Category: Administrative & Regulatory

Hello Again, Worlds: A Failed Gaming IPR Leads to § 101 Success

The tides have turned again in the litigation campaign against gaming companies by Worlds, Inc., who many may recognize as one of the named parties in often-cited Federal Circuit case law on real-parties in interest (“RPI”). In 2018, the Federal Circuit shook up the IPR landscape with a series of RPI decisions, starting with Wi-Fi One, LLC v. Broadcom Corp., which held that the PTAB’s time-bar determinations under § 315(b) are appealable. A series of frequently-cited Federal Circuit decisions followed, including Applications in Internet Time, LLC v. RPX Corp. and Worlds, Inc. v. Bungie, Inc.

In Worlds, Inc. v. Bungie, Inc., the PTAB issued final written decisions holding 34 out of 40 challenged claims unpatentable. On appeal, the Federal Circuit held that the petitioner bears the burden of persuasion for proving that the petition is not time-barred under § 315(b), meaning Bungie had the burden of persuasion to show that Activision—which had been served with a complaint more than one year before Bungie filed its petition—was not an RPI. The Federal Circuit vacated and remanded, and on remand, the PTAB vacated its final written decisions.

Those vacated IPR decisions laid the groundwork for invalidating Worlds’ patents. Recently, a U.S. District Court (D. Mass.) invalidated the asserted patents under § 101, based in part on the PTAB’s substantive analysis. See Worlds, Inc. v. Activision Blizzard, Inc., et al., No. 12-cv-10576-DJC, Dkt. 358 (D. Mass. Apr. 30, 2021) (“Decision”). The Court noted that the PTAB decisions were vacated on procedural grounds and considered the PTAB findings as persuasive authority. “Although now vacated, the substance of the PTAB’s prior rulings serves to support the Court’s analysis below that the client-side and server-side filtering of position information is not inventive.” Decision at 7-8.

The parties focused on four representative claims, including claim 1 of U.S. Patent No. 7,945,856 (the “’856 patent”).

For Step 1, World’s prior arguments, including in the IPR, were used against it. Worlds had argued that its patents were directed at a method of “crowd control” and that these claims are the filtering function to do so. Citing to those characterizations, the Court held the claims to be directed to “the abstract idea of ‘filtering’ (here of ‘position’ information”) which amounts to ‘crowd control.’” Decision at 14.

Activision argued that such filtering is “a fundamental and well-known concept for organizing human activity,” and that the claims do nothing more than recite a general client-server computer architecture to perform routine functions of filtering information to address the generic problem of crowd control. See Decision at 14 (citing BASCOM Global Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1348 (Fed. Cir. 2016)). The Court agreed that this conclusion was consistent with Mayo, Alice, and other cases.

For Step 2, Worlds’ briefing relied heavily on BASCOM’s holding that an inventive concept “may arise … in the ordered combination of the limitations.” BASCOM, 827 F.3d at 1349 (emphasis added). Worlds argued that the claims teach an inventive ordered combination of steps: “a multistep process whereby a server receives position information of avatars associated with network clients; the server filters the received positions and then sends selected packets to each client,” whereby a client can then further determine which avatars to display.” See Decision at 17.

However, the Court held that “there is nothing in the ordering of the steps in the claims (i.e., receiving, determining, comparing) that make them inventive; the ‘steps are organized in a completely conventional way.’” Decision at 18. “The steps of the claims here use only ‘generic functional language to achieve the purported solution’ of filtering of position information for crowd control.” Id. (citing Two-way Media, Ltd. V. Comcast Cable Comms. LLC, 874 F.3d 1329, 1339 (Fed. Cir. 2017)). “None of the remaining claims are limited to ‘any specific form or implementation of filtering . . . .” Id.

While Worlds emphasized technical-sounding terminologies, such as clients, servers, avatars, networks, and packets, the Court noted that “[c]lient-server networks, virtual worlds, avatars, or position and orientation information are not inventions of Worlds but rather, their patents seek to demonstrate their use in a technological environment.” Decision at 19. “That is, Worlds’ asserted claims use a general-purpose computer to employ well-known filtering or crowd control methods and means that ultimately use same to display graphical results and generate a view of the virtual world, none of which is inherently inventive or sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application.” Id.

Notably, the briefing and the Court’s decision did not appear to rely on expert testimony or evidence in the district court litigation. Therefore, the PTAB’s technical analysis from its vacated decisions played an important role, providing the foundation for the Court’s conclusion that “client-side and server-side filtering of position information is not inventive.” Decision at 7-8.

While gaming companies must be mindful of the many potential procedural pitfalls in PTAB challenges, this recent decision shows the importance of attacking non-inventive patents using both § 101 and IPRs.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.

ARTICLE BY Harper Batts and Jeffrey Liang of Sheppard, Mullin, Richter & Hampton LLP
For more articles on gaming IPR, visit the NLRIntellectual Property section.

Santa Clara County Orders Businesses to Track Employees’ COVID-19 Vaccination Status

Santa Clara County wasted no time in altering its public health regulations in response to the county’s graduation to the ‘yellow tier’ of California’s Blueprint For a Safer Economy on May 18, 2021.  Within hours, the County announced a new Public Health Order that went into effect on May 19, 2021.

The Order retires several of the most burdensome requirements of the County’s October 5, 2020, Risk Reduction Order.  As a result, businesses are no longer required to (1) maximize the number of people who work remotely; (2) submit Social Distancing Protocols to the County Public Health Department; or (3) observe County-issued limitations on in-person capacity.

However, the Order imposes several new requirements on employers, including:

  1. Face Coverings: All businesses must require employees and customers to wear face coverings in accordance with the Mandatory Directive on Use of Face Coverings.
  2. Capacity limitations: Some businesses remain subject to State-issued COVID-19-related capacity limitations and must limit the number of people inside their facilities to a certain percentage of their usual maximum occupancy.
  3. Industry-Specific Requirements: Businesses must follow any industry-specific guidance from the State.
  4. Mandatory Reporting Regarding Personnel Contracting COVID-19: Businesses must require that all personnel immediately alert the business if they test positive for COVID-19 and were present in the workplace either:
    1. within the 48 hours before the onset of symptoms or within 10 days after onset of symptoms if they were symptomatic, or
    2. within 48 hours prior to the date on which they were tested or within 10 days after the date on which they were tested if they were asymptomatic.

