Category: Administrative & Regulatory

Athletes and Employees Speak Out: Do Your Employment Practices Drop the Ball in Addressing Diversity, Controversial Speech, or Tensions at Work?

With the 2017-18 National Football League (NFL) regular season and National Basketball Association (NBA) pre-season underway, many spectators are excited to don their favorite players’ jerseys and cheer on their teams. Yet in recent years, many fans also find themselves equally entrenched in controversial debates that have little to do with who wins or loses the game.

Rather, these dialogues relate to the frequent media coverage over the alleged “blacklisting” of former San Francisco 49ers quarterback Colin Kaepernick after he took a knee during the national anthem last season to protest police brutality against minorities, related demonstrations held in front of the NFL’s corporate offices, and actions of solidarity on football fields across the country by athletes like Marshawn Lynch and members of the Cleveland Browns virally trending with the hashtag #ImWithKap. Most recently ESPN sports host, Jemele Hill, drew the attention of the White House and placed her own employment in the cross-hairs by stating in a series of tweets that President “Donald Trump is a white supremacist who has largely surrounded himself w/ other white supremacists” and is “unqualified and unfit to president.” and in In response, the White House press secretary called Hill’s statements a “fireable offense.”

As athletes and other public figures use their careers to bring awareness to social movements and other world events such as the Charlottesville tragedy, the implications of social movements on employee relations remains a hot topic that poses challenging issues for employers related to diversity, inclusion, and free speech. Here are a few of those related topics and some practical suggestions of ways employers can address these issues in the workplace:

Does the First Amendment Apply to Athletes or Employees Generally?

People often mention their First Amendment guarantees without understanding that this right is not without certain limitations, especially in the employment context. Specifically, while this protection covers federal, state, and local government employees, courts have held that First Amendment protections do not generally extend to the employees of private-sector employers.

Does Social Media Change Things?

As evidenced by legendary athletes Dale Earnhardt Jr.’s and Kareem Abdul-Jabbar’s Twitter posts in response to the Charlottesville tragedy, many athletes and employees use social media to vocalize their positions on social issues. The National Labor Relations Board (NLRB) has taken on cases where employers have fired or taken disciplinary actions against employees who have engaged in certain protected speech via various social media platforms. On the agency’s website, the NLRB states: “The National Labor Relations Act protects the rights of employees to act together to address conditions at work…. [t]his protection extends to certain work-related conversations conducted on social media”.

This raises the question: Can an employee be disciplined for making racially- or politically- charged speech via social media?

The standard that the NLRB considers is whether the employee is engaging in “protected concerted activity” involving the terms and conditions of employment. Courts have used a multi-factor assessment to determine whether discipline or discharge violates Section 8(a)(1) of the NLRA, which evaluates whether:

  1. the activity in which the employee was engaged was “concerted” within the meaning of Section 7 of the NLRA;
  2. the employer knew of the concerted nature of the employee’s activity;
  3. the concerted activity was protected by the NLRA; and
  4. the discipline or discharge was motivated by the employee’s protected, concerted activity.

If the employer alleges that an employee engaged in misconduct during otherwise protected activity, the NLRB generally considers four factors in determining whether speech is protected:

  1. the place of the discussion;
  2. the subject matter of the discussion;
  3. the nature of the employee’s outburst; and
  4. whether the outburst was, in any way, provoked by an employer’s unfair labor practice

In many instances, purely individual speech about a social or political topic that in no way involves an employee’s work conditions will not be protected by the NLRA. Because of the fact-specific nature of the inquiry, a determination must be made on a case-by-case basis.

So What Now?

Even employers not covered under the First Amendment and NLRA’s protections are finding themselves examining some weighty questions. For example:

  • Although there may be legally sanctioned limitations to free speech in the workplace, does the modern day work culture require employers to facilitate an employment experience that goes beyond what the law requires?
  • Are employers tasked with creating a workplace that is inclusive but also allows people to express unique (and sometimes controversial) viewpoints on social or political issues?
  • If so, how does this work and does it ultimately help the business to thrive long term?

Last year the NBA and the NBA’s Players Association (NBAPA) appeared to have answered this question in the affirmative and implemented this approach with its players. Despite having player agreements with language that can, in some cases, regulate players’ conduct, NBA athletes have expressed their positions on social issues both on and off the court.  For example, during pre-game warm ups LeBron James wore a t-shirt stating “I Can’t Breathe,” bringing awareness to the death of Eric Garner. Similarly, Carmelo Anthony and Dwyane Wade made a social action appeal during the 2016 ESPY awards.

Many players have been so outspoken that last year NBA Commissioner Adam Silver and NBPA Executive Director Michele Roberts penned a letter noting that both organizations were addressing the best ways they could move forward in “developing substantive ways . . . to come together and take meaningful action.” The letter noted that, in recent weeks, many teams had reached out to the organizations to figure out how they could “create positive change” and garner support with team efforts.

Employers may want to take note of the ways that the NBA and the NBAPA are attempting to address this topic. Additionally, employers may also want to review the following considerations.

