Category: Administrative & Regulatory

Chicago’s Vaccine Anti-Retaliation Ordinance – What Employers Need to Know

On April 21, the Chicago City Council (“City Council”) passed the Vaccine Anti-Retaliation Ordinance (the “Ordinance”) establishing protections for Chicago workers who take time off of work to receive the COVID-19 vaccine. The Ordinance broadly applies to individuals, including independent contractors, who perform work in the City of Chicago. It is effective immediately and remains in effect until further notice.

Overview of the Ordinance

Under the Ordinance, employers must allow workers to take time off to obtain the COVID-19 vaccine without retaliation against them in their terms and conditions of employment—whether the worker voluntarily chooses to get vaccinated or whether vaccination is mandated by the employer. Workers may either choose to take time off to receive the vaccine, or to do so outside of work. However, the Employer may not force employees to receive the vaccine outside of work if the employee opts to get the vaccine during working time.

Unless the employer mandates the vaccine, employers do not need to pay employees for the time off. However, employers must allow workers to use any accrued paid time off (“PTO”) for unpaid time required to receive the vaccine. Please note, it is at the option of the employee whether or not to use PTO to receive the vaccine: An employer cannot force the use of accrued PTO.

If an employer mandates the vaccine, the employer must pay the employee for the time spent getting vaccinated, if the vaccine appointment is during a shift, at their regular rate of pay, capped at four hours per vaccine dose. Employers that mandate COVID-19 vaccinations cannot require workers to use accrued paid time off as an alternative to compensating workers in accordance with the Ordinance.

Enforcement and Penalties for Violations

The Chicago Office of Labor Standards will enforce the Ordinance. Employers found to violate the Ordinance are subject to fines that may range from $1,000 to $5,000 per violation.

Individuals may also sue in court for remedies including reinstatement and triple damages.

Practical Considerations for Employers

At present, neither the Ordinance nor any accompanying guidance addresses what documentation, if any, may be required from a worker to verify the need for leave under the Ordinance. The Ordinance is also silent as to whether a covered worker is entitled to additional protected leave—or whether an employer may require the worker to use accrued PTO—in the event the worker is temporarily unable to return to work due to adverse effects/symptoms experienced as a result of receiving the vaccine. We anticipate that additional guidance for employers will be issued addressing questions left unanswered by the current language of the Ordinance.

We suggest that employers consider the following to maximize compliance and reduce legal risk:

  1. Update COVID-19 leave policies to reflect the requirements of the Ordinance;
  2. Train supervisors and managers on the requirements of the Ordinance;
  3. Communicate updated vaccine leave policies with employees;
  4. Determine whether vaccine mandation is appropriate for the business, consistent with state and federal labor and employment laws;
  5. Establish policies for the documentation of the need for leave, consistent with other state and federal anti-discrimination and confidentiality laws.
    ©2021 von Briesen & Roper, s.c

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

“I Robot:” The SEC Evaluates the First Law of Robotics

One of the priorities announced in the 2021 Examination Priorities Report of the U.S. Securities and Exchange Commission’s Division of Examinations (“EXAMS”) is a review of robo-advisory firms that build client portfolios with exchange-traded funds (“ETF’s”) and mutual funds. EXAMS notes that these clients are almost entirely retail investors without investments large enough to support the costs of regular human investment advisers. EXAMS sees that the risks involved in these robo-advisor accounts pose particular issues, that retail clients may well not recognize.

Law of Robotics

Accordingly, it may help to reflect on the Laws of Robotics invented by that science fiction author Isaac Asimov (for “I Robot,” a short story in his 1950 collection), particularly the First Law:

A robot may not injure a human being or, through inaction, allow a human being to come to harm.

This “policy” undergirds the 2021 Examination Priorities Report’s focus on robo-advisors. EXAMS notes the following as matters of particular concern:

Investors may not understand the risks associated with specific investments; the risk profiles of mutual funds and of ETF’s vary widely, from diversified to concentrated, from simple to complex strategies. Robo-advisors have a fiduciary duty to provide adequate disclosure to investors and to insure that the information is understood.

Funds used in client accounts may not be suitable for the investor, again the robo-advisor has a fiduciary duty to know a client’s particular financial situation and investment goals. EXAMS notes that it will be checking on the bases for selecting investments, especially when niche or leveraged/inverse ETF’s are involved.

Full disclosure of any conflicts of interest are mandatory, noting the continuing enforcement actions for abuses in mutual fund investments involving higher cost fund shares.

The SEC Evaluates

Now is the time for compliance personnel to review all of the account opening documentation to ensure that relevant information about a client’s financial condition, investment objective, and time horizons are captured. Further, the firm brochure and websites should be carefully scrutinized to ensure that disclosures are written in plain English AND are robust. Then compliance personnel should review the process by which investments are recommended to ensure it adequately takes into account the client’s risk tolerance and investment objectives, and to be able to confirm that a recommended investment aligns with those factors, all of which should be documented.