If a business learns that any of its personnel have tested positive for COVID-19 and were at the workplace during the specified time frame, the business is required to report the positive case within 24 hours to the County Public Health Department at sccsafeworkplace.org.

Businesses must also comply with all case investigation and contact tracing measures directed by the County.

  1. Ascertainment of Vaccination Status: Businesses must ascertain the vaccination status of all personnel. Under the order, personnel includes employees, contractors, and volunteers. Until a person’s vaccination status is ascertained, they must be treated as not fully vaccinated.  Personnel who decline to provide vaccination status must also be treated as unvaccinated.

Businesses must complete their initial ascertainment of vaccination status for all personnel within 14 days of May 19, 2021, or no later than June 1, 2021.  Thereafter, businesses must obtain updated vaccination status for all personnel who were not fully vaccinated every 14 days (e.g., June 15, June 29, July 13, etc.).  Businesses must maintain appropriate records to demonstrate compliance with this provision.  The County has provided a template self-certification form for this purpose.

  1. Mandatory Rules for Personnel not Fully Vaccinated: Businesses must require all personnel who are not fully vaccinated to:
    1. comply with all applicable provisions of the Mandatory Directive on Use of Face Coverings, and
    2. comply with all applicable provisions of the Health Officer’s Mandatory Directive on Unvaccinated Personnel.

In announcing the new Order, the County’s Health Officer indicated additional changes will occur in conjunction with California’s “reopening” on June 15, 2021.  Dr. Cody predicted the future changes will even further differentiate between vaccinated and unvaccinated people.

Employers doing business in the County must act quickly to reconcile their new obligations under the Order with other California laws, chiefly the Fair Employment and Housing Act (“FEHA”), which is enforced by the state’s Department of Fair Employment and Housing (“DFEH”).  The DFEH previously issued guidance for employers that will assist in this endeavor.

Jackson Lewis P.C. © 2021

ARTICLE BY Patrick C. Stokes and Kate L. Brown of Jackson Lewis P.C.
For more articles on COVID-19 Vaccination Status, visit the NLRCoronavirus News section.

The Trend Towards Legal Recreational Cannabis: Considerations for Employers

In the first four months of 2021, Virginia, New Mexico, New York and New Jersey passed laws legalizing or decriminalizing, in some form, recreational marijuana.  Exactly how these laws will affect employers in these states is still an open question, but for now, employers should understand the nuances of the laws so they can prepare for the emerging reality that is legal marijuana.

Recent Laws

New Mexico’s law, which takes effect in June 2021, legalizes recreational marijuana use and sales for people over age 21.  The law allows employers to test for marijuana but has protections for medical marijuana users, which means employers, with limited exceptions, are prohibited from taking adverse action against applicants and employees who have a prescription for and/or use medical marijuana.

New York’s law allows individuals who are at least 21 years old to possess, use, and transfer (without compensation) limited amounts of cannabis.  With some narrow exceptions, employers are prohibited from taking adverse employment action against employees solely because of their use, recreational or otherwise, of cannabis before or after their work hours.  Employers, however, may still prohibit employees from using cannabis while working, on the employer’s premises, or while operating or using the employer’s equipment or property.

New Jersey’s law legalized the sale, use and possession of recreational marijuana for individuals 21 and older.  The law does not restrict an employer from maintaining and enforcing drug-free workplace policies but, when it comes to marijuana, requires employers to show use and/or impairment at work, as opposed to off-duty use, before the employer can take adverse employment action.

Virginia’s new law (HB 2312 / SB 1406) legalizes home cultivation and personal possession of cannabis beginning July 1, 2021, and retail sales to individuals 21 years and older beginning January 1, 2024.  An amendment to existing law (HB 1862) provides employment protections for medical marijuana cardholders by prohibiting employers from terminating, disciplining, or otherwise discriminating against an employee “for such employee’s lawful use of cannabis oil pursuant to a valid written certification.”  While the statute provides anti-retaliation protections for an “employee’s lawful use of cannabis oil based on a valid written certification,” it does not: (i) restrict an employer’s ability to take adverse action for an employee’s impairment while at work or to prohibit possession during work hours; (ii) require an employer to commit any act that would cause the employer to be in violation of federal law or that would result in the loss of a federal contract or federal funding; or (iii) require any “defense industrial base sector employer or prospective employer” to hire or retain any applicant or employee who tests positive for marijuana in excess of specified amounts.  See our recent post concerning employment protections for medical use of cannabis oil.

Under each of these laws, the requirements employers must meet in order to justify adverse employment action can be difficult to ascertain.  Also, the various state administrative agencies tasked with providing guidance regarding these laws have not produced final versions of that guidance.  Even when such guidance is available, however, questions for employers will remain.  Much of what employers can and cannot do under these laws depends on the type of work in which the employees are engaged and the nature of the employment policies at issue.  There will likely not be a “one-size-fits-all” approach to navigating this new legal landscape and employers should be mindful of this as they contend with the prospect of broadening legalization of marijuana.

Copyright © 2021, Hunton Andrews Kurth LLP. All Rights Reserved.
ARTICLE BY Michael Reed and Holly H. Williamson of Hunton Andrews Kurth
For more articles on legal cannabis, visit the NLR Biotech, Food, Drug section.

Questions Linger for Employers with Regard to COVID-19 Policies

The country breathed a collective sigh of relief when, on May 13th, the CDC announced updated guidance that fully vaccinated people no longer need to wear a mask or physically distance “in any setting.” In reality, masking and social distancing requirements remain in New Jersey and to a lesser extent in New York, and the guidance still leaves many open questions for employers. Notably, the CDC’s workplace guidance has not been updated as of the date of this writing and continues to recommend masking and social distancing in the workplace. The CDC’s latest guidance still calls for wearing masks in crowded indoor settings like buses, planes, hospitals, prisons and homeless shelters. Importantly, and as discussed below, the new guidance does not negate the need for continuing COVID protocols in the workplace.

While the CDC cited scientific statistics (the efficacy of the vaccines against illness from COVID-19 and certain variants) as the impetus for expanding maskless activities for vaccinated people, the agency also communicated that it hoped to incentivize more people to get vaccinated. Many employers considering whether to implement vaccine policies are now trying to figure out how the CDC’s newest guidance applies to their businesses.

