Category: Administrative & Regulatory

Get Poked or Get Canned – Can You Terminate an Employee for Refusing the Vaccine?

The answer is it depends.

Why is the employee refusing the vaccine?

For employers mandating the vaccine, an employee’s refusal to receive it because he or she simply does not want to be vaccinated is likely fair game for termination. Typically, however, an employee will seek a reasonable accommodation that enables him or her not to get the vaccine, raising an objection pursuant to the Americans with Disabilities Act (a medical issue) or Title VII (a sincerely held religious belief). Those scenarios require an employer to entertain the request by engaging in an interactive process to determine, primarily, whether there exists a way to provide the accommodation without creating an undue burden (or hardship) on the employer. The threshold for the hardship analysis is much higher for a medical reason than a religious reason. Keep in mind that you do not have to remove essential functions of a job or create a separate position as a reasonable accommodation.

What if you have a union or a federal contract?

The issue becomes even more complicated if a union is involved or the employer is a federal contractor. With a union, you must make sure you bargain appropriately before imposing a change in working conditions.

On the federal contract side, those employees will fall under a vaccine mandate starting October 15, just like federal employees. In the past months, vaccine requirements have differed from site to site depending on the particular government contracting agent. For example, if the site lets visitors (including contractor/subcontractor employees who perform their duties onsite) enter with masks or a negative test as an alternative to vaccination, the employer will in most cases need to provide the same accommodation. If the site takes a more stringent approach and does not allow masks and negative tests as an alternative, the employer may be able to deny such a request and terminate the employee instead. Before you terminate an employee, make sure to check for any vacancies in which you can provide the accommodation. If no such vacancies exist, the employer should allow the employee to exhaust available sick or PTO time, as well as FMLA leave, if his or her vaccine refusal is based on a medical issue. For a religious issue, the employee would not qualify for sick time, but the employer should allow that employee to exhaust available PTO prior to termination.

What about the OSHA Emergency Temporary Standard?

We expect OSHA to issue its Emergency Temporary Standard (ETS) soon, which will shed light on the analysis, but we do not yet know exactly what that guidance will be. We expect, however, that exceptions based on disability or religious requests for accommodation will be a part of the rules, and the ADA and Title VII analysis will be necessary.

As always, stay tuned for additional guidance after OSHA issues its ETS.

© 2021 Bradley Arant Boult Cummings LLP

Article By Anne Knox Averitt, Chuck Mataya and Anne R. Yuengert of Bradley Arant Boult Cummings LLP

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

Illinois Appellate Panel Splits the Difference for BIPA Statute of Limitations in Closely Watched Decision

Currently pending before the Seventh Circuit Court of Appeals is the important question of when a claim under the Illinois Biometric Information Privacy Act (“BIPA”) accrues.  Cothron v. White Castle, No. 20-3202 (7th Cir.)  In another litigation CPW previously identified, a panel for the Illinois Court of Appeals recently addressed whether BIPA claims are potentially subject to a one-, two-, or five-year statute of limitations.  Tims v. Black Horse Carriers, Inc., 2021 IL App (1st) 200563 (Sep. 17, 2021).  The answer is apparently “it depends,” based on the particular claims a plaintiff asserts under the statute.

The underlying facts of the case, as with many BIPA litigations, arose in the employer-employee context.  Plaintiff filed a putative class action Complaint in March 2019.  Plaintiff alleged that he worked for Defendant from June 2017 until January 2018. Plaintiff alleged that Defendant “scanned and was still scanning the fingerprints of all employees, including Plaintiff, and was using and had used fingerprint scanning in its employee timekeeping,” in violation of BIPA.

Count I of the Complaint alleged that Defendant violated Section 15(a) of BIPA by failing to institute, maintain, and adhere to a retention schedule for biometric data.  Count II of the alleged that Defendant violated BIPA Section 15(b) by failing to obtain an informed written consent and release before obtaining biometric data. Finally, Count III of the Complaint alleged that Defendant violated BIPA Section 15(d) by disclosing or disseminating biometric data without first obtaining consent.

Defendant subsequently moved to dismiss the Complaint in its entirety, asserting that Plaintiff’s Complaint was filed outside BIPA’s limitation period.  The motion noted that BIPA itself has no limitation provision and argued that the one-year limitation period for privacy actions under Illinois Code Section 13-201 applies to causes of action under the BIPA.

Plaintiff opposed, arguing that: (1) BIPA’s purpose is (in part) to prevent or deter security breaches regarding biometric data and therefore (2) in the absence of a limitation period expressly contained in BIPA itself, the five-year period in Illinois Code Section 13-205 for all civil actions not otherwise provided for should apply.  Plaintiff also argued that the one-year limitations period applied to actions only involving publication of information—which was not implicated for all claims under BIPA

The statute of limitations issue was eventually certified to a panel of the Illinois Court of Appeals.  The Court noted at the onset that Section 15 of BIPA “imposes various duties upon which an aggrieved person may bring an action” and “[t]hough all relate to protecting biometric data, each duty is separate and distinct.”

The Court ultimately found the publication-based distinction raised in the parties’ briefing a useful construct for categorizing claims under BIPA: “[a] plaintiff could therefore bring an action under the Act alleging violations of section 15(a), (b), and/or (e) without having to allege or prove that the defendant private entity published or disclosed any biometric data to any person or entity beyond or outside itself.  Stated another way, an action under section 15(a), (b), or (e) of the Act is not an action ‘for publication of matter violating the right of privacy.’” (quotation omitted).

The end result reached was that the Court held Section 13-201 (the one-year limitations period) governs BIPA actions under Section 15(c) and (d) while Section 13-205 (the five-year limitations period) governs BIPA actions under Sections 15(a), (b), and (e).

