Category: Health

Connecticut Further Revises “Safe Workplace Rules for Essential Employers,” Requiring All Employees to Wear Face Masks or Face Coverings At All Times

On April 17, 2020, the Connecticut Department of Economic and Community Development materially revised its previously issued “Safe Workplace Rules for Essential Employers.” Now, all employees working at every workplace that remains open during the COVID-19 pandemic must wear a face mask or face cloth covering at all times.

Employers are required to provide masks or face coverings to employees and, if infeasible because of supply-chain shortages, employers must provide materials for employees to make their own masks or face coverings. Employers must provide these materials, along with the Centers for Disease Control tutorial showing how to make masks and face coverings or, alternatively, compensate employees for reasonable and necessary costs to make their own masks and face coverings.

The new requirements do not apply to employees whose health or safety would be negatively impacted by wearing a mask or face covering due to a medical condition.  And employees are not required to produce medical documentation to verify the stated condition.

© 1998-2020 Wiggin and Dana LLP

For more on states’ COVID-19 legislation, see the Coronavirus News section of the National Law Review.

COVID-19 Pandemic: Streamlining Financial Institution Regulation to Encourage Lending

In recent weeks, regulators of U.S. financial institutions have heeded calls to relax or provide temporary relief from a wide array of regulations that are viewed as impediments to lending in the current crisis environment.  Some of these actions were mandated (or reinforced) by provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).  Many of the relevant regulations were enacted following the 2008/2009 financial crisis with the goal of strengthening the capital and liquidity positions of financial institutions and limiting their risk taking. The current economic and credit crisis has brought into clear relief the tensions between protecting and limiting risk-taking of financial institutions, and ensuring that those financial institutions have the capacity to lend to support the economy in a crisis, and the changes below make clear that market participants and regulators are increasingly concerned that certain regulations may limit flexibility and credit formation in a crisis like the COVID-19 pandemic.  Below we present a summary of some of the most significant recent changes that have been enacted by regulators or via statute. If you have questions about what these changes mean for your business or a financial institution you transact with, please reach out to the listed authors or your regular Polsinelli contacts.

Regulatory Streamlining Changes That Have Been Recently Adopted:

  • Changes to Financial Institution Capital Requirements in Connection with Paycheck Protection Program Lending Facility and Paycheck Protection Program (PPP):  Existing capital requirements may constrain lending by increasing the amount of equity or other capital that banks must have to support expanded lending, particularly loans that would be assigned a higher risk weighting under existing capital rules.  Additionally, the Federal Reserve’s PPP Lending Facility operates by lending to banks against PPP loans they have originated, which would also have a regulatory capital impact to participating institutions.  To provide liquidity to small business lenders and relief to small businesses, a provision in the CARES Act [1], as implemented with a joint interim final rule issued by the Federal Reserve and other banking regulators [2], (1) provides that PPP loans guaranteed by the Small Business Administration (SBA) will be assigned a zero risk weight under the risk-based capital rules and (2) effects changes to the regulatory capital treatment of utilizing the PPP Lending Facility, which, together, should neutralize the regulatory capital effect of banks increasing lending under the PPP and financing those loans via the Federal Reserve’s PPP Lending Facility.

  • Limiting Troubled Debt Restructurings (TDRs) Determinations: Generally, under U.S. GAAP, lenders are required to treat loans modified due to borrower financial distress as TDRs, which triggers additional reporting obligations and accounting requirements.  Federal and State bank regulators have acted to collectively encourage financial institution to work with borrowers have indicated that they and will not direct supervised institutions to automatically categorize COVID-19 related loan modifications as troubled debt restructurings (TDRs). [3]  Additionally, the CARES Act allows lenders to suspend such determinations, with certain limitations, with respect to loan modifications from March 1, 2020 through the earlier of December 1, 2020 and 60 days after the end of the declared public health emergency. [4]

  • Delay of Application of Current Expected Credit Loss (“CECL”) to Financial Institutions: FASB auditing standards require that financial institutions recognize the inherent losses in their loan and lease portfolios. CECL is a new methodology for measuring the inherent losses, and requires lenders to estimate and report expected credit losses at origination of a loan, rather than when a loan becomes distressed. The Federal Reserve and other banking agencies issued a joint interim final rule authorizing an extension in the transition period for implementing the full effects of CECL, which is intended to delay any impact that CECL might have on regulatory capital (and therefore lending). [5]  Additionally, the CARES Act specifies that insured depository institutions, bank holding companies and affiliates would not be required to adopt the standard prior to the earlier of December 31, 2020 and the termination of the declaration of national emergency—however market participants have raised questions about whether that would still require them to comply for the 2020 reporting period. [6]  Separate adoption dates apply for smaller financial institutions, and have also been delayed.

  • Temporary Change to Federal Reserve Supplementary Leverage Ratio Rule: The Supplementary Leverage Ratio applies to large financial institutions to limit their total leverage exposure. The change would exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation until March 31, 2021, and would therefore allow those institutions to expand their balance sheets and potentially provide additional credit to households and businesses. [7]

  • Temporary Change to Community Bank Leverage Ratio: Under existing law, qualifying community banking organizations have the option to adopt a simplified 9% leverage ratio in lieu of complying with the full panoply of BASEL III capital rules (those financial institutions meeting the leverage ratio requirement are generally deemed to be well capitalized for prompt corrective action purposes). A provision of the CARES Act, [8] as implemented by interim final rules of the Federal Reserve and other banking regulators, temporarily reduces the applicable leverage ratio to 8% (with a graduated transition to 8.5 % in 2021 and back to 9% thereafter) and provides for a grace period for covered institutions whose leverage ratios fall below the applicable requirement. [9]

  • Technical Changes to Total Loss Absorbing Capital Rules (“TLAC”): TLAC rules require global systemically-important  banks to maintain loss-absorbing long term debt and other tier 1 capital at specified levels.  The Federal Reserve System revised the definition of eligible retained income for purposes of the TLAC rules. This technical change allows covered companies to continue to lend and utilize their capital buffers in a gradual manner without severely constraining their ability to distribute capital. [10]

  • Deferral of Appraisals and Evaluations for Real Estate Transactions Affected by COVID-19: The federal banking agencies have issued a final interim rule [11] allowing lenders to defer certain appraisals and evaluations for up to 120 days after closing of residential or commercial real estate loan transactions to provide temporary relief by enabling regulated institutions to continue to close loans even if they are unable to arrange an appraisal/evaluation ahead of closing. [12] Real estate transaction involving acquisitions, development and constructions are excluded from the scope of the interim final rule. The temporary relief provisions will expire on December 31, 2020, unless extended. The National Credit Union Administration (NCUA) will consider a similar proposal on April 16, 2020. [13] The federal agencies along with NCUA and the Consumer Financial Protection Bureau have issued a joint statement offering guidance and describing temporary changes to Fannie Mae and Freddie Mac appraisal standards to provide assistance to lenders. [14]

  • Federal Reserve Regulatory Reporting Relief for Small Institutions: The Federal Reserve will not take action against a financial institution with $5 billion or less in total assets for submitting its March 31, 2020, Consolidated Financial Statements for Bank Holding Companies (FR Y-9C) or Financial Statements of U.S. Nonbank Subsidiaries of U.S. Bank Holding Companies (FR Y-11) after the official filing deadline, as long as the applicable report is submitted within 30 days of the official filing due date. [15] The federal financial institution regulators and state regulators also offer similar relief to financial institutions affected by COVID-19. [16]

  • Temporary Modification to Wells Fargo Growth Restriction Order: One of the consequences of the Wells Fargo account opening scandal was a 2018 Consent Order that, among other things, restricted Wells Fargo’s asset growth until it met certain requirements. In light of the extraordinary events related to the COVID-19 pandemic, the Federal Reserve amended that order to temporarily lift the asset restriction to allow Wells Fargo to continue lending without violating the limits in the order. [17]

  • Six-Month Delay of the Federal Reserve’s Revised Control Framework:  The Revised Control Framework would have changed the determination of “control” for purposes of the Bank Holding Company Act and therefore the application of certain bank regulatory requirements.  The delay moves the effective date to September 30, 2020 to give additional time for implementation as well as for institutions to consult with the Federal Reserve on the effect of the change. [18]

  • Early adoption of Standardized Approach for Measuring Counterparty Credit Risk Rule (“SA-CCR”): SA-CCR is a new methodology for measuring counterparty credit risk of derivatives contracts for regulatory capital purposes, The Federal Reserve and other banking regulators issued a joint notification allowing the companies early adoption of SA-CCR by banks and bank holding companies, with the intent that the early adoption could reduce regulatory capital requirements and therefore encourage lending. [19]

[1] 26 U.S.C. §1102.