Be Aware of Blacklisting Laws

Many states have blacklisting laws that, generally, prohibit employers from limiting former employees’ opportunities. The following are a handful of state laws regulating blacklisting:

  • North Carolina law prohibits employers from preventing or attempting to prevent any “discharged employee from obtaining employment with any other person, company, or corporation” whether by verbal or written action.
  • The California Labor Code also prohibits any person from preventing or attempting “to prevent the former employee from obtaining employment” by misrepresentation and punishes any manager or employee who knowingly “fails to take all reasonable steps to prevent” such action.
  • Indiana law makes it illegal for an employer to prevent a “discharged employee from obtaining employment with any other person” or employer.
  • Florida law makes it illegal for two or more people to “agree, conspire, combine or confederate together for the purpose of preventing any person from procuring work . . .  or to cause the discharge of any person.” The law also prohibits verbal, written, or printed communication that “threaten[s] any injury to life, property or business of any person for the purpose of procuring the discharge of any worker . . . or to prevent any person from procuring work”.
  • New York Labor Law says it is an unfair labor practice “[t]o prepare, maintain, distribute or circulate any blacklist of individuals for the purpose of preventing any of such individuals from obtaining or retaining employment because of the exercise by such individuals of any of the rights guaranteed by section seven hundred three,” which discusses the right to join a labor organization or to bargain collectively.
  • Arizona law explicitly defines the term “blacklist” as “any understanding or agreement whereby the names of any person or persons, list of names, descriptions or other means of identification shall be spoken, written, printed or implied for the purpose of being communicated or transmitted between two or more employers of labor, or their bosses, foremen, superintendents, managers, officers or other agents, whereby the laborer is prevented or prohibited from engaging in a useful occupation. Any understanding or agreement between employers, or their bosses, foremen, superintendents, managers, officers or other agents, whether written or verbal, comes within the meaning of this section and it makes no difference whether the employers, or their bosses, foremen, superintendents, managers, officers or other agents, act individually or for some company, corporation, syndicate, partnership or society and it makes no difference whether they are employed or acting as agents for the same or different companies, corporations, syndicates, partnerships or societies.”

Be Proactive

Do not wait for your company to become the next trending hashtag on social media as a result of a workplace controversy! Instead, be prepared and take proactive measures in the event employees take a stand on controversial issues. Some options are to proactively address and be sensitive to diversity issues, and to recognize and understand the benefits of workforce diversity both as a source of varied ideas and a competitive advantage. Employers may also want to consider hiring a Chief Diversity and Inclusion Officer or diversity and inclusion team responsible for addressing equity issues.

Be Current

Consider reviewing your employee handbooks, in addition to contracts you might have with individual employees (or athletes) and third parties to ensure your company’s policies regarding diversity and inclusion, nondiscrimination and harassment, and professional development are up to date. Employers may also want to consider evaluating successes and areas for growth in the following areas:

Finally, employers may want to examine records to determine whether all employees, especially management employees, have participated in appropriate diversity and inclusion trainings, particularly on implicit or unconscious bias.

Be Careful

Employer-created bans on any socially- or politically-related speech rarely if ever actually work and may create exposure to liability under the First Amendment, the NLRA, or state-specific laws. Rather than imposing an outright ban on certain conduct, employers may want to slow down and engage in careful thought at the outset prior to taking any action on behalf of the organization. Employers may also find it beneficial to acknowledge that what happens in the world impacts the workplace. Accordingly, employers may want to develop affinity or employee resource groups, and/or maintain a diversity committee that facilitates well-thought-out inclusion initiatives. With many issues at play from reducing the risk of unlawful discrimination charges to preventing social media reputational harm, planning ahead may help to avoid potential risks.

This post was written by Karla Turner Anderson & Dawn T. Collins of Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved. © 2017
For more Labor & Employment legal analysis go to The National Law Review

Federal Laws Do Not Preempt Connecticut Law Providing Employment Protections to Medical Marijuana Users

Connecticut employees using medical marijuana for certain debilitating medical conditions as allowed under Connecticut law for “qualified users” are protected under state law from being fired or refused employment based solely on their marijuana use. Employers who violate those protections risk being sued for discrimination, according to a recent federal district court decision.

Background

In Noffsinger v. SSC Niantic Operation Company (3:16-cv-01938; D. Conn. Aug. 8, 2017), the federal district court ruled that “qualified users” are protected from criminal prosecution and are not subject to penalty, sanction or being denied any right or privilege under federal laws, such as the Controlled Substances Act (CSA), the Americans with Disabilities Act (ADA) and the Food, Drug and Cosmetic Act (FDCA), because the federal laws do not preempt Connecticut’s Palliative Use of Marijuana Act (PUMA).

PUMA prohibits employers from refusing to hire, fire, penalize, or threaten applicants or employees solely on the basis of being “qualified users” of medical marijuana. PUMA exempts patients, their caregivers and prescribing doctors from state penalties against those who use or distribute marijuana, and it explicitly prohibits discrimination by employers, schools and landlords.

In Noffsinger, Plaintiff was employed as a recreational therapist at Touchpoints, a long term care and rehabilitation provider, and she was recruited for a position as a director of recreational therapy at Bride Brook, a nursing facility. After a phone interview, she was offered the position at Bride Brook and accepted the offer, and she was told to give notice to Touchpoints, which she did to begin working at Bride Brook within a week. Plaintiff scheduled a meeting to complete paperwork and routine pre-employment drug screening for Bride Brook, and at the meeting, she disclosed her being qualified to use marijuana for PTSD under PUMA. The job offer was later rescinded because she tested positive for cannabis; in the meantime, Plaintiff’s position at Touchpoints was filled, so she could not remain employed there.