Although the shorter limitations period adopted for BIPA claims under Section 15(c) and 15(d) is a welcome ruling for defendants named in BIPA class actions, this ruling will have a limited impact on pending and future-filed BIPA cases.  This is because with the statute’s generous liquidated damages, class actions (even if defined depending on the claim asserted to include only a 1-year period) will still potentially bring a significant payoff for determined class counsel.  The bigger question—pending before the Seventh Circuit—is when BIPA claims accrue in the first place.  For more on this, stay tuned.  CPW will be there to keep you in the loop.

© Copyright 2021 Squire Patton Boggs (US) LLP

Article By Kristin L. Bryan of Squire Patton Boggs (US) LLP

For more on BIPA, visit the NLR Communications, Media & Internet section.

EAGLE Act Aims to Reform Employment-Based Green Cards, H-1B Visa Program, and Family-Sponsored Visas

Rep. Zoe Lofgren (D-Calif.), chair of the House Subcommittee on Immigration and Citizenship, and Rep. John Curtis (R-Utah) have introduced the Equal Access to Green Cards for Legal Employment (“EAGLE”) Act. Its reforms focus on employment-based green cards, the H-1B visa program, and family-sponsored visas.

The EAGLE Act

The proposed bill makes it harder for fraud to occur. The bill requires all H-1B job postings to be listed on the U.S. Department of Labor (“DOL”)‘s website for 30 days. Employers are prohibited from employing more than 50% of their workforce through H-1B jobs. The Act also requires employers to adjust wage requirements for H-1B jobs in a way that reflects changes in the cost of living throughout the United States.

The bill’s sponsors strongly feel that the proposed changes will reduce H-1B visa fraud, which will, in turn, allow American employers truly in need of foreign workforce to meet their demands better, even without increasing the H-1B visa cap.

The bill also proposes a remedy to the current green card backlogs. By phasing out per-country caps by 2032, the bill would prevent U.S. Citizenship and Immigration Services (“USCIS”) from being overwhelmed with an enormous number of backlogged applications.

Present Immigration System Requires Reforms

It is widely known that the immigration system has had many setbacks, and reform is long-awaited. The last major reform was in 1990. At least five presidents have channeled their efforts in proposing drastic immigration reforms, but some have seen little success.

The present immigration system has placed caps on many visa programs, restricting the number of visas issued. This restricts employers with an immediate need for workforce, as they cannot find enough workers to employ within the United States. Since the pandemic, the U.S. has seen acute labor shortages, causing employers to lobby for an increase in the employment-based visa cap.

Employment-based permanent resident visas are subject to a 7 percent per-country cap. India and China have the maximum number of skilled workers on employment-based visas, resulting in skilled workers from these countries waiting for decades for permanent residency. As a result, these skilled workers are often unable to immigrate to the United States.

“We are now seeing recruiters from outside America luring those with highest skills away from the U.S.,” Lofgren stated in a press release. Unlike the United States, many countries, like Canada and Australia, use merit-based immigration programs. In the merit-based immigration system, potential immigrants are scored based on language skills, educational degrees, and salary offers. Visas are offered to those who meet the minimum requirements.

Reforms to H-1B Visa Program

One of the most coveted visa programs employers use is the H-1B, an employment-based visa for immigrants in a specialty occupation. Each year, only 85,000 H-1B visas are issued, including 20,000 set aside for applicants with master’s degrees and PhDs from American universities. There are far more applicants each year than the numeric limit allows, so a lottery is held. The H-1B program is also criticized for fraud by employers, some of whom employ foreign workers and pay them less than they would pay equivalent American workers.

©2021 Norris McLaughlin P.A., All Rights Reserved

Article By Raymond G. Lahoud of Norris McLaughlin P.A.

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

New York HERO Act Alert: COVID-19 Designated as Highly Contagious Communicable Disease

On September 6, 2021, New York State Commissioner of Health Howard A. Zucker designated COVID-19 as “a highly contagious communicable disease that presents a serious risk of harm to the public health in New York State.” As a result of the commissioner’s designation, employers are required to activate their airborne infectious disease exposure prevention plans in accordance with the New York Health and Essential Rights Act (NY HERO Act).

As we previously reported, on July 6, 2021, the New York State Department of Labor (NYS DOL), in consultation with the New York State Department of Health, published the Airborne Infectious Disease Exposure Prevention Standard and Model Airborne Infectious Disease Exposure Prevention Plan. Although the NYS DOL initially published the standard and model plan only in English, the NYS DOL has since furnished the standard and the model plan in Spanish. The industry-specific templates, for “Agriculture,” “Construction,” “Delivery Services,” “Domestic Workers,” “Emergency Response,” “Food Services,” “Manufacturing and Industry,” “Personal Services,” “Private Education,” “Private Transportation,” and “Retail,” are available only in English.

When the standard and the model plan were published, COVID-19 had not received the commissioner’s designation as a highly contagious communicable disease presenting a serious risk of harm to the public health. Now, because of the September 6, 2021, designation, employers with employees in New York may wish to ensure that they are complying with the applicable provisions of the NY HERO Act. Specifically, if not already completed, each employer shall:

  1. Immediately review . . . and update the plan, if necessary, to ensure that it incorporates current information, guidance, and mandatory requirements, issued by federal, state, or local governments related to [COVID-19];

  2. Finalize and promptly activate the . . . plan;

  3. Provide the verbal review [in accordance with the plan];

  4. Provide each employee with a copy of the . . . plan in English or in [Spanish, if identified as the employee’s primary language];

  5. Post a copy of the plan in a visible and prominent location at the worksite (except when the worksite is a vehicle);

  6. Ensure that a copy of the . . . plan is accessible to employees during all work shifts.

Per the act, if an employer has a handbook, the plan must be included in the handbook.