[2] Federal Reserve, Interim Final Rule, Regulatory Capital Rule: Paycheck Protection Program Lending Facility and Paycheck Protection Program Loans (amending Sections 32 and 131 of the capital rule) https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200409a1.pdf.  See, 12 CFR 3.2, 12 CFR 3.32(a)(1)(iii), 12 CFR 3.131(e)(3)(viii) and 3.305 (OCC); 12 CFR 217.2, 12 CFR 217.32(a)(1)(iii), 12 CFR 217.131(e)(3)(viii) and 12 CFR 217.305 (Federal Reserve); 12 CFR 324.2, 12 CFR 324.32(a)(1)(iii), 12 CFR 324.131(e)(3)(viii) and 12 CFR 324.304 (FDIC).

[3]  Federal Reserve et al. Press Release, Agencies Provide Additional Information to Encourage Financial Institutions to Work with Borrowers Affected by COVID-19 (March 22, 2020) https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200322a.htm. See, also, Federal Reserve et al. Press Release, Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (March 22, 2020) https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200322a1.pdf; Federal Reserve et al. Press Release, Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised) (April 7, 2020) https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200407a1.pdf.

[4] 26 U.S.C. §4013.

[5] Federal Register, Regulatory Capital Rule: Revised Transition of the Current Expected Credit Losses Methodology for Allowances (March 31, 2020) https://www.federalregister.gov/documents/2020/03/31/2020-06770/regulatory-capital-rule-revised-transition-of-the-current-expected-credit-losses-methodology-for.

[6] 26 U.S.C. §4014.

[7] Federal Reserve Press Release, Federal Reserve Board announces temporary change to its supplementary leverage ratio rule to ease strains in the Treasury market resulting from the coronavirus and increase banking organizations’ ability to provide credit to households and businesses (April 1, 2020) https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200401a.htm.

[8] 26 U.S.C. §4012.

[9] Federal Reserve, Interim Final Rule, Regulatory Capital Rule: Temporary Changes to the Community Bank Leverage Ratio Framework, (amending 12 CFR Chapters I, II and III), https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200406a1.pdf; Federal Reserve, Interim Final Rule, Regulatory Capital Rule: Transition for the Community Bank Leverage Ratio Framework, (amending 12 CFR Chapter I, II and III), https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200406a2.pdf

[10] Federal Register, Total Loss-Absorbing Capacity, Long-Term Debt, and Clean Holding Company Requirements for Systemically Important U.S. Bank Holding Companies and Intermediate Holding Companies of Systemically Important Foreign Banking Organizations: Eligible Retained Income (March 26, 2020) https://www.federalregister.gov/documents/2020/03/26/2020-06371/total-loss-absorbing-capacity-long-term-debt-and-clean-holding-company-requirements-for-systemically.

[11] Federal Reserve, Interim Final Rule, Real Estate Appraisals (amending 12 CFR 34, 12 CFR 225 and 12 CFR 323), https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200414a1.pdf. See, 12 CFR 34.43 (OCC); 12 CFR 225.63 (Federal Reserve); 12 CFR 323.3 (FDIC).

[12] Federal Reserve et al., Press Release, Federal Banking Agencies to Defer Appraisals and Evaluations for Real Estate Transactions Affected by COVID-19 (April 14, 2020) https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200414a.htm. 

[13] Id.  

[14] Federal Reserve et al., Interagency Statement on Appraisals and Evaluations for Real Estate Related Financial Transactions Affected by the Coronavirus (April 14, 2020) https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200414a2.pdf.

[15] Federal Reserve Press Release, Federal Reserve offers regulatory reporting relief to small financial institutions affected by the coronavirus (March 26, 2020) https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200326b.htm.

[16] FFIEC Press Release, Financial Regulators Highlight Coordination and Collaboration of Efforts to Address COVID-19 (March 25, 2020) https://www.ffiec.gov/press/pr032520.htm.  

[17] Consent Order, In the matter of Wells Fargo & Company, Docket No. 20-007-B-HC, United States of America before the Board of Governors of the Federal Reserve System Washington, D.C., filed April 8, 2020, https://www.federalreserve.gov/newsevents/pressreleases/files/enf20200408a1.pdf.

[18] Federal Reserve Press Release, Federal Reserve Board announces it will delay by six months the effective date for its revised control framework (March 31, 2020) https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200331a.htm. 

[19] Federal Register, Standardized Approach for Calculating the Exposure Amount of Derivatives Contracts (March 31, 2020) https://www.federalregister.gov/documents/2020/03/31/2020-06755/standardized-approach-for-calculating-the-exposure-amount-of-derivative-contracts

© Polsinelli PC, Polsinelli LLP in California

For more on COVID19 related lending, see the Coronavirus News section of the National Law Review.

Social Distancing During Wedding Season: Mitigating Loss and Securing Insurance Coverage

In a typical year, March flowers hint at wedding showers soon to be celebrated.  But 2020 is not a typical year.  As travel and crowd size restrictions continue to tighten, the wedding industry—which relies on large gatherings of people, many of whom travel for the occasion—has been and will continue to be significantly impacted.  And wedded bliss is big business; as reported by NPR, “Americans spent $54 billion on more than 2 million weddings” in 2019.

As my colleagues have noted, insurance may be an invaluable resource to businesses impacted by the coronavirus and related restrictions.  How does this apply to the wedding industry, including venues, event planners, photographers, videographers, caterers, musicians, florists, and potentially airlines, hotels, and online travel vendors?

For all such businesses, vendors’ own losses (also known as “first-party claims”) may be covered by the following types of insurance:

  • Property Insurance, which can apply when a property cannot be used for its intended purpose, even absent structural damage or destruction. Thus, for example, the contamination of a wedding venue, rehearsal dinner site, church, photography studio, or other location due to the presence of coronavirus may be covered.
  • Business Interruption Insurance, which is designed to reimburse policyholders for profits lost due to a covered risk. Such insurance may apply both for amounts lost while a company is out of operation and while the company has resumed operation and is working back up to full capacity.
  • Contingent Business Interruption Insurance, which covers loss sustained by one company as a result of impacts on a third party, such as a supplier. For example, loss may be sustained by a domestic wedding vendor because a dress ordered from China will be delivered late due to restrictions in place there.  And given how many vendors can work together on a single wedding, this coverage type could conceivably apply to more than one loss in connection with a single event.
  • Business Income Insurance, which may apply to loss of income that results from governmental orders that limit the business’s ability to operate. Although such coverage often is time-limited, how those limits apply will—as always—be subject to specific policy language and facts.
  • Event Cancellation Insurance, which generally applies when loss results from a cause “beyond the insured’s control.” Although this coverage typically is discussed in the context of concerts and the like, if contained in vendors’ policies, it could apply to wedding-related losses as well.

