Category: Administrative & Regulatory

Surprise Billing Regulations: Out-Of-Network Providers at In-Network Facilities

On 1 July 2021, the Department of the Treasury, the Department of Labor, and the Department of Health and Human Services (the Departments) issued an interim final rule (IFR)1 implementing certain provisions of the No Surprises Act (the Act).2 Congress enacted the Act in 2020 to protect patients from “surprise medical bills” and to limit so called “out-of-network” cost sharing bills for patients receiving care from providers who are not “in-network” participating providers in the patient’s health plan. The Act is applicable to emergency services, non-emergency services furnished by out-of-network providers at certain in-network health care facilities, and air ambulance services furnished by out-of-network providers. The IFR provides additional guidance to health care providers and facilities, including hospital and freestanding emergency departments, for complying with the Act. Comments on the IFR are due on 7 September 2021. Assuming no further changes from the Departments following the comment period, the requirements for providers as outlined in the IFR will be effective as of 1 January 2022.

For in-network providers and facilities, the Act and the IFR will require advance planning with respect to certain public and patient-specific disclosures. In-network providers and facilities will also need to prepare patient notice and consent forms in order to comply with updated surprise billing protections. Further, such providers will need to be actively coordinating with plans and insurers prior to seeking payment in order to determine whether notice and consent and/or balance billing prohibitions are triggered.

Key takeaways include:

  • The IFR extends surprise billing protections to non-emergency services furnished by an out-of-network provider at in-network health care facilities.
  • Out-of-network providers may not bill patients for an amount that exceeds in-network cost sharing, as determined in accordance with the balance billing provisions, when furnishing services at an in-network health care facility.
  • Such balance billing prohibitions will not apply if the patient has been provided with adequate notice as has agreed to waive such requirements pursuant to a valid consent, with certain enumerated exceptions.
  • Providers and facilities will further be required to make certain additional disclosures regarding protections against balance billing, including written disclosures to patients and prominent public displays on-site and online.

BACKGROUND

The Act provides protections from surprise medical bills for certain emergency and non-emergency services. The Act protects patients from surprise medical bills for emergency services from the point of evaluation and treatment until the patient can be stabilized and can consent to transfer to an in-network facility. Such protections apply to three emergency categories (1) emergency services received at an out-of-network facility, (2) emergency services rendered by an out-of-network individual provider, such as an emergency physician, regardless of whether the facility is in- or out-of-network, and (3) emergency services provided by out-of-network air ambulances. Additionally, patients will be protected from surprise medical bills for non-emergency services (1) provided by an out-of-network provider at an in-network facility and (2) out-of-network air ambulance services.3 For services subject to these protections, the Act limits cost sharing for out-of-network services to in-network levels and requires such cost sharing to count toward any in-network deductibles and out-of-pocket maximums.4

The Act effectively repeals the “Greatest of Three Rule” framework. Prior to the Act, the Affordable Care Act (ACA) enacted provisions requiring that insurance companies hold out-of-network patients harmless as if they were in-network. The ACA’s implementing regulations required insurers or private health plans to reimburse providers at the greatest of three enumerated amounts (the Greatest of Three Rule): (1) the rate generally reimbursed by the plan of insurance for out-of-network providers (i.e., the usual, customary, and reasonable amount); (2) the median in-network rate; or (3) the Medicare rate. The Act will effectively repeal the Greatest of Three Rule framework and replace it with a new reimbursement regime for emergency and certain non-emergency out-of-network services. The Act directs the Departments to establish through rulemaking the methodology that a group health plan or health insurance issuer offering group or individual health insurance coverage must use to determine the “qualifying payment amount” used to determine a patient’s coinsurance. For provider reimbursement where there is no governing state law or agreement between the payor and the provider, the Act establishes a baseball style arbitration that takes into account the qualifying payment amount. To learn more about how the No Surprises Act and IFR address reimbursement, please see our prior alerts here and here.

IMPACT FOR OUT-OF-NETWORK PROVIDERS AT IN-NETWORK FACILITIES

In the IFR, the Departments contend that surprise billing is a significant issue across all types of coverage and throughout the country, particularly certain specialties that are not “actively shoppable by consumers,” such as anesthesiology or laboratory providers, which often bill as out-of-network at in-network facilities.5 While the IFR focuses in part on emergency services, it also focuses on non-emergency services in certain circumstances, specifically extending surprise billing protections to non-emergency services furnished by an out-of-network provider at an in-network health care facility.6 Specifically, if a health plan provides benefits for certain non-emergency items and services at a facility, the plan must cover items and services furnished to a plan enrollee by an out-of-network provider with respect to a visit at an in-network health care facility, including meeting requirements regarding cost-sharing, payment amounts, and processes for resolving billing disputes. For providers, the IFR clarifies the Act’s requirement that out-of-network providers or facilities may not bill patients for an amount that exceeds in-network cost sharing. This cost-sharing is determined in accordance with the balance billing provisions. The balance billing prohibition is applicable when an out-of-network provider furnishes services at an in-network health care facility. The prohibition specifically includes those off-site out-of-network providers, such as laboratories, who furnish items or services that a patient receives as part of a visit to the in-network facility.7 The prohibitions on balance billing do not apply if certain notice is provided to the patient and the patient waives the balance billing protections with respect to the particular out-of-network provider.8

NOTICE AND CONSENT REQUIREMENTS

The IFR details the following specific standards around the notice and consent requirements for out-of-network providers providing items or services at in-network facilities.