Because Commissioner Zucker’s designation requires activation of the plans, employers may also want to consider that the model plan and industry-specific templates provide that when a plan is activated, training “which will cover all elements” of the plan must be provided. Per the model plan and industry-specific templates, the topics to be covered during training include the following:

  1. The infectious agent and the disease(s) it can cause;

  2. The signs and symptoms of the disease;

  3. How the disease can be spread;

  4. An explanation of [the] … [p]lan;

  5. The activities and locations at [the employer’s] worksite that may involve exposure to the infectious agent;

  6. The use and limitations of exposure controls[;]

  7. A review of the standard, including employee rights provided under [the NY HERO Act].

The model plan and industry-specific templates also provide that the training will be furnished “at no cost to employees and take place during working hours,” or, if training cannot take place during normal work hours, that “employees will be compensated for the training time (with pay or time off).” In addition, the training is required to be “[a]ppropriate in content and vocabulary to [the] educational level, literacy, and preferred language” of each employee and “[v]erbally provided in person or through telephonic, electronic, or other means.”

The commissioner’s designation will remain in effect until September 30, 2021, at which point the commissioner will “determine whether to continue [the] designation.” Accordingly, employers may wish to continue to monitor guidance and information from the New York State Department of Health and the NYS DOL to determine additional or continuing obligations, if any.

© 2021, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

Article By Simone R.D. Francis of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

For more articles on the NY HERO Act, visit the NLR Labor & Employment section.

Labor Day 2021: State of the U.S. Labor Unions

Hard to believe, but Labor Day 2021 is already upon us. In addition to (hopefully) preparing for an extended, relaxing weekend with family and friends, that also means it’s time for my annual bird’s-eye look at the current labor relations landscape in America. While this year on the surface appears to be a mixed bag for unions, the labor movement may have reason to be optimistic in the coming years.

Let’s start with a look at the numbers. According to the Bureau of Labor Statistics’ annual report, union membership in the private sector rose on a percentage basis for the first time in years from 2019 to 2020. However, this percentage increase largely was attributable to a decline in overall workforce numbers related to the pandemic, as unionized employees were not hit with job loss to the same extent as their non-union counterparts.

Nevertheless, it wasn’t all good news for unions. According to a Bloomberg Law report, 13 major unions saw a decline in their membership ranks last year.

As the economy and soaring jobs market heats up, though, it should be expected that union membership numbers will increase. Further contributing to a likely increase in 2021 is the favorable legal landscape ahead for unions. Indeed, Congress currently is considering passing the PRO Act, which would, among other things, make it easier for unions to organize workforces. In addition, the National Labor Relations Board (NLRB) now has a pro-union majority for the first time in years. It is widely anticipated that the NLRB will issue a host of opinions favorable to unions, such as decisions that limit management flexibility to unilaterally alter organized workers’ terms and conditions of employment, and that it will promulgate rules to streamline the union organizing process.

In sum, unlike prior years, there appears to be a basis for optimism within the labor movement. We’ll see what they do with this potential momentum. Employers with unions and those desiring to remain union-free should continue to monitor legal developments and organizing trends so they can be prepared to navigate the changing landscape. In the meantime, hope everyone enjoys the Labor Day weekend.

© 2021 BARNES & THORNBURG LLP

Article By David J. Pryzbylski of Barnes & Thornburg LLP

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

Considerations for Employers Thinking about COVID-19 Vaccine Mandates

Since the beginning of the COVID-19 pandemic, employers have dealt with many challenges related to ensuring a safe and healthy workplace for their employees. With the persistence of the highly transmissible Delta and Delta Plus variants, the rise in the number of positive tests and cases, and the potential impact of other variants, employers are wondering whether to delay the return of employees still working remotely and what safety measures should be implemented for those in the workplace. Some employers have re-implemented procedures that had been lifted, such as requiring all employees (vaccinated or not) to wear masks and limiting in-person meetings and other gatherings.

As part of this analysis, many employers are debating whether to mandate the COVID-19 vaccine for their employees. While several large private employers, including Disney, Google, Facebook, United Airlines, and Tyson Foods, have implemented vaccine mandates, other employers remain hesitant to take that step. Further, employers who want to mandate the vaccine may not know the best way to do so.

A vaccine mandate comes with various legal and practical risks, especially because relevant legal precedent and guidance surrounding an employer’s ability to mandate the COVID-19 vaccine is still fairly limited. Employers considering mandating vaccinations may wish to consider the following:

  • Percentage of Vaccinated Employees. Employers can ask about an employee’s vaccination status and even require proof of vaccination. The percentage of vaccinated workers may help employers determine whether a mandate is needed or how the mandate should be enforced.
  • Community Vaccination and Infection Rates. In addition to vaccination rates in the workplace, employers also may consider vaccination and infection rates in their local communities. This information can provide employers with some idea of the likelihood of employees being exposed and infected, infection trends, and also help them determine whether a mandate is needed.
  • Government Orders and Laws. The general consensus is that a federal nationwide vaccination mandate is unlikely, as the government’s authority to institute such a mandate is unclear. By contrast, it is well-established that states and municipalities have authority to mandate vaccines to protect public health. Some states and municipalities already have mandated vaccinations for certain groups of workers or facilities, such as workers in nursing homes, long-term care facilities, or health care and/or group facilities in general. On the other hand, several states have enacted laws with prohibitions on vaccine mandates. The majority of these laws against mandates apply only to state and local governments; employers and private schools in those states may still require vaccinations.
  • Feasibility of Reasonable Accommodations for Those Who Are Exempt. Although the Equal Employment Opportunity Commission (EEOC) has taken the position that employers may mandate the COVID-19 vaccine, employers must make exceptions for certain employees because of disabilities, medical contraindications, or sincerely-held religious beliefs. Under those circumstances, employers may need to engage in a reasonable accommodation process to determine whether and how reasonable accommodations can be provided. The employer will be required to provide the employee with a reasonable accommodation to the vaccination requirement unless it would pose an undue hardship or a direct threat to the workplace which cannot be mitigated. Employers must be prepared to identify and handle such exemption requests. More information regarding the EEOC’s guidance on COVID-19 vaccinations in the workplace can be found here.
  • Current Lack of Full FDA Approval for Some Vaccines. While the U.S. Food and Drug Administration (FDA) has now granted full approval to the Pfizer vaccine, Moderna and Johnson & Johnson’s Janssen vaccine maintain Emergency Use Authorization (EUA) status. This distinction may be important to employers because the Food, Drug, and Cosmetic Act (FDCA) includes a condition that potential recipients of an EUA product “are informed” of certain things, including “the option to accept or refuse [vaccination] administration.” Given that different vaccine clinics and other locations offering vaccines typically only offer one type, employers may want to consider how to provide information to employees regarding availability of certain vaccines or consider allowing more time for employees to obtain a particular vaccine.