Regardless of the insurance type, vendors would be wise to keep records of how virus-related restrictions impact their business.  Those facts will be key to any claim.

Vendors also may seek coverage for claims filed against them if, for example, they provided services for a wedding that occurred before restrictions were put in place and attendees were exposed to the virus.  Such third-party claims potentially could be covered by General Liability Insurance, Workers’ Compensation Insurance, and Employers’ Liability Insurance.

When submitting a claim for first- or third-party losses, policyholders should expect insurers to reserve rights or deny claims based on limitations in the policies that may, on their face, appear to apply.  However, policyholders should never accept at face value an insurer’s reservation or denial.  For one thing, limitations on coverage are construed narrowly, and whether they apply depends on specific policy language and facts.  For another, if reasonable people could read a coverage limitation differently, the policy is ambiguous, and will be construed in favor of coverage.

Finally, regardless of the type of insurance, a key factor for the wedding industry will be mitigation, or minimizing loss.  Common law and many insurance policies require policyholders to try to minimize the negative impact of an event on their business.  For wedding vendors, this might mean accommodating couples by postponing services.  That, in turn, means that vendors ultimately will receive payment, but only after a gap in income.  In an industry that tends to be locally based and relies on word of mouth, this approach is a smart business practice.  And, in some instances, insurers may reimburse policyholders for both the amount they spend to minimize loss (e.g., costs associated with finding a new date and dealing with associated logistics), any income they lose during the “gap” period that they are unable to defer, and the opportunity costs resulting from weddings being rescheduled when others might otherwise have taken place.  In short, working with your clients to save their big day might be the right choice in more ways than one.

© 2020 Gilbert LLP

ARTICLE BY Jenna A. Hudson of Gilbert LLP.
For more on COVID-19 impacts on various industries, see the National Law Review Coronavirus News section.

Could the COVID-19 Pandemic Impact Child Custody and Relocation?

As a result of the COVID-19 pandemic, many face uncertainty about their jobs and careers. The last week of March saw 6.6 million Americans applying for unemployment benefits, and many more experienced reduction in their compensation. The uncertainty could lead to more people choosing to relocate closer to family or take jobs that may require them to relocate for different economic opportunities. If you share physical custody of your children with their parent, what should you consider before making the decision to relocate?

Under Michigan law, a parent is prohibited from relocating a child, whose custody is governed by a court order, more than 100 miles from the child’s legal residence at the time of the original court order. As a result, parents who share custody of their child and want to relocate will need court permission. MCL 722.31. The court analyzes a parent’s request to move with a child in four steps. The first is to determine whether the relocating parent can support the move of the child by analyzing the following factors:

  1. Whether the legal residence change has the capacity to improve the quality of life for both the child and the relocating parent.
  2. The degree to which each parent has complied with and utilized his or her time under a court order governing parenting time with the child and whether the parent’s plan to change the child’s legal residence is inspired by that parent’s desire to defeat or frustrate the parenting time schedule.
  3. The degree to which the court is satisfied that, if the court permits the legal residence change, it is possible to order a modification of the parenting time schedule and other arrangements governing the child’s schedule in a manner that can provide an adequate basis for preserving and fostering the parental relationship between the child and each parent, as well as whether each parent is likely to comply with the modification.
  4. The extent to which the parent opposing the legal residence change is motivated by a desire to secure a financial advantage with respect to a support obligation.
  5. Domestic violence, regardless of whether the violence was directed against or witnessed by the child.

MCL 722.31

What impact, if any, does the COVID-19 pandemic have on a court’s analysis of the above factors? First of all, as far as the COVID-19 pandemic relates to the potential quality of life of a particular geographic region, as more and more data becomes available regarding the outbreak, certain regions of the country that found themselves more susceptible to COVID-19 may be less likely to increase the quality of life for a parent and child. Certain geographic areas may pose more of a health risk to families until the development of a vaccine. Second, many parents, although acting reasonably and in the best interests of their child, have informally agreed to modify their parenting time due to Gov. Whitmer’s Stay Home, Stay Safe order. Although it is difficult to imagine a court would criticize a parent for putting a child’s health first, lapses in parenting time and parental absence can dramatically impact a child’s relationship with a parent, which a court may be hard pressed to ignore, despite good intentions. At the end of the day, a parent’s desire to provide more stable financial and family support during this uncertain time may not necessarily result in a court approving the move.

© 2020 Varnum LLP

For more on family & other laws affected by COVID19, see the Coronavirus News section of the National Law Review.

To Provide an N95 Mask or Not to…That is the Question Plaguing Some Employers (US)

One of the biggest questions plaguing employers during the COVID-19 pandemic is whether or not to provide employees with respirators—the holy grail of all PPE at this time. On March 11, 2020, the White House issued a Presidential Memorandum, entitled “Making General Use Respirators Available,” which mandated all necessary efforts by the government and public at large to make respiratory devices available for use by healthcare workers during the COVID-19 pandemic to mitigate against further transmission of the virus. In response, OSHA has issued several forms of temporary enforcement guidance for the Respiratory Protection standard, as well as its April 13, 2020 Interim Enforcement Response Plan for Coronavirus Disease 2019 (COVID-19), and both the healthcare and general industries have scrambled to comply with this exacting standard in the face of extensive shortages.

As we recently discussed here, OSHA issued two enforcement guidance memos on April 3, 2020, regarding issues surrounding the use of respiratory equipment. The first memorandum discusses the use of respiratory protection and the N95 mask shortage due to COVID-19, specifically outlining enforcement discretion to permit the extended use and reuse of respirators, as well as the use of respirators that are past their manufacturer’s recommended shelf life—when following the directions set forth in the memorandum (i.e., attempting to obtain other NIOSH-approved respirators and using all other feasible engineering controls) and when used as recommended by the CDC. The reasoning behind the memorandum is the sad fact that the pandemic has limited the availability for N95 filtering facepiece respirators to only workers in the healthcare and emergency response fields (and even then there are not enough respirators to go around). The second memorandum provides similar guidance on the use of respiratory protection equipment certified under the standards of other countries or jurisdictions during the COVID-19 pandemic, if the methods set forth in the first memoranda are unavailable. Both memoranda explicitly explain their application to both (1) healthcare personnel exposed to actual and potential COVID-19 patients, as well as (2) workers exposed to other respiratory hazards due to the shortage of respirators resulting from the COVID-19 pandemic response.

On April 8, 2020, OSHA issued further guidance and announced the expansion of temporary guidance provided in a March 14, 2020 memorandum regarding supply shortages of N95 masks or other filtering facepiece respirators (FFRs) due to the COVID-19 pandemic. The memorandum expands application of mandatory fit-testing requirements in the March 14 memorandum beyond healthcare to all workplaces covered by OSHA—where there is required use of respirators—and explains that “OSHA field offices will exercise enforcement discretion concerning the annual fit-testing requirements, as long as employers have made good-faith efforts to comply with the requirements of the Respiratory Protection standard and to follow the steps outlined in the March 14, 2020 memorandum.”