Litigation

Plaintiff sued for violation of PUMA’s anti-discrimination provisions, common law wrongful rescission of a job offer in violation of public policy and negligent infliction of emotional distress. Defendant filed a Rule 12(b)(6) pre-answer motion to dismiss based on preemption under CSA, ADA, and FDCA. The federal court denied the motion and ruled that PUMA did not conflict with the CSA, ADA or FDCA, because those federal laws are not intended to preempt or supersede state employment discrimination laws. The court concluded that CSA does not make it illegal to employ a marijuana user, and it does not regulate employment practices; the ADA does not regulate non-workplace activity or illegal use of drugs outside the workplace or drug use that does not affect job performance; and the FDCA does not regulate employment and does not apply to PUMA’s prohibitions.

The court’s decision is notable in that it is the first federal decision to determine that the CSA does not preempt a state medical marijuana law’s anti-discrimination provision, and reaches a different result than the District of New Mexico, which concluded that requiring accommodation of medical marijuana use conflicts with the CSA because it would mandate the very conduct the CSA proscribes. The Noffsinger decision supplements a growing number of state court decisions that have upheld employment protections for medical marijuana users contained in other state statutes. These decisions stand in stark contrast to prior state court decisions California, Colorado, Montana, Oregon, and Washington that held that decriminalization laws – i.e., statutes that do not contain express employment protections – do not confer a legal right to smoke marijuana and do not protect medical marijuana users from adverse employment actions based on positive drug tests.

Key Takeaways

Employers may continue to prohibit use of marijuana at the workplace; and qualified users who come to work under the influence, impaired and unable to perform essential job functions are subject to adverse employment decisions. Employers in Connecticut, however, may risk being sued for discrimination for enforcing a drug testing policy against lawful medical marijuana users.  In those cases, employers may have to accommodate off-duty marijuana use, and may take disciplinary action only if the employee is impaired by marijuana at work or while on duty.

It remains unclear how employers can determine whether an employee is under the influence of marijuana at work. Unlike with alcohol, current drug tests do not indicate whether and to what extent an employee is impaired by marijuana. Reliance on observations from employees may be problematic, as witnesses may have differing views as to the level of impairment, and, in any event, observation alone does not indicate the source of impairment. Employers following this “impairment standard” are advised to obtain as many data points as possible before making an adverse employment decision.

All employers – and particularly federal contractors required to comply with the Drug-Free Workplace Act and those who employ a zero-tolerance policy – should review their drug-testing policy to ensure that it: (a) sets clear expectations of employees; (b) provides justifications for the need for drug-testing; and (c) expressly allows for adverse action (including termination or refusal to hire) as a consequence of a positive drug test.

Additionally, employers enforcing zero-tolerance policies should be prepared for future challenges in those states prohibiting discrimination against and/or requiring accommodation of medical marijuana users. Eight other states besides Connecticut have passed similar medical marijuana laws that have express anti-discrimination protections for adverse employment actions: Arizona, Delaware, Illinois, Maine, Nevada, New York, Minnesota and Rhode Island. Those states may require the adjustment or relaxation of a hiring policy to accommodate a medical marijuana user. Additionally, courts in Massachusetts and Rhode Island have permitted employment discrimination lawsuits filed by medical marijuana users to proceed.

Finally, employers should be mindful of their drug policies’ applicability not only to current employees, but also to applicants.

This post was written by David S. Poppick & Nathaniel M. Glasser of Epstein Becker & Green, P.C.  ©2017. All rights reserved.
For more Health Care Law legal analysis go to The National Law Review

Trump Administration Considers Elimination of J-1 Program for Some Students

The Trump Administration is considering the elimination of the J-1 Summer Work-Travel Program for students who come to tourist areas in the U.S. as temporary summer help and as participants in cultural exchanges. Like the numerical limitations placed on H-2B temporary seasonal visas, the elimination of this J-1 Summer Work-Travel Program would particularly affect the hospitality industry in areas that rely on these students to cook, wait tables, and run amusement park rides in tourist areas during the summer months.

Morey’s Pier Amusement Park in Wildwood, New Jersey, hired more than one-third of its 2017 summer workforce through the J-1 Summer Work-Travel Program. Its Director of Human Resources reported that it makes extensive efforts, including through job fairs, to hire U.S. workers, but cannot find enough people interested in the seasonal work. The Park hired 82 percent of the U.S. applicants who applied for jobs and the remaining 18 percent could not be hired because they were too young to be life guards or to serve alcohol.

Other tourist areas such as Hershey, Pennsylvania, and the Poconos also depend on the J-1 Summer Work-Travel Program. Congressman Bill Keating (D-MA), who represents Cape Cod and the Islands of Nantucket and Martha’s Vineyard, is critical of the reported plan to reduce these visas for students who he believes are vital to his area’s economy.