2021-08-31_16-55-51.png

  • Collective Bargaining Obligations. Implementation of a vaccine requirement is likely a mandatory subject for collective bargaining, requiring employers to negotiate with the union representing unionized employees. Also, the union may request bargaining about the impact of a decision to mandate vaccination, requiring bargaining about issues like testing, union representation through the exemption process, and leave requests.
  • Concerns of Vaccinated Employees. Vaccinated employees may be worried about interacting with colleagues in the workplace who are unvaccinated. Employees may have young children at home who are unable to get the vaccine or family members living in the same household who are immunocompromised. Some employees may feel their employer should take more action with regard to vaccinations in order to ensure a safe and healthy workplace. Section 5(a)(1) of the Occupational Safety and Health Act contains a general duty clause which may provide such employees with a tool to support a claim that the employer failed to provide a safe and healthy work environment.

Employers may wish to consider all options to determine what measures work best for their own workplace:

Option #1: Encourage Rather than Mandate

One option is to encourage, rather than mandate, the vaccine. This may include offering various incentives, such as cash, time off, transportation to employees related to receiving the vaccine, educating employees, and/or having management lead by example. Employers who still see a high percentage of unvaccinated individuals, however, may feel a mandate is more appropriate.

Option #2: Implement a Soft Mandate

Some employers have recently opted for a “soft mandate.” The soft mandate requires that unvaccinated employees practice certain precautions, such as wearing masks, social distancing, and weekly testing; employers also may limit or prohibit unvaccinated employees from work-related travel. This approach has been encouraged by President Biden for federal workers and contractors, and certain cities and states (such as New York City and the State of California) are taking similar approaches for their public workers. However, given reports that the virus can infect and be transmitted even by vaccinated employees, some of the precautions noted above (such as masking and social distancing) may be appropriate for all employees.

Option #3: Health Plan Premium Surcharges

Some employers are considering implementing a premium surcharge for unvaccinated employees participating in the employer’s health plan as an alternative to terminating unvaccinated employees. These surcharges are likely to range from twenty to fifty dollars, similar to surcharges imposed for employees who smoke. Delta Airlines, however, recently imposed a two-hundred-dollar surcharge per month on unvaccinated employees. COVID-19 diagnoses are likely to generate higher costs and health insurance premiums due to serious illness or hospitalization. However, this may violate the Americans with Disabilities Act (ADA) due to discrimination based on a health-related condition and as there is limited data evidencing unvaccinated employees actually result in higher costs compared to vaccinated employees.

Option #4: Implement a Hard Mandate

Of course, employers may pursue mandates with strong enforcement measures, such as termination, for employees who choose not to be vaccinated. Employers who impose a hard mandate should consider how much time is appropriate for allowing employees to become vaccinated. Because the Pfizer vaccine requires four weeks between the first and second doses, and another two weeks before the vaccine is fully effective, this timing should be considered in setting a time period. Similarly, employers may want to consider whether and how they would like to help provide access to the vaccine, such as by paying for transportation, providing time off from work, or holding a clinic at the workplace. Employers also should consider how they will communicate and distribute information regarding the COVID-19 vaccine and any associated policies to employees and employee expectations, how they will track which employees who have obtained the vaccine, and how they will address relevant questions or concerns from employees. Additionally, employers may find it helpful to provide their employees with information regarding the business reasons for the mandate and the benefits of the mandate. Employees terminated for not complying with their employer’s vaccine mandate may not be eligible for unemployment benefits; their ability to do so will likely depend on state regulations as well as the appetite of unemployment compensation commissions (and employers) to deprive workers of any benefits.

Employers are encouraged to speak with competent legal counsel about these issues.

Copyright © 2021 Robinson & Cole LLP. All rights reserved.

Hurricanes and Act of God Defenses

Following a major hurricane or other extreme weather event, vessel owners and operators may face liability for failure to perform their agreed contracts or for liability arising from an allision or collision. When such major hurricanes strike, to escape liability, vessel owners and operators may take advantage of two doctrines: (1) force majeure; and (2) the inevitable accident/ Act of God defense. Below we explain those doctrines and the burden of proof for each.

A.        Contractual Defenses – Force Majeure Clauses

Maritime contracts for services generally include clauses for performance, demurrage, deviation, termination and suspension.  In addition, most contracts include a force majeure clause designed to excuse one or all of the parties from liabilities or obligations under a contract when there has been an occurrence of an extraordinary and unforeseeable event beyond the control of the parties. These are known as force majeure clauses—which roughly translates to a “superior force.” A typical force majeure clause reads as follows:

Except for the duty to make payments hereunder when due, and the indemnification provisions under this Agreement, neither Company nor Contractor shall be responsible to the other for any delay, damage or failure caused by or occasioned by a Force Majeure Event as used in this Agreement.  “Force Majeure Event” includes: acts of God, action of the elements, warlike action, insurrection, revolution or civil strife, piracy, civil war or hostile action, strikes, differences with workers, acts of public enemies, federal or state laws, rules and regulations of any governmental authorities having jurisdiction in the premises or of any other group, organization or informal association (whether or not formally recognized as a government); inability to procure material, equipment or necessary labor in the open market acute and unusual labor or material or equipment shortages, or any other causes (except financial) beyond the control of either Party. Delays due to the above causes, or any of them, shall not be deemed to be a breach of or failure to perform under this Agreement.

