comply with the full range of regulations outlined in the AI Act. EU member states will have implemented their own rules on penalties, including administrative fines, for non-compliance with the AI Act.
36 months after Entry into Force	The European Commission will issue an implementing act outlining specific requirements for post-market monitoring of high-risk AI systems, including a list of practical examples of high-risk and non-high risk use cases.
By the end of 2030	This is a critical milestone for companies developing or using high-risk AI systems listed in Annex III of the AI Act, as compliance obligations will be effective. These systems, which encompass areas like biometrics, law enforcement, and education, will need to comply with the full range of regulations outlined in the AI Act. EU member states will have implemented their own rules on penalties, including administrative fines, for non-compliance with the AI Act.

In addition to the above, we can expect further rulemaking and guidance from the European Commission to come forth regarding aspects of the AI Act such as use cases, requirements, delegated powers, assessments, thresholds, and technical documentation.

Even before the AI Act’s Entry into Force, there are crucial steps U.S. companies operating in the EU can take to ensure a smooth transition. The priority is familiarization. Once the final version of the Act is published, carefully review it to understand the regulations and how they might apply to your AI systems. Next, classify your AI systems according to their risk level (high, medium, minimal, or unacceptable). This will help you determine the specific compliance obligations you’ll need to meet. Finally, conduct a thorough gap analysis. Identify any areas where your current practices for developing, deploying, or managing AI systems might not comply with the Act. By taking these proactive steps before the official enactment, you’ll gain valuable time to address potential issues and ensure your AI systems remain compliant in the EU market.

White House Publishes Revisions to Federal Agency Race and Ethnicity Reporting Categories

On March 28, 2024, the White House unveiled revisions to the federal statistical standards for race and ethnicity data collection for federal agencies, adding a new category and requiring a combined race and ethnicity question that allows respondents to select multiple categories with which they identify.

Quick Hits

The White House published an updated SPD 15 with revisions to the race and ethnicity data collection standards for federal agencies.
The revisions change the race and ethnicity inquiry by making it one question and encouraging respondents to identify under multiple categories.
Federal agencies have eighteen months to submit an agency action plan for compliance and must bring all of their data collections and programs into compliance within five years.
The race and ethnicity categories are widely used across federal agencies and serve as a model for employers for their own data collection and required diversity reporting.

The White House’s Office of Management and Budget (OMB) published updates to its Statistical Policy Directive No. 15: Standards for Maintaining, Collecting, and Presenting Federal Data on Race and Ethnicity (SPD 15) with major revisions, the first since 1997. The revisions took immediate effect and were formally published in the Federal Register on March 29, 2024.

OMB stated that the revisions—which come after a two-year review process that included input from more than 20,000 comments, ninety-four listening sessions, three virtual town halls, and a Tribal consultation—are “intended to result in more accurate and useful race and ethnicity data across the federal government.”

Background

In 2022, OMB convened the Federal Interagency Technical Working Group on Race and Ethnicity Standard (Working Group) to review the race and ethnicity standards in the 1997 SPD 15 with the goal of “improving the quality and usefulness of Federal race and ethnicity data.” The race and ethnicity standards are used by federal contractors and subcontractors for affirmative action programs (AAPs) and by employers for federal EEO-1 reporting and U.S. Equal Employment Opportunity Commission (EEOC) surveys. Many employers further use the race and ethnicity categories for their own recordkeeping purposes, and federal agencies use the categories for various surveys and federal forms.

In January 2023, OMB published the Working Group’s proposals, observing that the 1997 SPD 15 standards might no longer accurately reflect the growing diversity across the United States and evolving understandings of racial and ethnic identities. During the pendency of the review process, several justices of the Supreme Court of the United States criticized the imprecision of the 1997 race and ethnicity categories throughout the Court’s 237-page opinion in the June 2023 Students for Fair Admissions, Inc. v. Harvard College (SFFA decision) case, in which the Court struck down certain race-conscious admissions policies in higher education.

