Marijuana in the Manufacturing Workplace

The requirement to maintain a safe workplace often clashes with state and local laws that protect the rights of individuals who use marijuana while off-duty, creating unique challenges for manufacturing employers.

Manufacturing employers still may prohibit the use of marijuana at work, as well as marijuana impairment at work. But marijuana drug testing is complicated and controversial because of the legal protections for off-duty marijuana use in some states and cities, the legal protections for medical marijuana users in many jurisdictions, and because there are no drug tests that can detect current marijuana impairment or very recent use of marijuana.

Federal Law

Manufacturers no longer should defend “zero tolerance” marijuana drug testing policies. Previously, employers could argue that marijuana still is illegal under federal law or that the employer is a federal contractor that must comply with the federal Drug-Free Workplace Act. The federal government has not enforced the law that makes marijuana illegal for some time, and it has permitted states to create and enforce their own laws with respect to medical and recreational marijuana.

Some courts have recognized that the federal government is allowing state governments to regulate marijuana and, therefore, courts are enforcing state marijuana laws despite marijuana’s illegal status at the federal level. Courts also have rejected arguments that federal contractors “must follow federal law” because the federal Drug-Free Workplace Act does not require drug testing and does not permit employers to regulate off-duty conduct.

State Laws

At present, 39 states and the District of Columbia have medical marijuana laws, while 22 states and the District of Columbia have recreational marijuana laws (Maryland’s law will take effect in July and others will be enacted in the coming months). Many of these laws provide employment protections to applicants and employees. The variations in the laws make it difficult for multi-state manufacturers to have consistent marijuana policies in all locations.

What It Means for Employers

Due to the recent trend in some states to protect off-duty use of marijuana, and even prohibiting pre-employment marijuana testing, many manufacturers are discontinuing pre-employment marijuana testing, especially in states where marijuana is legal. Applicants often are surprised to learn that a positive marijuana drug test will lead to withdrawal of the job offer. If the positive marijuana drug test result is due to medical use (and there are no general off-duty protections in the state), manufacturers must be familiar with the applicable law.

Some states prohibit discrimination against medical marijuana users, while other states may allow an employer to take an adverse employment action if the job is considered “safety-sensitive,” i.e., a job with dangerous duties, as defined by applicable state law.

In certain other states where discrimination is prohibited and the manufacturing employer has safety concerns, the employer should engage in the “individualized assessment” and “direct threat analysis” required under state laws that mirror the federal Americans With Disabilities Act. This process includes discussions with the applicant and the applicant’s physician to assess the safety risk.

Reasonable suspicion marijuana testing is permissible in most states because impairment at work never is permitted. In states where off-duty marijuana use is protected, manufacturers should rely on the impaired behaviors when taking disciplinary action, rather than rely solely on the positive marijuana drug test result (assuming that testing for marijuana is permitted). This is because marijuana stays in the human body for a long time, so the positive drug test result is not conclusive proof that the employee was impaired at work. Manufacturers also should make sure that supervisors and managers are trained to observe and document reasonable suspicion determinations properly, as these documented observations will be key evidence in a potential lawsuit.

To make matters even more complicated, CBD (cannabidiol), “low THC,” and hemp products are being marketed and sold everywhere since Congress legalized hemp (having no more than 0.3 percent THC, the psychoactive component of marijuana) in 2018. Separate from marijuana laws, the use of “low THC” or CBD products is allowed in a number of states, usually for medical purposes, which means that manufacturing employers should tread carefully when an applicant or employee claims to use CBD products for medical reasons. While many CBD and hemp products are marketed as having little or no THC, these statements may not be true, because the U.S. Food and Drug Administration does not yet regulate them. These products may cause positive drug test results for marijuana. There has been an increase in lawsuits where former employees claim that their positive marijuana drug test results allegedly were caused by CBD products.

While it appears that marijuana eventually will be legalized at the federal level, manufacturers must ensure they are complying with all applicable laws. Manufacturing employers should:

  • Review drug and alcohol policies for compliance with applicable drug testing and marijuana laws;
  • Remove marijuana from the drug testing panel in locations where testing for marijuana is prohibited and locations where off-duty use is protected and consider removing it in other locations where it may be an obstacle in the hiring process;
  • Train Human Resources employees and other managers to engage in the interactive process with employees who use medical marijuana (or medical CBD products); and
  • Train supervisors to make appropriate and timely “reasonable suspicion” determinations.

Jackson Lewis P.C. © 2023

For more cannabis legal news, click here to visit the National Law Review.

