Category: Administrative & Regulatory

President Trump issues Executive Order adopting Most Favored Nation Approach

In what appears to be one of President Trump’s last official acts, he has issued an Executive Order adopting, for certain purposes, the Most Favored Nation clause approach to the pricing of drugs in the United States.  During the campaign, it was the position of President-Elect Biden that we should be negotiating the price with the drug companies for the sale of drugs in the United States.

Obviously, an Executive Order by one President can be quickly replaced with an Executive Order by the next President.

The only approach in regard to institutionalizing the Most Favored Nation clause approach to drug pricing, would be Congressional legislation, which has not been forthcoming during the four years of the Trump Administration.

A recent development is the decision of the Canadian government to enact significant restrictions on the bulk purchase of drugs in Canada for shipment into the United States.  This is most likely the result of pressure by the drug companies, who have made it clear to the Canadians that the drug companies will only provide Canada with a certain quantity of drug products at particular pricing levels and at quantities which are sufficient for the Canadian population alone.  The drug companies will not permit the Canadians to sell drugs that had been purchased at the much cheaper Canadian price than the price for which those drugs are sold in the United States to institutions in the United States.

This action of the Canadians highlights that the approach of the Most Favored Nation clause would not be greeted in a friendly manner, by many of our allies.  These allies benefit from being able to negotiate cheaper prices for drugs, since the drug companies can then make up the shortfall needed for their R&D or their profit, by charging much higher prices for drugs in the United States.  Enacting a Most Favored Nation clause would shut down that option, on behalf of the drug companies, and they would be forced to negotiate with our allies at much higher prices for drugs sold to the allies.  Of course, this would stop the cost shifting to the American consumers and spread the cost of the development of drugs among all users, including those of our allies.

It will be interesting to see what approach the Biden Administration takes in regard to the pricing of drugs and whether or not it will continue the Trump approach of Most Favored Nation or will attempt to develop a different negotiating strategy for the pricing of drugs.

© 2020 Giordano, Halleran & Ciesla, P.C. All Rights Reserved
For more articles on executive orders, visit the National Law Review Election Law / Legislative News section.

CPSC Issues COVID-19 Consumer Products Guidance, Further Muddying the Regulatory Waters and Increasing Scrutiny of COVID-19 Products

As the COVID-19 pandemic continues, and with an incoming Biden administration that is expected to step up efforts to control the spread of the virus, use of personal protective equipment (“PPE”) and cleaning/disinfectant products has never been more important or widespread among the public.  However, in late October, the Consumer Product Safety Commission (“CPSC”) issued guidance on its website asserting that certain consumer protection rules within its jurisdiction apply to PPE, and reminding consumers of the CPSC laws that apply to cleaning/disinfectant products (the “COVID Guidance”).

The CPSC commissioners disagree about the import or official applicability of the COVID Guidance, and questions abound as to how it interplays with FDA regulations issued by the U.S. Food and Drug Administration (“FDA”), including Emergency Use Authorizations (“EUA”), as well as EPA regulations on disinfectant products – not to mention how or whether the COVID Guidance impacts the protections afforded by the Public Readiness and Emergency Preparedness Act (the “PREP Act”).  But in any case, the guidance unquestionably heightens scrutiny around COVID-related products, and likely will give consumer plaintiffs’ attorneys additional lawsuit fodder – so manufacturers should understand it.

Broadly, the COVID Guidance covers two broad categories of products: face coverings, gowns, gloves (i.e., PPE), and cleaning/disinfectant products.

Face Coverings, Gowns, and Gloves

Under the COVID Guidance, face coverings, gowns, and gloves designed for consumer use are considered “articles of wearing apparel” and therefore must (1) comply with the flammability requirements of the Flammable Fabrics Act; and (2) be tested to either 16 C.F.R. Part 1610 (Standard for the Flammability of Clothing Textiles) or Part 1611 (Standard for the Flammability of Vinyl Plastic Film), depending on the materials used for construction.  Further, U.S. manufacturers and importers of these products must issue a General Certificate of Conformity (“GCC”) certifying that these clothing articles meet all applicable requirements.

The COVID Guidance imposes additional requirements for PPE apparel designed specifically for children’s use (i.e., ages 12 and under).  Under the Consumer Product Safety Act (“CPSA”), all children’s products must bear permanent tracking information, meet total lead content limits, and meet lead in paint or similar surface coating limits (if either a paint or surface coating is present on the product).  Product testing must take place at a CPSC-accepted testing lab, and U.S. manufacturers/importers of these products must also issue a Children’s Product Certificate.