Notably, all three memoranda outline some version of this statement: “Due to the impact on workplace conditions caused by limited supplies of N95 FFRs, all employers should reassess their engineering controls, work practices, and administrative controls to identify any changes they can make to decrease the need for N95 respirators. Employers should, for example, consider whether it is possible to increase the use of wet methods or portable local exhaust systems or to move operations outdoors. In some instances, an employer may also consider taking steps to temporarily suspend certain non-essential operations.” OSHA also clarified that “[a]ll employers whose employees are required to use or are permitted voluntary use of respiratory protection must continue to manage their respiratory protection programs (RPPs) in accordance with the OSHA respirator standard, and should pay close attention to shortages of N95s during the COVID-19 pandemic. Paragraph (d)(1)(iii) in section 1910.134 requires such employers to identify and evaluate respiratory hazards in the workplace, and paragraph (c)(1) requires employers to develop and implement written RPPs with worksite-specific procedures and to update their written programs as necessary to reflect changes in workplace conditions that affect respirator use.” OSHA confirmed this fact in its April 13, 2020 Interim Enforcement Response Plan, where it again focused on healthcare and emergency response job tasks with “high” and “very high” occupational exposure risk to COVID-19.

So who should be provided respirators in the first place then? OSHA has not yet put forth any guidance saying that it will require (or even recommend, consistent with CDC guidance for the general public) NIOSH-approved respiratory protection in the typical working environment, except for employees working within 6 feet of patients “known to be, or suspected of being, infected with SARS-CoV-2 and those performing aerosol-generating procedures.” The agency has also clarified that the use of PPE, including respiratory protection, should not take the place of other prevention strategies.

However, whether respiratory protection is required is still a case-by-case analysis, the outcome of which will be dependent on each employer’s internal hazard assessment and the risk category within which the employer’s workers fall (as described in OSHA’s guidance). Only for high risk and very high risk positions does OSHA recommend the use of respiratory protection, including NIOSH-approved N95 devices, as well as face shields or goggles—in accordance with CDC guidance for hospital preparedness. For medium risk workplaces, the guidance notes that situations requiring employers to use respirators are rare. And for lower risk workplaces, OSHA does not even recommend additional PPE, let along respirators. Instead, the agency directs that “[w]orkers should continue to use the PPE, if any, that they would ordinarily use for other job tasks.” Therefore, employers falling into the latter two categories that want to provide respiratory protection may be stuck between a rock and a hard place until supply levels increase and agency guidance expands.

That said, OSHA recognizes the difficulties at hand and has clarified that its inspectors will be given specific enforcement discretion when enforcing the Respiratory Protection standard during the COVID-19 outbreak. In exercising this discretion, inspectors are instructed to refer to OSHA’s guidance outlined herein, to continue to check for additional or modified guidance, and to always assess “whether the employer is making a good-faith effort to provide and ensure workers use the most appropriate respiratory protection available for exposures to SARS-CoV-2.” Per OSHA’s Interim Enforcement Response Plan, assessing good-faith efforts will be accomplished by the following:

  • Implementing the hierarchy of controls in an effort first to eliminate workplace hazards, then using engineering controls, administrative controls, and safe work practices to prevent worker exposures to respiratory hazards;
  • Prioritizing efforts to acquire and use equipment according to OSHA’s guidance memorandum above;
  • Performing a user seal check each time an employee dons a respirator, regardless of whether it is a NIOSH-certified device or not, and do not use a respirator on which they cannot perform a successful user seal check; and
  • Training workers to understand proper usage, maintenance, sanitation, and storage of respirators and other PPE.

In other words, it is hard to get respirators in the first place, even for healthcare and emergency workers falling into the high and very high risk categories. So, employers must implement comprehensive backup plans involving the use of engineering controls, administrative controls, safe work practices, and other appropriate PPE. However, if respirators are available for your workers, and they need and are provided respirators for their particular position, they must be used in the context of a comprehensive respiratory protection program that meets the requirements of OSHA’s Respiratory Protection standard (29 CFR 1910.134), at least to the greatest extent possible, including the requirements for medical exams, fit testing, and training.

© Copyright 2020 Squire Patton Boggs (US) LLP

For more on respirator availability & usage, see the National Law Review Coronavirus News section.

Interpol Issues Alert on Increased Risk of Ransomware Attacks Against COVID-19 Medical Organizations

Interpol has issued an alert to global law enforcement agencies about the increased risk of ransomware attacks on hospitals, health care providers and other organizations on the front line of response to the COVID-19 pandemic.

The Purple Notice, issued to all 194 member countries, notified them that Interpol’s Cybercrime Threat Response team has detected a “significant increase” in ransomware attempts against hospitals and medical organizations.

According to a spokesman from Interpol, “[A]s hospitals and medical organizations around the world are working non-stop to preserve the well-being of individuals stricken with the coronavirus, they have become targets for ruthless cyber-criminals who are looking to make a profit at the expense of sick patients. Locking hospitals out of their critical systems will not only delay the swift medical response required during these unprecedented times, it could directly lead to deaths. INTERPOL continues to stand by its member countries and provide assistance necessary to ensure our vital healthcare systems remain untouched and the criminals targeting them held accountable.”

The primary vector for the ransomware attacks continues to be phishing attempts. Unfortunately, due to the emergency nature of COVID-19, healthcare workers are working long, stressful hours, and may not be as vigilant as usual in spotting phishing emails. The criminals are luring tired workers into clicking on links and attachments with subject lines that appear to be COVID-19- related or are from the Centers for Disease Control or other governmental bodies trying to keep healthcare workers informed about the rapidly spreading virus.

Hospitals and other healthcare entities should be aware of these warnings from INTERPOL and Microsoft [view related post] and notify their employees to be extra vigilant when opening emails, links and attachments.

Copyright © 2020 Robinson & Cole LLP. All rights reserved.

For more industries affected by COVID-19, see the National Law Review Coronavirus News section.

FCPA Landmines Beneath the Surface of the COVID-19 Crisis

COVID-19 took the world by surprise and continues to spread across the globe in more than 210 countries and counting.  The outbreak in the United States escalated rapidly, with over 585,000 confirmed cases as of April 14, 2020.  The federal government and a number of hard-hit states were caught off guard, and soon learned that their inventories of personal protective equipment (“PPE”) and other life-saving equipment such as test kits and ventilators were insufficient to keep pace with the pandemic.  The demand for equipment to fight COVID-19 skyrocketed and government and commercial entities have shifted into high gear to respond.  Whether motivated by humanitarian concern or commercial enterprise, many state and local governments, companies and individuals are now looking abroad to procure critical supplies on an expedited basis.  At the same time, many foreign industrial manufacturers are positioning themselves for the high demand of exports by adapting their facilities to produce PPE.  For example, Chinese electric car maker BYD announced on March 13, 2020 it is now the largest face mask factory in the world—less than one month after converting its facilities in response to the pandemic.  In the midst of these exigent circumstances, the global supply chain landscape is replete with Foreign Corrupt Practices Act landmines—and well-intentioned companies hoping to partner with foreign PPE manufacturers could become a casualty if they don’t watch their step.

Anticipated FCPA Enforcement in the Wake of the COVID-19 Pandemic

The Foreign Corrupt Practices Act of 1977 (“FCPA”) makes it unlawful for any commercial enterprise, or individual representing one, to offer, promise to pay, or direct or authorize another individual to pay money or anything of value to a foreign government official for the purpose of expanding or maintaining their commercial interests.  15 U.S.C. §§ 78dd-1, et seq.  The FCPA also requires publicly traded companies “make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer.”  Id.  The statute has a criminal and civil bite; the DOJ is responsible for all criminal enforcement of the FCPA and civil enforcement of its bribery provisions, and the SEC is responsible for civil enforcement of the FCPA’s “books and records” provisions if securities are involved.  The DOJ and SEC rarely enforced the FCPA in its first three decades of existence.  These agencies, however, have aggressively interpreted and enforced the law since the turn of the century.  From 2000 to 2019, the DOJ brought 235 enforcement actions and the SEC brought 168 enforcement actions, together involving over $11 billion in monetary resolutions.  In 2019, the U.S. Government collected more in a single year through DOJ and SEC actions against companies in FCPA cases than ever before.  There are several FCPA-related considerations for companies to keep in mind as they navigate business during the COVID-19 pandemic.