Revisions to SPD 15

The updated standards closely follow the Working Group’s final recommendations and revise SPD 15 to require that data collection:

combine the race and ethnicity inquiry into one question that allows respondents to select multiple categories with which they identify,
add “Middle Eastern or North African” (MENA) as a “minimum reporting category” that is “separate and distinct from the White’ category,” and
“require the collection of more detailed data as a default.”

Under the 1997 standards, respondents were required to first select an ethnicity (i.e., “Hispanic or Latino” or “Not Hispanic or Latino”), and second, select a race category (i.e., “American Indian or Alaskan Native,” “Asian,” “Black or African American,” “Native Hawaiian or Other Pacific Islander,” or “White”).

The revised race and ethnicity categories for minimum reporting are:

“American Indian or Alaska Native”
“Asian”
“Black or African American”
“Hispanic or Latino”
“Middle Eastern or North African”
“Native Hawaiian or Pacific Islander”
“White”

The updated SPD 15 further revises some terminology and definitions used and provides agencies with guidance on the collection and presentation of race and ethnicity data pursuant to SPD 15. Additionally, the update instructs federal agencies to begin updating their surveys and forms immediately and to complete and submit an AAP, which will be made publicly available, to comply with the updated SPD 15 within eighteen months. Federal agencies will have five years to bring all data collections and programs into compliance.

OMB noted that “the revised SPD 15 maintains the long-standing position that the race and/or ethnicity categories are not to be used as determinants of eligibility for participation in any Federal program.”

Looking Ahead

The new race and ethnicity categories have implications for employers as they use these categories for federal reporting compliance and their own recordkeeping purposes, including potentially influencing their own diversity, equity, and inclusion (DEI) initiatives. Covered federal contractors and subcontractors must also use the categories in meeting their affirmative action obligations.

Still, the updated SPD 15 adds only one new minimum category. OMB recognized the tension with attempting to “facilitate individual identity to the greatest extent possible while still enabling the creation of consistent and comparable data.” One of the issues OMB identified as needing further research is “[h]ow to encourage respondents to select multiple race and/or ethnicity categories when appropriate by enhancing question design and inclusive language.” The agency is also establishing an Interagency Committee on Race and Ethnicity Statistical Standards that will conduct further research and regular reviews of the categories every ten years, though OMB may decide to review SPD 15 again at any time.

Employers may want to take note of the revisions to SPD 15 as these changes will directly impact many employers’ compliance and recordkeeping obligations. They may also want to be on the lookout for additional guidance from federal agencies, such as the Office of Federal Contract Compliance Programs (OFCCP) and the EEOC, on when and how to implement the standards. Relevant agencies will have to take action before employers will be required to implement the new standards. In the meantime, employers may want to consider whether to use the government’s new or existing categories when shaping their DEI initiatives, as racial and ethnic identities and terminology continue to evolve.

Unlocking India’s Space Potential: India Liberalizes Foreign Direct Investment Regime

The foreign investment policy was ambiguous about space activities beyond satellites, leading to different interpretations.
Some companies made investments basis the view that investments in the activities not listed under the FDI policy in this sector could be made up to 100% without prior government approval.
The proposed FDI Space Policy addresses these concerns and allows 100% foreign investments under the automatic and governmental approval route.
Formal notification is awaited which will make this policy effective as law.

Background

India currently is home to more than 200 space start-ups, and the space sector in India has attracted USD 124.7 million investment in the year 2023. The existing foreign investment policy of India (“FDI Policy”) requires foreign investors to obtain prior government approvals for investing in the space sector, particularly for the establishment of satellites.

Considering the growth of this sector, the Indian government has been periodically releasing policies / notifications, establishing organizations, etc. with the intent to allow more private participation in this sector. This has led to the establishment of an organization to promote the sector called the Indian National Space Promotion and Authorization Centre in 2020, as well as the introduction of the National Geospatial Policy, 2022 followed by the Indian Space Policy, 2023.

On February 21, 2024, the Union Cabinet approved amendments to the Foreign Direct Investment (“FDI”) policy and communicated it in a press release (“FDI Space Policy”) which proposes to liberalize investments in the space sector. However, a formal notification from the relevant authorities is still awaited for the amendments to become enforceable as law.

