Category: Labor & Employment

Legal News Reach – Season 2, Episode 1: Immigration & Its Impacts on the U.S. Labor Market with Raymond Lahoud [PODCAST]

Welcome to our first episode of Season 2! Rachel and Jessica speak with Raymond Lahoud, a Member of Norris McLaughlin, P.A., focusing on immigration law. Immigration issues are complicated enough, but how does that factor into boosting the U.S. economy?  Listen to our last episode to find out more.

Be sure to also check out the latest episode of Mr. Lahoud’s podcast, “Immigration Matters.”

We’ve included a transcript of our conversation below, transcribed by artificial intelligence. The transcript has been lightly edited for style, clarity, and readability.

Full Transcript

INTRO  00:02

Hello and welcome to Legal News Reach, the official podcast for The National Law Review. Stay tuned for our discussion on the latest trends, legal marketing, SEO, law firm best practices, and more.

Rachel  00:15

Today’s episode is the first of the second season, where we’re broadening our focus to trending topics in the legal industry. Today we’re speaking with Ray Lahoud, Member of North McLaughlin about the impact of COVID-19 on immigration and labor shortages. Ray, would you like to tell our listeners a little bit about yourself?

Raymond Lahoud  00:30

Well, thanks for having me, Rachel. It’s really awesome to be here on this podcast and to talk about such an interesting area of law right now, in the world, particularly immigration law. I’m a partner at Norris McLaughlin, where I serve as the Chair of the Immigration Law Group here. I handle employment-based immigration matters, removal defense, employment, verification, I noncompliance all types of immigration matters, a broad spectrum with my great team of attorneys, paralegals, and assistants here at North McLaughlin. So thank you again for having me. It’s great to be here.

Rachel  01:05

One of the first topics we wanted to focus on here is immigration’s impact on labor shortages. You’ve written a lot about the impacts on the U.S. economy due to labor shortages. Can you explain how immigration can help remedy the situation?

Raymond Lahoud 01:18

I think we can all agree that without labor without employees, without people to go and work in whatever company, whatever organization, whatever place that exists out there that that needs to provide services or goods to the American public needs, needs employees. Without labor, there’s no economy, immigration right now is really a huge part of the employment demand, or the employment shortage share. There’s a lot of Americans who are able to legally work who just don’t want to work or have you know, taken different decisions or different approaches on life or what they want to do with their life. But we still need people to perform some of these essential functions from farming, to nursing care to handling, you know, mushroom picking to manufacturing, immigration is the way that has long proven to be a way to solve that through temporary visa programs through you know, green card programs that existed out there. And under the Trump administration. And when COVID hit, things really got hit pretty hard and really slowed down the ability for people to bring in international employees to the United States that fill that gap.

Rachel  02:29

This has been an ongoing issue. So are there any policy changes on your radar that will help solve this issue, either through immigration or otherwise?

Raymond Lahoud 02:38

The only way to solve this issue is through comprehensive immigration reform. For over a decade now, we’ve been using the number of 11 million people that are in the country without documentation, I think we can all agree that that number is significantly higher, probably 20, or 30 million people, step one is going to be trying to figure out how we handle those 20 to 30 million people or even Federalists 11 million people that 11 to 20 million people that we have the United States without documentation. And that means that some people are going to have to be deported, who you know, may have certain crimes may have certain issues in terms of their background, but a significant number of these individuals have been in the country for a long time, working without authorization, pleading taxes. So there has to be a process of legalization for those individuals, which is the big issue. We don’t what is legalization for them. And then there also has to be a secure border where people can’t just cross the border without any documentation. I mean, every country has borders, borders are important. We can all see how important borders are right now with what’s happening in Ukraine. You know, comprehensive immigration reform includes having an ability for individuals to come into the United States to work to claim asylum if they have to, to help our employers here in the United States who need employees because people are just not taking part or not applying to Americans are just not applying to take on these jobs. The great resignation has, for some reason taken over the United States and it continues. So what do we need? We need comprehensive immigration reform? How do we get there? It’s getting members of Congress to agree daily, I’m talking to clients who will arrive in Pennsylvania and they’ll say how do I start working here I just crossed the border assuming that because they heard on Facebook before they came up here are on TikTok are though like that it would be very easy for them to claim asylum. So I’m dealing with a lot of clients and potentials and individuals who have just recently crossed the border now feel that they’re stuck in the United States because they can’t leave because they have to go through proceedings and they can’t work. I mean, there’s also in this representation, let’s say that we keep hearing the numbers, millions are coming to the United States. There are millions of encounters. So you may have one person try to come to the United States four or five times and each one is considered an encounter. And this is a problem that we see from President to President, by the way, and this is why I say we need comprehensive immigration reform. Because let’s go back to 1986. Ronald Reagan was going to deal with the immigration problem we had, you know, millions of people here in the United States back then. And he did put three amnesty 1213 14 million people were granted permanent resident status, they say that cost the turn of California to a blue state once they became citizens top political. In the end, they’re like going back to that every President has made immigration, much tougher, actually very tough. Actually, it was the administration that puts some of the toughest policies when it comes to what’s called the public charge rule. The way our system is written right now is that the executive branch just has so much ability and authority discretionary ability and authority over what to do or what not to do, what they can do what they can’t do in terms of immigration. And then every time a new president comes in, something changes drastically. So you had Obama come in, then he puts in place DACA, you know, gives eight 900,000 people, you know, a temporary quote-unquote, status, and you have President Trump come in, and he takes it away. And then you have President Biden come in. Again, it goes back to comprehensive immigration reform. It’s all just been patchwork since after ’86. Now we have 11, 12, 13, 14, 20 million people here. So it’s-I think the distaste is, is that we’re going to grant people status, and it’s just going to happen, again, has to be a two-fold fix as to be true, comprehensive immigration reform where we’re not, you know, 10 years down the road, we don’t have another 15 million people that don’t have documentation here.

Rachel  06:34

What can companies do to help deal with this shortage of immigrant labor or just labor in general?

Raymond Lahoud 06:39

Every day, I probably field 20 to 30 calls from employers who cannot find employees. It’s the biggest problem. I think that’s facing our country right now. And I’m not sure where it comes from, I really don’t understand what this great resignation is, I don’t know how people can live. Right now, there are several legal immigration processes that are available. One is the H Tubi. system, which is a great way of bringing in seasonal employees for farms for landscaping, contractors, painters, manufacturing work, which we bring workers over here year after year. The H1-B lottery is another visa process. So there’s visa processes that are out there, it’s good to avail as an employer to not be afraid of these processes to you know, when you’re recruiting globally recruit, and when you find a candidate, seek out an immigration attorney and say, Hey, is there a way that I can bring this person over legally sponsor them? Is there a pathway and there are. You have companies like the bigger tech companies that are getting all the big H1-B visas, you have the bigger farming companies that are getting all the H2-B visas, because the smaller ones are not really availing themselves, the legalized programs that exist there, we have a lot of people who are coming into the country across the border, these individuals, they’re turning themselves into the Customs and Border Protection. So there’s an expectation at some time that, you know, some of them have fears of returning, I mean, that they’re going to start going through processes. These are individuals that will likely have employment authorization documents, within a year or so don’t forget about the American worker offer good wages, offer good benefits offer time off the world’s change right now in terms of how things work. So if there’s, you know, remote operations that you can offer, do that offer child care services, if you could, but you have to be creative.

Jessica  08:25

So I would love to get your perspective since you’ve been involved in immigration law for so long, and you definitely have a great grasp on the history of a lot of immigration policy changes. I know with COVID, you know, the legal industry got backed up in general; just court cases being rescheduled, I would really like to know what the last two years for immigration law has looked for you how has it changed because of the pandemic updates on border restrictions? I’d love to get your take on that.

Raymond Lahoud 08:52

When the pandemic hit immigration really became incredibly, incredibly busy from the travel restrictions to a title 42 at the border expulsions to people that were detained in immigration custody that were getting COVID It was a disaster for a long time for a lot of people. A lot of people out there who are stuck in other countries, you know, travel bans were coming up and moving and changing by the minute. And companies. You know, the companies that we represent, the employers that we represent that keep operating there were essential. They were central companies and they were healthcare companies. They were companies that do industrial manufacturing or handle electricity and the like, so they needed their employees here. So during COVID, we spent a lot of time trying to figure out the ways to bring a lot of these employees into the United States through the waivers that existed. They’re reaching out to the State Department to seek special exemptions. And then at the same time, you know, the immigration to the deportation defense part of it really came to a halt. court hearings were halted for all like non detained cases, which took an already incredibly backlogged immigration court system and took it about I have four more years behind now. So you’re probably looking at a good 10 years before an immigration judge for a trial. And after continuances and the, like 10 cases COVID really spread pretty heavily, we have to file lots of petitions and requests to try to get clients that were detained by immigration out of custody within the United States. So a lot happened during COVID. And when it came to immigration, in those days, there were nights where I was awake at, you know, two, three in the morning, making sure a client was able to get back in.

Jessica  10:34

We’re in such an interesting environment at this point, especially more recently with the Ukraine crisis, but we also had a changing of the hands in the White House, all the different elections. So there’s been a lot of transition period. And you know, we touched on it a little bit already. But the changes moving forward, I mean, now that the pandemic is having some type of release, besides needing that comprehensive immigration law changes, do you see any other changes now that we’re getting out of the pandemic, whether that’s Ukraine specifically, or just in general? What do you think is gonna happen here?

Raymond Lahoud 11:07

I think that we’ve, we’ve moved on to our next disaster with our next emergency, we’ll say, which is Ukraine right now. This is all that we hear about on the news, there aren’t COVID numbers at, you know, at the bottom, how do people are dying, how many people died and the like, I just feel that, you know, Ukraine has as taken over COVID. Now COVID brought on a time of remote hearings, which are still continuing now. The immigration courts, making fun of them with, you know, video, WebEx hearings in Zoom hearings, are able to move them quicker through the system and the like, and I have some serious issues. When it comes to remote hearings. You know, there’s huge due process concerns and having my client be able to testify in person where the judge can see his or her face. You know, there’s some very serious concerns in that. So they’re changes that, you know, came about from COVID, in terms of remote operations and the like, but I don’t know if they’re necessary to our benefit, even for, you know, immigrants work were coming in. And also, you would think that we really learned how to process things a lot faster. You know, what, we’re kind of hit with the crisis, and we just aren’t, you know, our embassies are still in a huge backlog when it comes to processing visas and, you know, fiance petitions and merit-based petitions and the like, but we are seeing movement here stateside within that, honestly, in terms of change. I mean, you just, it’s all patchwork.

Jessica  12:27

If memory serves me correctly, I know the Biden administration has put more emphasis on visas for STEM. I think people coming either for schooling or for employment, if I’m remembering correctly, do you think that’s a step in the right direction, I know it’s another “patch,” but…

Raymond Lahoud 12:43

 The United States has a huge number of international students in the United States, even locally here in what’s called the Lehigh Valley, Pennsylvania, Lehigh, Lafayette, Cedar Crest Moravian, their F huge international student populations and international student populations are critical to cultural diversity to you know, just to the growth of the school and it’s bringing the world together. So as part of it, so students will come here from abroad, Saudi Arabia, countries, China, Japan, Australia, they’ll come to the F1 visa complete their courses here to get a bachelor’s degree. And if they typically, if you come in under the f1 visa, regardless of your degree, you’ll get 12 months of what’s called occupational practical training. And that’s because you 12 months of just training in your, your area of of studies, when you were in school, if you earned a STEM degree science, tech, engineering or math degree, you can get an additional 24 months of occupational practical training. To me, that’s great to me for bringing people here, and we’re educating them, we should keep them here and you know, give them jobs here. I mean, we there’s no reason that you know, we should be training talent and, you know, bringing in talent from across the world, and then just sending them, you know, back to, you know, their home country, particularly if they’re willing to stay and work here and become members of society in good standing that contribute pay taxes. Why not? Even if you were you came in, you knew you were coming in across the border, see, you’re still a kid, and then you turn over all of your information to the government when you’re 17 or 18 years old. And then, you know, four, eight years later, the Trump ministration says that they are going to get rid of it and it goes through courts who put it back in and take it out and put it back in and then there’s an injunction lifted, and these are hundreds of thousands of lives in people’s hands. People really have to recognize that there are faces to these individuals that have deferred action that have temporary protected status that there are faces to them. And it’s more than just politics. But could you imagine if you were in that position with deferred action, not knowing should I finish going to college should I spend the money should I take a job, what do I do next?