Cleaning Solutions

Household cleaning solutions – for example, hand sanitizers and soaps – are primarily regulated by the FDA, but also fall under the jurisdiction of the CPSC if they constitute a “hazardous substance” under the Federal Hazardous Substances Act (“FHSA”).  Generally, the FHSA defines a “hazardous substance” as (1) a substance (or mixture of substances) that may cause substantial personal injury or substantial illness during customary or reasonably foreseeable handling or use, including reasonably foreseeable ingestion by children; and (2) the substance (or mixture of substances) is toxic, corrosive, an irritant, a strong sensitizer, is flammable or combustible, or generates pressure through decomposition, heat, or other means.  The FHSA requires that hazardous substances bear prominent warnings on their labels – for example, “KEEP OUT OF REACH OF CHILDREN,” “DANGER”, and “HARMFUL OR FATAL IF SWALLOWED,” among others.

© 2020 Foley & Lardner LLP
For more articles on the CPSC, visit the National Law Review Consumer Protection section.

How Long Until Biden Nominates the MARAD Administrator?

As President-elect Biden begins assembling his new team, personnel decisions play an important role in what the next four years will look like for the maritime industry. As speculation begins to mount, a question we see regularly is how long it will take for the president to appoint a new head of the U.S. Maritime Administration (MARAD).

The short answer is not any time soon. If past is prologue, it will be many months before a new administrator is confirmed. In the chart below, we detail the nomination and confirmation timelines of the last six MARAD administrators during the first term of an incoming president:

Admiral Mark Buzby had the fastest confirmation in recent history, despite having to wait nearly nine months after the 2016 election to take command at MARAD.

The longest wait for a MARAD Administrator occurred during the first term of the Obama presidency. David Matsuda was formally nominated to the post more than a year after the 2008 election, and in the end wouldn’t be confirmed until nearly 600 days after the election.

It should be noted, that in addition to those listed, several MARAD administrators have navigated the nomination process in the second term of a presidency; including Paul “Chip” Jaenichen (2014), Sean Connaughton (2006), Clyde Hart (1998), and John Gaughan (1985).

The new MARAD administrator will have big shoes to fill in replacing Admiral Buzby, but despite a slow-developing process, the agencies maintain order and continuity at the staff level from top to bottom. But if history holds, don’t expect a rapid transition at MARAD.

Marad Nominee Timeline

Copyright 2020 K & L Gates
ARTICLE BY Mark Ruge and  Brody Garland of K&L Gates
For more articles on maritime law, visit the National Law Review Government Contracts, Maritime & Military Law section.

CDC COVID-19 Guidance: Safe Workplace and Home Holiday Celebrations

It seems especially important to celebrate the people and events that we care about after all that has been endured this year. Holidays are one of the ways we celebrate, but holidays need to look different in 2020. COVID-19 can spread easily from one person to another during routine activities. Traditional holiday activities, such as workplace parties and family gatherings, are no exception. Bringing together employees, family members (including pets) and friends increases the risk of spreading COVID-19. To mitigate this risk, the U.S. Centers for Disease Control and Prevention (CDC) published updated guidance on November 12, 2020, for holiday celebrations and small gathering as well as guidance for Thanksgiving celebrations.

Celebrate Holidays Virtually or Limit Celebrations to Single Households

The CDC recommends celebrating virtually (i.e., through phone and video chat) or limiting celebrations to personal households. Personal households include individuals who currently live and share common spaces in an apartment or house. People who do not currently live in the same household, including college students who are returning from school for the holidays, are considered to be from different households. Those individuals can be included through interactive virtual experiences. Virtual celebrations also are ideal for the workplace, especially with the continuation of remote work arrangements.

Host and Attend In-Person Gatherings Responsibly

When hosting or attending holiday gatherings in the workplace or at home, take preventative measures to keep everyone safe. Guidance includes these safety steps:

  • Check the COVID-19 infection rates in the area of the gathering to determine if it is safe to host or attend the celebration in person.

  • Limit the number of individuals in attendance to enable social distancing.

  • Host the celebration outdoors.

  • Require attendees to wear face masks whether the celebration takes place indoors or outdoors.