  • The notice must be tailored to the individual patient in each circumstance, including identification of the provider or facility and a good faith estimate of the amount to be billed.9
  • A facility may provide a single notice for multiple out-of-network providers, provided that (1) each provider’s name is specifically listed, (2) each provider includes an individual estimate of the items and services they are individually furnishing, and (3) the patient has the option to consent to waive balance billing protections with respect to each individual provider separately.10
  • The notice and consent forms must be provided together and cannot be attached to or incorporated into any other documents.11
  • The notice be provided within an appropriate timeframe for the patient to make an informed decision. For example, for appointments scheduled in advance, notice should be made at least 72 hours before the date of the appointment, or if an appointment is made on the day of, notice should be given at least three hours prior to furnishing the items or services.12
  • The notice must make clear that the good faith estimate and patient consent do not constitute a contract or a binding commitment to the estimated charge.13
  • The notice must include information regarding whether prior authorization or other care management limitations may be required prior to the provision of services.14
  • The notice must clearly state that the patient is not required to consent to receive such items and services, and that the patient may instead seek care from an available in-network provider or facility and that in such cases, in-network cost-sharing amounts will apply.15
  • For post-stabilization services furnished by an out-of-network provider at an in-network emergency facility, the notice must include a list of in-network providers at the facility who are able to furnish the same items or services and state that the patient may be referred at their option to such provider(s).16
  • The Departments also clarified that an in-network facility may provide the notice on behalf of an out-of-network provider.17
  • Notice must be available in any of the 15 most common languages in the geographic region in which the facility is located. If an individual cannot understand any of the provided languages, the provider or facility must obtain a qualified interpreter.18
  • A patient may demonstrate consent by signature of the consent form, and may revoke consent by notifying the provider or facility in writing prior to the furnishing of items or services.19
  • Obtained consent must be maintained for a minimum of seven years.20

EXCEPTIONS TO NOTICE AND CONSENT REQUIREMENTS

In limited circumstances under the Act and as outlined in the IFR, notice and consent requirements do not apply for certain types of non-emergency items or services. In these situations, the prohibition on balance billing and in-network cost-sharing requirements will continue to apply. Specifically, notice and consent requirements do not apply to (1) ancillary services, including items and services related to emergency medicine, anesthesiology, pathology, radiology, and neonatology; (2) items and services provided by assistant surgeons, hospitalists, and intensivists; (3) diagnostic services, including radiology and laboratory services; and (4) items and services provided by an out-of-network provider where there is no in-network provider who can furnish such item or service and the applicable facility.21 Further, notice and consent requirements do not apply for items or services furnished as a result of unforeseen, urgent medical needs arising when post-stabilization services are furnished and the out-of-network provider or facility has already satisfied the notice and comment criteria.22

DISCLOSURE REQUIREMENTS

In addition to notice and consent requirements, the Act also requires providers and facilities to provide general public disclosures regarding patient protections against balance billing, including written disclosures to patients and postings both physically displayed in a prominent location at the location of the provider or facility and on a public website. These requirements will apply for plan years beginning on or after 1 January 2022. The disclosure provided to patients must include clear and understandable information about applicable state requirements and how to contact appropriate federal and state authorities if the patient believes the provider or facility has violated any applicable requirements for balance billing.23 This disclosure may be on a one-page form and should be provided no later than at the time the provider requests payment from the patient (or if no payment is requested from the patient, at the time a claim for payment is submitted). The Departments suggest that this disclosure may be provided earlier, such as at the time when an individual schedules an appointment or when other standard notice disclosures, such as the Notice of Privacy Practices, are provided.24 The IFR states that the Departments will separately issue a model disclosure notice for providers and facilities. Notably, providers that do not furnish items or services at a health care facility or in connection with visits at a health care facility are not required to make such disclosures, and disclosures are only required for patients who are participants, beneficiaries, or enrollees of group health plans or insurance coverage offered by an insurer.25 Further, in order to streamline the documents provided to patients, the IFR clarifies that a provider may satisfy the above disclosure requirements if it has a written agreement with the facility that requires the facility to provide a single disclosure including information about balance billing requirements that are applicable to both the facility and the provider.26

ENFORCEMENT AND COMPLIANCE

The Act authorizes states to enforce certain requirements of the Act and requires the Department of Health and Human Services (HHS) to enforce if a state fails to substantially enforce the requirements.27 Failure to meet the requirements of the Act may result in civil monetary penalties in states where HHS directly enforces balance billing requirements. Accordingly, out-of-network providers and facilities should take necessary precautions to ensure that their billing practices are in alignment with the Act and IFR guidance. For example, the Departments recommend that out-of-network providers that furnish non-emergency services confirm whether the facility at which they are providing such services is in-network or not to determine whether balance billing protections will apply. Additionally, out-of-network providers should be in communication with applicable plans and insurers when limitations on cost-sharing do not apply, including when proper notice and consent have been obtained. The Departments further emphasize that out-of-network providers providing non-emergency services may need to alter current billing practices to ensure they are not running afoul of the Act’s requirements. In particular, out-of-network providers may need to bill a health plan or insurer before billing an individual directly, in order to determine whether the plan covers the applicable non-emergency services at issue and thus triggers the applicable requirements.28

CONCLUSION

Out-of-network providers who furnish services at in-network facilities, as well as in-network facilities that allow out-of-network providers to furnish services at their facilities, should be prepared to operationalize notice, consent, and disclosure requirements for out-of-network providers providing services in their facilities. Before providing services at a given location, out-of-network providers that furnish non-emergency services should confirm whether the facility at which they are providing such services is in- or out-of-network to determine whether balance billing protections will apply. Additionally, providers may need to alter current billing practices to meet the requirements of the Act. In particular, providers will need to proactively communicate with plans and insurers when limitations on cost-sharing do not apply, including when proper notice and consent have been obtained.

Our health care practice routinely assists health systems, hospitals, and other providers and suppliers with legal advice and strategic considerations, including providing advice on reimbursement matters and preparing clients’ public comments on proposed and final rulemakings.

Footnotes

1 Requirements Related to Surprise Billing; Part I, Office of Personnel Management, Dep’t of Treasury, Dep’t of Labor, Dep’t of Health and Human Serv., 86 Fed. Reg. 36,872 (July 13, 2021) (Interim Rule).

2 The No Surprises Act was signed into law as part of the Consolidated Appropriations Act of 2021 (H.R. 133; Division BB – Private Health Insurance and Public Health Provisions).

3 See Interim Final Rule at 36,878, 36,882-83.

4 Interim Rule at 36,877.

5 Id. at 36,922.

6 Id. at 36,882.

7 Id. at 36,904-05.

8 Id. at 36,905.

9 Id. at 36,906.

10 Id. at 36,907.

11 Id. at 36,906.

12 Id. at 36,907.

13 Id. at 36,908.

14 Id.

15 Id.

16 Id.

17 Id. at 36,906.

18 Id. at 36,909-10.

19 Id. at 36,909.

20 Id. at 36,911.

21 Id.

22 Id. at 36,910.

23 Id. at 36,912.

24 Id. at 36,914.

25 Id.

26 Id. at 36,915.

27 Id. at 36918.

28 Id. at 36,905.

Copyright 2021 K & L Gates
For more articles about healthcare coverage, visit the NLR Healthcare Law section.