Jessica  15:01

COVID already caused a very large limbo feeling if you’re coming from another country, or you’ve been here, and then you might be told, “oh, you gotta go back to where you came from.” And I can’t imagine being young when you come here and then going back to a country you don’t even really know.

Rachel  15:17

So we wanted to get your viewpoints on Ukrainian refugees and immigration, how does this compare to other refugee crises that we’ve had in the past

Raymond Lahoud 15:27

Ukraine refugee crisis has brought the US government to its peak when it comes to refugees, and the like, they’ve acted very quickly, to bring in them what’s called Temporary Protected Status. You compare it to you know, what happened in Afghanistan and the lake, there are a lot of differences, I would say just that how quickly they are granted temporary protected status. You know, if you’re from Ukraine, there’s countries that are setting up policies like Canada to try to bring in people from Ukrainian. And I hope that these policies that these countries are putting together to help refugees in times of crisis will stay for other countries to beyond Ukraine’s. Hopefully this won’t be the last time that you’ll see other countries open their doors to help people. My mom and dad are both born in Lebanon and immigrated here during the civil war in the late 70s. And it was devastating. And the US opened its doors to the Christians from the north, they came in and became an integral part of the society life here in Pennsylvania, it’s good to see that in Ukraine, but we’re going to have other countries that are going to have similar issues. And who knows where, you know, President Putin may stop, we just really have to think long term about it. Because we also have to be realistic. And we can only handle so many people in our country. I hate to say that.

Rachel  16:49

How does that factor into maybe some of the more, like, long-term policy changes that the country could implement? Is there a need to sort of rethink how we bring in refugees, and how many people we can take and how that process really goes?

Raymond Lahoud 17:02

There is, there is, but how do you rethink that? You know, how do you it’s even just saying, you know, how many people can we take in I know you just feel I feel internally bad because you don’t want to turn anybody away, that’s really hurting, you know, and but we have to, thankfully, I’m not in Congress to make up those decisions. But I think there has to be, you know, some sense of reason, and balance. And I’m not really sure what that is.

Rachel  17:29

Like the US has to work together with other countries to make sure that we help them out of people that need to be helped. I don’t think it’s realistic for one country to sort of shoulder most of the burden.

Raymond Lahoud 17:38

It’s very hard to get refugee status. I mean, you don’t just kind of come into the United States and walk-in and may take years to go through I mean, if you’re going to the Iraqi refugee have to go in through the United Nations refugee program, there’s a huge process you have to go through, it’s not easy. The things that happened in Afghanistan kind of made known the issues with our you know, the refugee program and the lake. But it’s not, it’s not an easy process to go through. You can’t just walk into an embassy, US Embassy and say, Hey, I’m I’m afraid of where I’m living, I want to go to United States,

Rachel  18:09

Right, yeah. And I imagine on top of even having to be in a situation where you have to flee your home.

Raymond Lahoud 18:15

Anybody that goes through pain, like a harm or fear, you know, I mean, whether it’s domestic violence, and those are the worst of cases where I have clients who are coming in suffered extreme domestic violence, like at the hands of their spouses and the like, and, and with those, you know, you know, what you do, you can send them back, you know, when that when the spouse is going to kill them on, you know, they’re dead on arrival. And so those are cases that we’re dealing with inside the United States right now. It’s like we have refugees coming in. But we also have asylees, here in the United States that were people who are in here applying affirmatively for asylum, we have a lot of people in the United States that are here on like a protective status we do. We do so much. And other countries are recognizing that if you take a look at Australia, so people are coming into the to Australia, they don’t go into the country, they sit off-island for a long period of time for they claim asylum or anything like that. The other countries that are out there, I think that they all have some pretty unique set of circumstances that are there, and in ours has a lot of issues that we have to really work through.

Rachel  19:16

So you’ve written about policy changes in Pennsylvania aimed at helping undocumented immigrants, you know, entrepreneurs, people who are getting driver’s licenses, things like that. I was curious to get your insight on how you see these changes impacting both immigrants in the state as a whole, like what sort of have been the changes there?

Raymond Lahoud 19:33

Driver’s licenses in Pennsylvania, we’re seeing a movement. New Jersey, just fair aware, they pass legislation in the implement to the driver’s licenses, people who may not have a social security number or the like, right now in Pennsylvania. I believe it’s in the House Committee. It’s being discussed. I don’t see it moving out of there given the current makeup of the legislature. I don’t foresee it happening in Pennsylvania anytime soon. It does keep coming up a lot by members of the State House, I think it’s a good idea because people are driving. Let’s get real. There are people without papers in the United States. I mean, if we don’t realize that, I think that we’re just fooling ourselves. So, you know, it’s if it’s a way for them, they’re voluntarily providing their information, you know, why not register it, they can get their insurance. It’s not a federal issue. It’s a state issue as the as right to get driver’s licenses, it’s state-by-state. Pennsylvania considers that they look at it, they bring it up, but it always fills in committee doesn’t go anywhere. Pennsylvania, has the political planet as a swing state, as we all know, and immigration is a hot topic issue here.

Rachel  20:37

I’m glad to hear that at least it’s even if it’s not, you know, moving forward, I think it being on people’s minds is a good thing. So in terms of changes like that, and maybe large scale changes, like we spoken about how we just need really large scale immigration reform, I was wondering, we could talk about the changes that you think need be made to both attract and retain immigrants in the United States, I think there’s a lot of talk about specifically, after the Trump administration, a lot of international students to stop coming here, you know, the United States is losing talent to countries like Canada and other places like that. So I was curious to get your thoughts on that.

Raymond Lahoud 21:14

COVID-19 opened up a different way of kind of operating, we had spoken earlier, where, you know, these companies are now recognizing that they could get that global talent opened up a facility in India or, you know, have somebody remote in from Canada, or actually just physically move their locations to Canada, or their offices or their manufacturing sites to another country, because it’s easier to bring labor in. I think that other countries are starting to embrace certain kinds of immigration, like I know that Canada is, you know, they’ve implemented that another investment-based immigration system, they’ve made it easier for Indian workers a certain kind of ticket during COVID in the light. So there are countries that are taking no more proactive approach to bringing in people but during the Trump administration, people from abroad really felt they weren’t welcomed in the United States. And I saw that a lot with students, and there was a significant number. It’s coming back, and I’m seeing the numbers come back, and just from the schools locally, that that we’re working with. So in terms of the International Student Program, you know, I do feel that it’s picking back up after COVID. And after the Trump administration, I just think we have to kind of keep going with it to make sure that, you know, we know that the people that we’re inviting into our country, we know that we have to welcome them here and treat them kindly, and work with them. Because we’re just we are one world one people. I’m really just, I think it’s a realist here, and that, you know, you have immigration lawyers who, you know, will just, you know, push things to like an end and say, No, open borders, and you have no people on another end that would say, you know, close everything to anybody. And but I think we have to have recent ability. I mean, you just can’t close the United States to everything. I mean, you can’t close the United States to the globe’s cultures, we just have to find a middle ground. And I hope that, you know, I was able to kind of present some of that reason that no middle ground, that’s there being immigration where it’s hard to take, you know, some things that Trump did weren’t necessarily I’m going to do but if somebody heard me say that, and I will now, you know, they would be shocked at it. But I think that’s what the issue is, is that there’s no meeting of minds. People just become enemies, because somebody has a different political opinion. You know, I think there really has to come a realization that we just can’t shut the borders down completely. And you can’t open the borders up completely. There just has to be a middle ground that we all have to reach in. Our members of Congress really have to grow up and hopefully, they will. And hopefully, they’ll work with the Biden ministration. We’ll get somewhere.

Jessica  23:52

I actually have an interesting question. Since you’re located in Pennsylvania; Lancaster’s, a certified welcoming status for refugees. Do you think that’s helpful in situations like Ukraine? And like if more cities did that, do you see that as a positive direction?

Raymond Lahoud 24:06

I do, I do. I mean, like…Philadelphia has, like a welcome center for Lancaster was one of the counties like that. It’s really what they do with it is, yeah, it certainly hops. The more the better. Governor Wolf has actually taken very proactive actions towards the Ukrainian community here, even locally. But again, there’s more than just the Ukrainian community that are suffering from prosecution. So hopefully, it’ll open our minds to how we deal with other areas and in the future when this happens and how other countries can work together with it. But yeah, it does. It does help because it shows that we care you know, things like that only they can start shows that we care. You know, even if you know, New Jersey, they couldn’t give them give people a real ID driver’s license, but they gave them a license to drive and pencil and they can leave the state drive and add to it, it’s still a driver’s license so they can give What they want to know as much as they can give them and if that’s what Lancaster was able to give them, that’s what it was. They can’t give driver’s licenses but um, you know, that opens up a door for immigrants and to have stuff like that it’s good for them to have programs like that is good.

Rachel  25:14

Well, excellent. Thanks again, Ray for joining us today. We had a great conversation.

Raymond Lahoud 25:20

 It’s really been good being here talking about immigration. It’s an interesting topic. And hopefully, we’ll see things changing in the years to come and I’m here to talk to you whenever. Yeah, thank you for having me.

OUTRO  25:40

Thank you for listening to The National Law Review’s Legal News Reach podcast. Be sure to follow us on Apple Podcasts, Spotify, or wherever you get your podcasts for more episodes for the latest legal news. Interested in publishing and advertising with us? Visit www.natlawreview.com. We’ll be back soon with our next episode.

Article By Rachel Popa and Jessica Scheck of The National Law Review / The National Law Forum LLC

For more Legal News Reach podcasts, click here to visit the National Law Review.

Copyright ©2022 National Law Forum, LLC

Leave as a Reasonable Accommodation Continues to Vex Employers

An employee needs time off from work because of a medical issue. The employee is not eligible for leave under the Family and Medical Leave Act (FMLA), so the employer cannot call it FMLA leave.

Since the FMLA does not apply, does the employer have to give the employee leave under the Americans with Disabilities Act (ADA) as a reasonable accommodation? If so, for how long?

The issue of leaves of absence as a reasonable accommodation under the ADA continues to trouble employers. In comparison to the FMLA, which provides fairly bright lines regarding when leave is required and how much leave is permitted, the ADA’s lines are blurry when it comes to leave as a reasonable accommodation.

Medical Leave Can Be a Reasonable Accommodation Under the ADA – Even When In-Person Attendance Is Essential

A very recent decision (April 2022) from the Sixth Circuit Court of Appeals further illustrates this point. In the case of King v. Steward Trumbell Memorial Hospital, Jeanne King worked as an RN for Steward Trumbell Memorial Hospital. King had asthma, and when her asthma flared up badly enough, she needed to miss work. In April 2017, King had an asthma attack that left her unable to breathe, and she continued to suffer from severe asthma-related symptoms for five weeks, which caused her an emergency room stay in the hospital where she worked. During this period of time, she missed her next 14 shifts.

Four days after being released from the ER, King requested FMLA, but King was not an eligible employee under the FMLA as she had not worked 1,250 hours within the prior 12-month period. It took a few weeks for King to find out she was not FMLA eligible, however, and during that period of time, the hospital terminated her for failure to timely apply for a leave of absence. King filed a lawsuit claiming, among other allegations, violations of the ADA for failure to provide medical leave as a reasonable accommodation.

In her lawsuit, King claimed that if she had been given medical leave as a reasonable accommodation, she could have returned to work and satisfactorily performed her job. On the other hand, the hospital argued that regular, in-person attendance as an RN was an essential function of King’s position, and that the hospital was not required to eliminate that essential function as a reasonable accommodation under the ADA.