Existing FDI Policy

Existing foreign investment limits in the space sector are provided under the Schedule I of Foreign Exchange Management Act (Non-Debt Instrument) Rules, 2019 (“NDI Rules”). The current norms do not recognize “space” as a sector in itself. Instead, the space related activities are primarily captured under the head – “satellites – establishment and operation”. 100% foreign investment is allowed in this sector but the same is subject to approval from the government along with compliance of sectoral guidelines from Department of Space / Indian Space Research Organisation. In essence, all foreign investments in companies undertaking the activities of satellites-establishment and operations require government approval.

Reforms – New FDI Space Policy

The proposed FDI Space Policy allows 100% foreign investment in the space sector and has also created sub-categories, entry route and investment thresholds for various space related activities, which are as follows:

S.no.	Activity	FDI Thresholds
1.	Satellites-manufacturing & operation, satellite data products and ground segment & user segment	Up to 74% under automatic route and beyond 74% (up to 100%) under government route
2.	Launch vehicles and associated systems or subsystems, creation of spaceports for launching and receiving spacecraft	Up to 49% under automatic route and beyond 49% (up to 100%) under government route
3.	Manufacturing of components and systems/ sub-systems for satellites, ground segment and user segment	Up to 100% under automatic route

Analysis

(i) Status of existing investments

The existing FDI policy did not include space sector related activities (other than satellites-establishment and operation) such as launch vehicle business, ground segment, user segment, sub-component / sub-systems manufacturing, data products etc.

Various stakeholders argued that since the existing FDI policy did not specify certain activities such as launch vehicles, data sets, manufacturing of space systems / components etc. under the head of “satellites-establishment and operation”, foreign investments in such cases should be permitted up to 100% under the automatic route. This was based on the interpretation under the FDI policy that sectors / activities not specifically listed or prohibited, are permissible for foreign investment up to 100% under the automatic route, subject to sectoral conditionalities. Relying on the same, foreign investors made investments in space start-ups whose activities were not explicitly listed or regulated under the current FDI regime without obtaining government approval.

Some stakeholders interpreted “satellites” very broadly and took a more conservative view that all space related activities required government approval. Similarly, there were overlaps in activities / interpretation of the FDI policy under the sectors of defence, telecom and manufacturing.

The space liberalization norms under the proposed FDI Space Policy may have actually de-liberalized this sector for certain companies who received investments in allied space activities based on the understanding that sectors / activities not specifically listed or prohibited, should be eligible for foreign investments up to 100% under the automatic route. In such cases where the investment thresholds under the proposed FDI Space Policy may be breached, it would be interesting to see the government’s approach including granting approvals on a post-facto basis.

(ii) Sub- categorizations of activities within the Space Sector

While the government has acknowledged the sub-categories of activities within the space sector, it hasn’t clarified its rationale for providing different foreign investment thresholds for such activities. Relaxed thresholds for satellites (i.e., 74% under the automatic route (up to 100% under government route)) and its sub-components (i.e., 100% under the automatic route) encourage foreign participation in commercial aspects of space activities. In contrast, the 49% cap on foreign investments under the automatic route (up to 100% under government route) on launch vehicles acknowledge their dual-use potential for both civilian and defence purposes. This sensitivity, combined with the launching state’s heightened liability under Article II of the Convention on International Liability for Damage Caused by Space Objects (“Liability Convention”), may be viewed as necessitating greater government oversight.

However, industry players have also criticized the differential treatment provided to launch vehicles vis-a-vis satellites. They believe, in essence, both industries have similar sensitivity issues and hence should be treated at par from a foreign investment perspective. Hence, the difference in foreign investment thresholds require more explanation from the government.

(iii) Satellite Data Products

The term ‘satellite data products’ has not been defined under the proposed FDI Space Policy but investments in such activities would be permitted up to 74% under the automatic route (up to 100% under government route). This may lead to some conflict from a satellite imagery / data perspective read along with the liberalized Geospatial Guidelines, 2021. (“Geospatial Guidelines”).