The 2021 Examination Priorities Report makes clear that the Law invented by Isaac Asimov some 70 years ago equally applies to robo-advisory firms.

©2021 Norris McLaughlin P.A., All Rights Reserved
ARTICLE BY Peter D. Hutcheon of Norris McLaughlin P.A.
For more articles on the SEC, visit the NLR Securities & SEC section.

You Want Some “Metchup” with That?

The US Court of Appeals for the Fifth Circuit found no infringement by a large, well-known company that used the registered mark of an individual whose own use was local and generated only a few sales and minimal profits. The Court vacated and remanded the case to determine whether plaintiff had abandoned the mark. Dennis Perry v. H.J. Heinz Co. Brands, L.L.C., Case No. 20-30418 (5th Cir. Apr. 12, 2021) (Graves, J.)

In 2010, Dennis Perry created a condiment concoction in his home kitchen that he named “Metchup,” constituting a blend of private label mustard and ketchup, and a blend of mayonnaise and ketchup. Perry sold the concoction in the lobby of his small motel in Louisiana. The US Patent & Trademark Office granted registration for his trademark “Metchup” and after five years declared his mark “incontestable.” Perry had slow sales, however, only selling about 60 bottles with $50 total profit over the years. Perry had a Facebook page for his product, but did not advertise or sell the product in stores or online.

Meanwhile, Heinz produced a condiment called “Mayochup,” a blend of mayonnaise and ketchup, that it began selling in the United States in 2018. Heinz held an online naming contest to promote its product, and when one participant suggested the name “Metchup,” Heinz posted a mock-up picture with the “Metchup” name, along with other proposals. Heinz’s counsel saw Perry’s trademark registration, but because Heinz was not actually selling a product named “Metchup” and there were so few indications that Perry’s product was actually being sold, Heinz concluded that Perry’s mark was not in use and could be used in its promotion. When Perry saw Heinz’s posting, he sued for trademark infringement.

The district court found that while Perry may have once had a valid trademark registration for “Metchup,” there was no likelihood of confusion with the Heinz product and the mark had been abandoned as a consequence of de minimis use. Perry appealed.

The Fifth Circuit analyzed the dispute based on the eight-factor likelihood of confusion test. The Court found three factors weighed in Perry’s favor:

  • Product similarity: Both products were mixed condiments.
  • Potential purchaser care: Consumers would exercise less care for a low-priced condiment.
  • Mark similarity: Both products used the same word “Metchup,” although the Court noted that the packaging design looked very different.

The Court also found five factors weighed in Heinz’s favor:

  • The type of mark on the spectrum (i.e., whether the name is related to what the product is): Here, the mark was “suggestive” because it was a mash-up of names related to the sauces used.
  • Outlet and purchaser identity: The parties targeted different markets because Perry had limited sales in one motel, while Heinz targeted online and at almost all grocery stores.
  • Advertising identity: Perry did not advertise besides his one Facebook page without online sales, while Heinz had large-scale advertising and sales.
  • Defendant’s intent: Heinz did not intend to infringe because it assumed Perry’s mark was no longer in use.
  • Actual confusion: There was no record or survey of any consumers actually being confused on the source of the products.

Weighing the factors overall, the Fifth Circuit concluded that use of Perry’s mark ultimately was not widespread enough for a consumer buying the Heinz product to be confused. Absent a likelihood of confusion, the Court agreed with the district court that Heinz’s use did not constitute infringement.

With regard to whether Perry had abandoned the mark for non-use, the Fifth Circuit noted that while Perry’s registration had achieved “incontestable” status because it was registered for more than five years, incontestable marks are still subject to a defense of abandonment as a consequence of intentional discontinued use of the mark in commerce. On this issue, the Court found that the district court erred by misplacing the burden of proof standard for abandonment and by misapplying the “use in commerce” requirement.

First, the burden should not have been on Perry to disprove abandonment. The Fifth Circuit explained that the burden was on Heinz to prove that Perry did not use the mark in commerce. Second, Heinz had not proven abandonment because abandonment requires “complete discontinuance of use” of the mark. There is no threshold sales requirement for “use” under the Lanham Act. Even minor and sporadic good faith use of a mark (in this case generating about $50 in profit) will defeat an abandonment defense because even de minimis activities can still influence interstate commerce and be regulated by Congress. The Court remanded the case for a fact-finder to determine whether Perry was making good faith use of the mark in commerce—did Perry have a good faith intent to continue to use his mark in commerce, or was he just trying to ketchup to Heinz’s condiment success?

This post was written by Darra Loganzo.

© 2021 McDermott Will & Emery
For more articles on patent infringement, visit the NLR Intellectual Property section.

Goodbye COVID-19 Priority Phases and Tiers, Hello Battles With Vaccine Passports!