EU PFAS Ban Should Raise U.S. Corporate Concerns

On February 7, 2023, the European Chemical Agency (ECHA) unveiled a 200 page proposal that would ban the use of any PFAS in the EU. While the proposal was anticipated by many, the scope of the ban nonetheless drew reactions from a myriad of sectors – from environmentalists to scientists to corporations. U.S. based companies that have any industrial or business interests in the EU must absolutely pay close attention to the EU PFAS ban and consider the impact on business interests.

EU PFAS Ban Proposal

The EU PFAS ban currently proposed would take effect 18 months from the date of enactment; however, the ECHA is contemplating phased-in restrictions of up to 12 years for uses that the group considers challenging to replace in certain applications. The proposal is only the inception of the ECHA regulatory process, which next turns to a public comment period that opens on March 22, 2023 and will run for at least six months. ECHA’s scientific committees to review the proposal and provide feedback. Given the magnitude of comments expected and the likely hurdles that the ECHA will face in finalizing the proposal, it is not expected that the proposal would be finalized prior to 2025.

The EU PFAS ban seeks to prohibit the use of over 10,000 PFAS types, excluding only a sub-class of PFAS that have been deemed “fully degradable.” The proposal indicates: “…the restriction proposal is tailored to address the manufactureplacing on the market, as well as the use of PFASs as such and as constituents in other substances, in mixtures and in articles above a certain concentration. All uses of PFASs are covered by this restriction proposal, regardless of whether they have been specifically assessed by the Dossier Submitters and/or are mentioned in this report or not, unless a specific derogation has been formulated.” (emphasis added) Several specific types of uses and consumer product applicability would be included in the first phase of the proposed ban, including cosmetics, food packaging, clothing and cookware. This first phase of the ban implementation would include uses where alternatives are known, but not yet widely available, which is the reason why the first phase would take effect within 5 years. The second phase of the ban anticipates a 12 year period of time for ban implementation and encompasses uses where alternatives to PFAS are not currently known. Significantly for U.S. business, the proposed ban includes imported goods.

Impact On U.S. Companies

In 2022, U.S. companies exported just shy of $350 billion in goods to the EU. In many instances, companies do not deliberately, intentionally, or knowingly add or utilize PFAS in finished products that are sent to the EU. However, PFAS may be used in manufacturing processes that inadvertently contaminate goods with PFAS. In addition, many U.S. companies rely on overseas companies for supply chain sourcing. Quite commonly, supply chain sources outside of the U.S. do not voluntarily provide chemical composition information for components or goods that they supply. Inquiring of those companies for such information, or certifications that the good contain no PFAS, can be extremely difficult. Getting overseas companies to provide such information often proves impossible and even when certifications are made, the devil may be in the details in terms of what is actually being certified. For example, certifying that goods contain “no hazardous substances” or “no hazardous PFAS” sound reassuring, but by what measure of “hazardous” is the statement being made? Under what country’s regulations? Using which scientific definition? The result of all of these complexities may be that many U.S. based companies need to test their products themselves, which not only increases time to market issues and financial costs associated with production, but also risks to the companies doing business in the U.S. that they may open themselves up to environmental pollution or personal injury lawsuits by conducting such testing. In addition, alternatives may not be as cost effective as PFAS, which impacts businesses and has the potential trickle-down impact of passing some of the costs on to consumers.

While debate continues in the U.S. as to the scientific validity of the “whole class” approach to regulating PFAS (of which there are over 12,000 types according to the EPA), the EU PFAS ban leapfrogs the U.S. debate stage and goes directly to proposing a regulation that would embrace such a “whole class” regulatory scheme. Without a doubt, chemical manufacturers, industrial and manufacturing companies, and some in the science community are expected to strenuously oppose such an approach to regulations for PFAS. The underlying arguments will follow ones advanced and debated already in the U.S. – i.e., not all chemicals act identically, nor have the vast majority of PFAS been shown to date to present health concerns. Proper scientific method does not permit sweeping attributions of testing on legacy PFAS like PFOA and PFOS to be extrapolated and applied to all PFAS. The EU’s response to this via their proposal is that the costs of remediating PFAS from the environment are significant enough that it warrants regulating PFAS as a class to avoid costly, decades-long, and potentially repetitive remediation work in the EU.