  • Avoid physical contact, including hugs and handshakes, with individuals outside one’s personal household.

  • Avoid touching shared surfaces whenever possible.

  • Encourage attendees to wash their hands often with soap and water or to use hand sanitizer.

  • Plan ahead and ask attendees to avoid contact with people outside their personal households for 14 days before the in-person gathering.

  • Treat pets as you would any other family member and limit their interactions with people outside of the personal household. 

Follow Food Safety Practices

While the CDC acknowledges that there is no evidence to suggest that eating food is associated with directly spreading COVID-19, touching food, food packaging, plates or utensils poses the risk of infection if the object touched has the virus on it. The CDC recommends following food safety practices to reduce the risk of infection. The safety practices are advisable for workplace gatherings as well as in-person home gatherings. 

Avoid Travel or Practice Travel Safety

Travel increases the chance of spreading COVID-19, so the CDC recommends staying at home as the best safety practice. Where travel is desired or necessary, the CDC recommends the now-familiar safety measures: wear a facemask in public, including when using public transportation; maintain social distancing by staying at least six feet apart from others; wash hands often; and avoid touching the face, eyes, nose and mouth. In addition, many states have issued travel advisories with recommendations for individuals traveling from and returning to their home states from states or other destinations with increasing rates of COVID-19 to self-quarantine for 14 days. Check the travel advisories as a first step to planning out-of-state travel to help assess the risks and consequences of travel, including an inability to return to the workplace for 14 days. 

Self-Quarantine If Exposed to COVID-19

Self-quarantine is recommended for individuals exposed to COVID-19 during holiday celebrations. The quarantine should last for 14 days after contact with a person who has COVID-19. The 14-day period is recommended because symptoms of the virus (e.g., fever, cough or shortness of breath) may appear 2 to 14 days after exposure, and some infected individuals never have symptoms but are still contagious.

With Thanksgiving and the winter holidays upon us, it is natural to want to forget about COVID-19, put social distancing behind us, and celebrate with our colleagues, families and friends. Traditional workplace and home holiday activities may help spread the virus. While it is tempting to get together and celebrate as we have in the past, it is important to follow CDC guidance and choose activities with less risk to avoid giving the unwanted gift of COVID-19 to employees, families and friends. Skipping the mistletoe this year, a workplace best practice, also is advisable.

© 2020 Wilson Elser
For more articles on COVID-19, visit the National Law Review Coronavirus News section.

A Biden Board at the NLRB: What to Expect and When

This past Labor Day, President-elect Joe Biden told a group of union supporters that he would be “the strongest labor president you have ever had.” Just how true those words will be hinges on what party controls the Senate after the dust settles on this election season.

As part of his labor goals, Biden has championed the PRO Act, a substantive and drastically pro-union rewrite of the 85-year-old National Labor Relations Act that was passed by the House in early 2020. The PRO Act would codify the ambush election rule and micro-unit policy, neuter employers’ ability to mount counter-campaigns to union organizing attempts, and weaken right-to-work laws that protect employee free choice. The ambitious legislation would also permit the NLRB to issue heavy monetary penalties on employers for violating the NLRA and would more strictly require bargaining after an initial certification of a new union.

The legislation would be destructive to companies, but it seems unlikely to become law in today’s political landscape. Indeed, a less ambitious pro-labor bill, the Employee Free Choice Act, failed to pass a Democrat-controlled Congress in 2009.

But even if the PRO Act does not come to fruition, one thing is clear: there will be changes. Employers have benefitted greatly from the pro-employer NLRB over the past four years. We have seen a flurry of positive changes including wins on issues like joint employers, micro-units, abolishing the ambush election rule, and making it easier for employers to make unilateral changes in the workplace.

When and how change might occur under President-elect Biden will largely depend on when he is able to gain control of the NLRB.

The NLRB is currently composed of three Republican members and one Democrat, with one vacant seat. Assuming President-elect Biden is able to fill the vacant seat, his first opportunity to flip control of the Board in his favor will come in August 2021, when Trump appointee Bill Emanuel’s seat expires. NLRB General Counsel Peter Robb’s term expires in November 2021. Even then, control depends on the Senate confirming both the new general counsel and Board member positions.