On Tuesday, April 6, 2021, while touring a vaccination site in Alexandria, Virginia, President Joe Biden imposed a deadline on every state to open up vaccination eligibility to all adults by April 19, 2021 (moving up the previous target date of May 1, 2021). The White House COVID-19 coordinator, Jeffrey Zients, told governors also on April 6, 2021, that more than 28 million doses of vaccines will be delivered to all of the states the week of April 4-12, 2021. The president’s directive matches Dr. Anthony Fauci’s estimate in November 2020 that the earliest a vaccine would be available for most nonprioritized Americans would be April 2021.

While it is unclear whether or how that deadline could be enforced—and vaccination eligibility and scheduling does not mean that shots will actually get into people’s arms by, or on, the end of April (that will take several more weeks for sure)—it appears that the country is on the verge of opening up the floodgates regarding vaccine availability.

More than a dozen states have already completely opened up eligibility to anyone 16 years old and older. Now that there are vaccines available from three pharmaceutical companies, and the first few priority phases and tiers have been exhausted in most states, it seems that anyone willing to get the vaccine will be able to do so in very short order. Of course, polls show that approximately 13 percent of individuals say they will “definitely not” get vaccinated and another 25 percent say they will either “wait and see” or get vaccinated “only if required.” This may help explain why supply has met (or quickly will meet and exceed) the current demand for the vaccine.

Texas is one of the states opening up eligibility to everyone over the age of 16, but Governor Greg Abbott on April 6, 2021, signed an executive order prohibiting governmental entities (and those private businesses receiving public funds) from requiring proof of vaccination for purposes of receiving any service or entering any place—whether through the use of “vaccine passports” or otherwise. According to the governor, he issued these prohibitions and protections in Texas because each person has “the option to accept or refuse administration of the product” under an emergency use authorization (like all three of the currently available vaccines) and vaccination “is always voluntary in Texas and will never be mandated by the government.” This executive order also classifies mere “vaccination status” as “private health information,” although the federal government has explained that asking or requiring employees to show proof of receiving a COVID-19 vaccination is not a disability-related inquiry under the Americans with Disabilities Act.  Florida Governor Ron Desantis issued a similar Executive Order on April 2, 2021, but it prohibits all “businesses in Florida . . . from requiring patrons or customers to provide any documentation certifying COVID-19 vaccination . . . to gain access to, entry upon, or service from the business.”  While the Executive Order does not reference “employers” or “employees,” it is not clear yet how broadly the prohibitions will be interpreted.

Considerations for Tweaking Vaccination and “Return to Office” Policies

Even if an employer may legally require full vaccination before employees return to its offices or facilities, requiring employees to choose between a vaccine and all previously existing aspects of their jobs could still breed resentment, and risk legal action. But there is a good business case to be made for requiring full vaccination of all employees working at a worksite with other employees. The U.S. Centers for Disease Control and Prevention (CDC) recently provided guidance—Interim Public Health Recommendations for Fully Vaccinated People—and explained that fully vaccinated people need not wear masks or observe social distancing during private indoor visits with a small group of other fully vaccinated individuals (although even fully vaccinated individuals should “[a]void medium- and large-sized in-person gatherings” and continue to practice other preventative measures “in public settings”). The CDC guidance does not specifically address how to manage fully vaccinated employees in the workplace, and for the time being, existing state and local regulations regarding face coverings and other mitigation measures may still apply.

Given the above-referenced statistics and relatively high percentage of those who will oppose vaccination or receive it only begrudgingly, employers may want to consider alternatives such as continuing to allow remote working arrangements or allowing unvaccinated employees to return to their worksites under continued health and safety protocols, such as strict social distancing, masking, and quarantining.

However, other employers cannot (or may prefer not to) allow remote working arrangements indefinitely. For those employers, slowly phasing in a mandatory vaccination requirement may make sense, but such employers may also want to keep in mind reasonable accommodation requests from employees based on sincerely held religious beliefs or covered disabilities. Potential accommodations include granting exemptions from the vaccination requirement, waiting for alternative vaccine products without objectionable ingredients, or requiring additional mitigation measures, such as increased social distancing, continued use of face coverings, or reassignment to a different position or area of the workplace. Reviewing accommodation requests and engaging in the interactive process is a fact-intensive process, which often require careful consideration.

If a workplace is only open for those who have been vaccinated, knowing who is vaccinated is easy—everyone is! But, for those workplaces that allow both vaccinated and unvaccinated employees to return to their worksites, how do employees know who among them has been vaccinated—color-coded name badges, stickers, or other accessories? Will coworkers care if those working closely around them all day long have been vaccinated? How should employers track vaccination status, and can they? Currently, other than the Texas governor’s executive order, nothing prohibits employers from requiring proof of vaccination and (confidentially) keeping records of such vaccinations (e.g., seeing and maintaining a copy of employees’ CDC COVID-19 vaccination record cards). However, labeling (or branding) employees as either vaccinated or unvaccinated might lead to shaming, bullying, or harassment in the workplace if not properly implemented, monitored, and controlled.