What Does This New Guidance Mean?

New Jersey

New Jersey has not changed its existing masking mandates indoors where social distancing is not possible, but has relaxed masking requirements outdoors. On May 17th, Governor Murphy issued Executive Order 241, announcing individuals need not wear masks in “outdoor spaces,” regardless of their ability to social distance or vaccination status.1 Yet, the Order also reinforced that the Governor’s prior Executive Order No. 192, which requires individuals to continue to wear a face covering in indoor workplaces, remains in force.

New York

New York State diverged from New Jersey when it announced on May 17th that it planned to adopt the new CDC guidance on mask use and social distancing for fully vaccinated individuals for most business and public settings beginning on May 19th. Citing 52% of New Yorkers over the age of 18 being fully vaccinated, New York has authorized businesses to continue to require masks, but “[i]n most settings, vaccinated individuals will not be required to wear a mask.”2 New York has issued a flyer detailing how businesses in the state should implement the CDC’s guidance. Highlights include the following:

  • Fully vaccinated individuals do not need to wear masks or social distance in most settings, including commercial settings. Excluded from this guideline, however, are Pre-K through 12 schools, public transit, homeless shelters, correctional facilities, nursing homes and healthcare settings.
  • For businesses that operate with less than 250 persons indoors or less than 500 outdoors, they may require proof of vaccination status, either by paper, digital application, the State’s Excelsior Pass (digital proof of COVID-19 vaccination or negative test results), or the honor system.
  • For businesses with more than 250 persons indoors or 500 people outdoors (“large-capacity”), business capacity is no longer limited by any other criteria than the ability of unvaccinated people to remain six feet apart. If all patrons within an establishment (or a separate part of an establishment) are able to present proof of full vaccination, those fully vaccinated individuals need not wear a mask or social distance. Proof of vaccination by the honor system is insufficient in large capacity businesses.
  • CDC Guidance Impact on the Workplace

For employers, decisions regarding modifying or eliminating any masking or social distancing policies are dependent on federal, state and local laws and the factual circumstances at those workplaces. With workforces containing both vaccinated and unvaccinated individuals, a changing landscape of official guidance, and the desire of our communities to return to normal, employers still have challenges ahead. Employers need to evaluate their workplace environments and make decisions that promote and protect workplace safety as the guidance evolves. Evaluating remote work policies and crystalizing job roles where a physical presence at the office is necessary are sure to be high on the action items list.

When your jurisdiction allows for a reduction or elimination of indoor masking, preliminary factors to consider when deciding whether to modify your workplace’s masking protocols include:

  • The size and layout of the workspace in relation to the feasibility for employees to social distance;
  • Whether workers are vaccinated, the percentage of workers who are vaccinated, and/or implementing a vaccination policy;
  • How best to obtain vaccination information from employees;
  •  The extent to which visitors and/or customers are present who may or may not feel comfortable with a mask free workforce;
  • The type of work being done and whether such work is conducive to social distancing;
  • The employer’s ability to enforce internal COVID policies and potential consequences for violation;
  • For unionized workforces, the obligations of any collective bargaining agreement and/or negotiations over changes to terms and conditions of employment.

Final Thoughts

Employers need to review their policies and ensure communications with employees are clear and consistent with all federal, state, and local rules and guidelines. As with any changes in the workplace, clear communication seeking alignment, understanding, and buy-in from both employees and management in complying with the business’s COVID policies and procedures, with the goal of keeping all employees and visitors to the business safe, remains critical.

© Copyright 2021 Sills Cummis & Gross P.C.

ARTICLE BY Stacy L. Landau and Patricia M. Prezioso of Sills Cummis & Gross P.C.

COVID-19: Returning to A Mask-Free Workforce? Not Quite Yet

On 13 May 2021, the Centers for Disease Control and Prevention (CDC) issued new guidance, stating that individuals who are fully vaccinated against COVID-19 “can resume activities without wearing a mask or staying 6 feet apart, except where required by federal, state, local, tribal, or territorial laws, rules, and regulations, including local business and workplace guidance.” This forced employers across industries to evaluate their existing face covering/mask policies absent additional guidance from the Department of Labor (DOL) or Equal Employment Opportunity Commission (EEOC). On 17 May 2021, the Occupational Safety and Health Administration (OSHA) announced its endorsement of the CDC’s new guidelines, but did not provide any additional guidance for employers. Specifically, OSHA stated that it “is reviewing the recent CDC guidance and will update our health materials on this website accordingly. Until those updates are complete, please refer to the CDC guidance for information on measures appropriate to protect fully vaccinated workers.” Given that OSHA has not formally revised its existing guidelines and recommendations related to face covering requirements in the workplace as a means of mitigating the spread of COVID-19 and the EEOC has not updated its COVID-19 guidance since December 2020, employers should tread carefully and closely consider the risks involved before relaxing any face covering workplace restrictions.

OSHA IS RESPONSIBLE FOR WORKERS; CDC PROVIDES GUIDANCE FOR THE PUBLIC

The CDC’s mission is to protect the American public from “health, safety, and security threats,”1 while OSHA’s mission is to “ensure safe and healthful working conditions for workers.”2 The Occupational Safety and Health Act (OSH Act) contains a general duty clause, which requires employers to provide workers with a workplace free from recognized hazards that are causing or are likely to cause death or serious physical harm. Throughout the pandemic, OSHA has interpreted this clause to mandate the use of masks in the workplace to limit the spread of COVID-19.

Although the CDC’s guidance throughout the pandemic has helped inform many employer decisions, it is important to keep the CDC’s guidance in context. First, the CDC’s guidance is just that—guidance. OSHA, on the other hand, is responsible for enforcing the requirements of OSH Act, promulgates rules and standards, and assesses penalties to ensure compliance with the OSH Act. Second, as noted above, the CDC’s recommendations are aimed at protecting the American public, while OSHA’s rules and standards are designed to ensure employers provide a safe working environment to their employees. While OSHA has apparently endorsed the new CDC guidance, OSHA may publish more detailed guidance concerning the relaxed use of masks for vaccinated individuals in the workplace. Until then, OSHA has not formally removed its most recent COVID-19 guidance for employers published on 29 January 2021, which includes mandating the use of masks by both employees and third parties in the workplace.