Indeed, U.S. companies would be wise to assume the government will persist in its aggressive “a bribe is a bribe” approach to the FCPA, even in the midst of a worldwide health crisis.  First, corruption tends to thrive in times of crisis.  Weaknesses in governmental systems become exposed, and those with nefarious intent, or just too much aggressiveness, seize on the opportunity to exploit the panic, fear and suffering that accompanies disasters.  Increased corruption, in turn, often results in increased enforcement.  The financial crisis of 2008, for example, increased FCPA enforcement.  As companies faced pressure to obtain business and even maintain operational status during the crisis, their focus on FCPA compliance decreased.  The global economy came to a halt, and many companies decided to quickly merge and consolidate.  The speed of these consolidations resulted in the discovery by some acquiring companies of questionable payments and accounting practices both pre- and post-merger, resulting in increased FCPA compliance risks.  The DOJ and SEC were alerted and brought more FCPA enforcement actions and imposed higher civil fines from 2008 to 2011 than ever before.

Second, although the current administration has not directly addressed whether and to what extent it will pursue FCPA enforcement actions as a result of the COVID-19 pandemic, the DOJ and SEC have announced their intent to prioritize coronavirus-related fraud schemes.  For example, on March 20, 2020, the DOJ issued a press release announcing that Attorney General William P. Barr “is urging the public to report suspected fraud schemes related to COVID-19” and directing all U.S. Attorneys to prioritize investigating and prosecuting such schemes.  Four days later, the DOJ established the COVID-19 Hoarding and Price Gouging Task Force “to address COVID-19-related market manipulation, hoarding, and price gouging.”  Given the global supply chain pressure points and implications of the COVID-19 crisis, it would not be a stretch for the administration to extend its prioritization of such COVID-19-related fraud cases to include COVID-19-related global anti-corruption and bribery cases.

Third, the federal government is in the process of rolling out over two trillion dollars in aid and recovery funding in response to the coronavirus pandemic, and it likely will be eager to replenish its resources after such an unprecedented relief package.  The FCPA historically has generated significant revenue for the U.S. Government, and all criminal fines, civil penalties and disgorged profits resulting from FCPA violations go directly into the U.S. Treasury.  When the COVID-19 crisis curve drops in the U.S., the DOJ, SEC, and federal prosecutors could turn to the FCPA to assist the U.S. Government in bouncing back from the financial impact of the pandemic.

Finally, the current administration and others have been critical of China’s response to the COVID-19 crisis; Secretary of State Mike Pompeo, for example, remarked in a March 5, 2020 press conference that “there was information [from China] that could have been made available more quickly and data that could have been provided and shared among health professionals across the world.”  Further, on March 12, 2020, Chinese Foreign Ministry spokesman Zhao Lijian suggested, via Twitter, that the U.S. has not been transparent and that the U.S. Army may have brought the epidemic to Wuhan, China.  In the wake of a potential diplomatic fallout between the U.S. and China, the administration may be particularly vigilant of and aggressive toward U.S.-China deals implicating the FCPA.

Potential FCPA Landmines

American companies that import goods or supplies from abroad frequently rely on customs agents and third-party brokers to assist them in maneuvering the often complex customs process.  The use of such agents, however, may expose companies to FCPA compliance risks.  Numerous FCPA enforcement actions brought by the DOJ and the SEC have focused on improper payments made by third-party agents to government officials to secure customs clearance or additional business.

For example, on September 26, 2019, the SEC announced that a Wisconsin-based digital and print marketing provider agreed to pay nearly $10 million to settle charges that it violated the FCPA by engaging in multiple bribery schemes in Peru and China.  The SEC Order found that from 2010 to 2015 the company’s China-based subsidiary used sham sales agents to make and promise improper payments to employees of private and governmental customers to secure business.  Similarly, on February 28, 2020, an American communication technology provider settled FCPA charges with the SEC and DOJ for $8.8 million for using resellers and distributors in China to bribe government officials.

As companies face intense pressure to quickly obtain goods and clear them through the customs process to mitigate the healthcare and economic consequences posed by COVID-19, the risk of FCPA violations runs high.  For example, a customs official could refuse to allow the export of PPE without a bribe, and a company employee may be desperate enough to decide that the payment is worth making to preserve his or her employment at a time when company revenues are declining, non-performing employees are subject to lay-offs and furloughs, and sales expectations and revenues remain high.  Further, a company venturing into uncharted terrain by seeking to purchase high-demand and scarce products abroad to compensate for losses in traditional lines of business might face increased risks of bribery and corruption primarily due to inexperience.  Indeed, the pressure to maintain business or get back to “business as usual” may lead some employees to get dangerously close to or even cross ethical boundaries by committing bribery or other similar misconduct.

Best Practices

Companies seeking to procure goods and supplies abroad during the COVID-19 pandemic should consider the following best practices to avoid falling out of compliance with the FCPA:

  1. Maintain a Strong Compliance Presence

Company management should reinforce and reiterate the company’s commitment to its anti-corruption and anti-fraud compliance programs. Many companies are taking proactive steps to ensure the safety and well-being of their employees, cope with new “Work From Home” policies, and brace for the financial impact of the pandemic.  While a heightened focus on these critical areas right now is understandable, it is important now more than ever for companies and their compliance officers to remind employees, especially those responsible for facilitating the acquisition and importation of goods and supplies from abroad, of the company’s commitment to ethical business practices.

  1. Emphasize Reporting Procedures for Suspected FCPA Violations

Company management should conduct anti-corruption training for employees to ensure they are capable of recognizing unethical and potentially illegal conduct, and their responsibilities for reporting it according to company policies and procedures.  Compliance departments should test their reporting procedures to ensure employees are at ease in reporting any suspected FCPA violations through multiple avenues, and compliance officers should similarly test their ability to respond appropriately to reasonable suspicions of illegal activity.

  1. Increase Screenings and Transaction Review

Finally, company management should consider increasing due diligence efforts and taking a “deeper dive” when it comes to interacting with new suppliers, agents, and distributors. For example, companies should pay particular attention to whether the individual being reviewed is related to any public officials in their country of residence, has a history of employment or business dealings with the government, and whether they previously have been the subject of any corruption complaints, investigations or negative news events.  Further, companies that have instituted quantity, financial, or country of origin thresholds for reviews of transactions, expenses, and other aspects of company business for corruption risk, should consider adjusting such thresholds to include a broader and more conservative review process, at least until the COVID-19 pandemic and related equipment and supply demands substantially decrease.

Like all Blogs, this one is for information purposes only. It is not legal advice and does not form an attorney client relationship. As you are aware, things are changing quickly and there is no clear-cut authority or bright line rules in this area. This Blog does not reflect an unequivocal statement of the law, but instead represents our best interpretation of where things currently stand. This Blog does not address the potential impacts of the numerous other local, state, and federal orders that have been issued in response to the COVID-19 pandemic, including, without limitation, potential liability should an employee become ill, requirements regarding family leave, sick pay, and other issues.

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.

For more on COVID-19 & Global Trade, see the National Law Review Coronavirus News section.

Are Tech Workers Considering Unionizing In The Wake Of COVID-19?

Big tech companies by and large have remained union-free over the years unlike their peers in other industries such as retail and manufacturing. However, earlier this year – and before the COVID-19 pandemic upended workplaces across America – unions scored their first major organizing victory in the tech sector when employees at Kickstarter voted to form a union. According to at least one recent report, more tech company workers may soon be following suit.