Moreover, force majeure clauses, especially in contracts performed in the Gulf of Mexico, typically include hurricanes in the exhaustive list of potential force majeure events. If “hurricanes” are not specifically contemplated, such weather events may also qualify under “Act of God,” as discussed below.

When such a force majeure event occurs, the party seeking to invoke the clause bears the burden of proof in showing its application. Generally speaking, the party would need to present evidence proving: (1) that the alleged event constitutes a force majeure event; (2) that the event had adversely affected the party’s ability to perform; (3) that the party’s inability to perform is beyond its control; and (4) there existed no reasonable steps the party could have taken to avoid the event or its consequences. In the aftermath of a major hurricane such as Hurricane Katrina or Hurricane Ida, the parties should face little to no difficulty in proving that the hurricane qualified as a force majeure event and that their performance has been affected.

Even if a maritime contract does not contain a force majeure provision, parties may still look to common law principles to escape liability for nonperformance. For example, under the doctrine of “impossibility of performance,” a party can be relieved of its contractual obligations when the object of performance has become impossible or commercially impracticable. See Transatlantic Financing Corp. v. United States, 363 F.2d 312 (D.C. 1966).

All in all, following a major disaster, parties should first look to the language of the contract to determine the viability of such defenses. The contract will control and will dictate the parties’ next steps. Jones Walker routinely advises clients with respect to such matters.

B.        Defenses to Tort Liability – Act of God

The maritime doctrine of “Act of God” or “inevitable accident” serves as a defense to nonperformance of contractual obligations, as discussed above, and to liability for a maritime accident, such as a collision or allision. The doctrine serves as an affirmative defense to the element of causation. In other words, the loss was caused not by any action of the vessel owner or any human intervention, but was caused by an unpredictable and inevitable Act of God, which could not have been prevented. The U.S. Supreme Court has defined an “Act of God” as “a loss happening in spite of all human effort and sagacity.” The Majestic, 166 U.S. 375 (1897). This defense has also been widely defined as “any accident, due directly and exclusively to natural causes without human intervention, which by no amount of foresight, pains, or care, reasonably to have been expected could have been prevented;” and/or “a disturbance . . . of such unanticipated force and severity as would fairly preclude charging . . . [defendant] with responsibility for damage occasioned by the [defendant’s] failure to guard against it in the protection of property committed to its custody.” See 1A C.J.S. Act of God at 757 (1985); Ompania De Vapores INSCO S.A. v. Missouri Pacific R.R. Co., 232 F.2d 657, 660 (5th Cir. 1956), cert. denied, 352 U.S. 880 (1956). See also Skandia Ins. Co., Ltd. V. Star Shipping, AS, 173 F. Supp. 2d 1228 (S.D. Ala. 2001) (defining “Act of God” as a natural event that is overwhelming and cannot be forestalled nor controlled with respect to a Hurricane Georges cargo claim).  With respect to major weather events such as hurricanes, the doctrine acts as a defense to tort liability for breakaways resulting in collision and allisions. See  Petition of U.S., Heide Shipping & Trading v. S.S. Joseph Lykes, 425 F.2d 991 (5th Cir. 1970) (vessel breakaway in Hurricane Betsy). That said, such hurricanes must be “so extraordinary that the history of climatic variations and other conditions in the particular locality affords no reasonable warning of them.” Warrior & Gulf Navigation Co. v. United States, 864 F.2d 1550, 1553 (11th Cir. 1989) (other internal citations omitted).

Before even considering the “Act of God” defense however, three important maritime presumptions come into play: (1) the Pennsylvania Rule; (2) the Louisiana Rule; and (3) the Oregon Rule —named after the respective cases in which they arose. Under the Pennsylvania Rule, a party who violates a safety regulation, such as the COLREGS, will be presumed at fault for a maritime incident. The Pennsylvania Rule may be overcome but case law notes that: “a party who fails to observe a safety regulation [must meet] the burden of showing not merely that [its] fault might not have been one of the causes [of the loss], or that it probably was not, but that it could not have been.” United States v. Nassau Marine Corp., 778 F.2d 1111, 1116 (5th Cir. 1985). The Louisiana and Oregon Rules together create a presumption of fault against the vessel owner of a vessel striking another vessel or stationary object. The Louisiana and The Oregon Rules “[create] a presumption of fault that shifts the burden of production and persuasion to a moving vessel who, under her own power, allides with a stationary object.” Combo Maritime, Inc. v. U.S. United Bulk Terminal, LLC, 615 F.3d 599, 604 (5th Cir. 2010). The moving vessel may rebut the presumption by showing by a preponderance of the evidence, that (1) the collision was the fault of the stationary object (or other vessel), (2) that the moving ship acted with reasonable care, or (3) that the collision was an unavoidable accident.  Bunge Corp. v. M/V Furness Bridge, 558 F.2d 790, 795 (5th Cir. 1977), cert. denied, 435 U.S. 924, 98 S. Ct. 1488, 55 L. Ed. 2d 518 (1978)).