The trial court ruled that the hospital was right – regular, in-person attendance was an essential function of the RN position – and therefore King’s request for an exception from that requirement was per se unreasonable. The Sixth Circuit disagreed, however, and held that leave can be a reasonable accommodation even when in-person attendance is required to perform the job’s essential functions because the leave “enables the employee to return to work following the period of leave requested as an accommodation – i.e., it enables the employee to perform the essential function of attendance.”

So, What Makes a Leave of Absence Request Reasonable?

Given that a medical leave of absence can be a reasonable accommodation, the question then becomes what makes an accommodation request reasonable? In other words, how much leave is reasonable?

As the Sixth Circuit stated in King, there are few bright-line rules regarding how much leave an employer may have to give as a reasonable accommodation. One general rule that applies in most cases is that an employee’s request for indefinite leave is not a reasonable accommodation. So, if an employee is truly requesting an indefinite leave of absence, then an employer could likely deny that request for accommodation because it is unreasonable.

In contrast to indefinite leave, a request for a defined period of leave can be a request for a reasonable accommodation. For instance, in the King case, King requested five weeks of medical leave, which the Sixth Circuit found to be reasonable. While the reasonableness of a leave of absence oftentimes depends on the circumstances, generally speaking a leave request of 30 days or less is likely to be reasonable. It would likely take an employer about that long to fill the position anyway – so up to 30 days may be OK.

When determining whether the length of a leave request is reasonable, courts can refer to the amount of leave that the employer grants under its medical leave policy. For instance, in the King case, the hospital had a policy allowing for up to one year of non-FMLA leave. In comparison to seeking a year of non-FMLA leave, King was seeking five weeks. Since the hospital allowed up to one year of non-FMLA leave, and King was requesting five weeks, that helped make King’s request reasonable in the Sixth Circuit’s eyes.

Another factor to consider when deciding whether to grant leave as a reasonable accommodation is whether the leave could be effective in allowing the employee to return back to work. If the employee’s prognosis indicates a likelihood of recovery, then that weighs in favor of granting a leave of absence as a reasonable accommodation. On the other hand, a leave of absence for a situation in which the employee likely can never return to work is probably not a reasonable accommodation.

Tips and Takeaways

As the King case illustrates, leaves of absence as a reasonable accommodation continues to trouble employers and causes mistakes that can lead to costly litigation. There are some tips and takeaways that can help tame the leave-as-a-reasonable-accommodation beast:

  • If an employee requests leave as an accommodation (and is not FMLA eligible), then the employer should request medical information from the employee’s physician (through the employee because of privacy concerns) that supports the need for leave and specifies an expected return-to-work date.
  • If the information from the employee’s physician states that the employee’s leave should be indefinite, then indefinite leave is likely not a request for a reasonable accommodation and the employer could deny the request (with appropriate documentation).
  • If the employee’s physician does state an expected return-to-work date, then the employer should determine whether the amount of leave requested is reasonable. In doing so, the employer should consider its own policies concerning how much leave it grants for non-FMLA situations.
  • Also, the employer should consider how much time it would take to replace the employee if he or she was terminated. If it would take a comparable amount of time to replace the employee as it would to allow the employee to take leave, then the employer should likely just grant the leave.
  • The employer should also consider whether a leave of absence would be an effective accommodation. If an employee shows little to no ability to ever return to work because of ta medical condition, then granting leave for leave’s sake is likely not a reasonable accommodation under the ADA.
  • If the employee’s physician requests a reasonable amount of leave for the employee, and the employer decides to grant the accommodation, the employer should send a letter or email to the employee acknowledging the granting of the leave of absence, specifying how long the leave of absence has been granted for, and discussing return-to-work issues. In that letter, the employer should allow for the employee to request an extension of the leave of absence if medical conditions warrant. If the employee returns to work at the conclusion of that leave of absence, the employer may want to consider getting a letter from the employee’s physician releasing him or her to return to work and stating what, if any, restrictions the employee has. If the employee cannot return to work at the conclusion of the leave and does not request an extension, then the employer would likely be on solid footing to terminate the employee at that point in time.
  • An employer should treat each reasonable accommodation request as unique, not pre-judge it, and decide whether under the circumstances a reasonable accommodation should be granted.

Although dealing with leave-of-absence issues under the ADA will continue to cause employers issues because of the lack of bright lines, an employer who follows the steps outlined above may help tame the leave-as-a-reasonable-accommodation beast.

© 2022 Bradley Arant Boult Cummings LLP

Article By John P. Rodgers of Bradley Arant Boult Cummings LLP

For more articles on labor law, visit the NLR Labor & Employment section.

Cryptocurrency As Compensation: Beware Of The Risks

A small but growing number of employees are asking for cryptocurrency as a form of compensation.  Whether a substitute for wages or as part of an incentive package, offering cryptocurrency as compensation has become a way for some companies to differentiate themselves from others.  In a competitive labor market, this desire to provide innovative forms of compensation is understandable.  But any company thinking about cryptocurrency needs to be aware of the risks involved, including regulatory uncertainties and market volatility.

Form of Payment – Cash or Negotiable Instrument

The federal Fair Labor Standards Act requires employers to pay minimum and overtime wages in “cash or negotiable instrument payable at par.”  This has long been interpreted to include only fiat currencies—monies backed by a governmental authority.  As non-fiat currencies, cryptocurrencies therefore fall outside the FLSA’s definition of “cash or negotiable instrument.”  As a result, an employer who chooses to pay minimum and/or overtime wages in cryptocurrency may violate the FLSA by failing to pay workers with an accepted form of compensation.

In addition, various state laws make the form of wage payment question even more difficult.  For example, Maryland requires payment in United States currency or by check that “on demand is convertible at face value into United States currency.”  Pennsylvania requires that wages shall be made in “lawful money of the United States or check.”  And California prohibits compensation that is made through “coupon, cards or other thing[s] redeemable…otherwise than in money.”  It is largely unclear whether payment in cryptocurrency runs afoul of these state requirements.

Of note, the U.S. Department of Labor (“DOL”) allows employers to satisfy FLSA minimum wage and overtime regulations with foreign currencies as long as the conversion to U.S. dollars meets the required wage thresholds.  But neither the DOL nor courts have weighed in on whether certain cryptocurrencies (e.g., Bitcoin) are the equivalent, for FLSA purposes, of a foreign currency.

Volatility Concerns

When compared to the rather stable value of the U.S. dollar, the value of cryptocurrencies is subject to large fluctuations.  Bitcoin, for example, lost nearly 83% of its value in May 2013, approximately 50% of its value in March 2020, and recently lost and then gained 16% of its value in the span of approximately 15 minutes one day in February 2021.

Such volatility can give payroll vendors a nightmare and can, in some instances, lead to the under-payment of wages or violation of minimum wage or overtime requirements under the FLSA.

Tax and Benefits Considerations

Aside from wage and hour issues, the payment of cryptocurrency implicates a host of tax and benefits-related issues.  The IRS considers virtual currencies to be “property,” subject to capital gains tax rates.  It has also confirmed in guidance materials that any payment to employees in a virtual currency must be reported on a W-2 based upon the value of the currency in U.S. dollars at the time it was delivered to the employee.  This means that cryptocurrency wage payments are subject to Federal income tax withholding, Federal Insurance Contributions Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax.

For 401k plan fiduciaries, the Department of Labor recently issued guidance that should serve as a stern warning to any fiduciary looking to invest 401k funds into cryptocurrencies.  Specifically, the DOL wrote: “[a]t this early stage in the history of cryptocurrencies, the Department has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies.”  Given the risks inherent in cryptocurrency speculation, the DOL stated that any fiduciary allowing such investment options “should expect to be questioned [by the DOL] about how they can square their actions with their duties of prudence and loyalty in light of the risks.”

Considerations for Employers

Given the combination of uncertain and untested legal risks, employers should consider limiting cryptocurrency compensation models to payments that do not implicate the FLSA or applicable state wage and hour laws.  For example, an employer might provide an exempt employee’s base salary in U.S. dollars and any annual discretionary bonus in cryptocurrency.

Whether investing in cryptocurrencies themselves to pay employees or utilizing a third-party to convert US dollars into cryptocurrency, employers should also stay abreast of the evolving tax and benefits guidance in this area.

Ultimately, the only thing that is clear about cryptocurrency compensation is that any decision to provide such compensation to employees should be made with a careful eye towards the unique wage, tax, and benefits-related issues implicated by these transactions.

Article By Daniel J. Butler and Kevin J. White of Hunton Andrews Kurth

For more cryptocurrency and finance legal news, click here to visit the National Law Review.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.

Better Late than Never, Just About – UK Government Issues Workplace Guidance on Living with COVID

So with Covid 19 now officially behind us for all purposes (except actual reality, obviously), we have now been graced by the Government’s new “Living with Covid” guidance.  This was due to come into force on 1 April and was released fashionably late in the afternoon on, well, 1st April.  You could say with some justification that this did not give employers much time to prepare, but that is OK because on close review of the guidance there is in fact very little to prepare for.  As a steer to businesses, this is little short of directionless.

First, it makes the obvious point that the abolition of the requirement to give covid express consideration in workplace risk assessments does not take away any of the employer’s obligations to continue to comply with its health & safety, employment and equality duties (in the latter two cases, although unsaid, presumably as they may be affected by the former).

From there, the Government moves to normalise covid through a long list of symptoms common to it, colds, flu and other respiratory diseases – fair enough so far – but also to other quite unrelated conditions such as hangovers, migraines, food poisoning, being unfit, malaria and frankly just getting old (“unexplained tiredness, lack of energy”).  The list is significantly expanded from the traditional trio of continuous cough, fever, loss of taste and smell and now also includes muscle pain, diarrhoea, headache, loss of appetite and “feeling sick” (what, really?). Some medical practitioners say that this is long overdue recognition of all the things covid can do to you. However, it is still a wincingly unhappy expansion for employers, since the published list now essentially includes something from pretty much every ailment known to man. The guidance notes that it will not usually be possible to tell whether you have covid or something else from the symptoms alone and of course the free testing by which that could have been determined in the past is now largely withdrawn.  Therefore the guidance to individuals is that “if you have symptoms of a respiratory infection such as covid and you have a high temperature or you do not feel well enough to go to work, you are advised to try to stay at home and avoid contact with other people” and then “Try to work from home if you can.  If you are unable to work from home you should talk to your employer about options available to you”.  Given the rich panoply of symptoms now available to the discerning malingerer, justifying taking yourself home for five days while you work out whether your headache is covid or just a headache has never been so easy.

As a result, the burden is shifted squarely to employers to keep up the anti-covid fight, and in particular to decide whether to maintain restrictions on entry to their premises for those who are unvaccinated and/or untested.  Both will be increasingly difficult to sustain in view of the obvious official indifference to the question evidenced by the guidance, which focuses instead on the traditional measures of ventilation, regular cleaning of high-touch surfaces, provision of sanitiser and hygiene advice, etc. The other big hole in the guidance is as to the employer’s rights (or is it obligation?) to send someone home if they have one or more of that long list of potentially relevant symptoms, and even if the employee himself feels able to work and/or cannot work from home.  Nor does it deal with the employees’ sick pay rights in those cases.

Taking a reasonably hawkish view of those two questions:-

  1. If you know that the employee has symptoms which could well indicate that he is suffering from covid, and even if it could equally be something less serious, are you complying with your Health & Safety at Work Act duty to take all reasonably practicable steps to maintain a safe system of work if you allow him in anyway?  If he works in a sparsely –occupied well-ventilated area, perhaps yes, but otherwise probably not.  Given the virulence of Omicron, it is unarguably foreseeable that allowing someone who may have it to breathe wantonly on other people may lead to their contracting it too.  It is also clearly foreseeable, if no longer as much so as with the earlier covid variants, that those other people may become properly ill or die as a result.  Put mathematically, breach of duty + foreseeable risk of injury + causation + actual injury = liability.