Top Ten: What You Need to Know About the Bipartisan Infrastructure Investment and Jobs Act

8/10/2021 Update: On Tuesday morning, Aug. 10, the Senate passed its bipartisan infrastructure plan, H.R. 3684, by a 69-30 margin. A group of ten senators – nicknamed the “G10” and led by Sens. Kyrsten Sinema (D-AZ) and Rob Portman (R-OH) – were the drivers behind this infrastructure framework. Next, the Senate will work through the reconciliation process for a $3.5 trillion budget resolution. When they are back in session later this month or early next, the House plans to act on both the infrastructure bill and the budget resolution.

The Bipartisan Infrastructure Investment and Jobs Act of 2021 comes as an alternative to reauthorizing the Fixing America’s Surface Transportation (FAST) Act, which is set to expire at the end of September. It also incorporates key pieces of the Biden Administration’s domestic policy agenda. This 2,702-page bill – written across the aisle and being offered as a Senate amendment to H.R. 3684 – provides approximately $550 billion in new infrastructure spending over the next five years for surface transportation, including roads, bridges, rail, public transit, and airports; broadband; resiliency; water infrastructure, including for waste water and drinking water, and ports and waterways; and modernization, including low-carbon programs, electric vehicle charging, connecting communities, and addressing pollution. You can read the full bill text here.

It is anticipated that this package will pass the Senate sometime this coming weekend, however, its fate in the House of Representatives is unclear. This package has been tethered to President Biden’s “human infrastructure” plan, which House and Senate Democrats anticipate to pass via the budget reconciliation process to overcome Senate Republican opposition. The process on the budget reconciliation bill will begin next week as soon as the Senate dispenses with the Bipartisan Infrastructure Investment and Jobs Act of 2021.

Among other provisions, this package:

  1. Incorporates four bipartisan bills: (1) the Surface Transportation Reauthorization Act of 2021, (2) the Surface Transportation Investment Act, (3) the Drinking Water and Wastewater Infrastructure Act, and (4) the Energy Infrastructure Act. The Surface Transportation Reauthorization Act passed out of the Senate Committee on Environment and Public Works and the Surface Transportation Investment Act passed out of the Senate Committee on Commerce, Science and Transportation, both with bipartisan support.
  2. Seeks to encourage domestic manufacturing and procurement of materials for public works projects, with the intent to also create more domestic jobs throughout the product supply chain. “Build America, Buy America” ensures that American taxpayer dollars are spent on American-made iron, steel, and manufactured products.
  3. Appropriates for:
    • Surface Transportation Infrastructure:
      • $36B for Federal-State Partnership for Intercity Passenger Rail Grants
      • $27.5B to the Federal Highway Administration for bride repair and improvement
      • $16B for Amtrak’s National Network and $6 billion for Amtrak’s Northeast Corridor Network
      • $15B for Airport Infrastructure grants
      • $9.2B for the Bridge Investment Program
      • $12.5B for National Infrastructure Investments grants
      • $8B for the Federal Transit Administration’s Capital Investment Grants
      • $5B for a National Electric Vehicle Formula Program
      • $5B for an Airport Terminal Program
    • Drinking Water/Wastewater Infrastructure:
      • $10B to address per- and polyflouroalkyl (PFAS) substances
      • $5B for FEMA’s flood mitigation and pre-disaster mitigation programs
      • $618M for the Department of Agriculture’s NRCS Watershed program
      • $75Mfor a WIFIA program to improve dams
      • $8.3B for the Bureau of Reclamation’s water and related resources projects
      • $15B to the Drinking Water State Revolving Fund program
    • Broadband Infrastructure:
      • $42.5B for the Broadband Equity, Access, and Deployment Program
      • $2B for the Rural Utilities Service distance learning, telemedicine, and broadband program
      • $2.8B for Digital Equity
      • $1B for middle mile deployment, among other provisions
    • Energy Infrastructure within Department of Energy:
      • $16.2B for energy efficiency and renewably energy
      • $7.4B for fossil energy and carbon management
      • $2.1B for Carbon Dioxide Transportation Infrastructure Finance and Innovation Program
      • $21.4B for Office of Clean Energy Demonstrations
    • Environmental Infrastructure:
      • $4.6B for an Energy Community Revitalization program
      • $696M for Forest Service wildfire management
      • $3.4B for ecosystem restoration programs at the EPA, FWS, and NOAA
  4. Offsets some of the spending with “Pay Fors”, including but not limited to:
    • $50B in re-appropriated, previously unused funding from 2020 COVID-19 bills
    • $50B in unused savings from the COVID-19 employer retention tax credit
    • $105B in unused savings from COVID-19 Paid and Family Leave tax credits
    • $51B from delaying the Medicare Part D drug rebate rule
    • $28B from requiring cryptocurrency asset reporting to the IRS
    • $21B from extending feeds on Government-Sponsored Enterprises (GSEs)
  5. Does not raise taxes. The goal is for economic growth as a result of efficiency, less costly infrastructure, and more productive workers.
  6. Preserves the 90/10 split of federal highway aid to states, but does not address the user fee for the Highway Trust Fund.
  7. Creates the Advanced Research Projects Agency-Infrastructure (“ARPA-I”) to fund research aimed at improving core infrastructure through innovation and new technology.
  8. Requires federal contracts for the domestic production of personal protective equipment (PPE) to last at least two years.
  9. Has widespread bipartisan support from 100+ associations and organizations like the AFL-CIO, U.S. Chamber of Commerce, National Governors Association, Small Business Roundtable, and National Association of Manufacturers.
  10. Will add a projected $256 billion to the federal budget deficit over the 2021-2031 period, according to the Congressional Budget Office (CBO). This score, which was released August 5, is key information for members deciding whether or not to vote in favor of the amendment to the bill.
© 2021 Foley & Lardner LLP

Article By William Ball, Jared B. Rifis and Kate M. Merrill of Foley & Lardner LLP

For more articles on the Bipartisan Infrastructure Investment and Jobs Act, visit the NLR Utilities & Transport section.