Conclusions

It is of the utmost importance for businesses to evaluate their PFAS risk. Public health and environmental groups urge legislators to regulate these compounds in the U.S. and abroad. One major point of contention among members of various industries is whether to regulate PFAS as a class or as individual compounds.  While each PFAS compound has a unique chemical makeup and impacts the environment and the human body in different ways, some groups argue PFAS should be regulated together as a class because they interact with each other in the body, thereby resulting in a collective impact. Other groups argue that the individual compounds are too diverse and that regulating them as a class would be over restrictive for some chemicals and not restrictive enough for others.

Companies should remain informed so they do not get caught off guard. States are increasingly passing PFAS product bills that differ in scope. For any manufacturers, especially those who sell goods overseas, it is important to understand how the various standards among countries will impact them, whether PFAS is regulated as individual compounds or as a class. Conducting regular self-audits for possible exposure to PFAS risk and potential regulatory violations can result in long term savings for companies and should be commonplace in their own risk assessment.

©2023 CMBG3 Law, LLC. All rights reserved.
For more Environmental Law news, click here to visit the National Law Review

Whistleblowers Put Magnifying Glass on Optical Lens Manufacturer’s Kickback Scheme

September 1, 2022.  The United States Department of Justice settled two civil fraud cases against an optical lens manufacturer, marketer, and distributor Essilor regarding allegations that the company violated the Anti-Kickback Statute and the False Claims Act.  Under the terms of the settlement, the optical lens companies, Essilor International, Essilor of America, Inc., Essilor Laboratories of America, Inc., and Essilor Instruments USA, paid $16.4 million.  The three whistleblowers were former district sales managers.  The whistleblowers—or relators—filed two qui tam lawsuits under the False Claims Act, and as relators, they entitled to 15-25% of the government’s recovery.

According to the allegations, the optical lens companies created incentive programs which they marketed to eye care providers.  The programs offered incentives for optometrists and ophthalmologists to steer patients to choose Essilor brand products because the providers received (unlawful) remuneration for doing so.  When a healthcare provider’s choice of medication or device is driven by a financial reward from that device’s manufacturer, that is misconduct that violates the Anti-Kickback Statute.  Since providers submitted claims to Medicare and Medicaid for Essilor optical products allegedly chosen as part of these incentive programs, those claims violated the False Claims Act.

The optical lens company has to hire an Independent Review Organization (IRO) as part of the five-year Corporate Integrity Agreement (CIA) it entered into with the U.S. Department of Health and Human Services (HHS), and the Independent Review Organization will review any discount programs Essilor plans to roll out in the future.  The Acting Chief Counsel at the U.S. Department of Health and Human Services Office of Inspector General emphasized the impact of this case, “Kickback schemes can impact medical judgment, eroding the trust of both patients and taxpayers.”  Patients—and taxpayers—should not wonder whether their healthcare provider is recommending a particular healing modality because they are incentivized to make that recommendation.  Whistleblowers, such as the sales representatives in these two cases, can spot unlawful kickback schemes and be rewarded—properly—for reporting them.

© 2022 by Tycko & Zavareei LLP

Wisconsin Judge Rules that the WDNR Lacks Authority to Regulate PFAS

On April 12, 2022, a Wisconsin judge ruled in the case of Wisconsin Manufacturers & Commerce, Inc. and Leather Rich, Inc. v. WDNR, (Waukesha County Case 2021CV000342) that the WDNR lacks the authority to regulate PFAS chemicals because the Wisconsin Legislature has not established regulatory standards for them. According to the lawsuit, Leather Rich, Inc. entered into a voluntary WDNR environmental cleanup program in 2019, and the following year WDNR indicated that the businesses enrolled in the program were required to test for emerging contaminants, including PFAS. The plaintiffs in the case argued that because the WDNR had created a list of emerging contaminants without any legislative oversight or opportunity for public comment, and had not adopted regulatory standards through administrative rulemaking, the WDNR lacked the authority to require such testing. The judge’s ruling would require the WDNR to wait until legislators have established standards for PFAS through adoption of regulatory limits in state law or through administrative rules. It is estimated that the adoption of standards for PFAS could require 1-2 years. An attorney for the WDNR indicated that the WDNR plans to appeal the decision and file a motion to place the judge’s order on hold.

The WDNR has historically taken the position that the agency has authority under Wisconsin’s “Hazardous Substance Spill Act” (“Spill Act” – Wis. Stats. 292.11) to regulate PFAS even in the absence of established standards, as the Spill Act gives the WDNR broad authority to require testing and remediation of such chemicals. In late February, the WDNR’s Natural Resources Board (NRB)—the entity that sets policy for the WDNR—took steps toward the adoption of statewide standards for two of the most common PFAS compounds, which included an approval to adopt a drinking water standard of 70 parts per trillion (ppt) for two of the most common PFAS compounds; perfluorooctanoic acid (PFOA) and polyfluorooctane sulfonate (PFOS).