The Teamsters, Communications Workers of America, and the Office and Professional Employees International Union all reported an uptick in inquiries from non-union employees about prospects of unionizing the companies they work for, including in the tech and gig economy sectors. One of the reasons cited by these workers was a feeling that not enough is being done to protect employees against the spread of COVID-19, particularly those who work in e-commerce fulfillment centers or drive for ride-sharing apps. There also was concern by employees who were, at least at one point, denied remote work arrangements when they believed their jobs were suited for such an arrangement.

It remains to be seen whether organized labor will be able to augment its numbers based on these workers’ concerns. Several things may complicate any such efforts, including unprecedented layoffs and an almost singular focus by people across the nation on the ongoing pandemic itself.

To the extent unions try to capitalize on the unrest, there are many reasons employers facing organizing attempts should be concerned. For example, one of the most effective tools a company can consider to stave off a unionization attempt are large, all-employee meetings where leaders of the organization communicate directly to the workforce why forming a union isn’t in the company’s or employees’ best interests. In an era where social distancing is a necessity, such meeting – at least in-person – likely won’t be a viable option. In addition, mail-in ballot union elections may become the standard as long as social distancing requirements remain in effect, which are less preferred than live secret-ballot voting booths.

Accordingly, employers desiring to remain union-free should give thought to what talking points, materials, and strategies – as well as communications channels – they have available to them now around this issue. Waiting to do so until after a union petition hits may place them at a significant disadvantage.

© 2020 BARNES & THORNBURG LLP

For more industries impacted by COVID-19, see the National Law Review Coronavirus News section.

Price Gouging and Deceptive Advertising Practices Amidst COVID-19 Pandemic

The Federal Trade Commission, the Food and Drug Administration and state Attorneys General have bumped the protection of consumers in the midst of the COVID-19 crisis to the top of their respective lists, including, but not limited to, price gouging and unsubstantiated product efficacy claims.  The U.S. Department of Justice has also issued a broad mandate regarding criminal enforcement of deceptive, fraudulent and predatory practices.

 State Attorneys General

State Attorney General have actively been policing the advertising of claims related to products that purport to cure, treat or prevent COVID-19.  This includes both express and implied claims (e.g., immunity-based claims).

Currently are no vaccines, pills, potions, lotions, lozenges or other prescription or over-the-counter products to treat or cure.

By way of example, a group of thirty-two state attorneys general recently sent letters to executives at prominent online retailers, urging them to help police price gouging.  Additionally, the New York Attorney General has asked GoDaddy and other online registrars to halt and de-list domain names used for Coronavirus-related scams and fake remedies designed to unlawfully and fraudulently profit off consumers’ fears around the coronavirus disease.

The NY AG has also recently contacted Craigslist.com, calling on the company to immediately remove posts that attempt to price gouge users, or otherwise purport to sell items that provide “immunity” to the coronavirus or allow individuals to test for the disease.  For example, the AG’s letter referred to posts that promoted an “immunity pack,” a fake coronavirus testing kit, and face masks that are not even proven to provide coronavirus-related protection.  The AG also asked Craigslist to remove an advertisement for a bottle of Purell that was priced at over $200.

Price gouging on disinfectant products is also a priority.

State AGs and other federal agencies are actively investigating potential price gouging violations, filing enforcement lawsuits, issuing civil investigative demands (CIDs), and serving cease-and-desist warnings.  The NYC Department of Consumer and Worker Protection (DCWP) – formerly the New York City Department of Consumer Affairs (DCA) – has also been policing local business that it believes are selling necessary products (e.g., cleaning products, diagnostic products and services, disinfectants [wipes, liquids, sprays], face masks, gloves, hand sanitizers, medicines, paper towels, rubbing alcohol, soap, tissues and basic food supplies).

The State of New York’s price gouging statute prohibits the sale of goods and services necessary for the health, safety and welfare of consumers at unconscionably excessive prices during any abnormal disruption of the market.  During any abnormal disruption of the market for consumer goods and services vital and necessary for the health, safety and welfare of consumers, no party within the chain of distribution of such consumer goods or services or both shall sell or offer to sell any such goods or services or both for an amount which represents an unconscionably excessive price.

In the State of New York, whether a price is unconscionably excessive is a question of law for the court.  The court’s determination that a violation has occurred shall be based on any of the following factors:  (i) that the amount of the excess in price is unconscionably extreme;  or (ii) that there was an exercise of unfair leverage or unconscionable means;  or (iii) a combination of both factors in subparagraphs (i) and (ii).

Proof that a violation of has occurred can include, for example, evidence that:  (i) the amount charged represents a gross disparity between the price of the goods or services which were the subject of the transaction and their value measured by the price at which such consumer goods or services were sold or offered for sale by the defendant in the usual course of business immediately prior to the onset of the abnormal disruption of the market; or (ii) the amount charged grossly exceeded the price at which the same or similar goods or services were readily obtainable by other consumers in the trade area.  A defendant may be able to rebut such evidence by establishing that additional costs not within its control were imposed on the defendant for the goods or services.

Where a violation is alleged to have occurred, the AG may seek an injunctions, civil penalties and restitution.

Under the Rules of the City of New York, stores are prohibited from selling items that have been declared in short supply at excessively increased prices.  NYC has recently issued an emergency rule prohibiting price increases above 10% on various products necessary to combat the coronavirus.  New York State has now proposed legislation concerning medical supplies that includes a presumption that a price exceeding 10% of its price immediately prior to a public health emergency is to be considered unconscionably excessive.

Other states also utilize percentage-drive formulas when assessing excessive or unconscionable price increases, such as, without limitation, Arkansas, Florida, Michigan, Missouri, New Jersey, North Carolina, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, West Virginia, and Wisconsin.  Some states impose liability upon manufacturers and distributors.  Some states also impose civil fines and penalties for violations, in addition to potential criminal liability.

Any entity charged with price gouging during a public health emergency would be entitled to rebut an alleged violation of this new law with evidence that the additional costs not within the control of the defendant were imposed on the defendant for the consumer medical supplies.

FTC and FDA

The Federal Trade Commission and the Food and Drug Administration recently announced that it has issued joint warning letters to companies that allegedly had been disseminating unsubstantiated product advertising claims related to the coronavirus.  The letters cite efficacy claims that are not supported by competent and reliable scientific evidence, as well as issues relating to unapproved and misbranded drugs.

On March 26, 2020, FTC lawyer and Chairman Joe Simons issued a statement setting forth the agency’s enforcement efforts to protect consumers from unfair and deceptive commercial practices and to educate the public.  The FTC “will not tolerate businesses seeking to take advantage of consumers’ concerns and fears regarding coronavirus disease, exigent circumstances, or financial distress,” FTC lawyer Simons stated.

The FTC has also issued a press release calling attention to business-to-business scams that seek to exploit companies’ concerns about COVID-19, and sent letters to VoIP service providers and other companies warning them that “assisting and facilitating” illegal telemarketing or robocalls related to the coronavirus or COVID-19 pandemic is against the law.

“It’s never good business for VoIP providers and others to help telemarketers make illegal robocalls that scam people,” said FTC attorney Andrew Smith, Bureau of Consumer Protection Director.  “But it’s especially bad when your company is helping telemarketers exploiting fears about the coronavirus to spread disinformation and perpetrate scams,” Smith stated.

Department of Justice

The U.S. DoJ has issued a broad mandate with respect coronavirus-related fraud, price gouging and product hoarding.  In fact, it recently filed a number of federal criminal actions to combat fraud and other offenses related to the coronavirus pandemic.