California Breaks New Ground With OCal: Answers to Key Questions About “Comparable-to-Organic” Cannabis

California’s comparable-to-organic “OCal” certification program for cannabis and nonmanufactured cannabis products officially went into effect on July 14, 2021.  The OCal program represents a new branch of state cannabis regulation, but remains firmly rooted in existing state and federal organics standards and procedures.  Its goal is to “assure consumers” that certified OCal products “meet a consistent standard comparable to standards met by products sold, labeled, or represented as organic.”

The OCal program raises a variety questions for cultivators, distributors, certifying agents and consumers.  We provide answers to six of those questions here.

What’s the difference between “OCal” and Organic?

Most OCal requirements will be very familiar to California organic producers, as the program generally follows the National Organics Program (NOP) in its substantive requirements, and the California Organics Program (COP) in enforcement provisions.  Of course, the United States Department of Agriculture (USDA) cannot expand organics certification to cannabis without authorization—and legalization.  So until Congress takes action, it falls on states to take the initiative.

Both OCal and NOP require certified operations, including certified cultivators and distributors, to develop and update a “system plan” that documents many practices and procedures required for both programs, including:

  • Tillage and cultivation practices that maintain or improve the physical, chemical, and biological condition of soil and minimize soil erosion
  • Crop rotations, cover crops, intercropping, alley cropping, hedgerows or the application of plant and animal materials
  • Plant and animal management to maintain or improve soil organic matter content, biological diversity, nutrient cycling, and microbial activity, including through composting
  • Crop health enhancements, including selection of plant species and varieties with regard to suitability to site-specific conditions and resistance to prevalent pests, weeds, and diseases
  • Pest control through introduction of predators and parasites, habitat maintenance, and weed control through mowing, grazing, and mulching

Land to be used for OCal or organic cultivation must not have any prohibited substances for three years prior to certification.  Certified operations must use their own seeds and planting stock, or seeds and planting stock from an OCal or organic certified nursery (subject to limited exceptions for availability).  Both organic and OCal operations must implement measures to prevent any commingling of certified and non-certified products, and to prevent contact operations and products with prohibited substances.  OCal regulations incorporate the “National List of Allowed and Prohibited Substances” (7 C.F.R. §§ 205.601, 205.602), which applies to organic products certified through the NOP.

Under the original OCal authorizing legislation, the Medicinal and Adult-Use Cannabis Regulation and Safety Act, the OCal program would have been eliminated if and when cannabis became eligible for NOP certification.  That sunset provision was removed in 2019 by Assembly Bill (AB) 97.  Under current law, parallel certifications of cannabis as “OCal” and of other crops as Organic will be the standard in California for the foreseeable future.

Will Container-Grown Cannabis be Eligible for OCal Certification?

California Department of Food and Agriculture (CDFA) guidance expressly allows OCal certification of plants grown in container systems, including hydroponic systems, so long as they comply with regulations.  This comports with current USDA interpretation of federal organics regulations.  Currently, a challenge to organic certification for “soil-less” crops is pending[1] before the U.S. Court of Appeals for the Ninth Circuit.  Because most OCal statutes and regulations mirror their federal model, including provisions that require soil management and enhancement, a ruling that ends organic certification for hydroponic and other soil-less crops could also raise doubt about OCal eligibility for container-grown cannabis.  For example, both the NOP and the OCal program require production practices that “maintain or improve the natural resources of the operation, including “ soil, water, wetlands, woodlands, and wildlife,” and require “cultural, biological, and mechanical practices that foster cycling of resources, promote ecological balance, and conserve biodiversity.”

What about products that include cannabis, can they be OCal certified?

The OCal program under the CDFA will only apply to “non-manufactured” cannabis products, defined as products containing only one ingredient: cannabis.  Only limited processing, including drying, curing, grading, trimming, rolling, and packaging, is allowed.  AB 97 required the California Department of Public Health (CDPH) to create an OCal certification program for manufactured cannabis products, which include edibles, concentrates and topicals.  No rulemaking has been initiated as of July 2021.

Who is in charge of OCal certification and compliance?

In order to qualify for and maintain a licensed, OCal-certified operation, cultivators and distributors will need to meet requirements implemented by at least three entities: the CDFA, certifying agents, and the newly-created California Department of Cannabis Control (DCC).  The DCC took over cannabis licensing in 2020, taking on responsibilities previously held by the CDFA.  The OCal program was not included within its scope of authority, however.  Under the current statutory scheme, cultivators and distributors seeking OCal certification will need to maintain compliance with regulations administered by both state agencies.

Certifying agents also play a key role in OCal implementation, as the entities that actually grant certification to cultivators and growers.  Private entities (non-profits or not-for-profit organizations) and local jurisdictions (counties and cities) are eligible to serve as certifying agents.  For accreditation, organizations demonstrate the knowledge, staff and operational competence to run a certification program; they may be accredited either through the CDFA or the NOP.  Registration requires annual reporting, including documentation of annual site inspections of all of all operations certified by the agent. Certifying agents are required to undergo regular performance evaluations and outside audits.

What does OCal certification mean for privacy and confidentiality?

OCal certified operations must allow certifying agents and CDFA officials to access and inspect facilities and records during business hours, and must also make all agricultural inputs, cannabis and cannabis waste accessible for examination and sampling.  They are subject to unannounced inspections, as well as mandatory annual reviews and periodic testing of pre-and post-harvest cannabis for pesticide residue.  Any application or drift of any prohibited substance onto an OCal facility must be reported immediately, as well as any change in operations that could affect compliance.  CDFA officials may inspect, audit, review or investigate a certified operation or a registered agent at any time, with or without prior notice.

While these requirements ensure transparency and support enforcement, OCal regulations require “strict confidentiality” for any business-related information concerning any certified operation.

How are OCal rules and regulations enforced?

The CDFA may suspend an operation for six months or more when it believes that it has violated or is not in compliance with OCal regulations.  It may also revoke the accreditation of a certified agent that fails to meet reporting obligations and other requirements.  The CDFA has authority to impose fines up to $17,952.00 per violation for labeling or selling a product “OCal” or “organic” not in compliance with regulations, and to $20,000.00 per violation for other willful violations.  Certifying agents are subject to at least six months’ suspension for failing to maintain accreditation requirements.  The CDFA will grant a hearing regarding any alleged violations, and enforcement actions may be appealed through an agency appeals process or in court.