In short, we could expect there to be pro-union changes at the NLRB beginning in the fall or winter of 2021. This timeline is similar to the beginning of the Trump administration, when we saw the biggest flurry of pro-employer rulings come in December 2017 after Republicans gained control of the NLRB. Once Biden gains control, we might see a strategy similar to that employed by the Trump and Obama Boards. A mix of precedent-overturning NLRB decisions and rulemaking could be in store for employers.

© 2020 BARNES & THORNBURG LLP
For more articles on the NLRB, visit the National Law Review Labor & Employment section.

SEC Proposes to Modernize Fund Shareholder Reports and Disclosures

The SEC has proposed modifications to the disclosure framework for mutual funds and exchange-traded funds (ETFs). The proposal sets forth a layered disclosure approach to highlight key information for retail investors. If adopted, the proposed modifications would:

  • require streamlined shareholder reports that would include fund expenses, performance, illustrations of holdings and material fund changes;
  • encourage the use of graphics or text features to promote effective communications; and
  • promote a layered and comprehensive disclosure framework by continuing to make available online certain information that is currently required in shareholder reports but may be less relevant to retail shareholders. Highlights from the proposal include the following: Tailored Shareholder Reports. Under proposed Rule 498B, new investors would receive a fund prospectus in connection with their initial investment, as they currently do, but funds would not deliver annual prospectus updates to shareholders thereafter.

Instead, funds would keep existing shareholders informed through streamlined annual and semi-annual reports, as well as timely notifications of material fund changes as they occur. Certain changes to a registration statement, such as updates to existing risk disclosures, may be deemed not to be material and therefore not subject to the timely notification requirements under proposed Rule 498B. Proposed Rule 498B would not prohibit a fund from continuing to satisfy its prospectus delivery obligations by delivering a copy of the summary prospectus and any supplements to the summary prospectus to existing shareholders. Current versions of the prospectus, which must include any material fund changes, would remain available online and would be delivered upon request in paper or electronically, consistent with the shareholder’s delivery preference. Funds would continue to be subject to the same prospectus and registration statement liability and anti-fraud provisions for fund documents required to be made available online but not required to be delivered to existing shareholders (the summary and statutory prospectus and information required to be incorporated into those documents). The proposal would require a fund company to prepare separate reports for each of its series but not for each class of a multi-class fund. The proposal also would provide additional flexibility for funds to add tools and features to annual reports that appear on their websites or are otherwise provided electronically. This could include video or audio messages, mouse-over windows, pop-up definitions, chat functionality and expense calculators. A link to a hypothetical streamlined shareholder report issued by the SEC in connection with the proposal is available here.

Availability of Information on Form N-CSR and Online. Information currently required in shareholder reports that is not included in the streamlined shareholder report would be available online, delivered free of charge upon request, and filed on a semi-annual basis with the SEC on Form N-CSR. Such information includes the schedule of investments and other financial statements, while a graphical representation of a fund’s holdings would be retained in the streamlined shareholder reports.

Exclusion of Open-End Funds from Scope of Rule 30e-3. The proposal would also amend the scope of Rule 30e3, the optional internet availability of shareholder reports, to exclude open-end funds. The proposal would not affect the availability of Rule 30e-3 for closed-end funds. The SEC’s rationale for narrowing the scope of this rule is based on its preliminary belief that the direct transmission of tailored reports represents a more effective means of improving investors’ access to and use of fund information, and reducing funds’ printing and mailing expenses, than allowing open-end funds to rely on Rule 30e-3.

Amended Prospectus Disclosure of Fund Fees and Risks. The proposal would amend prospectus disclosure requirements and related instructions to provide greater clarity and more consistent information regarding fees, expenses, and principal risks. The proposed amendments would: (1) replace the existing fee table in the summary section of the statutory prospectus with a simplified fee summary, (2) move the existing fee table to the statutory prospectus, and (3) replace certain terms in the current fee table with terms intended to be clearer to investors. The proposed amendments would also permit funds that make limited investments (up to 10% of net assets) in other funds to disclose acquired fund fees and expenses (AFFE) in a footnote to the fee table and summary instead of requiring AFFE to be presented as a line item in the table. The amendments would preclude a fund from disclosing non-principal risks in the prospectus. An additional new instruction would require that funds describe principal risks in order of importance, with the most significant risks appearing first, and tailor risk disclosure to how the fund operates rather than rely on generic, standard risk disclosures. Proposed instructions would also prohibit the presentation of principal risks in alphabetical order.