So in my view, despite the vacuum in the new guidance, an employer not just can, but really should send home immediately an employee with any material case of the symptoms listed, as a minimum until it becomes clear that the real issue is something else (though not malaria – best not let them in either).

A firm stance on this will also help combat reluctance to return to the office among those staff concerned about the health risk of doing so.  If they or their cohabitants are particularly vulnerable, the knowledge that basically no precautions are being taken to ensure that those present in the workplace are all covid-free will only feed those anxieties.

  1. If the employee is sent home on these grounds and cannot work there, will he be entitled to full salary (as it was not by his choice) or sick pay only?  In many cases he will be back within a week and the two may be the same.  Where they are not, however, I believe that it would strictly be sick pay only – though the employee may himself be physically able to work, he is practically unable to do so by reason of his own possible medical condition, the risk it may pose to others in the workplace and the duty of the employer to take reasonable steps to head off that risk.  That said, there are employment relations arguments both ways on this – on the one hand, that the symptoms listed are so varied and transient that they represent an easy avenue for abuse, and on the other that if reporting them means you get packed off home on reduced pay (perhaps none until SSP kicks in on day 4), you are much less likely to report them in the first place and will probably prefer to pass your day posing an undeclared but potentially quite serious risk to your colleagues.

Article By David Whincup of Squire Patton Boggs (US) LLP

For more coronavirus legal news, click here to visit the National Law Review.

© Copyright 2022 Squire Patton Boggs (US) LLP

The X Box: EEOC Announces Addition of Nonbinary Gender Option to Discrimination Charge

In recognition of Transgender Day of Visibility, today, the EEOC announced that it would be providing members of the LGBTQI+ community the option to select a nonbinary “X” gender marker when completing the voluntary self-identification questions that are traditionally part of the intake process for filing a charge of discrimination.

Specifically, in an effort to promote greater equity and inclusion, the EEOC will add an option to mark “X” during two stages of the intake and charge filing process. This addition will be reflected in the EEOC’s voluntary demographic questions relating to gender in the online public portal, which individuals use to submit inquires regarding the filing of a charge of discrimination, as well as related forms that are used in lieu of the online public portal. The nonbinary “X” gender marker will also be included in the EEOC’s modified charge of discrimination form, which will also include “Mx” in the list of prefix options.

Additionally, the EEOC will incorporate the CDC and NCHS’s proposed definition of “X,” which provides as follows: (1) “unspecified,” which promotes privacy for individuals who prefer not to disclose their gender identity; and (2) “another gender identity,” which promotes clarity and inclusion for those who wish to signify that they do not identify as male or female.

The EEOC’s announcement came shortly after the White House released a detailed Fact Sheet highlighting the steps the federal government has taken to address equality and visibility for Transgender Americans.

Article By Aretta K. Bernard and Stephanie Olivera Mittica of Roetzel & Andress LPA

For more labor and employment legal news, click here to visit the National Law Review.

©2022 Roetzel & Andress

USCIS Policies Lead to High Denial Rates for L-1B Petitions

The L-1B nonimmigrant visa program is regularly utilized by companies to transfer employees with specialized knowledge from foreign countries to the United States. According to a recent analysis, the program continues to experience significant denial rates, raising questions about the underlying causes of the phenomenon.

L1-B Visa Program

The L1-B Visa Program allows employers to transfer certain nonimmigrant employees from foreign offices to offices within the United States. Specifically, the employment-based nonimmigrant visa program allows the transfer of professional employees with specialized knowledge relating to the organization’s interests from foreign offices to the United States, sometimes even to establish a U.S. office. To qualify under the program, the employee must possess “specialized knowledge,” which, according to the U.S. Citizenship and Immigration Service (“USCIS”), requires knowledge of the petitioning employer’s product, service, research, equipment, techniques, management, or other interests. USCIS evaluates L-1B petitions on a case-by-case basis.

In practice, L-1B petitions are filed by employers on behalf of their employees seeking intracompany transfer. While an employer may file an L-1B petition for an individual employee, larger companies may have the option to file a “blanket petition” so long as the company meets certain criteria. When petitioning for individual employees, the petition must be approved and then taken to a U.S. consulate for approval. For blanket petitions that have been approved, the employer need only submit a Form 129S, Nonimmigrant Petition Based on Blanket L Petition, which then may be taken to a consulate for approval.

High Denial Rates of L-1B Petitions

A recent article by Forbes analyzed government data concerning L-1B petitions and detailed their trends over the last decade. During that period, the average denial rate for L1-B petitions was 28.2%, a significant number, especially considering the denial rate for H-1B petitions averages under 5%. While the denial rate declined to 21.3% in the third quarter of the fiscal year 2021 and 20.7% in the fourth quarter, the denial rates were 32.7% and 33.3% respectively for the first two fiscal quarters of 2021.

Given that L-1B petitions appear to receive greater scrutiny than other business nonimmigrant visas, one must wonder what causes the denial rate, and what steps can be taken to ensure approval of such a petition.

Explanations for High L-1B Denial Rates

The unusually high denial rate for L-1B petitions could be explained in part by the high bar set by USCIS in adjudicating the petitions. However, at least one attorney noted the case-by-case nature of the petitions do not easily lend itself to a simple adjudication process, noting that “USCIS applies [the standard] in a way that favors documentary evidence while discounting the company’s own assessments of the worker’s importance and knowledge […]” While the USCIS Policy Manual provides immigration officers with some guidance, more comprehensive guidance could certainly be helpful.

In response to the investigation conducted by Forbes, USCIS commented,

“USCIS officers review each L-1B petition on a case-by-case basis to determine if they meet all standards required under applicable laws, regulations, and policies. […] The agency will continue to solicit feedback from stakeholders to identify procedural efficiencies and promote policies that break down barriers in the lawful immigration system.”

Additionally, the denial rate can be attributed at least in part to the political implications of the executive branch. For the fiscal year 2021, the improvement that can be detected in the L-1B denial rate followed President Biden’s assumption of office. This shift may be attributed not to a more liberal implementation of policy, but rather to the reinstatement of the USCIS policy of giving deference to previous decisions. This deference does not extend to petitions or applications made by Customs and Border Protection (“CBP”) or Department of State (“DOS”) officials.

The high denial rate for L-1B petitions serves to frustrate employers, and even discourages foreign investment in the United States. While the petitions continue to receive increased scrutiny, it is advisable to take the utmost care in the preparation of applications and ensure that all are supported with sufficient evidence and documentation.

Article By Raymond G. Lahoud of Norris McLaughlin P.A.

For more immigration legal news, click here to visit the National Law Review.

©2022 Norris McLaughlin P.A., All Rights Reserved

DOJ Aggressively Targeting PPP Loan Recipients for Fraud: What Businesses Need to Know

More than five million businesses applied for emergency loans under the Paycheck Protection Program (PPP), and with a hurried implementation that prevented a full diligence process, it’s not surprising the program became a target for fraud. The government is now aggressively conducting investigations, employing both criminal and civil enforcement actions. On the civil lawsuit front, companies that received PPP loans should be aware of actions brought under the False Claims Act (FCA) and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). This advisory details some of the key points of these enforcement tools and what the government looks for when prosecuting fraudulent conduct.

How will PPP Loan Fraud Enforcement Under the FCA Work?

A company can be liable under the FCA if it knowingly presents a false or fraudulent claim for payment or approval to the government or uses a falsified record in the course of making a false claim. 31 U.S.C. § 3729(a)(1)(A), (B). The FCA allows the government to recover up to three times the amount of the damages caused by the false claims in addition to financial penalties of not less than (as adjusted for inflation) $12,537, and not more than $25,076 for each claim.

The FCA can be enforced by individuals through qui tam lawsuits. This means a private individual, known as a relator, can file a lawsuit on behalf of the government. When a qui tam case is filed, it remains confidential (under seal) while the government reviews the claim and decides whether to intervene in the case. If the lawsuit is successful, the relator is entitled to a portion of the reward.

The False Claims Act has been used to pursue fraud claims in connection with PPP loan applications. Any company that participated in the PPP by applying for a loan should retain documentation justifying all statements made on the loan application and evidencing how any funds obtained through the loans were utilized.

How will PPP Loan Fraud Enforcement Under FIRREA Work?

The government is also utilizing FIRREA in response to fraudulent conduct related to PPP loans. FIRREA is a “hybrid” statute, predicating civil liability on the government’s ability to prove criminal violations. The statute allows the government to recover penalties against a person who violates specifically enumerated criminal statutes such as bank fraud, making false statements to a bank, or mail or wire fraud “affecting a federally insured financial institution.” 12 U.S.C. §1833a.

To establish liability under FIRREA, the government does not have to prove any additional element beyond the violation of that offense and that the violation “affect[ed] a federally insured financial institution.” The government has invoked FIRREA in the context of PPP loan fraud by stating the fraud related to obtaining the loan falls under one or more of the predicate offenses set forth in the statute.

What Factors Determine PPP Loan Fraud Penalties Under FIRREA?

While the assessment of a penalty is mandatory under FIRREA, the amount of the penalty is left to the discretion of the court but may not exceed $1.1 million per offense. There is an exception to this maximum penalty, however, if the person against which the action is brought profited from the violation by more than $1.1 million. FIRREA then allows the government to collect the entire amount gained by the perpetrator through the fraud. The actual amount of the penalty is determined by the court after weighing several factors including:

  • The good or bad faith of the defendant and the degree of his/her knowledge of wrongdoing;
  • The injury to the public, and whether the defendant’s conduct created substantial loss or the risk of substantial loss to other persons;
  • The egregiousness of the violation;
  • The isolated or repeated nature of the violation;
  • The defendant’s financial condition and ability to pay;
  • The criminal fine that could be levied for this conduct;
  • The amount the defendant sought to profit through his fraud;
  • The penalty range available under FIRREA; and
  • The appropriateness of the amount considering the relevant factors.

The government favors utilizing FIRREA penalties to pursue fraud claims for several reasons. The statute of limitations provided in 12 U.S.C. §1833a(h) is 10 years, which is much longer than most civil statutes of limitations. The standard of proof required to impose penalties is preponderance of the evidence, rather than the higher “beyond a reasonable doubt” standard that must be met in a criminal prosecution.

Checklist for PPP Loan Recipients

A company that applied for COVID relief funds, such as PPP loans, should ensure they satisfy the eligibility requirements for obtaining the loan, confirm false statements were not made during the application, and review the rules set forth by the SBA for applying for PPP. The government has shown it is willing to pursue remedies under the FCA and FIRREA for fraudulent statements made regarding a PPP loan application.

Article By Ronald G. DeWaard, Gary J. Mouw, and Gage M. Selvius of Varnum LLP

For more white collar crime and business fraud legal news, click here to visit the National Law Review.

© 2022 Varnum LLP

Cartel Corner | March 2022

INTRODUCTION

The US Department of Justice’s (DOJ) Antitrust Division (Division) has continued to actively investigate and pursue alleged criminal violations of antitrust laws and collusive activity in government procurement. US Attorney General Merrick Garland noted in a March 2022 speech at the ABA Institute on White Collar Crime that the Division ended last fiscal year “with 146 open grand jury investigations—the most in 30years.”[1] As we near the end of the first quarter of 2022, the Division has a record number of criminal cases either in trial or awaiting trial.

In this installment of Cartel Corner, we examine and review recent and significant developments in antitrust criminal enforcement and profile what the Division has highlighted as its key priorities for enforcement. For 2022 and beyond, those priorities are—and likely will remain—identifying and aggressively pursuing alleged violations involving the labor markets, consumer products, government procurement and the generic pharmaceutical industry.

LABOR MARKETS

Criminal investigations and prosecutions in the labor markets continue to be a top priority for the Division. Such enforcement has been gaining momentum since the Division and the Federal Trade Commission (FTC) issued their joint Antitrust Guidance for Human Resources Professionals in 2016 which warned that the DOJ—for the first time— intended to proceed criminally against “naked wage-fixing or no-poach agreements” between horizontal employers. That momentum lifted off in December 2020 and continued throughout 2021, with the Division bringing 12 criminal cases against nine individuals and three companies. Alleged wage-fixing and no-poach agreements have historically been prosecuted in the civil context, meaning fines for companies and individuals.