The review and possible elimination of the J-1 Summer Work-Travel Program arises out of the “Buy American, Hire American” Executive Order. The first hint that the Program might be cut was in a draft executive order that was leaked in January 2017. That draft, “Protecting American Jobs and Workers by Strengthening the Integrity of Foreign Worker Visa Programs,” was never signed or formally released. It included specific provisions questioning the desirability of the J-1 program, the L-1 visa program, the use of parole authority, and the H-1B visa program, among others. To date, the Administration has been achieving some of the goals first set forth in that draft by conducting more L-1 site visits, scrutinizing H-1B and L-1 petitions by issuing a staggering number of post-filing Requests for Evidence (RFEs), postponing (and ultimately planning to eliminate) the International Entrepreneur Rule that relied on parole authority, and, now, focusing on the possible elimination of the J-1 Summer Work-Travel Program.

According to the State Department website, “The J-1 Exchange Visitor Program [overseen by the Department of States] provides opportunities for around 300,000 foreign visitors from 200 countries and territories per year to experience U.S. society and culture and engage with Americans.” There are more than a dozen J-1 programs. Others that are reportedly being reviewed for possible elimination are the J-1 internship and au pair programs.

This post was written by Forrest G. Read IV  of Jackson Lewis P.C. © 2017
For more Immigration News go to The National Law Review

President Trump Establishes Regulatory Budgets by Executive Order

law books, regulatory budgetAmid  all of the controversy surrounding President Trump’s Executive Order suspending immigration from seven countries, and his nomination of Judge Neil Gorsuch to the Supreme Court, another executive order that may be at least as significant in the long run to reining in the administrative state has not received much attention.  The Executive Order on “Reducing Regulation and Controlling Regulatory Costs,” issued on January 30 without much fanfare, did three things: (1) required every agency promulgating any new regulation to get rid of two existing regulations; (2) required that the projected cost to the economy of the regulations being eliminated must be at least as great as the costs of the new one, as computed under standard Office of Management and Budget (OMB) guidelines, and (3) authorized OMB to impose a regulatory budget on each agency.

The first point, sometimes called “one in, two out,” has garnered some media attention, but in the long run, the other two provisions limiting regulatory costs may be at least as significant, particularly for the Environmental Protection Agency, which has historically imposed about half the costs of federal government regulation on the economy.  But this Executive Order also takes us into new territory and raises a host of legal questions.

The idea of a “regulatory budget” to constrain the costs government imposes on the economy  has been discussed since the 1970’s.  The basic idea is to adopt Madison’s constitutional concept of “balancing ambition with ambition” to regulate the regulators.  However, in the past, establishing a regulatory budget has generally been thought to require legislation.  Although proposed on numerous occasions, statutory authority to impose regulatory budgets has never been enacted.  It remains to be seen whether the courts will allow a binding regulatory budget to be imposed on agencies by the White House acting alone.

The Administrative Procedure Act specifically creates a cause of action to “compel agency action unlawfully withheld” as well as a right to petition for new rules.  How will the courts react when agencies begin to turn down petitions for new rules because there is no room for them in the agency’s regulatory budget, or because the agency judges them to be less important than existing rules that would have to be eliminated to pay for the new regulations?

In Motor Vehicle Manufacturers Ass’n. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983), the Supreme Court rejected an attempt by the Reagan Administration unilaterally to rescind an existing rule requiring automatic seat belts.  That precedent appears to require not only notice and comment but also a rational basis in the record that will survive judicial review in order to eliminate a legislative rule previously promulgated through notice and comment procedures.  What weight will the courts give to agency proposals to eliminate existing rules because they are required to do so in order to promulgate new ones under the Trump Executive Order?  And what about emergency rules or rules required by statute?  Do those also require elimination of two existing regulations?

Even assuming that the courts do uphold President Trump’s authority to impose the requirements discussed above on agencies and departments “in” the Executive Branch, what about the “independent” agencies, such as the Federal Energy Regulatory Commission (FERC), the Consumer Product Safety Commission (CPSC) or the Federal Trade Commission (FTC)?   These agencies often consist of multi-member commissions, sometimes with staggered terms and members of different political parties and a statutory prohibition on firing except for good cause.  On its face, the Executive Order does not exempt them, but the President’s power to direct them is unclear.  In Humphrey’s Executor v. United States, 295 U.S. 602 (1935), the Supreme Court held that President Roosevelt could not fire the Chairman of the FTC for policy differences.  More recently, the Obama Administration issued an Executive Order stating that independent agencies “should” comply with prior executive directives regarding public participation, scientific integrity in the rule making process, and retrospective analyses.  A number of independent agencies followed President Obama’s Order, but have been careful to characterize it as “ask[ing]” or “request[ing],” not mandating, agency action.

There are also a host of implementation questions that will presumably have to be answered by the OMB guidance implementing the recent Executive Order.  Many regulations, particularly in the environmental area, require large initial capital costs, but much lower costs for on-going operation and maintenance expenses; for example, when installing new pollution control equipment.  In assessing whether the costs of the eliminated regulations balances the costs of the new regulations, may the agency take into account the historic costs that have already been incurred (what economists call “sunk costs”), or only the current on-going costs that would be eliminated if those regulations were rescinded (what economists call “avoided costs”)?

More broadly, this Executive Order, as well as prior executive actions relating to the Keystone and Dakota Access Pipelines and Infrastructure Permitting, provides insight into the strategy that the Trump Administration appears to intend to use to control the so-called “Administrative State.”  For years, Presidents have struggled to impose policy direction and control on the actions of agency bureaucrats whom they generally cannot fire due to civil service protections. Past approaches have included the creation of the Senior Executive Service who are subject to dismissal, the OIRA review process for new rules, and the White House “czars” created by the Obama Administration.  It is becoming increasingly clear that the Trump Administration intends to try to manage the agencies by Executive Order, a strategy that some legal scholars have questioned as constitutionally dubious if the President directs particular actions as opposed to establishing general principles.