Fee and Expense Information in Investment Company Advertisements. The proposed amendments would require that presentations of investment company fees and expenses in advertisements and sales literature be consistent with relevant prospectus fee table presentations and reasonably current. The proposed amendments to the advertising rules would affect all registered investment companies and business development companies. The amendments would require fees and expenses in advertisements to include timely and prominent information about a fund’s maximum sales load (or any other non-recurring fee) and gross total annual expenses. Next Steps. The SEC has proposed an 18-month transition period. Accordingly, if adopted, the compliance date would be 18 months after the amendments’ effective date. Comments on the SEC’s proposal are due within 60 days after publication in the Federal Register.

Copyright © 2020 Godfrey & Kahn S.C.
For more artices on the SEC, visit the National Law Review Securities & SEC section.

SEC Publishes New Whistleblower Rules; Deadlines Impact Thousands of Cases

The Federal Register published the Whistleblower Program Rule changes approved by the U.S. Securities and Exchange Commission (“SEC” or “Commission”) on September 23, 2020. The changes published today not only impact the requirements governing the whistleblower program, but they establish new deadlines relevant to thousands of current or future cases.

While the effective date of the rules changes is listed as December 7, 2020, each rule’s applicability date should be examined as many are retroactive.

In Section III of the published rules, the SEC carefully explains the applicability of each provision. Highlighted below are rules that can impact pending cases.

Among the new deadlines established by the SEC are:

  • Rule 21F-4(e) defining “monetary sanctions.” This rule change will be applied retroactively and has a significant impact on the amount of an award a whistleblower may be entitled to under pending cases and in cases related to non-prosecution agreements. The rule applies “calculating any outstanding payments to be made to meritorious whistleblowers.” This means the rule covers all pending cases. It also covers sanctions obtained in cases resolved by non-prosecution agreements where the SEC never published a Notice of Covered Action.
  • Rule 21F-6 concerns the SEC’s discretion in small cases where sanctions obtained by the SEC are $5 million or less that rewards should be paid at the highest amount (i.e., 30% of sanctions obtained), barring the existence of negative factors that would justify a reduction. This rule applies to “all award claims still pending” on December 7, 2020. Thus, the applicability of this rule is retroactive.
  • Rule 21F-9 requires whistleblowers to file complaints using the TCR form to qualify for a reward. Whistleblowers have 30-days from an initial contact with the SEC to file the TCR. The 30-day requirement is tolled until a whistleblower obtains actual or constructive knowledge of the TCR filing requirement. However, the thirty day requirement can be triggered when a whistleblower hires an attorney to file a reward claim. This provision applies “to all award claims still pending” as of December 7, 2020, and all future filings. All persons contacting the SEC with information on potential violations need to be aware of this 30-day filing deadline, along with all attorneys who represent whistleblowers in SEC proceedings.
  • Rule 21F-13 relates to the administrative record on appeal of Whistleblower Award Applications. Under this rule, any WB-APP award application filed with the SEC after December 7, 2020, may not be supplemented. Therefore, whistleblowers must be careful to include the entire basis for an award claim in their WB-APP application. This rule applies “only to covered-action and related-action award applications that are connected to a Notice of Covered Action” posted on or after December 7, 2020.
  • Rule 21F-18 established a new summary disposition process. This rule applies to “any whistleblower award application for which the Commission has not yet issued a Preliminary Determination” as of December 7, 2020, as well as to any future award applications that might be filed. Therefore, this rule impacts pending reward claims.
  • Interpretive guidance on the meaning and application of the term “independent analysis” in Rule 21F-4. The SEC intends to rely on the principles articulated in the guidance for “any whistleblower claims that are still pending at any stage.” Thus, any person who has already filed a TCR complaint or a WB-APP application based on the “independent analysis” rules should examine this new guidance and determine whether they need to amend or supplement their filings.

The SEC whistleblower program has been extremely successful. As of today, the Commission has collected over $2 billion in sanctions from whistleblower cases, paid to harmed investors well over $750 million, and paid 112 whistleblowers over $719 million in rewards.

Copyright Kohn, Kohn & Colapinto, LLP 2020. All Rights Reserved.
For more articles on whistleblowers, visit the National Law Review Securities & SEC section.