Several recent developments are worth highlighting. First, in November 2021, a federal court determined for the first time ever that an alleged wage-fixing conspiracy could constitute a per se criminal violation of the Sherman Act. In U.S. v. Jindal, the Division alleged that two former executives of a physical therapist staffing company fixed the wages paid to physical therapists in the Dallas-Ft. Worth area. In denying the defendant’s motions to dismiss, a federal judge in the US District Court for the Eastern District of Texas determined that courts have not limited price-fixing conspiracies to the purchase and sale of goods but have also found them to cover the purchase and sale of services. The court continued, noting that buyers of services included employers in the labor market and that the alleged wage-fixing agreement was another form of price fixing.

Second, the DOJ’s aggressive posture in these cases continued in January 2022 when it charged four home healthcare staffing company owners with allegedly fixing workers’ wages and agreeing not to hire each other’s workers in 2020.

Third, until recently, each of the criminal charges brought by the DOJ have involved healthcare companies. The ability of the DOJ to criminally prosecute alleged non-solicit agreements is being challenged, where motions to dismiss are pending. However, in December 2021, the Division expanded its reach into the aerospace industry, charging a former government contractor and five employees of its suppliers for alleged allocation agreements relating to the hiring of engineers (U.S. v. Patel et al.). The DOJ’s indictment alleges that one of the defendants agreed with suppliers to allocate employees by restricting hiring and recruiting between the companies for almost a decade.

The increased focus and enforcement action relating to labor markets underscores the Biden administration’s stated priorities. For example, in July 2021, President Biden issued an Executive Order “Promoting Competition in the American Economy” which provided wide-ranging guidance and instructions to the federal government to promote and increase competition. One specific, identified initiative involved strengthening of guidance to prevent employers from collaborating to suppress wages, reduce benefits or engage in other anticompetitive practices. With the recent flurry of criminal labor market charges; repeated statements by the Division to the effect that protecting competition in the labor markets continues to be a top priority; the Division’s hosting of a joint workshop with the FTC in December 2021, titled “Making Competition Work: Promoting Competition in the Labor Markets”; and widespread support from the Biden administration, one can expect the Division’s focus on criminal enforcement in the labor markets to be an increasing refrain.

TAKEWAYS

The DOJ’s novel and aggressive stance on expanding Sherman Act criminal violations to include the ways in which companies engage with their workers may not ultimately be sustained by trial or appellate courts. For now, however, the DOJ remains determined to investigate and prosecute alleged “wage-fixing and no-poach” issues.

With the DOJ’s resolute approach changing the landscape of antitrust labor market cases, companies would be prudent to ensure that their compliance programs are up to date and include specific and appropriate guidance on these issues. When considering typical antitrust cartel investigations, the focus has traditionally been on alleged conspiracies relating to pricing, sales, and/or bidding of certain products or in certain geographic areas. The DOJ’s changing attitude toward labor market antitrust issues is a notable shift and may be directed at entirely different segments of a corporate business, including human resources and hiring, in any industry. To address the DOJ’s assertive approach, employers involved in hiring and compensation-related decisions would be well served to receive training addressing these potential antitrust issues.

CONSUMER PRODUCTS

Consumer products have recently been a hotbed of DOJ investigations for antitrust violations. The DOJ has several long-running investigations into a wide range of industries, including broiler chickens, commercial flooring and, most recently, DVDs and Blu-Rays in e-commerce. The latest developments in these investigations reflect the DOJ’s continued, and increasingly heightened, focus on prosecuting companies and high-ranking executives engaged in alleged anticompetitive conduct that directly affects American consumers.

BROILER CHICKENS

The DOJ’s first trial in its ongoing investigation into the $95 billion broiler chicken industry resulted in a hung jury. The lengthy trial began in October 2021, in Denver, against 10 current and former executives from major broiler chicken producers (and came on the heels of a guilty plea obtained by the DOJ earlier in 2021 in a price-fixing case against Pilgrim’s Pride Corp (Pilgrim’s Pride), which resulted in a $107 million criminal fine). The DOJ alleged that the defendants engaged in an overarching price-fixing and bid-rigging scheme for approximately a decade. But after seven weeks of trial, including four days of deliberation, the jurors remained deadlocked, resulting in the judge declaring a mistrial. The result highlights the challenge facing the DOJ in meeting its burden of proof on an alleged conspiracy based largely on documents and without cooperating witnesses.

After the mistrial, the defendants asked the court for a judgment of acquittal. The judge denied that request, and a retrial in the case began in late February 2022. Additionally, the DOJ has other cases in the pipeline in the same long-running investigation, including against broiler-chicken producers Claxton Poultry Farms and Koch Foods, Inc., as well as criminal charges against four additional former Pilgrim’s Pride executives. Trials for those additional corporate and individual defendants are set for October 31, 2022, and July 18, 2022, respectively.

In a related civil action, a federal judge in Illinois gave final approval for a $181 million settlement between six poultry producers and end-user consumers who claimed the companies conspired to fix broiler chicken prices. The deal was reached between the consumer plaintiffs and Peco Foods, Fieldale Farms, George’s, Tyson Foods, Pilgrim’s Pride and Mar-Jac Poultry. Consumers are still pursuing claims against 12 additional poultry companies.

Going forward, the DOJ indicated it will prioritize and pursue more matters that impact competition in agriculture. In fact, the DOJ and the Department of Agriculture (USDA) recently issued a joint statement on their shared commitment to effectively enforcing federal competition laws that protect farmers, ranchers, and other agricultural producers and growers from unfair and anticompetitive practices. As part of their effort to step up enforcement in the agriculture sector, the agencies launched farmerfairness.gov, a new online tool that allows farmers and ranchers to anonymously report potentially unfair and anticompetitive practices in the livestock and poultry sectors. If, after a preliminary review, a complaint raises sufficient concern under antitrust laws, it will be selected for further investigation, and may lead to the opening of a formal investigation.

One area to watch is the cattle civil antitrust litigation. While the DOJ is still in the investigation stage, direct purchaser plaintiffs filed a civil lawsuit against the Big Four meatpacking companies, accusing them of conspiring to drive up the price of beef to make bigger profits by suppressing slaughter volumes and constraining the supply of meat. On February 1, 2022, the proposed class of direct buyers reached a $52.5 million deal with one of the Big Four defendants JBS USA (JBS), which provided both monetary relief to the class, and JBS’s “extensive cooperation” in the buyers’ ongoing litigation against the three remaining nonsettling defendants. The settlement is currently before the US District Court for the District of Minnesota awaiting preliminary approval. It will be interesting to see what next steps the DOJ will take considering the civil litigation, particularly the evidence that will be provided by JBS’s cooperation.

COMMERCIAL FLOORING

Another long-running bid-rigging investigation in the commercial flooring industry resulted in additional indictments last year, as well. To date, the DOJ has indicted three companies and six individuals, including Mr. David’s Flooring International LLC (Mr. David’s), a Chicago-based commercial flooring contractor that pleaded guilty in August 2021. Like the first two companies that the DOJ charged, Mr. David’s was charged for conspiring with other companies—for at least eight years, from 2009 to 2017—to rig bids for commercial flooring by agreeing which company would win the bid and which would submit a complementary, intentionally losing bid. The DOJ also charged Mr. David’s with money laundering for allegedly concealing kickback payments the company made, in exchange for unauthorized discounts, to an account executive for a large flooring manufacturer.

As part of its guilty plea, Mr. David’s agreed to pay at least a $1.2 million criminal fine for its role in the conspiracies. This follows guilty pleas that the DOJ obtained from PCI FlorTech, Inc., in 2019 and Vortex Commercial Flooring in 2020, which resulted in a $150,000 criminal fine and $1.4 million in fines and restitution, respectively.

DVDS AND BLU-RAYS

With the expansion of e-commerce, the DOJ has also been active in prosecuting price-fixing conspiracies for consumer goods in online marketplaces. In 2021, the DOJ charged four individuals, one in June and three in November, with conspiring to fix prices of DVDs and Blu-Ray discs sold through an online marketplace. According to the charges, between November 2017 and October 2019 the defendants agreed to raise and maintain the prices of DVDs and Blu-Ray discs sold in the marketplace’s storefronts, the business addresses of which were located in five different states. The affected sales to customers throughout the United States by the four defendants ranged between $360,000 to $1,100,000. Each of the defendants have pleaded guilty. While the affected sales pale in comparison to large-scale matters like broiler chickens, the DOJ has shown equal willingness to aggressively pursue alleged collusive conduct in smaller and emerging sectors, particularly in online marketplaces.

TAKEAWAYS

Given the long-running nature of the investigations involving broiler chickens and commercial flooring, the change in the US presidential administration seems to have only increased the DOJ’s scrutiny into industries affecting consumer goods. Looking ahead, consumer products will likely remain one of the DOJ’s top priorities. Indeed, while the Biden administration recognizes the strain the pandemic has put on supply chain issues, resulting in higher prices in consumer goods, the White House has also placed the blame on “another culprit”: “dominant corporations in uncompetitive markets taking advantage of their market power to  raise prices.”

The DOJ recently announced an initiative to deter, detect and prosecute those who would exploit supply chain disruptions to engage in collusive conduct. As part of that initiative, the DOJ is prioritizing any existing investigations where competitors may be exploiting supply chain disruptions for illicit profit and is undertaking measures to proactively investigate collusion in industries particularly affected by supply disruptions. The DOJ is also working with authorities in other countries to detect and combat global supply chain collusion.

Those who work in the consumer goods space can expect additional scrutiny and enforcement from the DOJ in the months and years to come, especially in industries that have experienced higher consumer price increases. It is therefore important to have robust compliance programs, including appropriate employee training, in place to address and provide guidance on these issues.

PROCUREMENT

The DOJ’s Procurement Collusion Strike Force (PCSF)—an interagency partnership established in November 2019 to combat antitrust crimes and related fraud involving government procurement and funding—remained a top priority for the Division in 2021. Since its inception in 2019, the PCSF has significantly expanded in scope. The strike force now has offices in 22 federal districts staffed with DOJ trial attorneys, assistant US attorneys and agents from seven national law enforcement partner agencies. The PCSF has trained more than 17,000 special agents, attorneys, prosecutors, investigators, analysts, auditors, data scientists and procurement officials. In addition, in the spring of 2021 the PCSF announced the creation of PCSF Global. The goal of PCSF Global is to build connections with enforcement counterparts around the world and to investigate and prosecute collusion in procurement relating to US government funds spent overseas. The PCSF currently has almost three dozen investigations open domestically and internationally.

Below are a few key highlights from 2021:

PCSF’S RECENT WORK

On October 13, 2021, PCSF Director Daniel Glad delivered a speech recapping the strike force’s recent work and highlighting enforcement priorities, including “set-aside fraud” and collusion targeting infrastructure spending. Set-aside fraud refers to collusion and fraud affecting government programs that are designed to provide opportunities for disadvantaged communities and individuals to participate more fully in public procurement. Glad highlighted the PCSF’s recent investigation into set-aside fraud involving construction contracts in San Antonio. The director also commented that infrastructure will continue to be a focus for the PCSF as federal spending for infrastructure increases. Glad added that while the Sherman Act is the PCSF’s “lodestar,” the strike force’s focus includes prosecuting other crimes that also corrupt the competitive process for obtaining government contracts and funding.

BELGIAN SECURITY SERVICES

On June 25, 2021, a Belgian security services company, G4S Secure Solutions NV (G4S), pled guilty for its role in a conspiracy to rig bids, allocate customers and fix prices for contracts with the US Department of Defense and with the NATO Communications and Information Agency (NCI Agency) to provide security services for military bases and installations in Belgium. The NCI Agency is funded in part by the United States. This was the first international resolution obtained by the PCSF, as well as the PCSF’s first charged matter.