FOOTNOTES

[1] Link to prior article on this topic here.

Article By Louise Dyble of Sheppard, Mullin, Richter & Hampton LLP

Fore more articles on cannabis, visit the NLR Biotech, Food, Drug section.

Another One Bites the Dust: You Might Be Your Brother Employer’s Keeper (Again)

The U.S. Department of Labor (DOL) has announced a final rule rescinding the Trump administration’s “Joint Employer Status Under the Fair Labor Standards Act” rule, which took effect in March 2020 and provides guidance for determining when multiple employers are considered joint employers and, therefore, jointly liable for labor law violations. The repeal of the rule will likely result in more workers receiving minimum wage and overtime protections under the Fair Labor Standards Act (FLSA) and, in turn, greater legal and financial exposure for employers.

The FLSA generally requires employers to pay non-exempt workers at least the federal minimum wage for all hours worked and at least time and one half the regular rate of pay for hours worked more than 40 in a workweek. Under certain circumstances, an employee of one business may be considered a joint employee of a second business. (The joint employer concept can arise in any context when one company’s workers perform work for another company, but most frequently it arises in the context of staffing agency or leased employees).  If the second business is deemed a “joint employer,” both companies might be liable to the worker for minimum wages and overtime pay under the FLSA.

The joint employer rule that became effective in March 2020 established a four-factor balancing test for determining joint employer status under the FLSA. In determining whether a second company is a joint employer of a worker, the test examines:

  1. Whether the company hires and fires the worker;
  2. Whether the company supervises and controls the worker’s work schedules or conditions of employment to a substantial degree;
  3. Whether the company determines the worker’s rate and method of payment; and
  4. Whether the company maintains the worker’s employment records.

In a news release announcing rescission of the rule, the Biden administration’s DOL concluded that the rescinded rule “included a description of joint employment contrary to statutory language and Congressional intent” and “failed to take into account the department’s prior joint employment guidance.”

The final rule repealing the prior rule becomes effective September 28, 2021. The prior rule made it more difficult for companies to be held liable as joint employers and was generally considered a positive development for the business community.

©2021 Roetzel & Andress

Article by Monica L. Frantz of Roetzel & Andress LPA

For more articles on the DOL, visit the NLR Labor & Employment section.

Never Say Never! CDC Extends Eviction Moratorium Again until October 3, 2021

In June 2021, Rochelle Walensky, Director of the CDC extended the eviction moratorium until July 30, 2021.  At that time, the intention was to allow any further extensions absent an unexpected change in the trajectory of the global pandemic.  Enter stage right the Delta variant which has increased the number of COVID-19 cases across the United States.  As a result, the CDC has extended the moratorium until October 3, 2021 to prevent the further spread of COVID-19.  The CDC Order issued on August 3, 2021 (“Order”) is not a blanket extension of the pre-existing Order.

The Order is limited to those areas experiencing “substantial transmission”.  The Order however states that if landlords are not currently in a “substantial transmission” county but later receive the “substantial transmission” designation then landlords must comply with the mandates of the Order.

So what does that mean for landlords in Pennsylvania?  With 29 counties currently designated “substantial transmission” the moratorium continues for almost half of the state.

Coverage under the CDC Declaration now requires the following criteria:

  • Expect to have income less than $99,000 in 2020 (joint $198,000), or have received a stimulus check, or not have been required to report income to the IRS in 2019;
  • Be unable to pay full rent due to an income loss or “extraordinary” medical bills;
  • Have used best efforts make timely partial rent payments that are as close to the full rent payment as the individual’s circumstances may permit, taking into account other nondiscretionary expenses;
  • Eviction would likely render the individual homeless or force them to “live in close quarters” in a new congregate or shared living setting; and
  • The individual resides in a U.S. County experiencing substantial or high rates of community transition levels as defined by CDC.

With the exception to past litigation challenging the CDC’s authority to issue said Orders, as the moratorium continued landlords have attempted ability to challenge the truthfulness of the tenant’s CDC declaration.  Prior to the Order there were a patchwork of state and local courts that permitted the challenges, but some courts have remained silent on whether it would permit such a challenge.  Some reasoning offered by local courts was that prior CDC orders did not speak to the landlord’s ability to challenge the tenant’s declaration.  The most recent Order now specifically states that nothing in the Order prohibits a landlord from challenging the statements in the CDC Declaration in court, as permitted by state or local law.

With this specific language now inserted in the Order, only time will tell on whether a new area of litigation is ignited because of the CDC’s continued extension of the moratorium.

©2021 Strassburger McKenna Gutnick & Gefsky

For more articles on the CDC eviction moratorium, visit the NLR Real Estate section.

Will Delta Keep You Off the Plane? Keeping Tabs on the Latest CDC Guidelines

We are so ready to put COVID-19 behind us, but unfortunately, the delta variant is keeping us on our toes.  So, for the time being, where do we stand, and what do we do now?

Amended CDC Guidance for the Fully Vaccinated

Last week, the CDC updated its guidelines to recommend (along with its prior guidelines that unvaccinated individuals should continue masking) that fully vaccinated individuals:

  • Should wear a mask in public indoor settings in areas of substantial or high transmission
  • Might opt to mask in public indoor settings regardless of the transmission level if they or someone else in their household are immunocompromised or at increased risk for severe disease
  • Who have a known exposure to someone with COVID-19 should be tested three to five days after the exposure, and wear a mask in public indoor settings for 14 days or until receiving a negative test result

School Settings and Travel

The CDC is recommending universal indoor masking for all teachers, staff, students and visitors in a school setting, regardless of vaccination status. As for travel, the CDC maintains that domestic travel is low risk for fully vaccinated individuals, although masking on public transportation in the United States remains required.

What Employers Are Doing

In response to the spiking case numbers and the fluctuating guidelines, many employers are revisiting their COVID-19 protocols. Facebook, Google, Ford, Walmart, and Walt Disney Company have recently mandated vaccines for certain employees. Additionally, the White House announced Thursday that it would require vaccines for federal employees. Other employers whose staff has not yet returned to the office are revisiting their plans to do so.