Civil Rights Lawsuit Filed to Strike Down EO 13950

On October 29, 2020, the National Urban League and the National Fair Housing Alliance (represented by the NAACP Legal Defense and Education Fund, Inc.) filed a complaint challenging the constitutionality of Executive Order (EO) 13950 and asking for injunctive and declaratory relief. The plaintiffs, on behalf of themselves and a proposed class that includes federal contractors that the EO impacts, brought the lawsuit against the president, the secretary of Labor, and the U.S. Department of Labor (DOL).

The plaintiffs summarize the EO 13950 as follows:

In short, EO 13950 prohibits any federal contractor from engaging in speech, including the provision of certain training to its employees, that may foster belief in certain concepts that President Trump has deemed divisive, but which are widely-accepted, historically-based concepts that have been used for years in trainings and programs across the country in corporate, public sector, and educational settings.

They request relief based on several constitutional principles falling under the First and Fifth Amendments to the United States Constitution.

First Amendment Allegations

The plaintiffs contend that the order prohibits and censors protected speech, chills future protected speech, and vests the DOL with unfettered enforcement discretion in violation of the First Amendment to the United States Constitution.

In support of the censorship argument, the plaintiffs focus on the EO’s restrictions on whether and how covered organizations can include certain topics in their diversity and inclusion trainings. What the EO describes as “divisive concepts” and restricts, the plaintiffs contend, are fundamental to the public interest and constitute protected speech. Pointing to vague language in the order that they argue precludes reasonable employers and the DOL, as the enforcement agency, from understanding what speech constitutes noncompliance, the plaintiffs state that the order provides “no objective way to determine which activities are permitted and which are prohibited, creating a broad chilling effect and inviting unpredictable, uneven, and potentially selective enforcement.” The plaintiffs assert that the order lacks necessary parameters and, consequently, chills protected speech and vests the DOL with “unfettered discretion,” which the First Amendment prohibits.

The complaint sets forth a sequence of events leading to the issuance of EO 13950 that the plaintiffs claim is relevant to the First Amendment analysis and “reveal[s] the order’s clear purpose to restrict, if not, prohibit the expression of viewpoints.”

The plaintiffs also identify several post-order actions that they argue have created “uncertainty and confusion” surrounding the order. In this regard, the plaintiffs reference:

  • public statements by the president of the United States and administration officials;
  • the EO’s “radical departure from other executive orders and from [the] usual procedures [for enacting executive orders]”;
  • the executive branch’s action in discontinuing diversity trainings altogether;
  • the Office of Management and Budget’s September 28, 2020, memo, “Ending Employee Trainings that Use Divisive Propaganda to Undermine the Principle of Fair and Equal Treatment for All”;
  • the Office of Federal Contract Compliance Programs’ (OFCCP) October 7, 2020, frequently asked questions and the agency’s October 22, 2020, request for information.

The plaintiffs conclude that the order even threatens to chill speech that the order permits “because many federal contractors will choose to err on the side of caution and decline to discuss any matters that even remotely bear on issues of race or sex, for fear of violating the broad prohibitions in the Order.”

Fifth Amendment Allegations

The plaintiffs contend that the same facts and authorities underlying the First Amendment claim also establish Fifth Amendment violations. The plaintiffs claim that the EO is “unconstitutionally vague” and deprives people of color, women, and the LGBTQ community of equal protection and violates their due process rights. They argue that “[r]ace and sex-based discrimination against individuals who are people of color, women, and/or LGBTQ community were [sic] a substantial or motivating factor behind the issuance of EO 13950, in violation of the Fifth Amendment.” The complaint alleges that the order’s stated rationale is merely “pre-textual and meant to obfuscate its impermissible discriminatory purpose,” pointing to facts supporting the First Amendment analysis, the inconsistency between the order’s stated goals for workforce economy and efficiency and its effect to the contrary, and the foreseeable certainty of its disparate impact on people of color, women, and/or LGBTQ individuals.

Takeaways for Employers

This lawsuit and other potential legal challenges to EO 13950 are significant in a number of respects.

  • The order does not apply to contracts executed before November 22, 2020. In the meantime, lawsuits like this one signal to companies (and their employees) that there is some doubt about the order’s constitutionality, accuracy, enforceability and impact. The present legal challenge also highlights that there is at least some possibility the order will be struck down or modified before OFCCP has a meaningful opportunity to enforce it. To that extent, companies may conclude that overhauling their diversity programs in response to the order would be premature.
  • Constitutional challenges may bring to the surface the level of public concern over a statute, ordinance, or executive order. An organization’s internal departments may benefit from context related to the possible views of EO 13950 of their markets (e.g., customers, clients, communities). To the extent this complaint’s arguments align with company-stated values, this development may address concerns regarding a company’s possible withdrawal from diversity and inclusion efforts.
  • A complaint seeking to strike down the order may result in disclosure of additional information about how the administration intends to apply the order. At a minimum, employers will have more insight than they do now. In addition, the lawsuit may result in an interpretation of the order that clarifies for contractors the scope of their trainings and whether they can continue (even if they require some modifications).