The debate continues regarding whether “vaccination passports” or other types of identification should be used to distinguish between those who have been vaccinated and those who have not. Many restaurants, bars, concert venues, fitness centers, movie theaters, theme parks, and other businesses and organizations have said they will likely start requiring proof of vaccination (or proof of the need for an accommodation) in order for people to enter their facilities and enjoy their food, products, entertainment, and services. And, currently, most employers can start doing the same (subject to prohibitions that exist in Texas, Florida, and other states that follow suit).

Current Considerations for Employers

Employers may want to continue to communicate with employees (and continuously update them) regarding the organization’s position on vaccination, remote working arrangements, and safety protocols.

Employers may want to take this opportunity to implement a voluntary vaccination policy or convert a currently voluntary policy into a mandatory policy (whether for all employees or for those subsets of employees who are allowed or required to return to work in-person). And, if the ability to return to work in-person is not sufficient to reach a desired level of vaccinations in their workforces, employers might want to consider providing further incentives to vaccinate, such as monetary bonuses, gift cards, extra paid time off, or other rewards, if they have not already. However, a vaccination requirement for returning to an office or facility might incentivize employees to refuse vaccinations (or not tell their employers that they have been vaccinated) in order to continue their remote working arrangments—thus, ironically, creating a disincentive for getting vaccinated.

Either way, employers no longer have to worry about figuring out which employees might qualify for vaccinations under all the vague, confusing, and conflicting phases and tiers initially set up by the CDC and implemented with various tweaks by each of the states. And that is certainly great news and progress!

© 2021, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
ARTICLE BY James M. Paul of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
For more articles on vaccine passports, visit the NLR Coronavirus News section.

Help! We Think Our Employee Is Lying About COVID-19 Exposure or Symptoms

Does this fact pattern sound familiar?

Employer has a COVID-19 policy requiring employees with COVID-like symptoms or exposure to a COVID-positive (or suspected COVID-positive) person to report the same to Human Resources.  If reported, the employee is required to not come to work (or go home) and to self-isolate or quarantine for 14 days, consistent with CDC Guidance.

Seems easy enough. But then an employee calls work exactly two weeks prior to a company-paid holiday, and reports not feeling well (fever, slight cough, and muscle fatigue) – typical COVID-19 symptoms. The employee is told to stay home and “get better,” but not to come to work for 14 days consistent with CDC guidance and company policy.

Employee returns to work after the 14-day quarantine and the four-day holiday weekend and works for two weeks.  But then, the employee reports to Human Resources that he was just informed by a friend, with whom he was at a bar the previous night (and with whom he was in close contact), that the friend has COVID-like symptoms.  Consistent with company policy, employee is told to go home and quarantine/monitor for symptoms.  Fourteen days later, employee returns.

The next month, employee informs Human Resources that he was told that yet another friend with whom he was in close contact suspects he may have COVID-19.  Employee reports the friend had been helping him move, told him the next day he had been feeling really ill, and was just told that his roommate had COVID-19.  Employee is sent home and told to quarantine for 14 days and monitor for symptoms.  Fourteen days later, employee returns to work.

There have now been three instances in which employee has been away from work for 14-day periods.  His reliability is in serious question.  And worse, the company suspects he may not have been telling the truth, just so he could get off work.  In fact, Human Resources was informed that the employee is a “big-time skier” and often skis during the winter.  So what can you do?  Here are some options (and you can go with more than one) for consideration.

  • Question the employee about the circumstances of the symptoms or “close contact.”  For instance, on a form, have employee describe in writing all facts supporting his claim that he has experienced COVID-19 symptoms within the past 48 hours.
  • Ask employee to describe all facts supporting his claim that within the past 14 days, he or any member of his household has been in close contact with someone who has recently tested positive for COVID-19 or has suspected COVID-19 symptoms.
  • Require the employee to sign an attestation form stating that the claims of symptoms/close contact are true and accurate:  I certify that the above information is true and accurate and that any misrepresentation of the information provided could subject me to potentially adverse employment action, including but not limited to discipline and discharge.
  • As employers often do in suspected worker’s compensation fraud matters, you can hire an investigator to “follow” or investigate the employee while supposedly quarantining.  Is he, in fact, quarantining?  Or is he spending his days on the ski slopes?

Unfortunately, there are no “perfect” fixes to these challenging situations.  However, because the situation involves COVID-19 does not mean that the employer is handcuffed.  Just like other situations where an employee may be suspected of being dishonest, you can investigate and take action based on upon any dishonesty.  The world may have changed significantly since March 2020, and workplaces may have also changed since the onset of the pandemic; however, employee honesty will continue to be a legitimate work expectation – the lack of which may lead to a legitimate, nondiscriminatory adverse employment action.