ARTICLE BY E. Donald Elliott of Covington & Burling LLP

© 2017 Covington & Burling LLP

Government Forces Awaken: Rise of Cyber Regulators in 2016

As the sun sets on 2015, but before it rises again in the New Year, we predict that, in the realm of cyber and data security, 2016 will become known as the “Rise of the Regulators.” Regulators across numerous industries and virtually all levels of government will be brandishing their cyber enforcement and regulatory badges and announcing: “We’re from the Government and we’re here to help.”

The Federal Trade Commission will continue to lead the charge in 2016 as it has for the last several years. Pursuing its mission to protect consumers from unfair trade practices, including from unauthorized disclosures of personal information, and with more than 55 administrative consent decrees and other actions booked so far, the FTC (for now) remains the most experienced cop on the beat.   As we described earlier this year, the FTC arrives with bolstered judicial-enforcement authority following the Third Circuit’s decision in the Wyndham Hotel case.  Notwithstanding the relatively long list of administrative actions and its published guidance – businesses that are hacked and that lose consumer data, are at risk of attracting the attention of FTC cops and of proving that their cyber-related systems, acts and practices were “reasonable.”

But the FTC is not alone. In electronic communications, the Federal Communications Commission (FCC) in 2015 meted out $30 million in fines to telecom and cable providers, including to AT&T ($25 million) and Cox Communications ($595K). And this agency, increasingly known for its enforcement activism, may have just begun.  Reading its regulatory authority broadly, the FCC has asserted a mandate to take “such actions as are necessary to prevent unauthorized access” to customers’ personally identifiable information. This proclamation, combined with the enlistment of the FCC’s new cyber lawyer/computer scientist wunderkind to lead that agency’s cyber efforts, places another burly cop on the cyber beat.

The Securities and Exchange Commission (SEC) will be patrolling the securities and financial services industries. Through its Office of Compliance Inspections and Examinations (OCIE), the SEC is assessing cyber preparedness in the securities industry, including investment firms’ ability to protect broker-dealer and investment adviser customer information. It has commenced at least one enforcement action based on the agency’s “Safeguards Rule” (Rule 30(a) of Regulation S‑P), which applies the privacy provisions in Title V of the Gramm-Leach-Bliley Act (GLBA) to all registered broker-dealers, investment advisers, and investment companies. With criminals hacking into networks and stealing customer and other information from financial services and other companies, expect more SEC investigations and enforcement actions in 2016.

Moving to the Department of Defense (DoD), new rules, DFARS clauses, and regulations (e.g., DFARS subpart 204.73, 252.204–7012, and  32 CFR § 236) are likely to prompt the DoD Inspector General and, perhaps, the Defense Contracting Auditing Agency (DCAA) to examine whether certain defense contractors have the required security controls in place.  Neither the DoD nor its auditors have taken action to date.  But don’t mistake a lack of overt action for a lack interest (or planning).  It would come as no surprise if, by this time next year, the DoD has launched its first cyber-regulation mission, be it by the False Claims Act, suspension and debarment proceedings, or through terminations for default.

In addition to these cyber guardians, other federal agencies suiting up for cyber enforcement include:

  • The Consumer Financial Protection Board’s (CFPB) growing Cybersecurity Program Management Office;

  • The Department of Energy’s (DOE) Office of Electricity Delivery and Energy Reliability, examining the security surrounding critical infrastructure systems;

  • The Office of Civil Rights (OCR) of the U.S. Department of Health and Human Services, addressing healthcare providers and health insurers’ compliance with health information privacy and security safeguard requirements; and

  • The Food and Drug Administration, examining the cybersecurity for networked medical devices containing off-the-shelf (OTS) software.

But these are just some of the federal agencies poised for action.   State regulators are imposing their own sector-specific cyber security regimes as well.   For example, the State of California’s Cybersecurity Task Force, New York’s Department of Financial Services, and Connecticut’s Public Utility Regulatory Agency are turning their attention toward cyber regulation. We believe that other states will join the fray in 2016.

At this relatively early stage of standards and practices development, the National Institute of Standards and Technology (NIST) 2014 Cyber Security Framework lays much of the foundation for current and future systems, conduct, and practices. The NIST framework is a “must read.” NIST, moreover, has provided additional guidance earlier this year in its June 2015 NIST Special Publication 800-171, Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations.  While addressing security standards for nonfederal information systems (i.e., government contractors’ information systems), it also provides important guidance for companies who do not operate within the government contracts sphere.  Ultimately, this 2015 NIST publication may serve as an additional general standard against which regulators (and others) may assess institutional cybersecurity environments in 2016 – and beyond.

But for now, the bottom line is that in 2016 companies now must add to its list of actual or potential cyber risks and liability, the hydra-headed specter of multi-sector, multi-tiered government regulation – and regulators.

Article By Dave Thomas, Alexander W. Major & Melinda R. Biancuzzo
Copyright © 2015, Sheppard Mullin Richter & Hampton LLP.