The DOJ alleged that G4S participated in a conspiracy with two competitors to coordinate price increases, submit artificially determined, non-competitive bids and refrain from bidding for certain contracts from spring 2019 through summer 2020. The DOJ further alleged that the conspirators colluded during in-person meetings and via phone, text messages, encrypted messaging applications and email. G4S agreed to pay a $15 million criminal fine. In October 2021, two former employees of G4S also pled guilty to charges relating to the same conspiracy. Both individuals are Belgian nationals residing in Belgium.

The investigation demonstrates that the PCSF is focused on conspiracies that victimize the US government, whether the conspiracies or government activities are based in the United States or abroad. The PCSF remains committed to actively investigating and prosecuting companies and individuals based outside of the United States, such as the defendants here, who distort the competitive process for US government contracts.

NORTH CAROLINA ENGINEERING

In June 2021, a North Carolina engineering firm pled guilty to conspiring to rig bids and defraud the North Carolina Department of Transportation (NCDOT). Contech Engineered Solutions LLC and Brent Brewbaker, one of its former executives, had been indicted in October 2020. They were charged with six counts of bid rigging, conspiracy to commit fraud, mail fraud and wire fraud. The conspiracies, reaching back to at least 2009, involved water drainage systems projects. Contech agreed to pay a criminal fine of $7 million and approximately $1.5 million in restitution to the NCDOT. On February 1, 2022, Brewbaker was convicted by a jury of all six charged counts.

Contech argued that the conspiracy was not a per se violation because Contech and Pomona Pipe Products, its co-conspirator, competed vertically: Contech as the supplier, Pomona Pipe as the reseller. The district court disagreed, holding that Contech and Pomona held themselves out to NCDOT as competitors and, as such, this was bid-rigging subject to the per se analysis.

This matter is precisely the type of case the PCSF was designed to investigate. The PCSF trains law enforcement officers, procurement officials and others across the country “to better deter and detect antitrust crimes affecting government procurement, grant, and program funding.” With more government funding earmarked for infrastructure and an increased budget for the Antitrust Division, the PCSF is likely to increase its footprint at all levels of government.

MINNESOTA CONCRETE 

In September 2021, Minnesota concrete contractor Clarence Olson pled guilty to a bid-rigging charge. Olson and his co-conspirators conspired to rig bids on concrete repair and construction contracts submitted to at least four municipalities in Minnesota, including local governments and school districts in the Minneapolis-St. Paul area. The conspiracy began as early as September 2012 and continued through at least June 2017. Minnesota law required that municipalities obtain two or more quotations from independent bidders before awarding contracts above a certain threshold. According to the plea agreement, at a competitor’s request Olson submitted bid quotes with prices higher than that of the competitor to ensure that Olson would lose the bid.

RISKS BEYOND PRISON AND FINES 

Charges of bid rigging and procurement fraud can have collateral consequences beyond criminal liability. Companies and individuals are subject to state and federal suspension and debarment procedures. A suspension temporarily prevents a company from government contracting and typically lasts until the investigation or subsequent legal proceedings have terminated. If a company pleads guilty or is convicted, it may be debarred—a permanent ban from doing business with a government for a specified time period. The duration of the debarment typically correlates to the severity of the offense. Under federal law, a contractor may be debarred without a conviction if the evidence shows a knowing failure to disclose credible evidence of a criminal violation of federal antitrust law (48 CFR § 9.406-2(b)(vi)(A)).

Moreover, charges filed against affiliated individuals may impute the company when that individual was acting as an agent of the company. Although suspensions and debarments may last for shorter periods of time, the reputational damage may last far longer. If made public, the debarment could also impact a company’s or individual’s ability to do business in the private sector. Suspension and debarment are collateral consequences that the DOJ may consider in the process of investigating and prosecuting a criminal antitrust violation.

THE FUTURE OF THE PCSF 

The first year of the PCSF was dedicated to outreach, education and partnership implementation. The PCSF has now established partnerships with many law enforcement agencies across the country. Beyond domestic interagency investigations, the PCSF has launched initiatives that will expand its reach and target acute problems in government procurement. Investigations initiated by the PCSF have taken time to be investigated (particularly with a global pandemic making certain investigative steps more challenging), but in some instances these investigations have reached the recommendation and/or charging stage. We expect to see additional PCSF cases in the coming year.

PCSF Global: The PCSF has launched PCSF Global, an initiative aimed at fostering partnerships with international enforcement authorities. The US government spends considerable funds abroad, particularly for military contracts. International partners lend their expertise with foreign markets and give the PCSF eyes and ears on the ground abroad.

Set-Aside Fraud: One of the PCSF enforcement priorities is combating fraud in government set-aside programs. Such programs set aside government contracting opportunities for special interest groups such as disabled veterans, small businesses and minority-owned businesses. In January 2021, President Biden signed “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government,” an executive order aimed at increasing equal access to government contracting and procurement opportunities. While the PCSF mandate to combat fraud on set-aside programs existed before the executive order, it is strengthened by the Biden administration’s directive.

Data Analytics Project: The PCSF has hosted webinars attended by data scientists, analysts and auditors focused on using data analytics to detect procurement fraud. Data Analytics Project attorneys have engaged analytics shops to build tools for detecting collusion using bid data. Currently, the Data Analytics Project is focused on US procurement. In light of the PCSF Global initiative, it is possible that international partners will engage with the PCSF to develop cross-border tools.

Criminal Antitrust Anti-Retaliation Act (CAARA): CAARA, the first antitrust-specific whistleblower protection legislation, became law in December 2020. It prohibits employers from retaliating against employees, contractors, subcontractors and agents of employers for reporting antitrust violations or participating in antitrust government proceedings. The Securities and Exchange Commission (SEC), Internal Revenue Service (IRS) and other government agencies saw increased reporting since implementing similar whistleblower protections. CAARA is a tool that can be used to encourage early reporting and cooperation because of the legal protection it offers to whistleblowers, furthering the PCSF’s goals to deter and detect fraud.

GENERICS

For more than seven years, the generic pharmaceutical industry has been caught up in investigations and litigation asking whether the industry has engaged in a conspiracy to violate the antitrust laws.[2] In 2014 the Connecticut attorney general opened a civil investigation into whether manufacturers of generic pharmaceuticals had fixed prices and allocated markets. Shortly thereafter, the DOJ joined the mix, first opening a criminal investigation into these issues and then, a few years later, opening a civil False Claims Act (FCA) investigation into the same conduct. And by 2016, the plaintiffs’ bar had joined the fray, filing the first complaints of what soon became a massive and unwieldy multidistrict litigation (MDL), ultimately consolidated in the United States District Court for the Eastern District of Pennsylvania.

Below, we provide a brief update on this massive MDL and the DOJ investigation that started it.

MULTIDISTRICT LITIGATION: IN RE: GENERICS PHARMACEUTICALS PRICING ANTITRUST LITIGATION, NO. 16-MD-2724 (E. D. PA. 2016)

In re: Generics, the broad and long-running MDL, remains at the center of the pharmaceutical cases this past year. In addition to the governments of 49 states, the District of Columbia, American Samoa, Guam, Puerto Rico, Northern Mariana Island and the US Virgin Islands, the MDL also includes three putative plaintiff classes (direct purchaser, end-payer and indirect reseller plaintiffs), and more than a dozen individual entities (including major retailers, healthcare insurers and even some local governments) that filed opt-out complaints (e.g., The Kroger Co. et al, Humana Inc., and United Healthcare Services, Inc.). At present, the MDL involves at least 85 complaints alleging misconduct regarding more than 285 drugs, 38 manufacturers and 25 individual defendants.

The first civil complaints were filed in 2016, initially encompassing claims concerning just two drugs, digoxin and doxycycline. The Judicial Panel on Multidistrict Litigation later consolidated claims involving other drugs into the MDL. As the litigation has evolved, private plaintiffs and state attorneys general have since filed complaints involving numerous drugs, focusing on an alleged overarching conspiracy to fix prices, rig bids and allocate customers across the generic pharmaceutical industry. The state attorneys general, which have led the expansion of the MDL, have filed three such overarching conspiracy complaints: (1) a June 2018 complaint focused on Heritage Pharmaceuticals; (2) a May 2019 complaint focused on Teva Pharmaceuticals; and (3) a May 2020 complaint focused on dermatology products.  Many plaintiffs are seeking joint and several liability for the alleged overarching conspiracy—the scope of which is unprecedent and untested in antitrust litigation.

In May 2021, US District Judge Cynthia M. Rufe selected the state attorneys general overarching conspiracy complaint centered on over 80 dermatology products to serve as a bellwether case in the MDL. Two drug-specific complaints filed by the direct purchaser and end payer plaintiffs will also proceed as bellwethers. The court originally selected the state attorneys general May 2019 Teva-centric overarching conspiracy complaint as the bellwether. A coalition of 44 state attorneys general led by Connecticut filed the Teva-centric case in May 2019. However, following the DOJ’s August 2020 grand jury indictment of Teva on criminal price-fixing charges (see below), Teva petitioned to have the selection of its case as bellwether overturned. The pharmaceutical companies then sought to have the states’ first filed case, which centered around Heritage Pharmaceuticals, chosen as a replacement bellwether because the case involved a smaller scope and was more manageable to litigate. The states advocated for the May 2020 dermatology action as the bellwether. Despite involving over 80 drugs, the states contended this complaint was more indicative of the alleged conspiracy and their investigation had evolved in the years since the Heritage complaint was filed. Judge Rufe found that “the dermatology action [wa]s more typical of the overarching conspiracy cases than the Heritage-centric action and w[ould] provide overall a more comprehensive view of the positions of more parties in the MDL.”[3]

The bellwether selection was just the first step in what will continue to be a long series of cases. At present, class certification briefing in the drug-specific bellwether cases is scheduled to be completed by mid-October 2023. The district court will schedule hearings on class certification for dates to be determined in November 2023.[4] All motions for summary judgment regarding the states’ bellwether case must be filed by October 16, 2023, and motions for summary judgment regarding the drug-specific bellwether cases must be filed no later than November 16, 2023.[5] Pretrial conferences are not yet scheduled.

CRIMINAL LITIGATION: UNITED STATES V. TEVA PHARMACEUTICALS USA, INC. AND GLENMARK PHARMACEUTICALS, USA (E.D. PA. 2020)

While the MDL has proceeded, the DOJ has continued with its separate criminal investigation. In June 2020, the DOJ indicted Glenmark Pharmaceuticals, USA, alleging that it engaged in a conspiracy to fix prices for pravastatin and other undisclosed drugs from around May 2013 through December 2015. In August 2020, the DOJ filed a superseding indictment naming Teva as an alleged co-conspirator.[6] Glenmark sought to sever the cases to proceed with separate trials, but US District Judge R. Barclay Surrick recently denied that motion and ruled that a joint trial could proceed.[7] In June 2021, the Antitrust Division filed a scheduling order motion seeking a trial date of January 18, 2022; however, counsel for Glenmark and Teva found this date “unrealistic in light of the enormous volume of complex discovery in this case (more than 22 million documents and counting), as well as the backlog of trials in this District due to the pandemic.”[8] To date, no schedule has been set.

GENERIC DRUG COMPANY PENALTIES AND SETTLEMENTS

DOJ Investigations

Nonetheless, the DOJ has already obtained several settlements in both the criminal and civil FCA investigations, including securing several deferred prosecution agreements (DPAs) from the targets of its investigations.[9] In fact, the DOJ’s Antitrust Division and Civil Division have already collected more than $1 billion in penalties as a result of their investigations into the generic drug industry, as detailed below.

Most recently, in October 2021, Taro Pharmaceuticals USA, Inc., Sandoz Inc., and Apotex Corporation agreed to pay $213.2 million, $185 million and $49 million, respectively, to settle alleged False Claims Act violations stemming from conspiracies to fix prices of multiple generic drugs.[10] The Civil Division alleges that the three companies illegally paid and received compensation between 2013 and 2015 resulting from alleged agreements on price, supply and allocation of customers with other generic pharmaceutical manufacturers for 20 generic drugs, including etodolac, nystatin-triamcinolone cream and ointment, benazepril HCTZ and pravastatin. In addition, the companies entered into five-year corporate integrity agreements with the Health and Human Services Office of the Inspector General, which provides oversight for federal healthcare programs like Medicare and Medicaid. These agreements require internal monitoring and price transparency.