PFAS is an acronym for per- and polyfluorolalkyl substances, which are chemicals that were widely used from the 1960s to the early 2000s in the manufacture of a variety of consumer products, such as stain resistant carpets, non-stick cookware (e.g., Teflon), firefighting foam, food packaging (e.g., microwave popcorn bags/pizza boxes), water resistant clothing (e.g., pre-2000 GoreTex), water resistant repellent (e.g., Scotchgard) and dental floss. While the use of PFAS compounds has largely been phased out in the U.S., these compounds are still used in the manufacturing of many products worldwide. These substances, known as “forever chemicals,” have received considerable attention by federal and state environmental regulatory agencies because of their resistance to chemical breakdown due to the chemical bond between carbon and fluorine atoms in the PFAS compounds, which is one of the strongest in nature. Because of this, humans can still be exposed to PFAS long after the chemicals were released into the environment.

The WDNR has identified approximately 90 sites throughout Wisconsin with PFAS contamination, including municipalities such as Madison, Marinette, Peshtigo and Wausau with PFAS-contaminated groundwater.

©2022 von Briesen & Roper, s.c
For more articles about state lawsuits, visit the NLR Litigation section.

EPA Announces Additional Action to Assure Availability of Disinfectant Products for Use Against the Novel Coronavirus

On March 31, 2020, the U.S. Environmental Protection Agency (EPA) announced it is taking further action to help ease the production and availability of EPA-registered disinfectants by temporarily allowing manufacturers of certain already-registered EPA disinfectant products to obtain certain active ingredients from any source without prior approval from EPA.  This only applies to products on EPA’s List N: Disinfectants for Use Against SARS-CoV-2 (List N).  EPA announced on March 26, 2020, similar action on certain inert ingredients.

EPA typically requires disinfectant manufacturers to first apply for and receive EPA approval prior to making a change in the source of the active ingredient.  Under this temporary amendment, however, manufacturers can source certain active ingredients from alternate suppliers by informing EPA.  Once EPA has been notified, the registrant can immediately distribute or sell a product modified according to this temporary amendment, provided that the resulting formulation is chemically similar to the current formulation (i.e., the purity of resulting product from the alternate source falls within the certified limits of the currently registered formulation for which they are making the source change).  EPA states that by allowing manufacturers to obtain certain active ingredients from any source it will help alleviate reports of supply chain disruptions by pesticide registrants who manufacture disinfectant products on List N.

The eligible active ingredients are:

  • Citric Acid, Chemical Abstracts Service Registry Number (CASRN) 77-92-9;
  • Ethanol, CASRN 64-17-5;
  • Glycolic Acid, CASRN 79-14-1;
  • Hydrochloric Acid, CASRN 7647-01-0;
  • Hypochlorous Acid, CASRN 7790-92-3;
  • Hydrogen Peroxide, CASRN 7722-84-1;
  • L-Lactic Acid, CASRN 79-33-4; and
  • Sodium Hypochlorite, CASRN 7681-52-9.

EPA will assess the continued need for and scope of this temporary amendment on a regular basis and will update it if EPA determines modifications are necessary.  EPA will notify the public at least seven days prior to terminating this temporary amendment at www.epa.gov/pesticides.

After the termination date of the temporary amendment, registrants will not be able to release for shipment new registered product unless that product is produced using a source of active ingredient identified in the product’s approved Confidential Statement of Formula (CSF) or otherwise would have complied with relevant requirements in the absence of this temporary amendment.

EPA states in its temporary amendment to Pesticide Registration (PR) Notice 98-10, the following procedures to submit a notification for currently registered disinfectant products listed on EPA’s List N:

  • A cover letter with a subject line that clearly indicates that this is a “notification per TEMPORARY AMENDMENT TO PR NOTICE 98-10 (Insert date or other citation) for EPA Registration No. XXXXXX and [insert product name]”;
  • The active ingredient; and
  • The following statement:

[Name of Registrant] is notifying EPA of its intent to use one or more alternate, unregistered sources of active ingredient listed in the TEMPORARY AMENDMENT TO PESTICIDE REGISTRATION (PR) NOTICE 98-10 (Insert date or other citation) in the formulation of EPA Registration No. [xxx-xx].  Each source is chemically identical to (i.e., within the certified limits of) the active ingredients in the Confidential Statements of Formula previously accepted by EPA [insert CSF date(s)]. This self-certification is consistent with the provisions of PR Notice 98-10 and no other changes have been made to the Confidential Statement of Formula or labeling of this product.  Further, I confirm that the ingredients statement of this label remains truthful.  I understand that it is a violation of 18 U.S.C. Section 1001 to willfully make any false statement to EPA.  I further understand that if this self-certification is not consistent with the terms of PR Notice 98-10 and 40 C.F.R. 152.46, this product may be in violation of FIFRA and I may be subject to enforcement actions and penalties under section 12 and 14 of FIFRA.

Applications must be submitted via the CDX portal.  At this time, EPA is not accepting paper applications.  Once an application is submitted, EPA requests that an email is sent to disinfectantslist@epa.gov with the CDX tracking number (CDX _ 2020 _ XXXXXXX).  A registrant may distribute or sell a product modified according to this temporary amendment to PR Notice 98-10 once EPA receives the notification.


©2020 Bergeson & Campbell, P.C.

For more on COVID-19 hygiene and other concerns, see the National Law Review Coronavirus News page.

Legal Alert: Not So Fast: National Labor Relations Board Rejects Boeing S.C. Micro Unit

On September 9, 2019, the National Labor Relations Board (the “Board”) clarified its test for unionizing “micro units” of employees within larger workforces, and prevented the International Association of Machinists from representing a small group of Boeing Co. technicians at a plant in South Carolina. The Boeing Company, 368 NLRB No. 67 (2019). In a three-to-one vote, the Board said a proposed bargaining unit consisting of about 175 flight-readiness technicians at Boeing’s Charleston Final Assembly operation does not meet federal standards for appropriate units, because the workers are not distinct from the site’s larger workforce of approximately 2,700 maintenance and production workers.

The International Association of Machinists won an election in May of 2018 to become the bargaining representative of this smaller unit of employees. This election followed an earlier election where a large unit of production and maintenance workers rejected the Union in a 2,087 – 731 vote. After the May 2018 election, the Company appealed the certification of the smaller unit of Boeing employees, arguing that the NLRB Regional Director had improperly approved the small unit of flight-readiness technicians.

In Boeing, the Board indicated that the standard it set forth for unionizing smaller bargaining units of employees in the PCC Structurals decision from December of 2017 was being misapplied. The standard for unionizing micro units of employees, as set forth in Boeing, requires a three-step legal analysis to determine the appropriateness of the proposed bargaining unit. First, the proposed unit must share an internal community of interest. Second, the interests of those within the proposed unit and the shared and distinct interests of those excluded from that unit must be comparatively analyzed and weighed. Third, consideration must be given to the Board’s decisions on appropriate units in the particular industry involved.

Moving forward, unions will have to demonstrate a sufficiently distinct community of interest among the proposed bargaining unit as compared to excluded employees. And, excluded employees’ distinct interests will have to outweigh the similarity of interests that excluded employees share with members of the proposed bargaining unit. This decision strikes a strong blow against unions’ efforts to organize and represent smaller bargaining units.


Copyright © 2019 Ryley Carlock & Applewhite. A Professional Association. All Rights Reserved.

For more NLRB decision-making, see the Labor & Employment law page on the National Law Review.

President Trump Directs Federal Agencies to Solicit Input from Manufacturing Sector on Streamlined Permitting and Reduction of Regulatory Burdens

Donald Trump manufacturingIn his first week in office, President Trump has signed several Presidential Memoranda and Executive Orders aimed at encouraging domestic infrastructure development. Many of these executive actions direct federal agencies to adhere to a pair of central tenets, i.e., expedited review for high priority infrastructure projects and the use of U.S. materials and equipment.  The “Presidential Memorandum Streamlining Permitting and Reducing Regulatory Burdens for Domestic Manufacturing” signed on January 24, 2017, expands on these themes and directs federal agencies to undertake a notice and comment period, during which U.S. manufacturers can engage and share their thoughts on how the federal government can best support the expansion of domestic manufacturing.

The directive from President Trump is broad and covers all federal agencies that could impact the manufacturing sector.  Companies in the manufacturing sector might consider developing a strategy for federal engagement and formulating comments on potentially burdensome federal regulatory programs, including, as just a few examples, the Clean Air Act’s New Source Review program, conservation programs administered by the Department of Energy, labeling requirements from the Food and Drug Administration, and Department of Labor programs.