That Drone in Your Holiday Stocking Must Now Be Registered With FAA

Fearing for public safety over the explosion of hobby-type drones taking to the air, on December 14, 2015, the Federal Aviation Administration (FAA) issued the first rule1 of its kind directed squarely to owners and operators of hobby and recreational small unmanned aircraft systems (sUAS aka drones) that now requires their registration on the FAA’s new online drone registration portal.2 A second, more comprehensive drone rule is expected to issue in 2016 to allow the use of drones for certain commercial purposes where the risk to public safety is low.

In the meantime, the hobby drone rule, which goes into effect on December 21, 2015 ahead of the holiday rush, requires all hobby-type drones weighing between 0.55 pounds (about two sticks of butter) and 55 pounds that have flown prior to December 21, 2015 to be registered no later than February 19, 2016.3 For hobby drones in this weight class flying for the first time on or after December 21, 2015 (i.e. holiday stocking stuffers), the rule requires that the owner register the drone before the first flight.

The FAA structured the grace period to encourage registration of millions of pre-existing drones while also requiring that all new drones be registered before first flight. To further encourage registration, the $5.00 registration fee will be credited back to registrants if they register within the first 30 days. And to lessen the burden of registration, the rule provides that a single registration applies to as many drones as an owner/operator owns or operates. If these incentives are insufficient to prompt compliance, the rule provides civil penalties up to $27,500, and criminal penalties including fines up to $250,000 and/or imprisonment for up to three years.

U.S. citizens age 13 or older can register their drones at the FAA’s registration portal. The registrant will need to provide the FAA with their name, physical address, mailing address (if different) and email address. Upon completion of the registration process, the FAA will provide the registrant (or certificate holder, as the FAA calls them) with a unique registration number that must be affixed to each drone.4 In addition, each registration must be renewed every 3 years and will require an additional $5.00 renewal fee.

After the rule goes into effect on December 21, 2015, all operators of hobby drones falling within the weight limits of the rule must provide proof of registration in the form of a Certificate of Aircraft Registration, either in printed or electronic form—much the same way as an angler or a hunter currently provides proof of a state fishing license or a state hunting license to a game warden.5

A number of exceptions to the rule are worth mentioning. First, hobby drones that weigh less than 0.55 pounds (i.e. radio-controlled micro quadcopters that fit in the palm of your hand) do not require registration.6 The rule will not apply to drones flown solely indoors. The rule also does not apply to those who want to fly drones for commercial purposes (i.e. for pay and/or hire) or on behalf of a state or federal government agency (i.e. fire departments, police departments, etc.). Such operators must first obtain an exemption of the FAA’s rules applicable to, for example, passenger-carrying aircraft, that the FAA has interpreted as also being applicable to commercial operators of unmanned drones regardless of size and weight. In addition, any types of entities other than individual hobbyists—such as corporations, or anyone wanting to record a lease or security interest—cannot use the online registration portal.

The new rule is the first concrete step that the FAA has taken in response to Congress’ mandate to the FAA under Section 333 of the FAA Modernization and Reform Act of 2012 to integrate unmanned aircraft into the National Airspace System (NAS). The next big step will be the FAA’s issuance in 2016 of rules that provide a legal path for using drones for commercial purposes without having to obtain prior FAA approval. Those rules will likely have a sweeping impact on business owners of all types who want to buy and sell aerial imaging and/or aerial data transmission services, including large-scale land developers, shopping mall operators and owners of other large structures, real estate agents, wedding photographers, and live TV/radio broadcast providers, to name a few, as well as industries that support those businesses, including software and hardware component suppliers, venture capital and financing providers, accountants, and the like.

In the interim, the new rule will force a dramatic change in the way consumers think about small radio-controlled unmanned aircraft in the future—they’re not just toys anymore.

Article By Thomas E. Williams of Neal, Gerber & Eisenberg LLP
© 2015 Neal, Gerber & Eisenberg LLP.

1 See FAA Interim Final Rule (IFR) available at: https://www.faa.gov/news/updates/media/20151213_IFR.pdf
2 The FAA’s drone registration portal is available at: https://www.faa.gov/uas/registration/
3 Model radio-controlled aircraft of all types, including the type of fixed wing, radio-controlled model aircraft that have flown in parks and fields for decades, fall under the new rule.
4 The unique registration number may be affixed via permanent marker, label, engraving or other means as long as the number is readily accessible and readable upon close visual inspection.
5 Although it is unlikely that the FAA will have the manpower to enforce the new rule against hobbyists who do not register their drones, the FAA nevertheless intends to employ a strategic approach to encourage compliance ranging from outreach and education programs to administrative and/or legal action should the facts of a case so warrant.
6 According to the FAA, most toy drones costing $100 or less will likely weigh less than 0.55 pounds (250 grams).

SEC Is Sued Again For Doing Nothing

Have you heard about a lawsuit filed earlier last week against the Securities and Exchange Commission due to its failure to respond to a petition asking the Commission to adopt political spending disclosure requirements?

SEC-logoGOLD

But must the Commission act on the petitions that are submitted to it?  Rule 192 of the Commission’s Rules of Practice requires only that the Commission acknowledge receipt and give notice of any action taken by the Commission:

The Secretary shall acknowledge, in writing, receipt of the petition and refer it to the appropriate division or office for consideration and recommendation.  Such recommendations shall be transmitted with the petition to the Commission for such action as the Commission deems appropriate.  The Secretary shall notify the petitioner of the action taken by the Commission.