STATE AND LOCAL LAW

Many state and local laws, executive orders, and other guidance continue to require masks in the workplace (and inside public places). Indeed, the CDC does not have authority over state or local governments that may impose stricter requirements, and its recent guidance explicitly defers to state and local laws. Importantly, although some State Executive Orders across the country have been changed since the most recent CDC guidance went into effect, some other State Executive Orders remain in effect and some require mask wearing and social distancing. Therefore, employers should consult state and local restrictions before lifting any mask wearing policies.

Further, some jurisdictions also have employer liability statutes and specific workers’ compensation standards that mandate employer compliance with certain health and safety guidelines, which may include state and local regulations. These statutes often provide that when employers adhere to safety standards designed to prevent the spread of COVID-19, the employer is able to limit exposure or reduce liability when and if an employee contracts COVID-19 in the workplace.

INDUSTRY GUIDANCE

Employers must also consider whether the CDC’s new guidance actually changes anything for them, as the guidance does not apply to all industries or to all settings. For example, vaccinated individuals are still required to wear a face covering on airplanes and in healthcare facilities. Employers who work in or regularly interact with these industries should be mindful that requirements may differ. Any changes to a mandatory face covering policy should be made with those considerations in mind.

CONTRACTUAL OBLIGATIONS

In addition to government regulations, some employers may be contractually obligated under a lease or other agreement to maintain a mask mandate, regardless of the new CDC guidance. Therefore, prior to implementing any relaxed mask-related policies, employers should evaluate whether contractual or landlord restrictions may apply. Employers also should consider consulting any applicable insurance policies before modifying mask mandates.

EQUAL EMPLOYMENT OPPORTUNITY CONSIDERATIONS

Finally, the EEOC has not updated its “What You Should Know About COVID-19 and the ADA, the Rehabilitation Act, and Other EEO Laws” (WYSK) to account for the widespread availability of vaccines or the impact of vaccinations on mask wearing in the workplace. However, the current WYSK guidance provides some helpful information for employers considering lifting mask mandates in the workplace. For example, as discussed in our December 2020 alert on workplace vaccination considerations, asking for an employee’s vaccination status is not a prohibited medical inquiry under the Americans with Disabilities Act. Thus, if an employer elects to lift mask restrictions in the workplace, it should consider whether it will require employees to show proof of vaccination before allowing the employee to be present in the workplace without a mask, balancing risk avoidance with considerations of workplace culture and morale. If an employer chooses to require proof of vaccination, such proof should be limited to (i) an employee’s CDC vaccination card and a (ii) corresponding identification card, such as a driver’s license. Further, employers should ensure that employees do not bring an entire medical file or unrelated medical documents as proof of vaccination. Limiting who has access to information regarding employee’s vaccination status is advisable and employers that choose to inquire about vaccination status should develop a written protocol for collecting such information and keeping it confidential. Such employers requiring proof of vaccination should maintain information related to an employee’s vaccination status separate from the employee’s general personnel file. Employers also may consider designating a human resources contact to administer the policy and maintain the list of vaccinated employees.

Keeping anti-discrimination laws in mind, employers should carefully consider how they will enforce a revised face covering policy in a non-discriminatory manner and while awaiting further guidance from the EEOC. Whether or not an employee is wearing a mask may inadvertently reveal the employee’s vaccination status. Thus, the risk for employers will be in how employees are treated in response to unavoidable disclosure. Managers and supervisors should be reminded of company equal employment opportunity policies and should be trained to not exclude masked individuals (or vice-versa) from employment opportunities. While distinguishing between unvaccinated and vaccinated employees may seem non-discriminatory, employers must remember that many individuals will remain unvaccinated because of a medical disability or a sincerely held religious belief and others may simply be more comfortable continuing to wear a mask in the workplace.

KEY TAKEAWAYS

  • Employers should consider a number of factors before implementing a revised face covering/mask policy in the workplace.
  •  Employers should work with their counsel to ensure their workplace policies are compliant with the OSH Act and all applicable state and local laws, including anti-discrimination laws.
  • Employers should expect an increase in employee concerns related to wearing a mask in the workplace and should prepare responses to anticipated questions and develop a plan for messaging the changes to their workforce before making any policy changes.
  • Employers should consider requiring proof of vaccination before allowing an employee to go without a mask in the workplace. If an employer chooses to do so, proof of vaccination should be in the form of the CDC vaccine card and government issued identification.
  • Employers who are lifting mask restrictions for vaccinated employees should have a clear reporting procedure for employee concerns. Such a reporting procedure should not involve employee-to-employee communications.
  • Employers who are lifting mask restrictions for vaccinated employees should consider identifying for employees’ scenarios where mask wearing still may be expected such as visiting customer locations that mandate mask wearing, visiting industries excluded from the CDC’s relaxed mask guidance, traveling and/or meeting with third parties, or attending events (where vaccine status of visitors cannot be ascertained).
  • Employers should consider how a revised face covering policy may affect return-to-work plans. Employees, especially those who are immunocompromised or those who have children or individuals who are at high-risk of COVID-19 in their residences, may be more reluctant to return to a physical location with relaxed mask wearing policies.
    Copyright 2021 K & L Gates

For more articles on CDC mask guidance, visit the NLR Coronavirus News section.

100 Days of the Biden Administration, Part II: Key Labor and Employment Policy Developments

In its first 100 days in office, the Biden administration has advanced its policy priorities, many of which have involved repealing the policy accomplishments of the previous presidential administration. The Biden administration can be expected to advance its own proposals soon.

The first part of this two-part blog series focused on the Biden administration’s first 100 days and reviewed the administration’s legislative plans. The second part of the series addresses policy developments occurring at the executive branch agencies and independent agencies.

U.S. Department of Labor

Personnel Is Policy

On March 22, 2021, the U.S. Senate confirmed former Boston mayor and union official Martin Walsh as secretary of labor. While it is still early, many in the business community remain optimistic about Walsh’s willingness to listen to their concerns. As for other leadership positions at the U.S. Department of Labor (DOL), the deputy secretary of labor nominee, Julie Su, and solicitor of labor nominee, Seema Nanda, have had their confirmation hearings but have not been voted on by the full Senate. Su runs California’s Labor and Workforce Development Agency, while Nanda is an Obama-era DOL vet and former chief executive officer of the Democratic National Committee. If Su and Nanda are confirmed by the Senate, they will work with Walsh as the top three officials dictating policy at the DOL.