Takeaways

In the coming weeks, keep an eye on the fluctuating recommendations and especially the mandates in any locations where you have employees. If you are (re)considering a vaccination mandate, remember that you have to make exceptions for anyone who cannot receive it due to a medical issue or sincerely held religious belief; we blogged on this issue earlier here. Additionally, while you may ask about vaccination status, you want to be careful in how you ask and what you do with that information. If you’re uncertain about your COVID-19 protocol as it pertains to employment liability, give your lawyer a call.

© 2021 Bradley Arant Boult Cummings LLPNational Law Review, Volume XI, Number 216
For more articles on travel, visit the NLRCoronavirus News section.

Can Employers Make COVID-19 Vaccinations Mandatory?

Now that the vaccines for COVID-19 are widely available in the United States, many schools are preparing for in-person instruction in the fall and more workplaces are starting to move away from remote work and bring their employees back into the office. Of course, many essential workers have remained in their workplaces throughout the pandemic. In order to protect their employees and customers from the pandemic virus, many employers in both the public and private sectors are requiring employees to get vaccinated before returning to work or as a condition of remaining at work. New York City has announced that all government employees need to get vaccinated by September 13, 2021, or else be subject to weekly COVID-19 testing.  President Biden announced a similar mandate – vaccine or testing – for federal government employees and contractors on July 29, 2021. The proliferation of employer vaccine mandates across the country has spawned a number of legal challenges by employees who want to keep their jobs but do not want to get vaccinated, and by unions who do not think such changes should be implemented unilaterally by employers. This blog explores some of the legal issues that federal and state courts will be addressing as these cases proceed.

Claims based on right to refuse “unapproved” COVID-19 vaccines

Plaintiffs in several lawsuits have argued – thus far unsuccessfully – that employers cannot impose vaccine mandates because the COVID-19 vaccines have only received Emergency Use Authorizations from the Food and Drug Administration, thus rendering the vaccines “unapproved” and “experimental.” Employees at Houston Methodist Hospital in Texas (Bridges v. Houston Methodist Hospital), Dona Ana Detention Center in New Mexico (Legaretta v. Macias), and Los Angeles County schools in California (California Educators for Medical Freedom v. Los Angeles Unified School District) have all argued that their employers’ requirements that they get the COVID-19 vaccine or face termination amounts to compelling them to participate in a medical experiment in violation of their rights under federal law.

Plaintiffs in all three cases point to 21 U.S.C. § 360bbb-3, a law governing the Secretary of Health and Human Services’ ability to grant Emergency Use Authorization to drugs or medical devices that have not received full approval from the FDA. The law says that the HHS Secretary must establish conditions to ensure that anyone who administers a product under an Emergency Use Authorization must inform patients “of the option to accept or refuse administration of the product, [and] of the consequences, if any of refusing administration of the product,” 21 U.S.C. § 360bbb-3(e)(1)(A)(ii)(III). The plaintiffs claim that this law gives them a right under federal law to refuse the vaccine, and that any employer mandate to the contrary is unenforceable. Some of the plaintiffs point to other sources of law to claim a right to refuse vaccination. For instance, the New Mexico plaintiffs pointed to Griswold v. Connecticut and Roe v. Wade, two famous Supreme Court cases holding that the constitution recognizes a right to privacy that encompasses access to contraception and abortion. They argue that this same right prohibits the Dona Ana Detention Center from terminating their employment if they refuse the vaccine. The California and Texas plaintiffs pointed to the Nuremberg Code of 1947, international laws adopted in the wake of the Holocaust that prohibit forced medical experimentation without informed consent. The plaintiffs basically have argued that the employers’ vaccine mandates are tantamount to the horrifying medical experiments conducted by Nazi doctors on concentration camp prisoners.

There is little chance that these arguments will be met with any sympathy by courts.  Contrary to the claims of the plaintiffs, the Centers for Disease Control and Prevention and the Equal Employment Opportunity Commission both recognize that federal law does not prevent employers from imposing vaccine mandates. The CDC website says: “The Food and Drug Administration (FDA) does not mandate vaccination. However, whether a state, local government, or employer, for example, may require or mandate COVID-19 vaccination is a matter of state or other applicable law.” Similarly, the EEOC says that “The federal EEO laws do not prevent an employer from requiring all employees physically entering the workplace to be vaccinated for COVID-19,” so long as employers allow for legally required reasonable accommodations for employees with disabilities or religious beliefs that do not allow for vaccinations. Furthermore, the Supreme Court first held more than 100 years ago, in its 1905 decision in Jacobson v. Massachusetts upholding a state law requiring smallpox vaccination, that the Constitution does not provide a right to opt out of vaccine mandates in the midst of a public health crisis. Accordingly, lower courts are unlikely to hold that there is a constitutional right to opt out of employer vaccine mandates in the midst of the COVID-19 pandemic.

The only court to weigh in on one of these cases has shown no patience for these arguments. On June 12, 2021, the United States District Court for the Southern District of Texas dismissed all of the claims brought against Houston Methodist Hospital, bluntly stating that the plaintiffs’ efforts to portray themselves as unwilling participants in medical experiments misstate the facts, and that any analogy to Nazi experimentation in concentration camps is “reprehensible.” Looking at Section 360bbb-3, the Court held that the statute only regulates the conduct of the HHS Secretary and does not create any rights that a private individual can enforce in a lawsuit. Furthermore, the Court noted that none of the plaintiffs are actually being coerced into taking the vaccine. Rather, the Hospital gave them the option to refuse the vaccine and told them the consequence of their refusal, namely, that they would be terminated from their job. “If a worker refuses an assignment, changed office, earlier start time, or other directive, he may be properly fired. Every employment includes limits on the worker’s behavior in exchange for his remuneration. This is all part of the bargain.”