© 2021 Foley & Lardner LLP

ARTICLE BY Daniel A. Kaplan of Foley & Lardner LLP
For more articles on coronavirus policies, visit the NLR Labor & Employment section.

EEOC Will Issue Guidance on COVID-19 Vaccine Incentive Programs Offered by Employers

Lawmakers and many employer organizations have urged the Equal Employment Opportunities Commission (EEOC) to issue guidance to companies that are considering providing incentives to employees who get the COVID-19 vaccine. Specifically, Sen. Richard Burr and Rep. Virginia Foxx stressed the importance of guiding employers that want to protect their employees stating,

“Employers actively working to protect their employees by increasing the number of workers receiving vaccinations through incentive programs are seeking assurance this action is allowable and does not violate important labor laws such as the Americans with Disabilities Act…”

In response, just a few days ago Carol Miaskoff, the EEOC’s acting legal counsel, stated that the agency expects to update its technical assistance to address these issues, but that the work is still ongoing. She did not indicate when the EEOC would issue its guidance.

Even without the promised guidance, many employers have offered incentives to their employees who receive the COVID-19 vaccine, including paid time off and cash bonuses, but the concern is the legality of the incentive programs. Do these incentives violate federal anti-bias laws? Do they violate the Americans with Disabilities Act (ADA)? If an employee cannot receive the vaccine for medical or religious reasons, how are those employees being treated?

Employers should be careful when offering incentives to employees prior to the EEOC’s guidance. Things to consider before offering incentives are to look at the size of the incentive, meaning if the incentive is too large, it may lose its “voluntary” status, the value of the incentive, and to ensure there isn’t a disability-related inquiry of the employees.

©2021 Roetzel & Andress
ARTICLE BY Amanda M. Connelly of Roetzel & Andress LPA
For more articles on the COVID-19 vaccine, visit the NLR Labor & Employment section.

The Do’s and Don’ts of Videoconference Oral Proceedings

As many will be aware, there is a challenge to the legality of videoconference Oral Proceedings pending at the EPO’s Enlarged Board of Appeal (G 1/21).[1] In particular, the Enlarged Board has been asked to consider whether such proceedings can go ahead if the parties do not consent to use of the videoconference format. Although the question referred to the Board encompassed Examination, Opposition and Appeal proceedings, the EPO has decided to continue with videoconference Oral Proceedings for both Examination and Opposition matters irrespective of whether or not the parties involved consent to do so.[2]

A Decision from the Enlarged Board is expected to issue relatively quickly, but unlike most referrals to be Enlarged Board, there does not appear to be much confusion about the direction the EPO will take. The EPO is generally keen to embrace the digital format and recent case law from the Boards of Appeal seems to suggest that the EPO will continue with videoconference Oral Proceedings as the “new normal”.[3] In anticipation that the Enlarged Board agrees, we have compiled our top tips for videoconference Oral Proceedings.

DO ask for a test call. Even though we are all now familiar with the format, a test call is a good opportunity to confirm that the audio is clear, and the video is working correctly. The test call will also allow you to practice screen sharing and joining/leaving breakout rooms. Test calls need to be requested at least six weeks in advance of the hearing, as only limited time slots are available.

DON’T assume your laptop speaker and camera will be adequate. If translators are involved, the EPO requires participants to have a headset, and even an inexpensive microphone can be a significant improvement to the in-built one found on most laptops. If the proceedings use Zoom, check in advance that your screen name is appropriate, the brightness settings are adequate for where you plan to sit, and check that any filters/backgrounds are turned off.

DO have your ID ready. It’s easy to forget when the only travel involved is into your home office, but it will speed up proceedings on the day.

DON’T assume things will be the same as an “in-person” hearing. Videoconference Oral Proceedings do generally seem to take a little longer than in person hearings, and some nuances of body language can be lost. How you communicate with your team during the hearing will also be different if you are in separate locations. Have you thought about a virtual alternative to passing notes during the hearing?

DO ask for breaks if needed. Everyone now recognizes that screen fatigue can be a problem. Chances are that if you need a break, someone else in the proceedings will be glad you asked.

DON’T put up with technical issues. If you can’t hear or see the proceedings adequately, the EPO advises that you attract the attention of the chair by waving. Proceedings will then be paused while the technical issues are resolved.

DO have a backup plan in case of a loss of connectivity. The EPO will ask for a telephone number, but it is worth seeing if you could use a WiFi hotspot (e.g., from a mobile phone) if the internet connection drops.

DO think about how you will prepare and submit any amendments on the day. If you are the Applicant or Patentee, there is a chance your case may be upheld on the basis of amended claims, and therefore an amended description could be required. The amended description pages need to be signed and sent to the EPO in an EPO-compatible pdf format. Since most of us do not have printer/scanners at home, it is worth thinking in advance about how to do this.