60-Day Comment Period on Reducing the Federal Regulatory Burden

Section 2 of the Presidential Memo on Manufacturing directs the heads of all federal agencies to (1) expedite reviews and approvals for proposals to build new or expand existing manufacturing facilities; and (2) reduce regulatory burdens affecting domestic manufacturing.  To accomplish this, President Trump has directed federal agencies to open a 60-day comment period, during which the manufacturing sector can offer thoughts on what federal actions can be undertaken to streamline permitting and reduce regulatory burdens for domestic manufacturers.

The notice and comment process will be directed through the Secretary of Commerce, and coordinated with the heads of the Department of Energy, the Environmental Protection Agency, the Office of Management and Budget, the Small Business Administration, and other agencies “as may be appropriate.” This sector-specific, federal agency-wide approach will allow those engaged in manufacturing to address the multitude of federal regulatory challenges faced by the industry via one commenting process instead of the piecemeal, regulatory battle-by-battle approach.

Report Outlining a Plan for Streamlined Permitting and Regulatory Burden Reductions

Section 3 of the Presidential Memo on Manufacturing directs the Secretary of Commerce to consider the comments received under Section 2 and submit a report to the President within 60 days of completion of the public comment period.  That report should:

  1. set out a plan to streamline federal permitting processes for domestic manufacturing;

  2. set out a plan to reduce regulatory burdens that affect domestic manufacturers;

  3. identify priorities and recommended deadlines for completing actions;

  4. include recommendations for any necessary changes to existing regulations or statutes, as well as actions to change policies, practices, or procedures that can be taken immediately under existing authority.

Recent Past Efforts at Regulatory Reform/Permit Streamlining

Regulatory reform is certainly not a new concept, although the success of past efforts is up for debate.  Congress passed statutes in the 1980s (the Paperwork Reduction Act and the Regulatory Flexibility Act) and again in the 1990s (the Unfunded Mandates Reform Act and the Congressional Review Act) with the goal of putting in place structures to limit the pace of regulatory development.  These statutes require additional coordination for certain information requests, cost-benefit analyses, and allow for the review (and potential disapproval) of major rules by Congress.  However, these statutes are generally forward looking and currently baked into the federal rulemaking process.  While they may augment consideration of new regulatory initiatives, they do nothing to address longstanding, burdensome regulatory programs.

More recent efforts at regulatory reform have been undertaken by Congress and focus on review (and potential repeal) of existing regulatory programs.  For example, on January 7, 2017, the House passed the Searching for and Cutting Regulations that are Unnecessarily Burdensome (SCRUB) Act, which would establish the Retrospective Regulatory Review Commission to conduct a review of all federal regulations to identify regulatory programs or individual rules that “implement a regulatory program that should be repealed to lower the cost of regulation.”  Former President Obama also previously issued an Executive Order focused on improving permitting and review of infrastructure projects.

During the Obama Administration, Congress also made attempts to pass legislation streamlining federal permitting, largely to no avail.  Legislation either stalled or if passed, was limited to major infrastructure projects subject to National Environmental Policy Act (“NEPA”) review. For example, the Responsibly and Professionally Invigorating Development (RAPID) Act passed the House, but never came to a vote in the Senate.  The Federal Permitting Improvement Act of 2015, bipartisan legislation aimed at improving federal permitting, was passed as Title XLI of the “Fixing America’s Surface Transportation Act’’ or the ‘‘FAST Act” but focused on projects that were subject to NEPA and required a total investment of more than $200 million.

The current effort differs from previous attempts at reform in that it focuses on one specific sector of the economy the President seeks to bolster (manufacturing) and also sets up a formal process for that sector to share with the government its thoughts on how the federal regulatory knot can be unwound.  The manufacturing sector covers a wide range of industries, e.g., chemical, products, oil-field equipment, pharmaceutical, textiles, just to name a few; each with unique regulatory challenges.

Subsector Example: Current Approval Burden for New Chemical Manufacturing Facility

As an example of the regulatory/permitting burden faced by just one subsector of the manufacturing industry – chemical manufacturing – it currently takes between three to five years to obtain all of the necessary permits and other governmental approvals necessary to break ground on a major new chemical plant.  Between 50 and 60 separate permits and other authorizations issued by dozens of federal, state and local agencies must be secured, in a process that creates significant uncertainty and delay, challenging project proponents at every turn and severely testing investors’ will to continue project funding.  Many of the required authorizations have overlapping purposes, and agency deadlines, where they exist at all, are often extended multiple times to address issues that have little to no bearing on the concerns that a given approval was intended to address.  Environmental authorizations alone typically make up half or more of the required approvals and can involve as many as 15 to 20 separate agencies commenting on each other’s redundant requirements and engaging in jurisdictional battles with one another, all of which further contributes to delay and uncertainty.  And while labor costs and other considerations also play a role, the inevitable result is that more and more projects end up being built overseas.