OSHA and Workplace Safety

  • Assistant secretary nominee. In early April 2021, President Joe Biden announced his intention to nominate Douglas L. Parker to be the assistant secretary of labor for the Occupational Safety and Health Administration (OSHA). Parker currently serves as chief of California’s Division of Occupational Safety and Health (Cal/OSHA).
  • OSHA emergency temporary standard. For months, workers’ advocates and Democrats have been calling on OSHA to issue an emergency temporary standard (ETS) to protect workers from COVID-19. On January 21, 2021, President Biden doubled down on these demands when he issued an executive order instructing the DOL and OSHA to consider issuing an emergency temporary standard by March 15, 2021. On April 26, 2021, more than a month past the deadline, OSHA sent its draft ETS to OIRA for approval. Any final ETS could be impacted by recent guidance from the U.S. Centers for Disease Control and Prevention, which recently eased mask requirements.
  • COVID-19 vaccine reactions. On April 20, 2021, OSHA issued new guidance on when an employer must record in its injury and illness logs an employee’s adverse reaction to a COVID-19 vaccination. In short, if an employer requires employees to get vaccinated, then any adverse action is “work-related” and, therefore, recordable.

Wage and Hour

  • Independent contractor rule. On May 6, 2021, the DOL rescinded its independent contractor rule, which had set forth a test for independent contractor status that focused on “the worker’s opportunity for profit or loss” due to individual initiative and investment. Although the rule was finalized on January 7, 2021, it never became effective.
  • Joint-employer rule. On March 12, 2021, the DOL proposed to rescind the Fair Labor Standards Act joint-employer rule that took effect in March 2020, but was subsequently vacated by a district judge in New York. The rule had set forth a four-factor test for determining joint-employer status.
  • Tip rule. While portions of the 2020 final tip rule went into effect on April 30, 2021, the Wage and Hour Division (WHD) delayed until December 31, 2021, the effective date of the provisions concerning civil money penalties and employees who perform tipped and non-tipped work.
  • Liquidated damages. On April 9, 2021, the WHD “return[ed] to pursuing pre-litigation liquidated damages” in lieu of litigation, after temporarily halting the practice in order to encourage economic recovery during the pandemic.
  • PAID program. The DOL discontinued the Payroll Audit Independent Determination (PAID) program, which the Trump administration initiated in 2018 to encourage employers to voluntarily correct certain underpayments to employees.

Federal Contractors and the Office of Federal Contract Compliance Programs (OFCCP)

  • OFCCP director. Jenny R. Yang, former chair of the U.S. Equal Employment Opportunity Commission, is now the director of the OFCCP. Expect her to focus the agency on increased enforcement, particularly around compensation discrimination.
  • Minimum wage increase. On April 27, 2021, President Biden issued an executive order that will require covered federal contractors and subcontractors to pay employees a minimum of $15 per hour by January 2022.
  • Diversity and inclusion training. President Biden revoked Executive Order 13950, relating to federal contractors’ diversity and inclusion training efforts.
  • Religious exemption. The OFCCP proposed to rescind a December 2020 regulation that is intended to provide protections for religious organizations to “hire employees who will further their religious missions, thereby providing clarity that may expand the eligible pool of federal contractors and subcontractors.”

Office of Labor-Management Standards

The DOL subagency that “promotes labor-management transparency as well as labor union democracy and financial integrity” proposed to rescind a Trump-era rule that required increased financial disclosures from labor organizations.

Labor-Management Relations

Unprecedented Firing of NLRB GC

Within hours of being inaugurated, President Biden fired Peter Robb, the National Labor Relations Board’s general counsel. Robb’s term wasn’t scheduled to expire until November 2021. This was an unprecedented decision, as NLRB general counsel are traditionally permitted to serve out their terms during changes in administrations. The move sends a message to stakeholders that the administration is going to be very aggressive in the traditional labor arena. It also allows the administration to begin “teeing up” cases in anticipation of taking full control of the Board by fall 2021.

A Republican Board. For Now.

Republicans will hold a majority on the NLRB through August 2021 because Board members’ terms are staggered. Expect a lot of political activity surround the Board during the late summer and early fall as President Biden tries to get his Board member nominees confirmed. The administration hopes that a Democratic-controlled Board can start enacting policy changes by the second half of the year.

Graduate Students

On March 15, 2021, the Board withdrew its regulatory proposal to exempt from the coverage of the National Labor Relations Act students who, in connection with their undergraduate and graduate studies, are financially compensated for the services they provide to private colleges or universities.

Contract Bar

On April 21, 2021, a bipartisan Board upheld its contract-bar doctrine, which bars union elections during the term of a collective bargaining agreement for up to three years.

Pending Matters

  • Uniform policies. The Board is reviewing the public feedback that it requested on its standard regarding employer uniform policies and whether they interfere with employees’ wearing of union insignia.
  • Employer investigations. The Board is also reviewing public feedback it requested on the issue of the proper standard to apply in situations in which employers question employees in the course of preparing defenses to unfair labor practice allegations.

 Immigration

USCIS Director Nominee

In mid-April 2021, President Biden announced his intent to nominate Ur Jaddou to be director of U.S. Citizenship and Immigration Services (USCIS). Jaddou previously served as USCIS chief counsel.

H-4 Work Authorization

On January 25, 2021, USCIS withdrew a Trump administration proposal that would have rescinded work authorization permits for dependent H-4 spouses.

“Executive Order on Restoring Faith in Our Legal Immigration Systems and Strengthening Integration and Inclusion Efforts for New Americans”

On February 2, 2021, President Biden issued an executive order to begin unwinding Trump-era immigration policies by directing the secretary of state, the attorney general, and the secretary of homeland security to “review existing regulations, orders, guidance documents, policies, and any other similar agency actions” that do not, among other things, “promote integration, inclusion, and citizenship, and … embrace the full participation of the newest Americans in our democracy.”