When one of the aforementioned principles apply, the presumption shifts the burden of proof to the vessel owner — both the burden of producing evidence and the burden of persuasion — who must show that it was without fault or that the collision was the result of an inevitable accident, i.e. an Act of God. Bunge Corp. v. M/V Furness Bridge, 558 F.2d 790, 795 (5th Cir. 1997). Where a party invokes the Act of God defense and alleges that such vis major event caused the accident (ie. no fault of the vessel owner), the vessel owner bears a heavy burden to demonstrate that its “drifting was the result of an inevitable accident, or a vis major, that human skill and precaution and a proper display of nautical skill could not have prevented.” Bunge Corp., 240 F.3d at 926. In addition, a party who invokes Act of God with respect to inclement weather must prove not only that the weather was heavy, “but also that it took reasonable precautions under the circumstances as known or reasonably to be anticipated.” In re Southern Scrap Material Co., 713 F. Supp. 2d 568, 578 (E.D. La. 2010) (internal citations omitted). In other words, the party must show that it took reasonable precautions under the circumstances to prevent the breakaway, collision, or allision. Petition of U.S., 425 F.2d 991, 995 (5th Cir. 1970). If any human negligence was a contributing cause of the incident, the Act of God defense will be defeated. Crescent Towing & Salvage Co., Inc. v. M/V Chios Beauty, No. 05-4207, 2008 U.S. Dist. LEXIS 62247 (E.D. La. Aug. 14, 2008). This is because an Act of God is such a catastrophic event that the exercise of reasonable care or reasonable precautions could not have prevented the loss.

Hurricanes are generally regarded as “Acts of God.” Even though storms are not unusual for the Gulf of Mexico, courts recognize that a hurricane that causes unexpected and unforeseeable devastation with unprecedented wind velocity, storm surges, flooding, etc. is a classic case of an “Act of God.” Terre Aux Boeufs Land Co. v. J. R. Gray Barge Co., 00-2754 (La. App. 4 Cir. 11/14/01); 803 So.2d 86, 92. For example, following Hurricane Katrina, the U.S. District Court for the Eastern District of Louisiana held that a Category 4 or 5 hurricane was an Act of God sufficient to bar a claim by a marina owner against the owner of a vessel that broke away from her berth, drifted and hit another vessel.  The defense of Act of God applied because, 1) the accident was due exclusively to natural events without human negligence, and (2) there was no negligent behavior.  J.W. Stone Oil Dist., LLC v. Bollinger Shipyard, 2007 WL 2710809 (E.D. La. 2007).  The district court held in Stone Oil that hurricanes are considered in law to be an Act of God unless there is an intervening and contributing act of individual negligence. This includes taking reasonable precautions based upon the available information. But see Borries v. Grand Casino of Miss., Inc., 187 So.3d 1042, 1050 (Miss. 2016) (holding that plaintiff presented sufficient evidence to create a factual dispute as to whether a casino vessel was properly moored ahead of Hurricane Katrina so as to preclude a summary judgment on the Act of God defense). The relevant inquiry always revolves around what reasonable precautionary steps the vessel owner took ahead of the storm (or should have taken).

In Simmons v. Lexington Ins. Co., 2010 WL 1254638 (E.D. La. 2010), aff’d., 401 Fed. Appx. 903 (5th Cir. 2010), the district court also considered whether reasonable precautions had been taken by a marina to protect a sailboat in Hurricane Katrina under both Louisiana and maritime law.  The Court reviewed other Katrina cases, including Conagra Trade Group, Inc. v. AEP Memco, LLC, 2009 WL 2023174 (E.D. La. 2009), and Coex Coffee Int’l., Inc. v. Dupuy Storage & Forwarding, LLC, 2008 WL 1884041 (E.D. La. 2008).  (Katrina’s unprecedented flooding and devastation was an Act of God defense.)  In Conagra, supra, the district court was asked to review a contract of affreightment for a cargo of wheat aboard a barge that sunk.  The defendant was found not negligent in delivering its barge of cargo several days before the weather forecast accurately predicted the landfall of Katrina.  In In re S.S. Winged Arrow, 425 F.2d 991 (5th Cir. 1970), the court affirmed that the Act of God defense applied to the loss of a vessel properly moored well before it became apparent that Hurricane Betsy would strike.

Regardless of if such cases are brought in federal court or state court, the Act of God doctrine will apply. For example, following Hurricane Rita, Jones Walker successfully defended its client in a Louisiana state court by invoking the Act of God defense in response to a barge breakaway in Lake Charles that struck and destroyed a bridge. Following a trial, the jury exonerated the defendant vessel owner finding that Hurricane Rita caused the loss, not any alleged act of the barge owner.

C.        Contractual Performance Clauses – Act of God

Clauses for demurrage, detention or laytime usually involve delays in the loading or unloading of cargo or the delivery of goods and materials.  Laytime is the period of time allowed for loading and unloading.  Demurrage and detention are sums paid to compensate for time lost related to the delivery of equipment or cargo.  Demurrage begins to run after the passage of laytime or the agreed time of delivery and performance.  Damages are awarded for failure to perform.  Deviation is an obligation to maintain a proper course in ordinary trade and to timely arrive at the agreed destination.  All deviation clauses are subject to certain liberties.  Any deviation may affect insurance and hire.

Typically a contract for maritime services can be terminated for cause or for convenience.  Similarly, parties may negotiate terms to suspend performance, which would suspend payment of hire and performance of services.  A suspension clause is typically an off-hire clause where the contract terms remain but no hire is paid.  Usually a vessel owner will be compensated and reimbursed for certain additional expenses if a contract is terminated for convenience.  An Act of God clause excuses delays in performance, but in most cases serves to either suspend performance or terminate the contract for cause as between the parties.

D.        Conclusion

In sum, following major hurricanes like Katrina, Laura, and now Ida, vessel owners and operators may invoke the Act of God defense (with respect to both tort liability and contractual obligations). That said, to successfully invoke the defense, the vessel owner faces a high burden in proving that human negligence did not cause the loss. Such a burden requires certain evidence, testimony, and other proof.

© 2021 Jones Walker LLP

Article By Grady S. Hurley, Jefferson R. Tillery and Sara B. Kuebel of Jones Walker LLP

For more articles on government contracts, visit the NLR Government Contracts, Maritime & Military Law section.

Wealth Planning in 2021: Preparing For a Changing Tax Landscape

Since President Biden took office at the beginning of this year, there has been much buzz and conjecture regarding what the tax policy under the Biden-Harris Administration would look like.  In light of the recently released Department of Treasury’s General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals, commonly known as the “Green Book,” we now have a better idea of the proposed tax law changes that the Administration will focus on implementing in the coming year.