Finally, DO remember that, everyone is in the same situation, with the same fears that the internet connection will drop at a critical time, the neighbors will choose that day to begin renovation work, or that a cat filter will appear out of nowhere.[4] Consequently, we have found the EPO to be understanding of any technical concerns and ready to work with us to resolve these.

[1] https://www.epo.org/law-practice/case-law-appeals/eba/pending.html

[2] https://www.epo.org/news-events/news/2021/20210324a.html

[3] https://www.epo.org/law-practice/case-law-appeals/recent/t162320eu1.html

[4] https://www.theguardian.com/us-news/2021/feb/09/texas-lawyer-zoom-cat-fi…

© 2021 Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
For more articles on virtual proceedings, visit the NLR Litigation / Trial Practice section.

Oops: NASDAQ Seeks to Correct a 2009 Error Re: ADR Listing Requirements

On Wednesday, April 7, 2021, the U.S. Securities and Exchange Commission (“SEC”) issued Release No. 34-91492 publishing a Proposed Rule Change by NASDAQ to amend the requirements for listing ADRs on each of NASDAQ’s Global Select AND Global Markets.

American Depository Receipts

“ADRs” are American Depository Receipts. They have a long history in the U.S. capital markets, having been invented by J.P. Morgan in 1927 to facilitate access to the American stock market by Selfridges, an iconic British department store organized and managed by an American expatriate as the second-largest (after Harrod’s) department store in the UK in 1909 (and featured in a BBC TV series of that name about both the store and Mr. Selfridge). ADRs are depository receipts issued by an American bank when the underlying securities are deposited in a foreign depository bank. There are some interesting complexities about ADR’s depending on whether the ADR is a Level 1 ADR, or whether it is a Level 2 Sponsored ADR, which requires filing a separate registration statement with the SEC. And then there are Level 3 ADRs that require the foreign company to not only file a Form F-1 with the SEC but to adhere either to U.S. GAAP accounting standards OR IFRS as published in the IASB. The April 7 NASDAQ Proposal does not directly impact any of these ADR complexities.

Listing requirements are just that: the conditions a company must meet in order to have its securities traded on NASDAQ. NASDAQ has three market tiers: the Global Select Market, the Global Market, and the Capital Market. The Capital Market is the trading tier with the least stringent requirements for listing. The NASDAQ Global Market requires that the companies seeking to list on it must have some international attributes and substantially higher financial and governance features. The NASDAQ has the most rigorous listing requirements and is the tier for leading international companies.

NASDAQ Listing Requirements

Until 2009, NASDAQ required that at least 400,000 ADRs be issued in order to be listed on any of the three NASDAQ tiers, insure that there would be sufficient liquidity and “depth in the market” to support public trading. Then in 2009, as part of a “housekeeping,” NASDAQ moved the listing requirements for ADRs on the Global Market AND the Global Select Market to a new section of NASDAQ listing requirements that had NO minimum number of ADRs in order to be listed on those tiers. Ironically, the least restricted trading tier RETAINED the 400,000 ADR requirement. Recently, someone at NASDAQ noticed the disparity. Fortunately, NO issue with fewer than 400,000 ADRs has been listed on either the Global Select or Global Market tiers in the 12 years since 2009. Now, NASDAQ seeks to reimpose the 400,000 minimum ADR requirement for ALL NASDAQ tiers. As this proposed change to the listing requirements is a simple reinstatement of a condition accidentally omitted in the 2009 “housekeeping,” and as no present listing will be adversely affected, NASDAQ requested, and the SEC granted, a waiver of the normal 30-day period before a change might take effect.

While, as Alexander Pope wrote: “To err is human, to forgive, divine;” to correct may even be better.

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

ARTICLE BY Peter D. Hutcheon of Norris McLaughlin P.A.
For more articles on the SEC, visit the NLR Securities & SEC section.

Russia Russia Russia! The Biden Administration Imposes Tough Sanctions on Russia

This week has been a week of significant foreign policy action. Today, President Biden issued a new Executive Order imposing new tough sanctions on Russia for its interference in the U.S. 2020 presidential election, as well as the SolarWinds cyber-attack that impacted multiple U.S. government agencies. This action was taken a day after Secretary of State Blinken stated strong concerns about the increase in Russian troops along the Ukrainian border. Earlier this week, the 2021 Threat Assessment report published by the Office of DNI (Director of National Intelligence) also cited Russia as presenting “one of the most serious intelligence threats to the United States,” noting a variety of provocative actions relating to cyber, military, and intelligence activities.