The Geospatial Guidelines largely permit foreign investments up to 100% under the automatic route with limited foreign investment restrictions especially if the activity is for (i) creation / ownership / storage of geospatial data of a certain accuracy (as defined under the Geospatial Guidelines); (ii) terrestrial mobile survey, street view survey and surveying activities in Indian territorial waters. There seems to be no specific restriction on satellite generated data (other than the above) under the Geospatial Guidelines. Thus, the proposed FDI Space Policy may end up limiting foreign investments for activities relating to Satellite Data Products (which would include geo-spatial data) in which otherwise is viewed to be permissible up to 100% under the automatic route.

The government should also define what constitutes satellite data products and to the extent possible it would be recommended that foreign investment up to 100% should be permitted under the automatic route.

Additionally, the rationale for capping investments for satellite data products under the proposed FDI Space Policy seems unclear as these are data sets which could be regulated under the Geospatial Guidelines and the new Indian privacy law.

(iv) Where are sub-components for launch vehicles covered?

The proposed FDI Space Policy explicitly covers the manufacturing of components and systems / sub-systems for the satellite sector, ground & user segment, and permits 100% FDI under automatic route for the same. With the absence of similar language for components in launch vehicles, it could imply its inclusion under the broader launch vehicle category, hence falling under the 49% automatic route (up to 100% under government route). Alternatively, it could also be argued since it is not expressly specified, the same could be covered under the 100% automatic route category. However, considering the critical role of such components in the sector’s development, clarification from the government would provide much-needed comfort especially if the components are dual use (satellite and launch vehicle usage).

(v) What about ground segment and user segment for launch vehicles?

Following the pattern observed with the satellite and ground segment categories, the absence of specific mention for the “ground segment & user segment” in the launch vehicle section raises further questions. This omission could be an oversight or intentional, but the lack of clarity hinders transparency and predictability for potential investors. Further clarity on the inclusion from an industry perspective in the official amendment notification would ensure a comprehensive and consistent policy framework for the entire launch vehicle sector.

(vi) Were any sub-categories / activities missed?

As space activities may expand to include space mining, exploration, international space station construction, space tourism etc., India needs to proactively address these areas. Especially, if these should be interpreted for foreign investments up to 100% under the automatic route, as this would have a bearing on India’s ability to attract foreign investment while safeguarding national interests, technological competitiveness, and responsible stewardship of India in space.

Conclusion

While the proposed FDI Space Policy provides substantial liberalization, further clarity is awaited based on the formal notification which will make this effective as law. Ideally, the Government should provide definitions / explanations for the proposed categorization and sub-categorizations, and further clarity on the inclusions and omissions of activities which may be related to most space sector functions such as user and ground segments.

While the move towards liberalization significantly reduces government control over the space sector, its inherent interconnectedness with other regulated domains like telecommunications / geospatial cannot be ignored. Despite these challenges, the government’s willingness to open the space sector to foreign investments is a positive step offering greater confidence to foreign investors. Relaxation in the existing norms also signifies a supportive stance towards the industry, encouraging both domestic and international participation. Notably, India successfully attracted substantial foreign investment even during the era of full government control. Therefore, with the current reforms, a significant increase in foreign investments is expected.

Footnotes
[1] Rajya Sabha Questions, Department of Space, available at
https://sansad.in/getFile/annex/262/AU621.pdf?source=pqars
[2] Notification, Department of Space, available at https://pib.gov.in/PressReleasePage.aspx?PRID=1988864
[3] Notification, Ministry of Commerce & Industry, available at
https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2007876
[4] Article II of the Liability Convention provides that a launching State shall be absolutely liable to pay compensation for damage caused by its space object on the surface of the earth or to aircraft flight.

Dictionaries and the Law – Hunting, Poaching, and the Right to Food

The Law Court’s recent decision in Parker v. Department of Inland Fisheries & Wildlife is fascinating—it is a rare instance when the Court has been called upon to interpret and apply a new constitutional provision. The Maine Constitution has had relatively few amendments, but in 2021 Maine voters approved a “Right to Food Amendment.” Parker involved a challenge to Maine’s Sunday hunting law prohibition under the new amendment.