At least three fundamental requirements are absent from Rule 192.  First, the rule doesn’t require the Commission to take action.  Second, the rule doesn’t require the Commission to act promptly. Finally, the rule doesn’t require the Commission to explain its reasons for denying a petition. Indeed, Rule 192 falls far short of the requirements of the Administrative Procedure Act as explained by then Circuit Court Judge Ruth Bader Ginsberg:

Section 4(e) of the Administrative Procedure Act, 5 U.S.C. § 553(e), commands that “[e]ach agency shall give an interested person the right to petition for the issuance … of a rule.”  Section 6(a), 5 U.S.C. § 555(e), requires “prompt notice” in the event an agency denies such a petition.  Further, section 6(a) directs that when a denial is not self-explanatory, “the notice shall be accompanied by a brief statement of the grounds for denial.”

Ass’n of Investment Bankers v. Securities and Exchange Commission, 676 F.2d 857, 864 (1982).

One obvious issue for the plaintiff in this most recent lawsuit is whether judicial review is even available.  The plaintiff doesn’t allege that the Commission has actually denied his petition.  To the contrary, the plaintiff admits that “To date, the SEC has given no indication it is still considering whether to recommend the issuance of such a proposed rule, nor has it otherwise responded to the pending rulemaking petitions”.  The complaint cites WWHT, Inc. v. Federal Communications Com., 656 F.2d 807 (D.C. Cir. 1981) but that case involved an actual order denying a petition for rulemaking.

Even if the court decides that a failure to respond is tantamount to a denial, plaintiff will still have an uphill climb.  As Judge Edwards observed in WWHT, Inc. review is “very limited”.  The court will also have to grapple with the conundrum of how to conduct a review when there is no record.

ARTICLE BY Keith Paul Bishop of Allen Matkins Leck Gamble Mallory & Natsis LLP
© 2010-2015 Allen Matkins Leck Gamble Mallory & Natsis LLP

DaVita Agree to $495 Million Settlement in Alleged Medicare Fraud Lawsuit Filed by Qui Tam Whistleblowers

On Monday, May 4, 2015, DaVita Kidney Care, a division of DaVita Healthcare Partners, Inc. (DaVita), and one of the leading dialysis services providers in the United States, agreed to pay the U.S. Government $450 million for allegedly violating the False Claims Act (FCA) when it continuously discarded good medicine and then billed Medicare and Medicaid for it. DaVita also agreed to pay $45 million for legal fees.

According to the lawsuit filed in 2011 by two former employees of DaVita, between 2003 and 2010, when DaVita administered iron and vitamin supplements such as Zemplar, Vitamin D, and Venofer, vials containing more than what the patients needed were used and the rest was thrown away. For example, if a patient only needed 25 milligrams of medicine, DaVita allegedly used a 100 milligram vial, administered only 25 mg, and tossed the rest in the trash. Although before 2001, this practice was condoned by the National Centers for Disease Control and Prevention (CDC) in order to prevent infectious outbreaks caused by the re-entry of the same vial of medicine, the CDC subsequently changed it policies to outlaw this practice.

This FCA lawsuit alleging that DaVita misused and mishandled of medicine, and overbilled Medicare and Medicaid is not the first such allegation against DaVita, which is not a stranger to FCA lawsuits. In fact, DaVita previously settled two other lawsuits in which it allegedly violated the FCA. In October 2014, DaVita agreed to pay the U.S. Government $350 million for allegedly persuading physicians or physician groups to refer their dialysis patients to DaVita by offering kickbacks for each patient referred. And in 2012, DaVita agreed to pay $55 million to the federal government for overbilling the government for Epogen, an anemia drug. These lawsuits were filed by former employees who decided to come forward as whistleblowers and to help to uncover what they considered to be illegal practices by DaVita. Under the FCA, such whistleblowers can bring what is known as a “qui tam” lawsuit, which is brought by a private citizen to recover money obtained by fraud on the government. As an incentive to bring qui tam lawsuits, the FCA provides that qui whistleblowers receive between 15 and 30 percent of the amount of funds recovered for the government.

Provisions of the FCA make it unlawful for a person or company to defraud governmental programs, such as Medicare or Medicaid.

Posted by the Whistleblower Practice Group at Tycko & Zavareei LLP

© 2015 by Tycko & Zavareei LLP

New York Implements Medical Marijuana Rules

The New York State Department of Health has issued regulations implementing the State’s medical marijuana law, enacted last July.

Published April 15 in the State Register, the regulations allow the use of marijuana for patients with cancer, AIDS, Lou Gehrig’s disease, Parkinson’s disease, multiple sclerosis, certain spinal cord injuries, epilepsy, inflammatory bowel disease, neuropathies, and Huntington’s Disease, and symptoms including severe or chronic pain, surgeries, severe nausea, persistent muscle spasms and wasting syndrome, who comply with the rules. The Commissioner of Health may add other conditions, symptoms or complications, under the regulations.