Guidance and legal information about EO 13950 is evolving quickly, and employers can expect many further developments in the coming days and weeks.

© 2020, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
For more articles on civil rights, visit the National Law Review Civil Rights section.

Lawsuits for Illegal Strip Searches

DETROIT — Strip searches are routinely performed by law enforcement officers of all types. This ranges from police to prison guards, as well as to TSA agents at airports in the United States.

Private security guards also perform strip searches, including in malls and retail stores.

While some strip searches are legal, others violate the person’s constitutional rights. In general, people have a reasonable expectation of privacy.

A public officer or private guard cannot simply conduct a strip search without a proper legal basis. When an illegal strip search occurs, the victim can file a lawsuit seeking compensation for the violation of protected rights.

The basis for most illegal strip search lawsuits is a violation of the Fourth Amendment of the U.S. Constitution. The text of the Fourth Amendment states:

“The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

The key words in the Fourth Amendment as it relates to an unlawful search are “unreasonable” and “probable cause.” Probable cause is a higher standard than reasonable suspicion. An officer does not have the right to search a person simply because there was a basis for stopping that person. In fact, most illegal strip searches are performed on people who are legitimately stopped or apprehended, but there is no legal basis to perform a subsequent search.

The main requirement is if the person being searched had a reasonable or legitimate expectation of privacy. Probable cause is required only when there is a reasonable expectation of privacy. When a search is disputed, what is “reasonable” is often determined by a judge or jury.

There are often even disputes as to what constitutes a strip search in the first place.

Different parties often have varying definitions of what constitutes a strip search. And, the context of each type of search may vary from one person to another.

For example, a prison guard performing a strip search may have one definition in mind that involves a physical search of the inmate’s body.  Others may have broader definitions as to what they define as a strip search.  Case law, both state and federal, have examined a variety of situations and fact patterns and their decisions form the basis of what is legal and what is not.

Some case law holds that complete nudity is required to be constituted as a strip search. Other cases hold that it is a lesser degree, and that a strip search can be illegal without the person being totally naked. There are many cases that also address the degree of the search itself and how invasive it is on the person being searched. This can vary on the type of crime suspected and the urgency to perform the search to preserve potential evidence against the person.

There have been many illegal strip search lawsuits filed throughout the United States. Most are based upon violations of the Fourth Amendment when asserted against a governmental agency, or person acting on behalf of the government. Other claims are brought under an invasion of privacy theory, and this theory is frequently used in cases against private individuals and entities.

In addition, there have been several class action lawsuits filed by prisoners and inmates at correctional facilities.   These cases allege that a large number of inmates were illegal searched by prison staff and correction officers. Several of these lawsuits have resulted in substantial class action settlements, including a $ 53 million settlement against Los Angeles County for illegal strip searches of thousands of women by law enforcement personnel.

Individual lawsuits seek compensatory damages for the harm suffered by the victim.  This includes both physical pain and suffering as well as mental anguish. The damages inflicted upon the victim often cause serious and permanent psychological harm.

Lawsuits hold the wrongdoers accountable for violating a person’s constitutional rights.  They also serve as a deterrence to future unlawful actions.  This helps to protect every person’s right to be free from an unlawful search and curbs systematic illegal actions of law enforcement.

Sources:

https://www.law.umich.edu/facultyhome/margoschlanger/Documents/Publications/Jail_Strip-Search_Cases.pdf

https://buckfirelaw.com/case-types/sexual-abuse/illegal-strip-search/

https://www.aclu.org/blog/criminal-law-reform/reforming-police/supreme-court-says-jails-can-strip-search-you-even-traffic

https://www.americanbar.org/groups/crsj/publications/human_rights_magazine_home/2013_vol_39/may_2013_n2_privacy/upending_human_dignity_fourth_amendment/

Buckfire & Buckfire, P.C. 2020
For more articles on the Fourth Amendment, visit the National Law Review Constitutional Law section.