Public Charge Rule

The administration will no longer defend the public charge rule in the courts as it begins the process of repealing the regulation.

H-1B Wage Allocation Rule Postponed

On February 4, 2021, USCIS announced that it would postpone the effective date of its H-1B wage allocation selection rule until December 31, 2021. Published in the Federal Register on January 8, 2021, the rule was originally scheduled to go into effect on March 9, 2021.

H-1B Prevailing Wage Rule

The DOL’s Employment and Training Administration (ETA) proposed to delay the effective date of the rule entitled “Strengthening Wage Protections for the Temporary and Permanent Employment of Certain Aliens in the United States.” The original regulation was finalized in the final days of the Trump administration and was set to go into effect on March 15, 2021. The ETA postponed the rule’s effective date until May 14, 2021, and is seeking a further delay to November 14, 2022.

Trump-Era Visa Bans

On February 24, 2021, President Biden revoked Proclamation 10014, issued in April 2020, which banned individuals from seeking entry to the United States on immigrant visas. In addition, the Trump administration’s Proclamation 10052, which banned individuals from entering the United States on certain nonimmigrant visas (such as H-1B and L-1), expired on March 31, 2021.

© 2021, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
For more articles on the Biden administration, visit the NLR Administrative & Regulatory section.

COVID-19 Vaccine Passport Programs: Privacy and Security Considerations

As access to COVID-19 vaccines becomes more prevalent, and we begin to conceptualize what a post-pandemic world might look like, many governments are assessing the idea of a COVID-19 vaccine passport framework.  In late March, the European Commission announced its plan for a COVID-19 Digital Green Certificate framework (“the framework”) to facilitate “safe free movement of citizens within the EU during the COVID-19 pandemic”. The Digital Green Certificate provides proof that an individual has either: 1) been vaccinated against COVID-19, 2) received a negative test result or 3) recovered from COVID-19.  But while the benefits to such a plan are clear, there are significant privacy and security issues to consider.

Shortly after the European Commission released the proposal of the framework, the European Data Protection Board (EDPB) and the European Data Protection Supervisor (EDPS) issued a joint opinion on the framework in respect to personal data protection implications (“the joint opinion”).  The joint opinion addressed the personal data implications of the framework, and highlighted, above all, that such a framework must be consistent and not conflict with application of the General Data Protection Regulations (“GDPR”), and that there should be adoption of adequate technical and organizational privacy and security measures in the context of the framework.

Below are key recommendations from the joint opinion:

  • Categories of Personal Data. While Annex I of the framework sets out categories and data fields of personal data that would be processed under the framework, the joint opinion emphasizes that the “justification for the need for such data fields” should also be included in the framework, as well as developing “more detailed data fields (sub-categories of data)…under the already defined categories of data should be added”. These revisions will help ensure that the framework is consistent with several GDRP principles including data minimization (i.e. not processing more than the data necessary to fulfil the purpose for which the data was collected) , purpose limitations (personal data shall only be collected for a specified, explicit and legitimate purpose) , and impact assessment (the obligation under the GDPR which requires controllers to conduct a data protection impact assessment before processing personal data would have to be redone if data fields were altered).
  • Adoption of Adequate Technical and Organizational Privacy and Security Measures in the Context of the Proposal. The joint opinion highlights that the framework should explicitly state that controllers and processors of personal data “shall take adequate technical and organizational measures to ensure a level of security appropriate to the risk of processing, in line with Article 32 GDPR”.  Also included, the joint opinion suggests “the establishment of processes for a regular testing, assessment and evaluation of the effectiveness of the privacy and security measures adopted”, as well as including language in the framework consistent with the GDPR to prevent confusion and ensure relevance.  Finally, the joint opinion notes that adoption of privacy and security measures should be taken both at the time of the determination of the means for processing, as well as by the time of the processing itself.
  • Identification of controllers and processors. The joint opinion recommends that the framework specify “the list of all entities foreseen to be acting as controllers, processors and recipients of the data in that Member State”. Identifying these entities will provide EU citizens with an understanding of “whom they may turn to for the exercise of their data protection rights under the GDPR, including in particular the right to receive transparent information on the ways in which data subject’s rights may be exercised with respect tot the processing of personal data”.
  • Transparency and data subject’s rights. The personal data related to the framework is particularly sensitive.  As a result, the joint opinion urges the European Commission to “ensure that the transparency of the processes are clearly outlined for citizens to able to exercise their data protection rights”.
  • Data storage. The joint opinion notes that to ensure GDPR principles surrounding data storage principles (e.g. storing data no longer than is necessary for the purposes for which it was processed) in the context of the framework, where possible, the framework should “explicitly define” and if not possible, then at least provide the “specific criteria used to determine such storage period”.
  • International data transfers. Finally, the joint opinion recommends “explicitly clarifying whether and when any international transfers of data are expected” as well as including safeguards “to ensure that third countries will only process the personal data exchanged for the purposes specified” within the framework.

The EU is not the only region implementing or considering a vaccine passport program.  Israel’s vaccine passport, the Green Pass, is already up and running (available to the 80% of the adult  population that is fully vaccinated), and several private companies are trying to develop globalized vaccine passport programs.  For example, one large tech company’s vaccine passport technology is being tested by the State of New York, for some sports venues and arenas.  Likewise, another technology, the Common Pass  if implemented will help individuals when travelling globally to demonstrate their COVID-19 status. It is worth noting however, that some states are actively banning vaccine passport technology and requirements.  For example, just last week in Florida, Governor Ron DeSantis signed into law legislation prohibiting businesses, schools and government offices from requiring proof of vaccination, with fines of up to $5000. And in general, public support of vaccine passports in the U.S. seems to vary by activity. According to a recent Gallup poll the majority of Americans support proof of vaccination for travel by airplanes and attending events with large crowds. Conversely, Americans are less supportive of proof of vaccination at work, staying in a hotel or dining at a restaurant.