Background on the New Russia Sanctions

At a high level, today’s E.O. prohibits certain dealings in Russian sovereign debt, and authorizes targeted sanctions on technology companies that support the Russian Intelligence Services’ efforts to carry out malicious cyber activities against the United States and its partners and allies. Under the E.O, the Treasury Department also announced the designation of over 30 Russian individuals and entities that carried out Russian government-directed attempts to influence the 2020 U.S. presidential election, and other acts of disinformation and interference (see full list here). In conjunction with the E.O., the U.S. expelled ten Russian diplomats that include representatives of Russian Intelligence Services.

The White House’s statement noted that these measures send “a signal that the United States will impose costs in a strategic and economically impactful manner on Russia if it continues or escalates its destabilizing international actions. This includes, in particular, efforts to undermine the conduct of free and fair democratic elections and democratic institutions in the United States and its allies and partners; [and] engage in and facilitate malicious cyber activities against the United States and its allies and partners ….”

What Triggered these New Sanctions?

Last year, SolarWinds, a major U.S. information technology firm, was the subject of a cyberattack that impacted its clients’ data, including multiple U.S. government agencies and Fortune 500 companies. In December, then U.S. Secretary of State Mike Pompeo said he believed Russia was behind the attack but U.S. investigators “were still unpacking precisely what it is.” Today, the U.S. has formally named Russian Foreign Intelligence Service (SVR) as the force behind these cybersecurity hacks on SolarWinds.

In addition to the attack on SolarWinds, the Biden Administration cited Russia’s attempts to influence the 2020 U.S. presidential elections, and other acts of disinformation and interference as triggers for these sanctions.

New Prohibitions on U.S. Financial Institutions on Dealing in Russian Sovereign Debt

Under the E.O., the Biden Administration issued Directive 1 generally prohibiting U.S. financial institutions from transacting in ruble and non-ruble denominated funds and bonds. This directive expands upon existing prohibitions on certain dealings in Russian sovereign debt that have been in place since August 2019.

Specifically, as of June 14, 2021, U.S. financial institution are prohibited from:

  • Participating in the primary market for ruble or non-ruble denominated bonds issued after June 14, 2021 by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation; and
  • lending ruble or non-ruble denominated funds to the three aforementioned entities.

The immediate impact is on U.S. financial institutions, including its foreign branches, that may be dealing with Russian sovereign debt.

E.O. Authorizes Targeted Sanctions

The E.O. also authorizes targeted sanctions on persons that have supported Russia’s efforts to carry out malicious cyber activities against the United States and its interference in U.S. or foreign elections, among other things (see Section 1 of the E.O., found here). Any action taken pursuant to the E.O. requires a determination by the Treasury Department in consultation with the State Department. But, we wouldn’t be surprised if additional designations come out in the next days or weeks under this authority.

We expect that measures will be taken against high-ranking Russian officials and technology companies with close ties to Russia’s Intelligence Services. For example, among those entities already designated under the E.O. are ERA Technopolis; Pasit, AO (Pasit); Federal State Autonomous Scientific Establishment Scientific Research Institute Specialized Security Computing Devices and Automation (SVA); Neobit, OOO (Neobit); Advanced System Technology, AO (AST); and Pozitiv Teknolodzhiz, AO (Positive Technologies) (see here).

In addition to the primary sanctions outlined above, the E.O. authorizes secondary sanctions to non-U.S. persons that provide “financial, materials, or technological” support to persons sanctioned under the E.O.

While the short-term impact will likely be on U.S. financial institutions, the broader message is that this Administration is not going to be shy about stiffer sanctions on Russia. Though the financial sector will always be a ripe target for sanctions as a foreign policy tool, if Russia’s aggression increases, we may see other sectors being targeted as well.

We will keep monitoring and updating as news develops.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.

ARTICLE BY Fatema K. Merchant and Mario Andres Torrico of
Sheppard, Mullin, Richter & Hampton LLP
For more articles on Biden Administration sanctions, visit the NLR  Election Law / Legislative News section.

Are Your Workplace Policies Compliant with the NLRA?

NLRB issues Memorandum GC-21-03 Signaling Aggressive and Expanded Enforcement of Section 7 Rights

On 31 March 2021, Peter Sung Ohr, Acting General Counsel of the National Labor Relations Board (NLRB), issued Memorandum GC 21-03 (GC 21-03) to the regional field offices signaling significant changes to enforcement priorities under Section 7 of the National Labor Relations Act (NLRA). In part, GC 21-03 indicates that the NLRB will be “robustly enforcing the Act’s provisions that protect employees’ Section 7 rights” and that “cases involving the retaliation against concerted employee conduct will be vigorously pursued.” GC 21-03 cites to increased workplace health and safety issues resulting from the COVID-19 pandemic as well as employees’ political and social justice advocacy concerns as factors necessitating increased enforcement of the NLRA.