Multidistrict Litigation

In connection with the In re: Generics MDL, the first civil settlements with certain plaintiffs were announced in 2021. In June 2021, Teva announced it settled, for $925,000, all claims brought by the state of Mississippi. In November 2021, two US subsidiaries of Sun Pharma—Taro Pharmaceuticals U.S.A., Inc., and Sun Pharmaceutical Industries, Inc.—agreed to pay a total of $85 million to a proposed class of direct purchaser plaintiffs (DPPs) in the MDL. The settlement can be reduced, however, by $10 million if the direct purchasers that opt out of the putative class collectively account for 20% or more of Taro’s and Sun Pharmaceutical Industries, Inc.’s aggregate dollar sales of the generic drugs at issue in the direct purchaser action.

Entity/Individual Date Charges/Resolution Settlement Amount
Jeffrey Glazer and Jason Malek (former Heritage Pharmaceuticals executives) Dec. 2016 Pleaded guilty to conspiring to fix prices, rig bids, and allocate customers for doxycycline hyclate and glyburide. Both awaiting sentencing. TBD
Heritage Pharmaceuticals May 2019 Entered into a DPA with the Antitrust Division to resolve the DOJ’s charges relating to glyburide, a drug used to treat diabetes, agreeing to pay a criminal penalty and cooperate fully with the ongoing criminal investigation. In a separate civil resolution with the Civil Division, Heritage agreed to pay to resolve allegations under the FCA related to the alleged price-fixing conspiracy. $225K criminal penalty and $7.1M civil settlement
Rising Pharmaceuticals Dec. 2019 Entered into a DPA with the Antitrust Division to resolve the DOJ’s charges regarding an alleged conspiracy to fix prices for a hypertension medication. $3.5M criminal fine and civil penalty combined
H. Armando Kellum (former Sandoz executive) Feb. 2020 Pleaded guilty to fixing prices, rigging bids and allocating customers for several drugs, including clobetasol and nystatin triamcinolone cream. Kellum is awaiting sentencing. TBD
Sandoz Inc. Mar. 2020 and Oct. 2021 Agreed to pay a criminal penalty for allegedly conspiring to fix prices on several generic drugs, including, but not limited to, drugs used to treat brain cancer, cystic fibrosis, arthritis and hypertension. Agreed to pay a civil penalty for aiding and receiving compensation prohibited by the Anti-Kickback Statute through arrangements on price, supply, and allocation of customers for drugs such as benazepril HCTZ and clobetasol. $195M criminal penalty and $185M civil settlement
Apotex Corporation May 2020 and Oct. 2021 Agreed to pay a criminal penalty to resolve allegations that it conspired to fix prices for pravastatin. $24.1M criminal penalty and $49M civil settlement
Taro Pharmaceutical USA, Inc. July 2020 and Oct. 2021 Entered into a DPA with the Antitrust Division to resolve the DOJ’s charges regarding an alleged conspiracy related to several drugs with affected sales of over $500 million. $205.6M criminal fine and $213.2M civil penalty

TAKEAWAYS

Although the district court has allowed several cases to proceed past the motion to dismiss stage, it remains unclear if the plaintiffs’ expansive allegations will survive summary judgment and later proceedings. In the months to come, there will continue to be interplay between the criminal trial proceeding against Teva and Glenmark and the civil cases proceeding in the MDL. For example, the MDL court is currently considering whether the DOJ should be allowed to extend a continued stay of depositions in the civil cases of specific individuals it views as “key” to its criminal investigation.

This investigation and litigation has brought significant attention to the generic drug and pharmaceutical industry at large, including increased scrutiny and calls for action by Congress (such as the US House of Representatives Committee on Oversight and Reform’s three-year Drug Pricing Investigation, which culminated in a majority staff report released in December 2021). Several pieces of legislation aimed at reigning in pharmaceutical prices have also been introduced. In all, these investigations and litigation, coupled with the increases in oversight and willingness to investigate by state and federal governments, suggest that the pharmaceutical industry will remain subject to heightened scrutiny of its business practices for many years to come.

CONCLUSION

As we move into the second quarter of 2022, one thing is abundantly clear: The DOJ’s aggressive criminal antitrust enforcement will only continue to increase. The Division ended the last fiscal year with 146 open grand jury investigations—the most in 30 years.[11] President Biden has made competition a priority for his administration.[12] Attorney General Garland has specifically identified “reinvigorating antitrust enforcement” as at the center of the DOJ’s mission.[13] In its FY 2022 budget request, the DOJ requested a 9% increase in spending, amounting to an additional $200 million.[14]

At the same time, there seems to be a shift in tone and approach at the Division. The Division has started to push the boundaries of criminal antitrust enforcement. As noted above, it has pursued naked no-poach agreements criminally, something that it had never done prior to 2020. In recent remarks to the ABA Institute on White Collar Crime, Richard Powers, the US Deputy Assistant Attorney General for Criminal Enforcement in the Division, noted that the Division is also prepared to criminally charge individual executives for violations of Section 2 of the Sherman Act, the provision that prohibits market monopolization—another exceedingly aggressive and controversial approach and something that the Division has not done in decades. To cap it off, the Division has shown a tendency, of late, to take cases to trial, rather than negotiate resolutions. And, it has hired a number of prominent Criminal Division alumni, several with significant trial experience, to help with this effort. All of this suggests that the Division is prepared to stretch the law in places and go the distance to pursue what it views as criminal violations of the antitrust laws.

 

 

ENDNOTES

[1] Attorney General Merrick B. Garland Remarks to the ABA Institute on White Collar Crime, Thursday, March 3, 2022, https://www.justice.gov/opa/speech/attorney-general-merrick-b-garland-delivers-remarks-aba-institute-white-collar-crime

[2] Christopher Rowland, Investigation of generic ‘cartel’ expands to 300 drugs, THE WASHINGTON POST (Dec. 9, 2018), https://www.washingtonpost.com/business/economy/investigation-of-generic-cartel-expands-to-300-drugs/2018/12/09/fb900e80-f708-11e8-863c-9e2f864d47e7_story.html

[3] Pretrial Order No. 171 (Revised Bellwether Selection; Stay of Certain Discovery), MDL 2724 Dkt. 1769 (E.D. Pa. May 7, 2021), at p. 3.

[4] In re: Generics, Pretrial Order No. 188 (Schedule of Further Proceedings in Bellwether Cases), available at https://www.paed.uscourts.gov/documents/MDL/MDL2724/16md2724%20PTO188.pdf

[5] Id.

[6] U.S. v. Teva Pharmaceuticals USA, Inc. and Glenmark Pharmaceuticals, USA, U.S. DEP’T OF JUSTICE (Aug. 25, 2020), https://www.justice.gov/atr/case/us-v-teva-pharmaceuticals-usa-inc

[7] US v. Teva Pharmaceuticals USA, Inc. and Glenmark Pharmaceuticals, USA, No. 20-200 Dkt. 146 (E. D. Pa. Jan. 14, 2022).

[8] Letter from D. Axelrod and K. Stojilkovic to Judge Surrick re: United States v. Glenmark Pharmaceuticals Inc., USA et al., 20-cr-200 (RBS), No. 2:20-cr-00200-RBS Dkt. 94 (June 10, 2021).

[9] Normally, in a cartel investigation, guilty pleas would be used; however, because a guilty plea would bar these companies from participating in certain government healthcare programs, which would effectively terminate business for some of the companies involved and deprive millions of Americans of important, often life-saving medication, the DOJ used DPAs in these settlements.

[10] Pharmaceutical Companies Pay Over $400 Million to Resolve Alleged False Claims Act Liability for Price-Fixing of Generic Drugs, U.S. DEP’T OF JUSTICE
(Oct. 1, 2021), https://www.justice.gov/opa/pr/pharmaceutical-companies-pay-over-400-million-resolve-alleged-false-claims-act-liability

[11] Id.

[12] https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/07/09/remarks-by-president-biden-at-signing-of-an-executive-orderpromoting-competition-in-the-american-economy/

[13] https://www.appropriations.senate.gov/imo/media/doc/Statement%20of%20Attorney%20General%20Merrick%20Garland%20-%20June%209,%2020213.pdf

[14] Id.

© 2022 McDermott Will & Emery

Article By Justin P. Murphy, Paul M. Thompson, Han Cui, Joshua W. Eastby, Anthony S. Ferrara and Alexandra Lewis and Marisa E. Poncia of McDermott Will & Emery

Many New Jersey Employers Must Soon Offer Employee Retirement Savings Plans

The New Jersey Secure Choice Savings Program Act (the “Act”) is set to take effect on March 28, 2022 and will require many employers to offer their own retirement plan or provide access to a State-sponsored program.

This Act impacts all New Jersey businesses that:

  1. have employed at least 25 employees in the State during the previous calendar year;
  2. have been in business at least two years; and
  3. do not already offer a qualified retirement plan.

The Act mandates employers to offer their full and part-time employees a retirement savings in either the form of either a qualified retirement plan (e.g., a 401(k) or 403(b)), or through the New Jersey Secure Choice Savings Program (the “Program”). The State-sponsored Program is an individual retirement account (IRA) where employees contribute a portion of their pretax earnings via automatic payroll deductions.

Employers must first decide whether they want to sponsor a qualified retirement plan or opt for the State-sponsored Program. Those who fail to comply will be subject to penalties ranging from a written warning to a $500 fine per employee. Employers have nine months from the implementation date to comply with the Act. While the anticipated implementation date is March 28, 2022, the Treasury Department website dedicated to the program notes that implementation is not yet operational.

We suggest intermittently checking in on the website.

© 2022 Giordano, Halleran & Ciesla, P.C. All Rights Reserved
For more articles about employment law, visit the NLR Labor & Employment section.

UAE Employment Law Update

2 February 2022 saw the introduction of a new UAE Labour Law in the form of UAE Federal Law No. 33 of 2021, Regulating Labour Relations (“New Law”), repealing the existing UAE Labour Law, UAE Federal Law No. 8 of 1980 as amended (“Previous Law”).  In addition to the introduction of the New Law, a set of companion Executive Regulations were issued on 3 February 2022, fleshing out certain provisions of the New Law.

The following is a non-exhaustive overview of the principal provisions of the New Law and the Executive Regulations.

Whilst the New Law makes several significant introductions, it equally maintains the status quo in others, as such what we see here is more evolution rather than revolution in terms of the regulation of employment relations governed by the New Law.

As with the Previous Law, the New Law does not apply to employees in the Dubai International Financial Centre or the Abu Dhabi Global Market which both have their own standalone employment laws and regulations.  In addition, employees of federal and local government agencies, members of the armed forces, police and security employees and domestic service workers (Article 3(2) of the New Law) are not subject to the New Law.

  1. Employment Arrangements

The New Law and Executive Regulations (Article 5) introduces the following models of work:

  1. Full time – working for a single employer full time;
  2. Part time – working for a single employer part time;
  3. Temporary work – work carried out for a specified time and for a specific task;
  4. Flexible work – work that allows changing work hours to take into account operational needs of an employer;
  5. Remote work – work that is performed outside of the workplace and which may be either full time or part time; and
  6. Job sharing – work is divided between one or more employees on a part time basis.

Furthermore, the Executive Regulations provide that additional employment arrangements can be introduced based on labour market demands.