While the Green Book contains various tax proposals that could significantly affect estate planning, it interestingly does not include a proposal to decrease the estate and gift tax exemption, which was a major topic of discussion during last year’s election cycle (click here to review our advisory on Estate Planning and the 2020 Election).  However, some Democrats in Congress nonetheless continue to argue for this reduction.  For example, Senator Bernie Sanders’ proposed legislation, For the 99.5% Act, would reduce the gift tax exemption to $1 million per person and the estate tax exemption to $3.5 million per person and would also impose new progressive estate tax rates ranging from 45% to 65%.

In any event, the Green Book contains the proposed tax laws that reflect the Administration’s top priorities and are more likely to be enacted than those proposals not included in the Green Book.  The Green Book proposals seek to reverse many of the tax laws included in the 2017 Tax Cuts and Jobs Act enacted under former President Trump, such as a proposed increase to individual income tax rates and an end to certain capital gains tax preferences, discussed in further detail below.

Green Book Proposals That Would Affect High Net Worth Clients:

Increase Top Marginal Individual Income Tax Rate for High-Income Earners.  The top marginal income tax rate would increase from 37% to 39.6% for taxable income in excess of the top bracket threshold.  For taxable years beginning January 1, 2022, this would apply to income in excess of $509,300 for married individuals filing jointly and $452,700 for single filers, and thereafter be indexed for inflation.

Tax Capital Gains for High-Income Earners at Ordinary Income Tax Rates.  For taxpayers with adjusted gross income of more than $1 million, long-term capital gains and qualified dividends tax rates would increase to match the proposed ordinary income tax rates.  To the extent that a taxpayer’s income exceeds $1 million, rates would go from 20% (or 23.8% including the net investment income tax (“NIIT”)) to 39.6% (or 43.4% including NIIT).  This proposal currently includes a retroactive effective date of April 28, 2021.

Treat Transfers of Appreciated Property by Gift or at Death as Realization Events.  This proposal would eliminate the so called “step up in basis loophole,” which allows for an asset transferred at death to be “stepped up” to fair market value for cost basis purposes resulting in no capital gains tax imposed on the asset’s appreciation through date of death.  Instead, the transfer of an appreciated asset by gift or at death would be treated as sold for fair market value at the time of the transfer, creating a taxable gain realization event for the donor or deceased owner.  There would, however, be a $1 million per person (or $2 million per married couple) exemption from recognition of capital gains on property transferred by gift or at death, indexed for inflation.  In addition, certain exclusions would apply, including:

  • Residence.  $250,000 per person (or $500,000 per married couple) would be excluded from capital gain on the sale or transfer of any residence.
  • Surviving spouse.  Transfers by a decedent to a U.S. citizen spouse would carry over the basis of the decedent and capital gain recognition would be deferred until the surviving spouse dies or otherwise disposes of the asset.
  • Charity.  Appreciated property transferred to charity would not generate a taxable gain; however, the transfer of appreciated assets to a split-interest charitable trust would generate a taxable gain as to the share of the value transferred attributable to any non-charitable beneficiary.
  • Tangible personal property.  No capital gain would be recognized on transfers of tangible personal property (excluding collectibles).

Although the tax imposed on gains deemed realized at death would be deductible on the estate tax return of the decedent’s estate, deductions are not equivalent to tax credits and in high tax states such as New York, the additional tax could be substantial.

Impose Gain Recognition on Property Transferred to or Distributed from an Irrevocable Trust.  Any transfers of property into, and distributions in kind from, an irrevocable trust would be treated as deemed recognition events subject to capital gains tax.  In addition, while the generation-skipping transfer (“GST”) tax exempt status of a trust would not be affected, gain would automatically be recognized on property held in an irrevocable trust which has not otherwise been subject to a taxable recognition event within the prior 90 years.  The first possible recognition event would be December 31, 2030 for any trust in existence on January 1, 1940.  This proposal would also apply to transfers to, and distributions in kind from, partnerships and other non-corporate entities.  Elimination of Valuation Discounts.  The valuation of partial interests in property contributed to a trust would be equal to the proportional share of the fair market value of all of such property.  In other words, no discounts for lack of marketability or minority interests would be allowed in valuing transfers of partial interests in LLCs, corporations, partnerships or real property.

Summary

The legislative text of the Administration’s tax proposals will likely not be available until the fall.  It is important to note that any proposed tax law changes face a split 50-50 Senate, which means that the prospect of passing any tax reform at all is uncertain.  Commentators believe that the Green Book proposals will be the subject of extensive negotiation over the next several months, including significant opposition to large increases in capital gains tax rates.  In the meantime, we at Wiggin and Dana [link to PCS attorneys page] are available to discuss the Green Book proposals in more detail and to make proactive, tailored recommendations in light of the current changing tax law landscape.

© 1998-2021 Wiggin and Dana LLP

Article by Michael T. Clear, Veronica R.S. Bauer, Robert W. Benjamin, Daniel L. Daniels, and Helen C. Heintz with Wiggin and Dana LLP.

For more articles on taxes, visit the NLR Tax section.

Oregon Bans Home Buyers’ ‘Love Letters’ to Sellers

As a potential harbinger of the future, Oregon has become the first state in the nation to ban real estate “love letters.” The new law goes into effect January 1, 2022.

The State of Oregon passed a law (HB 2550), and it signed by Governor Kate Brown, that, among other things, states the following:

In order to help a seller avoid selecting a buyer based on the buyer’s race, color, religion, sex, sexual orientation, national origin, marital status or familial status as prohibited by the Fair Housing Act (42 U.S.C. 3601 et seq.), a seller’s agent shall reject any communication other than customary documents in a real estate transaction, including photographs, provided by a buyer.