In accordance with the law, those patients will be able to use only non-smokable forms or marijuana, to be ingested or vaporized. “Smoking is not an approved route of administration.” However, even vaporization is banned in public places, and in no case may approved medical marijuana be consumed through vaporization in locations where smoking would be prohibited by the State’s Public Health Law, including places of employment. Products authorized by the regulations are restricted to liquids, oils or capsules. Unless the Commissioner approves, approved marijuana products may not be incorporated into edible food products by a registered organization.

Only five businesses or non-profits in the State may be licensed to grow, process of distribute approved marijuana. Each such enterprise may have four dispensing facilities. The Commissioner can consider permitting more dispensing facilities.

While implementation will not be immediate, employers should prepare for responding to employees taking marijuana under the law and regulations.

Authored by:  Roger S. Kaplan of Jackson Lewis P.C.

FAA Issues New Proposed Rules for Unmanned Aerial Systems (Drones)

Greenberg Traurig Law firm

The FAA Modernization and Reform Act of 2012 addressed the integration of civil unmanned aircraft systems, also known as UAS or drones, into the national airspace system. The Act requires the Secretary of Transportation to develop, among other things, a comprehensive integration plan and rules governing the operation of small UAS. On Feb. 15, 2015, the Federal Aviation Administration (FAA) issued its proposed rules. According to the Secretary of Transportation, UAS “technology is advancing at an unprecedented pace and this milestone allows federal regulations and the use of our national airspace to evolve to safely accommodate innovation.”

The Notice of Proposed Rulemaking will be available for public comment for 60 days following its publication in the Federal Register. Interested and affected companies have the opportunity to provide comments on the FAA proposal and shape the final UAS rule.

Permitted Vehicles

The proposed rules would permit the operation of UAS weighing less than 55 pounds. The UAS would not be required to have an airworthiness certificate, such as that required for an airplane, but they would have to display aircraft markings similar to other aircraft, and operators would be required to conduct a pre-flight safety check. The FAA is also soliciting public comment on further exemptions for “micro” UAS, weighing 4.4 pounds or less. The proposed rules do not apply to model aircraft and do not apply to private, recreational use of drones.

Operational Limits

The UAS could operate at speeds up to 100 mph, and at altitudes below 500 feet above ground level. Operations would be limited to daylight hours with visibility of at least 3 miles. The UAS would have to remain within the unaided visual line-of-sight of the operator; binoculars or an onboard camera would not satisfy this requirement. Operators could also use an observer to assist in maintaining visual contact, but would have to retain the ability to see the UAS themselves.

Licensed Operators

Operators would have to be licensed by the FAA, but they would not need a pilot’s license. Under existing regulations, operators can request an exemption from FAA regulations, but such exemptions are usually conditioned on possession of a pilot’s license by the operator. Under the proposed rules, operators would have to be at least 17 years old and be vetted by the Transportation Security Administration. They would be required to pass an initial aeronautical test at an FAA test site, with an update test every 2 years. The anticipated costs for the license are small, in the range of a few hundred dollars.

Flights over People and Property

The UAS would be prohibited from operating over any persons “not directly participating in the operation” or “not located under a covered structure that can provide reasonable protection.” This is a significant limitation, which would preclude flights over most public locations such as schools, beaches and parks, and might be read to limit flights over residential areas. Given the number of drone videos already posted online, this rule is likely to be broken, which, as noted below, may result in potential liability. The limitation on overflight of other persons also highlights privacy concerns. Although not directly addressed in the proposed rules, privacy issues will continue to be a point of friction between drone operators and those potentially affected, such as drone-operating photo-journalists and their news subjects.

Delivery Systems and Remote Monitoring

The line-of-sight requirement would likely preclude the type of remotely-piloted delivery systems envisioned by certain major sales and fulfillment services. This requirement may also limit the use of the proposed rules for authorizing remote monitoring of agricultural sites, pipelines and other areas that are out of the line-of-sight of the operator. However, in these situations, the FAA grants limited exemptions to existing FAA regulations for qualified operators, and the proposed rules do not preclude further development of rules for remote operation.

Liability and Insurance

A UAS weighing 50 pounds and traveling at 100 mph could represent a significant potential danger to persons and property. The proposed rules would require a report within 10 days of any accident involving injury to persons or property. Companies operating drones are cautioned that existing liability policies may not provide coverage for drones, particularly for those that are not operated in compliance with existing FAA regulations and exemptions. Some carriers are writing coverage specific to drones, and operators, as well as the companies that hire such operators, should consult with their insurance agents prior to commencing operations.

Ongoing Legal Issues and Interim Operations

The FAA rules are proposed rules, not authorizations for immediate operations. Therefore, companies that plan to use drones before the rules are finalized are cautioned that, unless they hold an existing FAA exemption, they may risk liability for the commercial use of drones. In addition to the FAA, state and local governments are currently exploring further restrictions on drone flights, including restrictions related to privacy, which are not directly addressed in the FAA proposed rules.

In addition to regulatory limitations, drone operations can create significant risks of liability for personal injury, property damage and other claims. These legal issues are likely to present risks even for companies that do not directly operate drones, but instead contract with drone operators.

Given the rapid development in both the technology and the rules and regulations, companies that plan to operate or hire drones should consult with counsel to get an up-to-date assessment of the regulatory environment and other legal risks pertaining to their particular location.

ARTICLE BY

Alais L. M. Griffin
Jordan D. Grotzinger
Adam Siegler
OF
Greenberg Traurig, LLP