Whatever the program, the privacy and security considerations surrounding the collection of personal data are similar, and become increasingly complicated in the context of a global vaccine program where overlapping, and sometimes conflicting, data privacy and security laws and guidance come into play.   In the U.S. alone, there are numerous laws which may be implicated when vaccine related data is collected from individuals in the public or private setting – such as for employees or customers.  These include the Americans with Disabilities Act (ADA), the Genetic Information Nondiscrimination Act (GINA), state laws, and the CCPA.  In addition to statutory or regulatory mandates, organizations will also need to consider existing contracts or services agreements which may provide for or limit the collection, sharing, storage, or return of data. Moreover, if a vendor were involved in a vaccine passport program, contracts/agreements would need to include confidentiality, data security, and similar provisions. This is most important if the vendor will be maintaining, storing, accessing, or utilizing the information collected about the organization’s employees or customers.

In short, a vaccine passport program may play a crucial role in ensuring a safe and healthy return to normalcy across the globe.  Nevertheless, the legal risks, challenges, and requirements of any such program, whether in the public and private forum, must be considered prior to implementation.

Jackson Lewis P.C. © 2021

ARTICLE BY Joseph J. Lazzarotti,  Jason C. Gavejian and Maya Atrakchi of Jackson Lewis P.C.
For more articles on coronavirus vaccines, visit the NLR Coronavirus News

CDC: Masks Are No Longer Required in Most Settings for Vaccinated People

On Thursday, May 13, 2021, the Centers for Disease Control (CDC) announced new guidance stating it is safe for fully vaccinated people to not wear masks or physically distance in any non-health care setting.1

Per this guidance, fully vaccinated people can now resume most activities without wearing a mask or physically distancing. Unvaccinated people, however, should still consider the risks of particular indoor and outdoor activities now deemed safe for vaccinated people, such as restaurant dining, exercising indoors, or attending a crowded outdoor event, and take necessary precautions.

This is only guidance. Individuals may still be required to wear masks, and businesses may still be required to enforce mask-wearing as required by federal, state, or local law. For example, travelers will still be required to wear masks on all forms of public transportation and in public transportation hubs within the United States.

Additionally, in this latest guidance, the CDC recommended that fully vaccinated people can refrain from testing and self-quarantining before and after domestic and international travel and following a known exposure if asymptomatic, unless the individual lives or works in a high-congregated setting, such as a correctional facility or homeless shelter.

As the country continues to emerge from the pandemic, individuals and businesses should be mindful of this changing landscape as federal and state agencies begin to loosen pandemic requirements. For specific questions concerning national and state COVID-19 legal developments, please contact your Dinsmore attorney.

[1] Guidance for Fully Vaccinated People, Centers for Disease Control, May 13, 2021, https://www.cdc.gov/coronavirus/2019-ncov/vaccines/fully-vaccinated-guidance.html.

ARTICLE BY Faith C. Whittaker of Dinsmore & Shohl LLP
For more articles on CDC mask guidance, visit the NLR Coronavirus News section.

College Health Association Recommends COVID Vaccine Mandate for Colleges and Universities

As higher education institutions across the country wrestle with how best to safely return campuses to in-person instruction, the American College Health Association (“ACHA”) has issued important new recommendations related to COVID-19 remediation. As a strategy for enhancing campus safety in the face of the ongoing global pandemic, the ACHA is recommending that institutions implement a COVID-19 vaccine mandate covering all on-campus students arriving for the fall term, subject to supply limitations or conflicting state law.

In issuing this recommendation, the ACHA observed that such a vaccine mandate “offers the most effective way for institutions of higher education to return to a safe, robust on-campus experience.” Further, the ACHA observed that such a mandate is in keeping with current practice on most campuses, which already have certain vaccine mandates in place.

The ACHA noted that its recommendation is buoyed by the expectation that the Food and Drug Administration (“FDA”) will convert existing vaccines from an emergency use authorization status (“EUA”) to full approval by fall. At the same time, it is observed that even the current EUA status should not “preclude an institutional vaccine requirement.”

ACHA recommendations further encourage institutions to: engage in appropriate educational communications related to the vaccine; consider how best to support students coming from regions of the globe that do not have access to an FDA-approved vaccine; and evenly apply appropriate vaccine mandate exemptions.

While a campus vaccine mandate may offer campuses a vital tool in the return to safe, in-person instruction, it is important that policies implementing such a strategy be equitable and consistent. Further, institutions should ensure that they have an exemption review process in place to address requests for medical and religious exemptions from any vaccination requirement. Of course, it is likely that some mandates will face public and, perhaps, legal scrutiny.

© Steptoe & Johnson PLLC. All Rights Reserved.

ARTICLE BY Jim Newberry of Mark E. Hanshaw of Steptoe & Johnson PLLC
For more articles on COVID vaccine mandates, visit the NLRCoronavirus News section.

How a CEO Can Be Liable for a Noncompliant Business

Your company is being targeted in a civil lawsuit. A whistleblower has filed a complaint with the U.S. Securities and Exchange Commission (SEC). The Internal Revenue Service’s Criminal Investigations Division (IRS-CI) is investigating your company for tax fraud. As the company’s chief executive, are you at risk for personal liability exposure?

Maybe. While most corporate liabilities reside exclusively at the corporate level, there are circumstances in which CEOs can be held liable for their companies’ noncompliance. In certain circumstances, CEOs can face personal civil, or criminal liability for acts taken by, or on behalf of, their companies. Litigation and investigations targeting businesses’ noncompliance can also lead to the discovery of wrongs committed by CEOs in their individual capacities, and these discoveries can lead to personal liability as well.

“CEOs can potentially face personal liability in a broad range of circumstances. As a result, CEOs need to take adequate steps to mitigate their risk, and they must be prepared to defend themselves during (and in some cases after) corporate investigations, litigation, and enforcement proceedings. ” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C. 

3 Types of Scenarios in Which CEOs Can Face Personal Liability Arising Out of Corporate Noncompliance

There are three main types of scenarios in which CEOs can face personal liability arising out of corporate noncompliance. However, within each of these three broad areas, there are numerous possible examples; and, as discussed below, CEOs need to implement appropriate measures to mitigate their personal risk. The three main types of scenarios in which CEOs can face personal liability are:

  • Piercing the corporate veil
  • Acts and omissions in the CEO’s corporate capacity
  • Acts and omissions in the CEO’s personal capacity

1. Piercing the Corporate Veil

Even outside of the legal and corporate environments, it seems that most people are familiar with the phrase, “piercing the corporate veil.” However, few people (including people in the legal and corporate environments) have a clear understanding of what this phrase actually means.