Next Steps for Manufacturers

President Trump has established a tight timeline for the public comment period and for the Secretary of Commerce to produce a plan to move forward.  While it may be a significant effort to identify under that timeline the major federal regulatory burdens that impact your manufacturing business and articulate them to the government, the opportunity to share those concerns and potentially help craft a path forward is ripe.

© 2017 Bracewell LLP

Made in the USA (For the Most Part)

made in the USANewspaper headlines report a new economic trend—manufacturing is returning to the United States. The country’s industrial production grew by 0.7 percent in July, its biggest jump since November 2014. This number represents everything made by factories, mines, and utilities. Before companies start slapping “Made in the USA” labels on their wares, they need to make sure they are familiar with the legal requirements to do so.

The Federal Trade Commission (the FTC) monitors the marketplace and aims to keep businesses from misleading consumers. Within the FTC’s jurisdiction is regulating “Made in the USA” claims.

If a product is labeled as “Made in the USA,” without any qualification, it must be “all or virtually all” made in the United States. “[A]ll significant parts and processing that go into the product must be of U.S. origin. That is, the product should contain no – or negligible – foreign content.” The FTC contemplates the site of final assembly or processing, the proportion of manufacturing costs paid to the U.S., and how detached the foreign material is from the finished product. For many businesses, this standard can be hard, if not impossible, to meet.

Since January 2015, the FTC has issued 46 letters to companies asserting misleading U.S. origin claims on a wide range of products, such as cookware, snow blowers, auto parts and pet products.

For example, the FTC recently determined that Shinola—a Detroit-based manufacturer of high-end watches, bicycles, and leather goods—did not meet it. Shinola advertises its products with the slogans “Built in the USA” and “Built in Detroit.” But in June of this year, the FTC called this labeling misleading because “100 percent of the cost of materials used to make certain watches . . . [and] more than 70 percent of the cost of the materials used to make certain belts” goes to imported materials. For example, Shinola’s watches incorporate Swiss-made timekeeping components.

Shinola’s founder had a good reason for why his company incorporated foreign parts:  many of the components are unavailable in the U.S. The components are imported to Detroit where Shinola’s 400 employees assemble watches in the company’s factory. The FTC, however, applied its “net impression” analysis and determined that Shinola’s slogans contradict reality. Shinola’s advertisements will now read “Built in Detroit using Swiss and Imported Parts.”

In light of the FTC’s stance on U.S. origin claims, companies should follow FTC decisions and exercise caution when saying “Made in the USA.” There is no bright line rule for whether a product is “all or virtually all” made in the USA. Companies should consider how their products fit within the FTC’s framework and only then decide whether their merchandise has, according to the FTC, been “Made in the USA.”

© 2016 Schiff Hardin LLP

FDA Flunks Mylan’s India Facilities, Finds cGMP Violations

When we open our medicine cabinet, we take for granted that the drugs we find there are safe and properly labeled. Many physicians privately worry, however, about the safety and efficacy of prescription drugs.

About 85% of the prescription drugs sold in the United States are manufactured offshore. Many of those offshore drugs are made by generic companies, foreign contract manufacturing companies and sometimes, offshore facilities owned by the so-called “big pharma” manufacturers themselves. Wherever manufactured, drugs distributed in the United States must meet certain current good manufacturing practices or cGMP standards.

Recently the Food and Drug Administration (FDA) began ramping up inspections of offshore manufacturing facilities and the results are shocking. Although cGMP violations have been found worldwide, experts are particularly worried about drugs made in China and India.

Earlier this month the FDA cited three facilities in Bangalore, India that manufacture drugs for Mylan. Headquartered in the U.K., Mylan is the second largest generic and specialty pharmaceutical company in the world. With approximately 30,000 employees worldwide and revenues of $7.72 billion (USD), Mylan certainly qualifies as big pharma.

The FDA says it inspected three of Mylan’s Indian plants between August of 2014 and February of this year. It found “significant” cGMP violations at all three facilities.