Two of the actions were filed in California.  One involving allegations that an individual solicited investments in a company he claimed would be used to market pills that would prevent coronavirus infections, as well as market an injectable cure for those who had already contracted the virus.  The other, involving allegations that an individual mislabeled drugs that were purported to be a miracle cure for COVID-19.

Another two actions were filed in New Jersey.  One involving charges of violating the federal Anti-Kickback Statute and conspiracy to commit health care fraud.  The other, involving allegations of assault resulting from an individual who represented to have tested positive for COVID-19 that coughed on FBI agents, lied to them about his accumulation and sale of surgical masks, medical gowns and other medical supplies, and selling supplies to doctors and nurses at inflated prices.           .

The DoJ also recently filed a civil wire fraud lawsuit in a Texas federal district court against a website (coronavirusmedicalkit.com) that was purportedly offering access to bogus World Health Organization vaccines.

Digital marketers, consumer-facing businesses and others in the supply chain should consider consulting with experienced FTC defense counsel to avoid unsupported efficacy claims and inadvertently charging unlawful prices for goods and services necessary for the health, safety and welfare of consumers.

© 2020 Hinch Newman LLP

For more on FTC COVID-Actions, see the National Law Review Coronavirus News section.

Emergency Paid Leave — Making it Work

The Families First Corona Virus Response Act creates a new entitlement – for workers – to receive paid sick leave and paid FMLA between April 1 and December 31, 2020.[i]  If the virus is contained in the next six to eight weeks as hoped, we can expect the economic impact on workers to be most severe in April, May and June 2020.  The Families First Act is intended to help as many individuals as possible to avoid financial exigency, job loss and loss of health insurance during this critical window. Emergency paid leave is funded at 100 percent by a federal tax offset and rebate.

This is not an employer v. employee situation.  Employers do not want to lay off their employees.  Layoffs create instability and have a significant economic domino effect.  Employees lose their income and benefits and, possibly, accept other employment in the short term out of necessity.  Employers may struggle to regroup and regain their markets if their trained workers are unavailable.  The ramifications of sudden mass unemployment are passed along through landlords and mortgage lenders, unpaid service providers and the emergency rooms that replace health insurance.

As clients adapt to the new normal, lawyers need to do the same.  Risk mitigation in the current environment requires thoughtful legal analysis supported by the capacity for change.  Two recent questions under the Families First Act illustrate the paradigm shift –

Emergency Paid Sick Leave – is a state shelter at home order a “State … quarantine or isolation order related to COVID-19”?

The Families First Act created temporary emergency paid sick leave accessible under six circumstances.[ii]  The first is when the employee is “subject to a Federal, State or local quarantine or isolation order related to COVID-19.”[iii]  Last month, as states rapidly issued shelter at home orders, employers and employees wanted to know whether a shelter at home order was a quarantine or isolation order entitling employees to paid sick leave.

The Wage and Hour Division published sub-regulatory guidance on March 23, 2020, (since updated several times) called Families First Coronavirus Response Act: Questions and Answers.  The WHD’s guidance did not initially answer the quarantine order question.  Questions 23-27 explained that emergency paid sick leave is not available when an employer has “closed” the employee’s worksite or furloughed the employee. [iv] The employee’s worksite is “closed” when the employer “sends the employee home” and “stops paying” the employee because the employer does not have work for the employee to do.  Under these circumstances, the employee is not entitled to take emergency paid sick leave.

A shelter at home order requires all individuals present within the state or local government’s boundaries to “stay at home or in their place of residence” with exceptions described in the order.[v] 

According to the common wisdom, although the Families First Act made no reference to it, the Centers for Disease Control and Prevention’s definition of quarantine applied.  The CDC’s definition of quarantine — separating and restricting the movement of people who were exposed to a contagious disease to see if they become sick — is discussed on the CDC’s webpage regarding ports of entry and land border crossings.[vi]  Using the CDC’s definition precludes the use of emergency paid sick leave for employees unable to work due to a state or local shelter at home order.

The legal analysis did not support the more restrictive reading.  The Emergency Paid Sick Leave Act does not make any reference to the CDC’s definition.  The related Congressional Record does not mention the CDC’s definition.  The Congressional Record for the compressed time during which Congress debated and then passed the Families First Act is explicit in its bipartisan emphasis on using taxpayer funded emergency paid leave to mitigate hardship for employees and employers.

The rules of statutory construction would not allow a court or administrative agency to read the CDC’s definition into the legislation.  The U.S. Supreme Court recently reiterated that courts are to enforce plain and unambiguous statutory language according to its terms.  In Intel Corporation Investment Policy Committee v. Sulyma, the Court relied on the dictionary definition of the word “actual” (“existing in fact or reality”) to confirm the meaning of the ERISA notice requirement of “actual knowledge.”[vii]

The Merriam-Webster Dictionary defines “quarantine” as “a restraint upon the activities or communication of persons or the transport of goods designed to prevent the spread of disease or pests.” [viii]  Shelter at home orders clearly qualify.

On April 3, 2020, the WHD confirmed that a state or local shelter at home order is a quarantine order for the purposes of the Emergency Paid Sick Leave Act.  With this context in mind, rather than looking for ways to avoid it, affected employers and employees should be encouraged to use an expansive view of Emergency Paid Sick Leave.

Emergency Family and Medical Leave Expansion Act – is it reasonable for the WHD to limit or prevent employees who recently used FMLA leave from the full use of Emergency Family and Medical Leave?

In contrast to the WHD’s initial silence on shelter at home orders, the guidelines clearly advised that FMLA time is limited to 12 weeks regardless of the entitlement.  The WHD’s guidance on this question does not seem reasonable when considered in light of the intent of the Families First Act and the likely consequences of applying it as advised.

An argument could be made that the WHD is creating, rather than interpreting, legislation by adding a limitation to the Families First Act that Congress did not intend.

Section 2612(a)(1) of the Family and Medical Leave Act entitles eligible employees to a total of twelve workweeks of unpaid leave during any 12-month period when the employee experiences “one or more” of five situations.[ix]  The same definitions of eligible employee and covered employer apply for each category of unpaid leave.

The Emergency Family and Medical Leave Expansion Act adds a fifth entitlement.  Section (F) creates a temporary nine month right to federally-financed paid childcare leave.[x]  A completely different eligible employee is entitled to a total of 12 workweeks from a completely different covered employer between April 1 and December 31, 2020, for a completely different reason, “because of a qualifying need related to a public health emergency in accordance with section 2620 [i.e., loss of access to child care or school].”

Although it is a new entitlement that is temporary, limited in time and applicable to a different set of employees and employers, the WHD restricted access to Emergency Family and Medical Leave.  Employees cannot take more than twelve total weeks of any FMLA leave during the employer’s 12-month unpaid leave administrative period.[xi]

This means employees who took unpaid FMLA leave in the first quarter of 2020 or earlier in their employer’s administrative period are partially or fully excluded from taking Emergency Family and Medical Leave.  These employees, by definition, are now at a much higher risk of job loss through no fault of their own.  Sudden job loss in the current environment is more likely to cause these families to lose their health insurance because they may experience longer periods of unemployment.  Loss of health insurance and the inability to pay medical bills is the most significant contributor to financial hardship and bankruptcy with all of the related economic reverberations.