NLRA Protections

The NLRA is a federal law that grants employees the right to form or join unions; engage in protected, concerted activities; address or improve working conditions; or refrain from engaging in such activities. The NLRA applies to almost all private employers but does not apply to federal, state, or local governments; employers who employ only agricultural workers; and employers subject to the Railway Labor Act. Some employers are surprised to find that the NLRA protects nearly all employees in the private sector, not only union employees or employees seeking to form or join a union. In fact, concerted activities protected under the NLRA often occur outside of the context of union activity. The NLRA does not cover, however, government employees, agricultural laborers, independent contractors, and supervisors (with limited exceptions).

It is not uncommon for the NLRB and its general counsel to modify or reverse their interpretations of the NLRA with changes in the composition of the Board. The political party of the presidency enjoys majority representation on the NLRB. Consequently, changes in the presidential administration often lead to significant changes for employers. GC 21-03 is emblematic of that trend. It states that “recent decisions issued by the current Board have restricted [Section 7 rights] for employees.” Specifically, GC 21-03 criticizes Alstate Maintenance1 and Quicken Loans2 for applying “mutual aid and protection” narrowly. The enforcement priorities highlighted in GC 21-03 are in stark contrast to enforcement priorities under the previous administration and a clear indication that employers should expect increased NLRB oversight for the foreseeable future.

Broadened Concerted Activities for Mutual Aid and Protection

Section 7 of the NLRA grants all covered employees the right to engage in “concerted” activities for the purpose of “mutual aid or protection.” The phrase “mutual aid or protection” focuses on “whether there is a link between the activity and matters concerning the workplace or employees’ interests as employees.”3 GC 21-03 indicates that such a link will be broadly construed, and it outlines an expansive characterization of what constitutes protected, concerted activity. As noted in GC 21-03, employee advocacy can have the goal of “mutual aid or protection” even when the employees have not explicitly connected their activity to workplace concerns. As examples, GC 21-03 cites to a solo strike by a pizza shop employee to attend a convention; protests in response to a sudden crackdown on undocumented immigrants or social justice concerns; and a hotel interview with a journalist concerning minimum wage issues. In addition, GC 21-03 highlights how concerted activity can occur outside of the context of union activity—such as when employees raise health and safety issues resulting from the COVID-19 pandemic or seek protections from government agencies.

Renewed Application of Inherenty Concerted Conduct

In addition to a clear directive to interpret concerted and protected activity more broadly under the NLRA, GC 21-03 also signals a renewed enforcement of conduct that is deemed “inherently concerted.” As noted in GC 21-03, employee conduct generally becomes concerted when it is “engaged in with or on the authority of other employees”4 or when an employee seeks either “to initiate or to induce or to prepare for group action.”5 In other words, concerted conduct revolves around employees’ intention to band together to improve their wages or working conditions. However, contemplation of group action is not required and employee discussions surrounding certain employment policies may be sufficient to constitute inherently concerted activity—even if group action has not yet been contemplated or is in its early stages. Indeed, as noted in GC 21-03, inherently concerted conduct need only involve a “speaker and a listener.” Further, GC 21-03 emphasizes that there are no “magic works” required for concert to attach. However, the NLRB has previously found that certain categories of workplace life have been found to be “inherently concerted”—namely, exchanges of information concerning (i) wages or wage differentials, (ii) changes in work schedules, (iii) job security, (iv) workplace health and safety, and (v) racial discrimination. GC 21-03 expressly warns that the NLRB will be considering such categories as well as “other applications of the inherently concerted doctrine” for the foreseeable future.

Key Takeaways

  • Employers should work with their counsel to ensure their workplace policies are compliant with the NLRA, including the expansive definition of protected conduct that will be enforced for the foreseeable future.
  • Employers should expect an increase in NLRB oversight and NLRA enforcement.
  • Employers should expect an increase in complaints brought by the NLRB, including increased prosecution of cases involving retaliation against concerted employee conduct.
  • Employers should exercise caution when deciding whether or not to discipline or discharge employees who have engaged in discussions or activities related to workplace health and safety (importantly as related to the COVID-19 pandemic), social justice issues, or political views.

1 367 NLRB No. 68 (2019).

2 367 NLRB No. 112 (2019).

3 Fresh & Easy Neighborhood Mkt., Inc., 361 NLRB 151, 153 (2014).

4 Meyers Indus., 268 NLRB 493, 497 (1984) (Meyers 1), remanded sub nom. Prill v. NLRB, 755 F. 2d 941 (D.C. Cir. 1985), cert. den. 474 U.S. 948 (1985).

5 Meyers Indus., 281 NLRB 882, 887 (1986) (Meyers II), affd. sub nom. Prill v. NLRB, 835 F. 2d 1481 (D.C. Cir. 1987), cert. den. 487 U.S. 1205 (1988).

Copyright 2021 K & L Gates

ARTICLE BY Rosemary Alito and  Rio J. Gonzalez of K&L Gates
For more articles on the NLRB, visit the NLR Labor & Employment section.