Worse, the FDA says that in all three instances Mylan’s response to the three inspections lacked “sufficient corrective actions.”

cGMP standards are in place throughout the manufacturing process to insure the potency and quality of the finished pharmaceuticals. The FDA wants to insure that there are no contaminants in the finished product as well as insuring the finished product is neither stronger nor weaker than advertised.

As a result of the inspections, the FDA concluded a likelihood that the finished drugs from all three plants were adulterated. Those findings are certainly bad news for consumers. It’s also bad for physicians as well. It’s hard for doctors to get dosages correct or monitor for side effects if a drug has inconsistent potency or the presence of contaminants.

In the case of Mylan’s Bangalore, India facilities, the violations were numerous and included:

  • gloves and sterile gowns for use in aseptic environments had holes and tears

  • personal sanitation violations

  • clean room violations

  • discolored injection vials

  • lots with failed assays or contaminants

At least one of the facilities had similar violations dating back to a 2013 inspection.

Overall, the FDA noted, “These items found at three different sites, together with other deficiencies found by our investigators, raise questions about the ability of your current corporate quality system to achieve overall compliance with CGMP. Furthermore, several violations are recurrent and long-standing.”

The FDA declared that continued noncompliance could result in drugs from these facilities being blocked from importation and distribution within the United States.

Mylan has had previous problems with U.S. regulators. In 2000 Mylan paid a $147 million fine to settle charges that the company raised the price of generic lorazepam by 2,6000% and generic clorazepate by 3,200%. The FTC had charged that the company raised the price of lorazepam, the generic equivalent of the brand name antianxiety medication Ativan, from $7 per bottle to $190. Although Mylan agreed to the payment of the fine, it denied any wrongdoing.

Only the FDA can punish drug companies for cGMP violations but if there is proof of an adulterated product entering the commerce stream, the federal False Claims Act can come into play. That law allows private individuals to file a lawsuit against a wrongdoer and receive a percentage of whatever is recovered by the government. Last year the Justice Department paid $635 million in whistleblower awards under the False Claims Act.

Whistleblowers in cGMP cases have received tens of millions of dollars. Dinesh Thakur, a former Ranbaxy executive, received $48 million for information about adulterated generic drugs.

To qualify for a whistleblower award, one must possess inside, “original source” information about a cGMP violation resulting in an adulterated drug or under / over potency medication being approved for sale by Medicaid, Medicare or Tricare. (Most drugs are approved.)

While we believe that contaminated drugs are relatively rare, industry sources tell us that potency issues are rampant. That means the drugs in your medicine cabinet may have little or no active ingredients.

Article By Brian Mahany of Mahany Law

© Copyright 2015 Mahany Law

Multistakeholder Group Seeks Comment on Draft Framework for IoT Device Manufacturers

Earlier this week, the Online Trust Alliance released a draft framework of best practices for Internet of Things device manufacturers and developers, such as connected home devices and wearable fitness and health technologies.  The OTA is seeking comments on its draft framework by September 14.

The framework acknowledges that not all requirements may be applicable to every product due to technical limitations and firmware issues.  However, it generally proposes a number of specific security requirements, including encryption of personally identifiable data at rest and in transit, password protection protocols, and penetration testing.  In addition, it proposes the following requirements:

  • A privacy policy that is readily available to review prior to product purchase, download or activation, and that discloses the consequences of declining to opt-in or opt-out of policies on key product functionality and features.

  • A privacy policy display that is optimized for the user interface to maximize readability.  The working group recommends layered privacy policies for this purpose.

  • Conspicuous disclosure of all personally identifiable data collected.

  • Data sharing is limited to service providers that agree to limit usage of data for specified purposes and maintain data as confidential or to other third parties as clearly disclosed to users.

  • Disclosure of the term and duration of the data retention policy.  In addition, the framework goes on to state that data generally should be retained only for as long as the user is using the device or to meet legal requirements.

  • Disclosure of whether the user has the ability to remove or anonymize personal and sensitive data other than purchase history by discontinuing device use.

  • Disclosure of what functions will work if “smart” functions are disabled or stopped.

  • For products and services designed to be used by multiple family members, the ability to create individual profiles and/or have parental or administrative controls and passwords.

  • Mechanisms for users to contact the company regarding various issues, transfer ownership, manage privacy and security preference.

In addition, the draft framework makes various other recommendations that go above and beyond the proposed baseline requirements, although acknowledging that the recommendations may not be applicable to every device or service.

© 2015 Covington & Burling LLP