“Ban the Box” Update: St. Louis Enacts Ordinance; California and Hawaii Expand Existing Laws

Under the St. Louis ban the box Ordinance (the “Ordinance”), which takes effect January 1, 2021, employers in St. Louis with 10 or more employees may not:

  1. Base a decision to hire or promote on an applicant’s criminal history, “unless the employer can demonstrate that the employment-related decision is based on all information available including the frequency, recentness and severity of the criminal history and the history is reasonably related to or bears upon the duties and responsibilities of the job position;”
  2. Inquire about a job applicant’s criminal history until after the employer has determined that the applicant is otherwise qualified for the job position, and interviewed the applicant, “except that such an inquiry may be made of all job applicants who are in the final selection pool from which the position will be filled;”
  3. Publish job advertisements, including electronically, that exclude applicants on the basis of criminal history;
  4. Include statements on job applications and other hiring forms, including electronic documents, that exclude applicants on the basis of criminal history;
  5. Inquire into, or require applicants to disclose their criminal history on initial job applications and other hiring forms, including electronic documents; and
  6. “Seek to obtain publicly available information” concerning job applicants’ criminal history.

With respect to prohibition Nos. 3 through 6, the Ordinance creates an exception where federal, state, or local law prohibits the employer from hiring an individual with a certain criminal history.

California

The California Fair Chance Act (“CFCA”) makes it an unlawful employment practice for an employer with five or more employees to include on an application for employment any question that seeks the disclosure of an applicant’s conviction history, or to inquire into or consider the conviction history of an applicant, until that applicant has received a conditional offer of employment. Additionally, the Act requires employers to: (a) make individualized assessments as to whether the conviction history has a direct adverse relationship with the specific duties of the job; and (b) provide notice under a specific procedure to employees if they intend to deny employment based on the conviction history.

Among other changes, new regulations promulgated by the California Fair Employment and Housing Council, effective October 1, 2020, expand the definition of an “applicant” to include individuals who begin work upon receiving a conditional offer of employment but before the employer has conducted or completed a criminal background check.  Ostensibly prompted by the delay some employers are encountering in obtaining relevant criminal history information due to the COVID-19 pandemic, the new rule ensures that individuals working pursuant to a conditional job offer still enjoy the protections afforded by the CFCA to “applicants.”

Also of note, the California Department of Fair Employment and Housing recently issued Frequently Asked Questions concerning the CFCA, detailing employers’ obligations under the law and providing guidance on how employers may conduct a compliant criminal background check.

Hawaii

Hawaii, which was one of the first states to create a “ban the box” law, recently added a notable amendment to the law. Effective September 15, 2020, SB 2193 prevents most private sector employers from considering felony convictions older than seven years, and misdemeanor convictions older than five years, reducing the look-back period from 10 years.

Other 2020 “Ban the Box” Developments

Maryland: As we previously reported, Maryland’s “ban the box” law, effective February 29, 2020, prohibits private employers with fifteen or more full-time employees from asking job applicants to disclose any criminal records or criminal accusations prior to the first in-person interview.

Virginia: Effective July 1, 2020, a new law that decriminalizes simple possession of marijuana also contains a “ban the box” provision prohibiting employers from requiring job applicants to disclose information concerning criminal charges, arrests, or convictions for simple possession of marijuana.

Suffolk County, New York: As we discuss here, effective August 25, 2020, Suffolk County employers with fifteen or more employees are prohibited from inquiring about a job applicant’s criminal convictions during the application process or before a first interview.

Waterloo, Iowa: Effective July 1, 2020, a new City ordinance prohibits employers with fifteen or more employees within the City of Waterloo from, among other acts, requiring applicants to disclose arrests, convictions, or pending criminal charges during the application process, including, but not limited to, any interview.  An employer, however, may “discuss” such information with an applicant if the applicant voluntarily discloses it.

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Employers covered by a “ban the box” law in one or more of the jurisdictions discussed above should review and, if necessary, update their policies and procedures, including job advertisements, applications, and other hiring (and where relevant, promotion) forms to ensure they are compliant with all applicable mandates.  Employers should also consider training personnel involved in the hiring process, particularly recruiters, human resources personnel, and those tasked with interviewing applicants and conducting criminal background checks.

©2020 Epstein Becker & Green, P.C. All rights reserved.
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