As is relevant here, the amendment provides that “[a]ll individuals have a natural, inherent and unalienable right to food, including the right to … grow, raise, harvest, produce and consume the food of their own choosing” for certain purposes, including nourishment. It then enumerates limitations on this right, conditioning the right on the requirement that the individual not commit “trespassing, theft, poaching or other abuses of private property rights, public lands or natural resources.”

The question in the case was whether the Maine law banning hunting on Sundays infringes on this right. In an interesting ruling, the Law Court said it did not. After reaching the straightforward conclusion that the plaintiffs could present a justiciable claim given the State’s denial of their request for a Sunday hunting permit, the Court took up the merits—and in so doing, raised some intriguing questions.

First, the Court accorded the Sunday hunting statute a presumption of constitutionality—even though the statute predated the constitutional amendment. But why? Normally the presumption accords the Legislature credit for seeking to act in accordance with existing constitutional limits. That rationale, the Court acknowledged, did not apply. The Court instead suggested that there are other reasons for according this presumption, but relied on cases stating that facial constitutional challenges are disfavored because they lack robust factual records and pose the risk of overbroad rulings. Those concerns seem to go to the particular vehicle for the challenge, not the presumed validity of the enactment itself. Isn’t the right answer, then, to apply the appropriate standard for facial challenges rather than apply a presumption? That point is at least debatable.

Second, the Court’s analysis of the amendment’s language raises interesting interpretive questions. The Court concluded that the term “harvest” includes hunting. The Court buttressed this conclusion by citing several authorities, including dictionary definitions, its own prior precedent, and statutory definitions. Based on these authorities, the Court reasoned, the amendment does include a right to hunt. The Court then observed that this right is subject to express limitations, including that the right does not include engaging in “poaching.” Citing dictionary definitions only, the Court then reasoned that the term “poaching” includes any illegal hunting. Thus, the Court held that the right to hunt does not include the right to hunt on Sundays, because the Legislature has made hunting on Sundays illegal.

One could imagine a potential criticism—does the reasoning in Parker render the right to hunt under the amendment meaningless? If the amendment is meant to protect the right to hunt, but does not circumscribe any law that renders hunting illegal, does the amendment protect hunting at all?

There are arguable critiques of the Court’s reliance on dictionary definitions. Two definitions cited, from Merriam Webster’s Collegiate Dictionary and Webster’s II New College Dictionary, suggest a broad definition of the term that includes any illegal taking of game. But query whether that is the ordinary understanding of the term. Various dictionaries, including Merriam Webster and Cambridge, suggest a primary meaning of “poaching” that relates to illegality in the manner in which the game is taken—i.e., taking game while encroaching on the land of another. Indeed, the Court’s citation to Black’s Law Dictionary, which defines poaching as the illegal taking of game “on another’s land,” supports this ordinary reading. At the very least, the availability of a narrower common meaning suggests the need for careful reliance on dictionaries, including analysis of primary definitions and the word’s context.

As Justice Scalia and Brian Garner note in Reading Law, the availability of multiple meanings for common words places great importance on evaluating not just to dictionary definitions but also the word’s context to determine its most likely meaning. Here, there are multiple hints at the word’s meaning to be found in the amendment’s context. The amendment itself references poaching and “other abuses of private property rights, public lands or natural resources.” The reference to “other abuses of private property” renders a definition of “poaching” that requires some sort of trespass more likely. And broader context might suggest the same; as mentioned above, a reading of “poaching” that includes any law rendering hunting illegal seems (at first blush) to render the amendment circular, and thus meaningless at least in part—a result that is generally discouraged. Of course, there may be rejoinders, but Parker does not provide them.

As Parker illustrates, constitutional and statutory interpretation requires careful, contextual analysis, and it is incumbent on attorneys to equip the Court with thorough arguments. That’s what a good appellate brief—whether by a party or by an interested party filing an amicus—is for. But for now, Parker answers a narrow question under the Right to Food amendment, while leaving many other questions about its scope and application open.

For more news on State Constitution Interpretation, visit the NLR Constitutional Law section.

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