Piercing the corporate veil refers to the act of holding a company’s owners and executives liable for the company’s debts. This can include either debts owed to commercial creditors, debts owed to judgment creditors, or both.

Corporations, limited liability companies (LLCs), and certain other types of business entities insulate owners and executives from personal financial responsibility for corporate debts. Owners and executives enjoy “limited liability” based on the existence of the business entity, which itself is classified as a “person” for most legal purposes. If the company gets sued, the limited liability protection afforded to its owners and executives means that they are not at risk for facing judgments in their personal capacities—in most cases.

But, there are various circumstances in which the veil of limited liability can be pierced (or, in plain English, in which a CEO can be held financially responsible for a company’s debts). Three of the most common circumstances that allow for piercing are:

  • Commingling – If a CEO commingles his or her personal assets with the assets of the business, a court may find that there is an insufficient distinction between the two. For example, if a small business owner/CEO deposits payments for accounts receivable into his or her personal account, a judge might determine that since the business owner/CEO is not respecting the company’s existence, the court should not respect it, either.
  • Failure to Observe Corporate Formalities – In addition to commingling, failure to observe other corporate formalities can lead to piercing as well. This includes failure to observe formalities such as preparing meeting minutes and resolutions, making annual filings, and separately purchasing assets for personal and business use.
  • Insufficient Corporate Assets – Judges have also allowed piercing in circumstances in which companies are grossly undercapitalized. Essentially, if a company is undercapitalized and takes on more debt or risk than it can reasonably handle, then a judge might hold the company’s owner and/or CEO personally liable as a result of failing to endow the company with the funds it needed to operate in good faith.

In piecing cases, CEOs can face full liability for debts incurred at the corporate level. Theoretically, this is true even if the CEO did not personally participate in the conduct that gave rise to the liability. The CEO’s personal liability attaches not as a result of the underlying wrong, but as a result of the CEO’s failure to observe and respect the requirements for securing limited liability protection.

2. Personal Liability for Acts and Omissions Committed in the CEO’s Corporate Capacity

Even when piercing is not warranted, CEOs can still face personal liability if they commit certain wrongful acts in their corporate capacity. CEOs can also face criminal culpability for crimes committed in their corporate capacity (including crimes purportedly committed for or in the name of the company).

For example, this has come up multiple times recently in federal Paycheck Protection Program (PPP) loan fraud investigations. In these investigations, companies are facing penalties for fraudulently obtaining (or even just applying for) PPP loans during the pandemic. But, in many cases their CEOs are facing personal liability as well. Typically, this liability is the result of either (i) the CEO submitting a fraudulent PPP loan on the company’s behalf, or (ii) simply being at the helm of an organization that fraudulently applied for and/or obtained federally-backed funds from a financial institution.

In most cases, in order for a CEO to be held liable for an act or omission committed in the CEO’s corporate capacity, the act or omission must either:

  • Have been committed intentionally;
  • Constitute gross negligence;
  • Constitute a criminal act; or
  • Fall outside of the CEO’s actual or apparent authority.

In addition to federal law enforcement investigations, this type of liability exposure frequently arises in civil litigation (where plaintiffs will often pursue claims against multiple related parties and individuals) and in shareholder derivative cases. If a plaintiff or group of shareholders believe that a CEO is directly responsible for the company’s conduct or performance, then the CEO will need to engage his or her own defense counsel for the litigation.

3. Investigations and Litigation Targeting CEOs in Their Personal Capacity

The third main type of scenario in which CEOs will face personal liability for business noncompliance is when litigation or an investigation at the corporate level leads to scrutiny of the CEO’s conduct in his or her personal capacity. For example, if IRS-CI investigates a company for tax fraud and there is evidence to suggest that the CEO may have been embezzling funds or withholding income from his or her own returns, then the CEO could face an investigation as well.

What Can CEOs Do to Protect Themselves from Personal Liability?

Given the risk of facing personal liability, what can – and should – CEOs do to protect themselves? Just as CEOs need to manage their companies’ risk effectively, they need to manage their own risk as well. Similar to corporate risk mitigation strategies, CEOs’ risk mitigation strategies should focus on (i) understanding their risks, (ii) understanding what it takes to maintain compliance, (iii) purchasing adequate insurance coverage, and (iv) knowing what to do in the event that a liability risk arises.

  • Understanding CEOs’ Risks – Mitigating risk starts with understanding the risks that need to be mitigated. For CEOs, while some of these risks mirror those that exist at the corporate level, others do not. While CEOs don’t necessarily need to implement risk mitigation practices that are on par with those of their companies, they do need to ensure that they have a clear understanding of the acts and omissions that have the potential to lead to trouble.
  • Understanding and Maintaining Compliance – CEOs need to have a clear understanding of what it takes to maintain compliance in both their corporate and individual capacities. At the corporate level, this ensures that CEOs don’t make mistakes that have the potential to be classified as criminal, intentional, or grossly negligent conduct. At the individual level, this helps mitigate against the risk of facing personal liability as a follow-on to a corporate-level lawsuit or investigation.
  • Purchasing Insurance Coverage – CEOs can purchase directors and officers (D&O) liability insurance coverage to mitigate against the risk of facing personal financial responsibility for noncompliance. However, CEOs also need to understand the limitations of D&O coverage. Policies often exclude claims based on gross negligence or failure to exercise the duties of a CEO’s office in good faith—and this means that lawsuits often target allegations based on gross negligence and bad-faith conduct so that plaintiffs can seek damages beyond CEOs’ D&O policy limits.
  • Knowing How to Respond to Liability Risks – Finally, CEOs need to know how to respond to liability risks. Just as companies should have policies and procedures for responding to lawsuits and investigations, CEOs should have discussions with their personal legal counsel so that they know what to do when a claim or inquiry arises. While there is certainly the possibility that a reactive response could be too little too late, when coupled with the other mitigation strategies discussed above, acting quickly in response to a threat can help reduce the likelihood of facing a civil judgment and/or criminal charges.

Oberheiden P.C. © 2021

ARTICLE BY Dr. Nick Oberheiden of Oberheiden P.C.
For more articles on compliance, visit the NLR Corporate & Business Organizations Section.