Claims based on religious and disability discrimination

Even though employees will likely not be able to show that employer vaccine mandates violate federal law, particular employees may be able to show that they have a right to opt out of an employer vaccine mandate based on their religious beliefs or medical conditions. For example, in Coronado v. Great Performances Artists As Waitress Inc., Antonio Coronado, a service worker, brought claims under the New York State and New York City Human Rights Laws in state court, claiming his employers’ decision to place him on furlough until he got vaccinated violated his “religious and ethical convictions” and discriminated against him “based upon his physical condition.” There are likely to be similar lawsuits brought by employees all over the country under federal, state, and local anti-discrimination laws. Although the court has not yet weighed in on Mr. Coronado’s complaint, the EEOC has provided guidance that will help show how such claims are likely to fair under the federal laws prohibiting employment discrimination on the basis of religion, Title VII of the Civil Rights Act of 1964, and disability, the Americans with Disabilities Act. Check out our blog post, “COVID-19 Vaccinations: What Employees and Employers Need to Know” to learn more.

Other vaccine mandate developments to come

Although most vaccine mandate litigation is focused on federal law concerning Emergency Use Authorization and anti-discrimination law, some opponents to vaccine mandates are taking other approaches. For instance, a case filed in the United States Court for the Northern District of Illinois argues that the employer’s imposition of a vaccine mandate – even one that allows accommodations for employees’ religious beliefs and disabilities – alters the terms and conditions of employment in violation of Collective Bargaining Agreements entered into by the plaintiff-union. See International Brotherhood of Teamsters, Local 743 v. Central States, Southeast and Southwest Areas Health and Welfare Pension Fund. This claim sidesteps any argument about the vaccine approval process as well as the employer’s legitimate interest in promoting workplace safety. Instead, the claim characterizes the employer’s vaccine mandate, which requires unvaccinated employees to use all of their paid time off and then face discipline (up to and including termination) unless and until they get vaccinated, as imposing a new restriction on the union members’ employment without going through the negotiation process required by the agreements and federal law protecting union rights. For instance, the National Labor Relations Act requires an employer to collectively bargain in good faith with the union over subjects that directly impact “rates of pay, wages, hours of employment, or other conditions of employment.” 29 U.S.C. §§ 158(a)(5); 159(a). The Teamsters Union argued that the employer’s unilateral imposition of the vaccine mandate creates a new “condition of employment,” and requirements on how employees must use their paid time off unlawfully circumvented the mandatory bargaining process. It remains to be seen how the court will handle this claim, but other unions with members opposing vaccine mandates are likely to bring similar claims if the Teamsters Union has any success here.

Some state legislators opposed to vaccine mandates are circumventing courts altogether and are proposing state laws that outright prohibit COVID-19 vaccine mandates. While many such laws are still under consideration, two states have successfully enacted laws curtailing employers’ ability to require their employees to get vaccinated. On April 28, 2021, Arkansas enacted Act 977, which prohibits any state or local agency or entity from requiring a COVID-19 vaccine as a condition of employment, education, entry to facilities, receipt of services, or issuance of a license, certificate, or permit. Ark. Code § 20-7-142. Montana went even further.  As of May 7, 2021, it is unlawful in Montana for any private or government employer to discriminate against any employee based on the employee’s vaccination status or possession of an “immunity passport,” although health care facilities are allowed to inquire about employees’ vaccination status and implement reasonable accommodations to protect employees and patients from any dangers posed by non-vaccinated employees. See Mont. Code Title 49, Chapter 2, Part 3. It remains to be seen if employers or employees seeking a safe workplace will challenge these state laws in court, and how courts will weigh an employer’s interest in workplace safety against the state’s interest in regulating commercial activity and protecting individuals against employer restrictions.

As more employers demand their employees get vaccinated and courts weigh in on existing lawsuits, the tactics of legal resistance to vaccine mandates are sure to adapt and change.

Katz, Marshall & Banks, LLP

Article By Joseph E. Abboud of Katz, Marshall & Banks, LLP

For more articles on COVID-19 vaccines, visit the NLR Coronavirus News section.

CDC Changes Masking Guidance for Fully Vaccinated Individuals

The Centers for Disease Control (CDC) announced on July 27, 2021 that it will adjust its advice to recommend that vaccinated people in substantial or high transmission areas of COVID-19 (defined below) wear masks in indoor public spaces. This guidance will substantially alter the CDC’s May 13 guidance that largely exempted fully vaccinated individuals from the indoor mask requirement. There has been no change in the outdoor masking recommendations at this time. In changing its masking recommendations, the CDC asserts that current scientific information indicates that the delta variant can be spread despite vaccine status, warranting an adjustment to its prior guidance.

Below is a summary of the updated guidance based on the media telebriefing:

  • In public indoor settings in areas of substantial or high transmission, all are to wear masks – including fully vaccinated individuals.
  • All individuals in K-12 schools must wear a mask, regardless of vaccination status, including teachers, staff, and visitors.
  • There should be a continuing effort to strongly encourage vaccination to reduce the spread of COVID-19, including the delta variant.
  • Community leaders should encourage universal masking and vaccination nationwide, regardless of whether or not in a substantial or high transmission area.

Despite the updated guidance, CDC Director Dr. Rochelle Walensky emphasized that wearing a mask is a “personal choice” and no “stigma” should attach to the decision whether or not to wear a mask. Moreover, Dr. Walensky acknowledged that the renewed indoor masking requirement would “weigh heavily” with individuals who are already fully vaccinated. The White House has not provided additional comment on the CDC guidance as of this writing.

The definition of a substantial or high transmission area is based on the CDC’s COVID-19 Data Tracker, which tracks the level of community transmission by county nationwide. Notably, the updated guidance does not apply to areas of moderate or low transmission.

While the CDC guidance is not mandatory, employers are advised to evaluate their workplace policies to determine the extent to which it may be prudent to alter workplace masking requirements. Additionally, states and cities are free to institute their own legally binding masking requirements, regardless of the CDC guidance. Employers are advised to closely monitor state and local developments. We also note that it is unclear what, if any, impact the CDC guidance will have on OSHA’s recent healthcare emergency temporary standard for healthcare employers or its enforcement of its safe workplace standards.

©2021 von Briesen & Roper, s.c

Article By John A. Rubin and Robert J. Simandl at von Briesen & Roper, s.c.

For more CDC COVID-related guidelines, see the National Law Review Coronavirus News section.