It could be argued that the WHD has legislated an unintended restriction into the EFML Expansion Act.  Consistent with its decision in King v. Burwell, the U.S. Supreme Court recently limited Chevron deference in similar cases where agency guidance created prescriptive limits that do not exist in the legislation.  In Smith v. Berryhill, the Court noted, “[a]lthough agency determinations within the scope of delegated authority are entitled to deference, it is fundamental ‘that an agency may not bootstrap itself into an area in which it has no jurisdiction.’”[xii]

The Emergency Family and Medical Leave Expansion Act entitlement is unique.  It applies to small employers with fewer than 500 employees who will receive tax credits for the leave payments.  The twelve-month availability period in the original FMLA is replaced by the quick start and hard stop nine-month Emergency Family and Medical Leave Expansion Act period of April 1 to December 31, 2020, after which the paid child care leave entitlement (hopefully) ends.  The standard FMLA eligibility requirements are replaced with the 30-day employment eligibility period.  The reason for the leave, to care for children because schools and daycare centers are closed, is situationally unique.

Most importantly, the EFML Expansion Act is a paid leave.  It is a significant, and significantly enhanced, entitlement for the people it is intended to help.  The legislative history clearly addresses the limited emergency parameters of this legislation and emphasizes that it is intended to be applied to workers as inclusively as possible.[xiii] Wages paid for EFML are reimbursed by the federal government at 100 percent.

Employees who used FMLA time in Q1 2020 (or within their FMLA administrative year) are, arguably, most in need of Emergency Family and Medical Leave.  They may suffer the most extreme consequences without it.

Employees who used FMLA time in 1Q 2020/admin year gave birth or welcomed an adopted or foster child into their home, received treatment for their own serious health condition or cared for a family member.  They are much more likely to need continuation of their employer-sponsored health insurance at this time.  If they are now home-schooling their children or unable to access daycare, they have no resources.  Loss of income and health insurance through a layoff or furlough would be a disaster that will affect the family well into the future.

It is difficult to understand how the WHD would not consider the effect of the guidance on overburdened hospitals, clinics and emergency rooms.  What possible rationale could support an interpretation of the Emergency Family and Medical Leave Expansion Act that will force employers to deny paid Emergency Family and Medical Leave to the employees who may need it the most and push families into the ER for their health care because they have lost their health insurance?[xiv]

There is a workaround.  Section 2653 of the FMLA, titled “Encouragement of more generous leave policies”, says “[n]othing in this Act or any amendment made by this Act shall be construed to discourage employers from adopting or retaining leave policies more generous than any policies that comply with the requirements under this Act or any amendment made by this Act.”[xv]

In response to specific Congressional encouragement, employers covered under the Emergency Family and Medical Leave Expansion Act could reset their FMLA administrative period to April 1, 2020.  The reset would allow all eligible employees to receive up to 12 weeks of paid EFML between April 1 and December 31, 2020, when they may need it most.

Although the FMLA regulations require 60 day notice of an administrative period date change, they also re-emphasize that the employer should take every precaution to avoid reducing the employee’s FMLA entitlement and do everything possible to preserve the greatest benefit to the employee.[xvi]  As long as the employer is enhancing the FMLA entitlement for employees, the 60 day notice period should be waived.

To contribute at a higher level, lawyers should guard against assuming a reflexive defensive crouch and help employers and employees use the emergency legislation to mitigate economic distress.

[i] FAMILIES FIRST CORONAVIRUS RESPONSE ACT, PL 116-127, March 18, 2020, 134 Stat 178

[ii] SEC. 5102. PAID SICK TIME REQUIREMENT.

(a) IN GENERAL.—An employer shall provide to each employee employed by the employer paid sick time to the extent that the employee is unable to work (or telework) due to a need for leave because:

(1) The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19.

(2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID–19.

(3) The employee is experiencing symptoms of COVID–19 and seeking a medical diagnosis.

(4) The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).

(5) The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter *196 has been closed, or the child care provider of such son or daughter is unavailable, due to COVID–19 precautions.

(6) The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

FAMILIES FIRST CORONAVIRUS RESPONSE ACT, PL 116-127, March 18, 2020, 134 Stat 178

[iii] Id

[iv] Questions 23-27, https://www.dol.gov/agencies/whd/pandemic/ffcra-questions (accessed 04/14/2020)

[v] State of Wisconsin Department of Health Services Emergency Order #12 Safer at Home Order https://evers.wi.gov/Documents/COVID19/EMO12-SaferAtHome.pdf

NOW THEREFORE, under the authority of Wis. Stat. § 252.02(3) and (6) and all powers vested in me through Executive Order #72, and at the direction of Governor Tony Evers, I, Andrea Palm, Secretary-designee of the Wisconsin Department of Health Services, order the following:

1. Stay at home or place of residence. All individuals present within the State of Wisconsin are ordered to stay at home or at their place of residence, with exceptions outlined below.

[vi] See, https://www.cdc.gov/quarantine/. 

[vii] Intel Corp. Inv. Policy Comm. v. Sulyma, 140 S. Ct. 768 (2020)

[viii] https://www.merriam-webster.com/dictionary/quarantine

[ix] (a) In general

(1) Entitlement to leave

Subject to section 2613 of this title and subsection (d)(3), an eligible employee shall be entitled to a total of 12 workweeks of leave during any 12-month period for one or more of the following:

(A) Because of the birth of a son or daughter of the employee and in order to care for such son or daughter.

(B) Because of the placement of a son or daughter with the employee for adoption or foster care.

(C) In order to care for the spouse, or a son, daughter, or parent, of the employee, if such spouse, son, daughter, or parent has a serious health condition.

(D) Because of a serious health condition that makes the employee unable to perform the functions of the position of such employee.

(E) Because of any qualifying exigency (as the Secretary shall, by regulation, determine) arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on covered active duty (or has been notified of an impending call or order to covered active duty) in the Armed Forces.

29 U.S.C.A. § 2612 (West)

[x] (F) During the period beginning on the date the Emergency Family and Medical Leave Expansion Act takes effect, and ending on December 31, 2020, because of a qualifying need related to a public health emergency in accordance with section 2620 of this title.

29 U.S.C.A. § 2612 (West)

[xi] Questions 44 and 45, https://www.dol.gov/agencies/whd/pandemic/ffcra-questions (accessed 04/14/2020)

[xii] Rather, “[a]lthough agency determinations within the scope of delegated authority are entitled to deference, it is fundamental ‘that an agency may not bootstrap itself into an area in which it has no jurisdiction.’”

Smith v. Berryhill, 139 S. Ct. 1765, 1778, 204 L. Ed. 2d 62 (2019) quoting Adams Fruit Co. v. Barrett, 494 U.S. 638, 649–650, 110 S.Ct. 1384, 108 L.Ed.2d 585 (1990).

[xiii] https://www.congress.gov/116/crec/2020/03/18/CREC-2020-03-18.pdf

[xiv] The issue of aggregating FMLA and EFML time is different than the question, not yet directly answered, of whether regular FMLA and EFML Expansion Act time runs concurrently after April 1, 2020.  The WHD did clarify that the EFML entitlement is limited to a total of 12 weeks.  In a temporary rule published April 10, 2020, the WHD explained that an eligible employee is entitled to no more than 12 weeks of EFML between April 1 and December 31, 2020, even if the employer’s FMLA administrative period runs from July 1 to June 30.  See, 29 CFR 826.70.

[xv] 29 U.S.C.A. § 2653 (West)

[xvi] 29 C.F.R. § 825.200(d)(1) says:

(d)(1) Employers will be allowed to choose any one of the alternatives in paragraph (b) of this section for the leave entitlements described in paragraph (a) of this section provided the alternative chosen is applied consistently and uniformly to all employees. An employer wishing to change to another alternative is required to give at least 60 days notice to all employees, and the transition must take place in such a way that the employees retain the full benefit of 12 weeks of leave under whichever method affords the greatest benefit to the employee. Under no circumstances may a new method be implemented in order to avoid the Act’s leave requirements.

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For more on the Emergency Paid Sick Leave law, see the National Law Review Coronavirus News section.