  1. Work Permits

The Executive Regulations (Article 6) stipulates the types of work permits available and the corresponding processes for obtaining, renewing and cancelling the same are as set in Article 7 of the Executive Regulations:

  1. Work permits for recruitment for employee’s outside of the UAE;
  2. Transfer work permit allowing a non-UAE national’s employment to be transferred between establishments registered with the Ministry of Human Resources and Emiratisation (“MOHRE”/“Ministry”);
  3. Relative work permit allowing a person who is on the residence visa of a family member to work for an employer registered with the MOHRE;
  4. A temporary work permit for where an employer is employed for a job whose performance or completion requires a specified period;
  5. A task work / mission permit allowing for an employer to bring an employee from outside of the country in order to perform temporary work or a specific project for a definite term;
  6. A part time work permit;
  7. A juvenile work permit allowing for an employer to employ a juvenile between the age of 15 and 18;
  8. A student training and employment permit allowing for an employer to train or employ a student over the age of 15;
  9. GCC national work permit allowing employers to employ nationals of other GCC states;
  10. Golden visa work permit allowing the employment of an employee in the UAE who holds a golden visa;
  11. National trainee work permit; and
  12. Self-employment permit allowing individuals to engage in freelance work (under self residence for foreign nationals).

Additional types of work permits may be introduced in accordance with the provisions of the New Law.

  1. Equality and Non-Discrimination

The New Law introduces the prohibition of discrimination on the basis of: race, ethnicity, sex, religion, national origin, or on the grounds of disability (Article 4 of the New Law).

Women are entitled to identical wages for the same work (Article 4(4) of the New Law).

  1. Employment Contracts

Article 10(1) of the Executive Regulations provides the minimum requirements necessary for the purpose of a valid employment contract.

Article 10(2) of the Executive Regulations specifically permits an employer (with the consent of an employee) to add additional provisions (over those stipulated under Article 10(1) of the Executive Regulations) provided that the same are not in contradiction with the provisions of the New Law and the Executive Regulations.

The Ministry shall prepare (pursuant to Article 10(4) of the Executive Regulations) contract forms for:

  1. Full time employment;
  2. Part time employment;
  3. Flexible work employment;
  4. Remote work employment; and
  5. Job sharing employment.

The Ministry may as required introduce further standard form contracts.  It will be interesting to see if free zones (e.g.: JAFZA, DAFZA, DMCC and DDA) which are subject to the New Law follow suite.  At the date of this client alert not all free zones have introduced new standard form contracts in compliance with the New Law and Executive Regulations.

  1. Salary

All employers registered with the Ministry are required to pay employees under the Wage Protection System (“WPS”) (Article 16(1)(b) Executive Regulations).  All wages are to be paid in AED unless agreed otherwise by the contracting parties.  How this will work in practice given WPS has previously provided for payment only AED remains to be seen.

Article 25 of the New Law sets out permitted deductions from an employee’s salary.  Notably Article 25(1)(b) of the New Law puts a limit on the percentage of salary that can be deducted at 20%, it is unclear if this is a given month or during a year.  Consideration will need to be given to circumstances where housing loans or the like are advanced and then repaid.

Article 26 of the New Law provides that a minimum wage may be set in the future.

  1. Contract Term

One fundamental change under the New Law is the abolition of unlimited term contracts.  The New Law introduces a maximum fixed term of 3 years (Article 8(3) of the New Law), albeit it is our understanding that employers which are Dubai onshore entities will continue to be granted only 2 year work permits and as such fixed term contracts in such instances will be granted on the basis of 2 year renewable terms.

Fixed term contracts may be extended for up to a 3 year period (noting comments above regarding visa terms) or shorter periods one or more times and a renewal does not necessarily have to involve express written notice and consent, instead it can be extended implicitly (Article 8(5) of the New Law).

  1. Probationary Period

As with the Previous Law, probationary periods can run for a period not to exceed 6 months (Article 9(1) of the New Law)).  An employer wishing to terminate during a probationary period must provide at least 14 days’ notice to terminate.  In the event that an employee wishes to terminate (Article 9(1) of the New Law during the probationary period, the employee must: provide at least 30 days’ notice where they wish to take on employment with another employer in the UAE (Article 9(2) of the New Law); or provide at least 14 days’ notice where the employee wishes to leave the UAE (Article 9(3) of the New Law).

  1. Employer Obligations

An employer may not assign work to an employee that is “fundamentally different” to the work agreed in the employment contract (Article 12 of the New Law).

An employer is obliged amongst other things to: keep employee files in accordance with the provisions of Article 13(1) of the New Law; invest in the development of skills of employees (Article 13(5) of the New Law); bear the costs of private healthcare in accordance with corresponding legislation (Article 13(8) of the New Law); and provide its employees (upon the employee’s request) at termination with a confirmatory notice setting out date of joining, date of expiry, total service, last wage, job title and the reason for termination, even if the contents of that letter reduces the ability of the exiting employee to gain employment (Article 13(11) of the New Law).

  1. Employee Obligations

The employee is under various obligations pursuant to Article 16 of the New Law, these include but are not limited to obligations of: confidentiality (Article 16(4) of the New Law); developing functional and professional skills (Article 16(8) of the New Law); and honesty and professionalism in the performance of work (Article 16(2) of the New Law).

  1. Working Hours / Overtime

Subject to exceptions under the Executive Regulations, the maximum working hours for an employee is 8 hours a day or 48 hours per week, with an emphasis on the word “or” (Article 17(10) of the New Law).

Article 15(1) of the Executive Regulations stipulates specific circumstances where time spent by an employee travelling to their workplace will count towards their working hours.  As a general rule such travel time does not apply (Article 17(3) of the New Law).

Overtime payment mechanisms are set out under Article 19 of the New Law.  A maximum of 2 hours overtime a day is permitted (Article 19(1) of the New Law).  Overtime is paid at a 25% uplift of basic salary save where the hours of overtime take place between 10pm and 4am when overtime is paid at a 50% uplift of basic salary (Article 19(3) of the New Law).

If work is required on a rest day the overtime payment is paid at a 50% uplift of basic salary (Article 19(4) of the New Law).

Overtime entitlement does not extend to those categories of employees set out in Article 15(4) of the Executive Regulations. Furthermore such categories of worker are also exempt from the maximum work hours.  Employees who are exempt include directors and board Chairman and persons holding supervisory positions, it remains to be seen how this will work in practice.

  1. End of Service Gratuity

The rules regarding the payment of end of service gratuity under the New Law introduce two key changes: 1) the concept of deductions to gratuity entitlement where an employee terminates their employment (prior to the completion of 5 years’ service) is removed; and 2) the law is now specific in terms of UAE nationals employed in the private sector having no rights to end of service gratuity.  All other gratuity provisions remain as per the Previous Law i.e. gratuity is payable after 1 years’ continuous service, calculated only against base salary, capped at 2 years’ salary and calculated on the basis of 21 days base salary for the first 5 years of service and 30 days base salary for service over 5 years.  Entitlement to gratuity for part years served after the conclusion of the first year of continuous service remain.

It is worth noting that the New Law does (under Article 51(8)) leaves the possibility that end of service may be replaced by an alternative pensions system likely to be similar to the DEWS system operational in the Dubai International Financial Centre.

Article 53 of the New Law provides that all employee entitlements are to be paid within 14 days from the date of contract expiration.

Article 29 of the Executive Regulations places controls on what deductions an employer can make against end of service gratuity.  This does include the repayment of loans (Article 29(1)(a) of the Executive Regulations).

Article 30 of the Executive Regulations regulates how end of service will be paid to employees who are not full time employees.

  1. Labour Claims

Article 55(1) of the New Law provides that where an employee has a claim against their employer and the claim does not exceed AED 100,000, then any court fees which would be normally payable by the employee are waived.

  1. Holiday Entitlement

The New Law provides for a minimum holiday entitlement of 30 days (typically this is reflected in employment contracts as 25 working days) (Article 29(1) of the New Law).  For new employees holiday entitlement accrues at 2 days per month for the first 6 months of service.

Part time workers are entitled to holiday pursuant to the requirements of Article 18 of the Executive Regulations.

Article 19 of the Executive Regulations provides that where an employer has allowed for the carry over of balance of unused holiday entitlement (Article 29(5) of the New Law).  Article 19(1) of the Executive Regulations provides that an employee may carry forward no more than half of their annual leave into the following year.

Article 19(2) of the Executive Regulations provides that where an employee’s service is terminated, a cash allowance for accrued but unused holiday at the date of termination is payable based on basic salary.

  1. Maternity Leave

Article 30 of the New Law provides 60 days of maternity leave, 45 days at full pay and 15 days at half pay.  Additional unpaid leave is available in certain medical circumstances.

For employees returning from their maternity leave, and for a period not exceeding 6 months from the date of delivery shall be entitled to 2 daily rest periods for breastfeeding not to exceed an hour each day of entitlement.

  1. Sick Leave

Following the completion of a probation period, an employee is entitled (under Article 31 of the New Law) to sick leave of no more than 90 consecutive or intermittent days each year based on: a) 15 days full pay; b) 30 days with half pay; and c) the period thereafter unpaid.

An employer may terminate the service of an employee after sick leave has been exhausted (Article 31(5) of the New Law).

Article 20(1) of the Executive Regulations recognises that no sick leave will be paid where illness relates to abuse of drugs or alcohol or a violation of an employer’s safety instructions.

  1. Various Leaves

The New Law (Article 32 and Article 21 of the Executive Regulations) introduces a number of additional leave entitlements including parental leave, study leave, mourning leave, sabbatical leave for UAE nationals performing national or reserve service.  Unpaid leave entitlement is covered under Article 33 of the New Law.

  1. Wrongful Termination

The arbitrary dismissal provisions under the Previous Law have been abolished and replaced by Article 47 of the New Law, which provides that an employee’s termination is unlawful if the termination relates to: a) filing a serious complaint with the Ministry; or b) filing a case against the employer which has proven to be correct.

Any successful wrongful termination claim compensation is capped at 3 months of salary- subject to the court’s discretion.

  1. Non-Competes

Article 10 of the New Law allows non-compete provisions to be applied to protect legitimate business interests.  Such non-competes are not to exceed 2 years.

Article 12 of the Executive Regulations provides that in order for a non-competition clause to apply then the following must be specified: a) geographical scope; b) term not to exceed 2 years; and c) nature of work that is being prohibited.

Any non-compete provision will have no standing where the employer has terminated the employee’s employment.  Article 12(2) provides that the enforcement of any non-compete requires the employer to demonstrate damage arising from the breach.

Article 12(c) of the Executive Regulations provides that certain categories of employee may not be subject to non competes.

  1. Suspension

An employer may suspend an employee for a period of 30 days for the purposes of conducting a disciplinary investigation (Article 40(1) of the New Law).  During that suspension period an employer is entitled to suspend half of the suspended employee’s salary.  Insofar as the employee is not terminated following their suspension, the employee’s suspended salary shall be repaid.

Further suspension rights exist where an employee has been accused of assault or criminal behaviour involving fraud or dishonesty.

  1. Disciplinary Rules

Article 39 of the New Law together with Article 24 of the Executive Regulations regulate disciplinary rules and sanctions, which broadly speaking run from written notices, wage deductions and suspensions.

  1. Termination of Employment

Article 42 of the New Law provides that a contract of employment can be terminated as follows: a) mutual agreement; b) expiry of a contract term unless renewed; c) death of the employee or permanent incapacity; d) final judgment involving a prison sentence of greater than 3 months; e) closure of the employer; f) insolvency of the employer; or g) failure of the employee to renew their work permit.

Under Article 43 of the New Law, either party is entitled to terminate the contract of employment for any legitimate reason, provided that notice is given.  Minimum notice is 30 days and maximum notice is 90 days.

Article 44 of the New Law is in effect the new Article 120 from the Previous Law.  Article 44 sets out circumstances in which termination without notice can occur.

Article 46 of the New Law provides that an employee’s service cannot be terminated by an employer before exhausting all sick leave.

  1. Compliance

Employers are required to ensure that unlimited term employment contracts are converted to fixed term arrangements in accordance with the New Law and Executive Regulations within 1 year of the adoption of the New Law, i.e., 2 February 2023.

The provisions of the New Law and Executive Regulations apply to all unlimited term contracts governed pursuant to the Previous Law.

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