Don’t Count Your Lamborghinis Before Your Trademark is in Use

The US Court of Appeals for the Ninth Circuit affirmed a grant of summary judgment, finding that a trademark registrant had alleged infringement of its trademark without having engaged in bona fide use of the trademark in commerce, as required by the Lanham Act. The Court found no material issue of fact as to whether the registrant had used the mark in commerce in a manner to properly secure registration, and the alleged infringer therefore was entitled to cancellation of the registration. Social Technologies LLC v. Apple Inc., Case No. 320-15241 (9th Cir. July 13, 2021) (Restani, J., sitting by designation)

This dispute traces back to a 2016 intent-to-use US trademark application filed by Social Technologies for the mark MEMOJI in connection with a mobile phone software application. After filing its application, Social Technologies engaged in some early-stage activities to develop a business plan and seek investors. On June 4, 2018, Apple announced its own MEMOJI software, acquired from a third party, that allowed users to transform images of themselves into emoji-style characters. At that date, Social Technologies had not yet written any code for its own app and had engaged only in promotional activities for the planned software.

Apple’s MEMOJI announcement triggered Social Technologies to rush to develop its MEMOJI app, which it launched three weeks later (although system bugs caused the app to be removed promptly from the Google Play Store). Social Technologies then used that app launch to submit a statement of use for its trademark application in order to secure registration of the MEMOJI trademark. The record also showed that over the course of those three weeks, Social Technologies’ co-founder and president sent several internal emails urging acceleration of the software development in preparation to file a trademark infringement lawsuit against Apple, writing to the company’s developers that it was “[t]ime to get paid, gentlemen,” and to “[g]et your Lamborghini picked out!”

By September 2018, Apple had initiated a petition before the Trademark Trial & Appeal Board to cancel Social Technologies’ MEMOJI registration. Social Technologies responded by filing a lawsuit for trademark infringement and seeking a declaratory judgment of non-infringement and validity of its MEMOJI registration. When both parties moved for summary judgement, the district court determined that Social Technologies had not engaged in bona fide use of the MEMOJI trademark and held that Apple was entitled to cancellation of Social Technologies’ registration. Social Technologies appealed.

Reviewing the district court’s grant of summary judgment de novo, the Ninth Circuit framed its analysis under the Lanham Act’s use in commerce requirement, which requires bona fide use of a mark in the ordinary course of trade and “not merely to reserve a right” in the mark. The issue on appeal was whether Social Technologies used the MEMOJI mark in commerce in such a manner to render its trademark registration valid.

The Ninth Circuit then explained the Lanham Act’s use in commerce requirement, which requires “use of a genuine character” determined by the totality of the circumstances (including “non-sales activity”), and explained that mere adoption of a trademark, without bona fide use in commerce, in an attempt to reserve rights for the future, is insufficient to establish rights in the mark. The Court reviewed supporting case law, distinguishing between cases where mere promotional activities or internal sales were determined not to constitute use in commerce, and cases where continuous use of a mark as a business name, in public relations campaigns, in sales presentations and in media coverage together sufficiently established bona fide use in commerce. The Court explained that looks for “external manifestation” and “sufficiently public use” to warrant trademark protection.

On the facts of the case before it, the Ninth Circuit found that the record evidence clearly demonstrated that Social Technologies’ use of the MEMOJI mark had not been bona fide use in commerce. With respect to its activities prior to Apple’s June 2018 MEMOJI announcement (which included no software code, the unsuccessful solicitation of investors, and no “association among consumers between the mark and the mark’s owner”), there was not sufficient use to entitle Social Technologies to trademark protection. The Court found that Social Technologies failed to put forward evidence that its admittedly rushed release of the software following Apple’s 2018 announcement was for a genuine commercial purpose warranting trademark protection, rather than mere “token use” in an attempt to reserve a right in the mark.

Affirming the district court’s grant of summary judgment, the Ninth Circuit concluded that Social Technologies did not engage in bona fide use of the MEMOJI trademark in commerce, that its registration was invalid, and that Apple was entitled to cancellation of Social Technologies’ MEMOJI registration.

© 2021 McDermott Will & Emery
For more articles on IP law, visit the NLR

Judge Again Finds DACA Program Illegal, Blocks New Applications, Allows Renewals

The Deferred Action for Childhood Arrival program (DACA) is not legal, U.S. District Court Judge Andrew Hanen has ruled in State of Texas et al. v. U.S. et al.

Judge Hanen issued an injunction preventing the Department of Homeland Security (DHS) from accepting new DACA applications. However, recognizing the substantial reliance interests involved, he allowed current DACA beneficiaries to continue to renew their statuses and their employment authorization – at least while appeals are pending. The Biden Administration immediately responded that it would appeal the decision.

The case is expected to wind its way through the U.S. Court of Appeals for the Fifth Circuit (in New Orleans) and end up at the U.S. Supreme Court for a third time. The first time was when the Supreme Court heard an appeal of Judge Hanen’s earlier decision that the extension of DACA and the creation of the Deferred Action for Parents of Americans and Lawful Permanent Residents were illegal. In that case, the Supreme Court tied, leaving Judge Hanen’s nationwide injunction in place. The second time, the Supreme Court ruled on narrow technical grounds that the Trump Administration had not followed the proper procedures when it attempted to terminate the DACA program.

The question now is whether Congress will pass legislation to protect the “Dreamers” and provide them a path to permanent residence and U.S. citizenship. The American Dream and Promise Act, passed by the House in 2021, provides those paths, but the full bill is not likely to pass in the Senate. A carve-out of the DACA provision might be possible. Otherwise, the thousands of individuals who were brought to the United States by their parents before the age of 16, will remain in limbo.

DACA was put into place by the Obama Administration in 2012 and has been under attack since 2017, when the Trump Administration announced it would terminate DACA. President Joe Biden has stated that Dreamers are “part of our national fabric and make vital contributions to communities across the country every day.” President Biden recognized the Dreamers’ contributions have been particularly evident during the COVID-19 pandemic, as “[m]any have worked tirelessly on the frontlines throughout this pandemic to keep our country afloat, fed, and healthy – yet they are forced to live with fear and uncertainly because of their immigration status.”

Judge Hanen’s decision in State of Texas v. U.S. does not affect the status or employment authorization of any current DACA beneficiaries. DACA beneficiaries who have unexpired employment authorization documents do not need to reverify employment authorization as a result of this ruling (although they will need to reverify prior to the expiration of their employment authorization).

Jackson Lewis P.C. © 2021
For more articles on DACA, visit the NLRImmigration section.