What exactly is the Oregon legislature seeking to prevent a seller’s agent from communicating? The new law prohibits buyer’s agents from providing the seller’s agent with what is known as “love letters,” letters written by the buyer with the intent of wooing sellers to accept their offers. The use of such letters has become a common tactic to pull at sellers’ heartstrings, especially in a sellers’ market, where many buyers are bidding for a property (often significantly over the asking price).

The practice usually involves the buyers writing about how much they love the home, and how they imagine their family living there. However, these letters may include descriptive details and family photos, which could reveal protected characteristics, such as a person’s race, national origin, skin color, sex, religion, sexual orientation, familial status, or marital status. The rationale behind a ban like Oregon’s is that information in these letters could be used by the seller, whether consciously or not, and create potential unlawful biases in the seller’s decision-making process as to whose offer to accept.

Concerns over housing discrimination has been around for decades. Yet, recently, there have been increased federal, state, and local enforcement efforts directed toward eradicating it. The Oregon statute may represent a growing trend against these types of “love letters.” For instance, as The Real Deal reported, the National Association of Realtors and Ohio Realtors have issued warnings and frowned upon the practice. Whether other states and real estate industry groups will follow suit remains to be seen, but it sounds like the Oregon ban may not be the last.

Brokers should provide regular training to their agents and employees on housing discrimination issues and ways to avoid liability under fair housing laws that, among other things, increase awareness of how materials submitted in support of a home purchase offer like these kinds of letters might do more harm than good and open the door to claims of housing discrimination and bias.

Jackson Lewis P.C. © 2021

Article By Jeffrey M. Schlossberg and John A. Snyder of Jackson Lewis P.C.

For more articles on property law, visit the NLR Real Estate section.

Collapse of Afghanistan – Operational and Compliance Considerations

Measures to mitigate current foreseeable impacts

The unprecedented speed of the collapse of the former Afghan central government is a humanitarian tragedy. The magnitude of which is rightfully distracting from the immediate near-term and long-term legal issues that those who supported the coalition efforts in Afghanistan are compelled to address as the immediate human concerns fade from the spotlight.

In particular, U.S. government (USG) contractors are going to face a variety of legal implications from the events unfolding in Afghanistan — which will vary depending upon the existence of assets, facilities, contracts, or personnel in Afghanistan. This alert addresses several common issues arose over the last 72 hours in assisting clients that had operations in Afghanistan. This alert is by no means exhaustive of the issues that will be faced by those with assets, facilities, contracts, or personnel related to USG business in Afghanistan.

U.S. Sanctions

It is probable that the U.S. will issue economic sanctions in the very near term based on the likelihood of widespread human rights violations and atrocities. U.S. sanctions will likely be levied against the Taliban, known leaders of the Taliban, and entities owned or controlled by the Taliban – including former private businesses subjugated to Taliban control. Typically, there is a permissible wind-down/extraction period, but such a grace period may not be afforded with possible Afghanistan sanctions based on the terrorist history of the Taliban. As a result, USG contractors should consider terminating business and contacts with Afghan entities to be able to comply with U.S. sanctions if or when levied.

Recovery of Investments

Based on the departure of the president and other key officials of the now displaced Afghan central government, it is probable that former officials will make a claim that they remain the legitimate government of Afghanistan in exile (though the Biden administration is already offering to recognize the Taliban if they respect women’s rights – which is unlikely.) It is also probable that the same displaced officials transferred assets out of Afghanistan to mitigate risk in the event of an overthrow. If so, there will be competing claims against limited assets. As a result, it may be necessary to work to recover any funds, capitalization or guarantees tied to any Afghan entities as soon as practicable.

Shutdown of Afghan Entities

At this time, the Afghan Embassy in Washington, D.C., still appears to be operational and is reportedly using electronic platforms to continue consular processes. The U.S. State Department is also advising that its interactions with the Afghan Embassy in D.C. for business-related matters are continuing, though it is likely that such operations and processes will be impacted or even come to a halt based on the above observations. As a result, the ability to “legally” shutdown an Afghan legal entity via the U.S. Afghan Embassy will become increasingly difficult or unlikely.

USG contractors that don’t have any personnel, facilities or assets in Afghanistan could be relegated to shutting down Afghan operations by actions in the U.S. and documenting such for U.S. sanctions and export control compliance purposes. Such documentation may also be useful for reimbursement claims from the U.S. government (which could be proposed for those supporting USG directives in Afghanistan if the Afghan presence was to support USG actions). Such documentation may be helpful in supporting U.S. tax deductions for losses or costs related to the “forced” Afghan shutdown.

To effectuate and document the shutdown of Afghan operations by actions in the U.S., it may be necessary that the board of directors for any Afghan subsidiary and its direct U.S. parent resolve to shut down the Afghan business, regardless of the ability to effectuate such in Afghanistan or with the Afghan Embassy in D.C. It will be important to maintain records of such to document compliance with possible future U.S. sanctions or changes in U.S. export control requirements.

U.S. Export Control

USG contractors should also determine if there are any U.S. export licenses or Technical Assistance Agreements (TAAs) in place. If so, they may need to be terminated. If the U.S. origin items or information covered by such licenses or TAAs is in Afghanistan, and is either unrecoverable or otherwise compromised, then the U.S. exporter may need to make a voluntary disclosure of such. We recommend the retention of outside counsel to complete a proper attorney-client privileged assessment of the specific facts related to the exporter’s situation and covered items, as well as possible voluntary disclosure based on the Taliban’s act of war.

As noted, additional issues and considerations will likely arise as more information becomes available about the immediate near-term and long-term situation in Afghanistan. USG contractors and other U.S. entities with business, operations or connections to Afghanistan will need to be mindful of the real-time changes in Afghanistan and the U.S. and international responses, and be prepared to adapt and implement policies, procedures and controls to address such.

© 2021 Bradley Arant Boult Cummings LLP