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In March 2018, the Medicaid and CHIP Payment and Access Commission (MACPAC) made its 2018 report to Congress, which included the Commission’s evaluation of telehealth services provided through the Medicaid program. Chapter 2 of MACPAC’s report had a positive outlook on telehealth’s contribution toward better accessibility of health care services to underserved individuals as well as individuals with disabilities.

Unlike its larger counterpart, Medicare, federal policy has not placed many restrictions on state Medicaid programs in terms of adopting or designing telehealth coverage policies. For example, there is limited reimbursement coverage of telehealth services provided through the Medicare Fee-For-Service (FFS) program (e.g., geographical restrictions). However, there is little federal guidance or information regarding the implementation of telehealth services in state Medicaid programs or coverage for these services. As a result, state Medicaid coverage of telehealth services is highly variable across state lines, in terms of telehealth modalities, specialties and services, provider types, and even permissible site locations where telehealth services may be rendered. This high degree of variability stems, at least in part, from the unique federal-state partnership that provides the foundation for all state Medicaid programs.

Federal Medicaid Program Requirements. Although the federal requirements for coverage of telehealth services provided through the Medicaid program are few, in comparison to comparable requirements under the Medicare FFS program, some broad CMS guidelines do require Medicaid providers to practice within the scope of their state practice laws and to comply with all applicable state professional licensing laws and regulations. Additionally, any payments made by state Medicaid programs for telehealth services must satisfy the federal Medicaid program requirements for efficiency, economy, and quality of care. Furthermore, although Medicaid program requirements for comparability, state-wideness, and freedom of choice do not apply to telehealth services, states choosing to limit access to telehealth services (e.g., limited to particular providers or regions) must ensure access to and cover face-to-face visits in areas where such services are not available. Moreover, states are not required to submit a Medicaid state plan amendment to cover and pay for telehealth services as long as the program is in a state where telehealth parity laws are in effect, which are intended to ensure same coverage and payment of telehealth services as those provided in-person.

State-to-State Variations in Medicaid Coverage of Telehealth Services. A big focus of the MACPAC report was the impact that state-by-state variations may have on providing access to telehealth services through state Medicaid programs. As previously noted, because of the lack of any unified federal telehealth policy, state Medicaid program coverage of telehealth services is inconsistent. Some states, like West Virginia, mirror their Medicaid policies and regulations after the Medicare program, meaning that telehealth services are covered only if the originating site is in a rural location that either meets the definition of a non-metropolitan statistical area or a rural health professional shortage area, or originating site must be at hospitals, critical access hospitals, physician offices, federally qualified health centers, etc. In other words, in these states, Medicaid recipients would be required to travel to particular qualified locations for their telehealth service to be covered under Medicaid. Interestingly, MACPAC reported that some states that initially adopted these Medicare-like standards have changed their policies over time, as the state Medicaid programs have gained experience and understanding of the implications for access, cost, and quality. Other states are increasingly allowing homes, workplaces, and schools to serve as originating sites for telehealth services, while some states do not explicitly require patients to be at any specific sites in order to receive telehealth services. For example, while West Virginia’s Medicaid program specifies that originating sites must be a physician’s or other health care practitioner’s office, hospitals, rural health centers, skilled nursing facilities, etc., Medicaid recipients in Washington state may choose the location they would like to receive telehealth services, without these types of restrictions.

Similarly, the types of telehealth services that are covered vary greatly from state-to-state. For example, Idaho’s Medicaid program covers live video telehealth for mental health services, developmental disabilities services, primary care services, physical therapy services, occupational therapy services, and speech therapy services. In contrast, Arizona’s Medicaid program covers live video telehealth for a variety of specialty services including cardiology, dermatology, endocrinology, pediatric subspecialties, hematology-oncology, home health, infectious diseases, neurology, obstetrics and gynecology, oncology and radiation, ophthalmology, orthopedics, pain clinic, pathology, pediatrics, radiology, rheumatology, and surgery follow-up and consultation.

Across state Medicaid programs there also is wide variation regarding the types of health care practitioners who may provide telehealth services to Medicaid program recipients. Nineteen states (e.g., Connecticut, Florida, Hawaii, Iowa, Kansas, Louisiana, Maine, Massachusetts, Mississippi, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Tennessee, Utah, and Vermont) do not specify the type of providers that may provide health care services via telehealth and therefore are presumed to have the most inclusive provider policies. There also is variation with respect to professional licensure requirements for these providers, with some state policies allowing out-of-state practitioners to provide telehealth services as long as they are licensed in the state from which they are providing the service and are registered with the state’s Medicaid program (e.g., Arizona) while other state policies require practitioners to be licensed or certified to practice in the state unless only providing episodic consultation services (e.g., Arkansas).

States set their own payment levels for telehealth services provided to Medicaid recipients. Some payment rates for telehealth services may be lower than payment rates for the same services provided in-person. State Medicaid programs also vary in terms of payments for facility fees and transmission fees, which assist providers with covering associated telecommunications costs. Additionally, state Medicaid policies for telehealth services may differ between managed care and FFS plans. Some states do not require Medicaid managed care plans to provide services via telehealth at all. For example, Florida’s live video telehealth is covered under Medicaid FFS but is optional for Medicaid managed care plans, while in Massachusetts telehealth services are not covered under Medicaid FFS but there is some coverage under at least one of the state’s Medicaid managed care plans.

Despite these variations, MACPAC found that Medicaid plays a significant role as a payor with respect to the following types of telehealth services:

Behavioral Health. MACPAC reported that non-institutionalized adult, children, and adolescents covered by Medicaid have a higher rate of behavioral health disorders compared to their privately insured counterparts. Barriers to care include fragmented delivery systems, lack of accessibility to provider and resources, and patients’ concerns regarding confidentiality and fear of stigma attached to seeking mental treatment. MACPAC reported that there is increasing evidence that telehealth has the potential to improve access to evidence-based care for mental health and substance use disorders for individuals located in underserved areas. As of now, all state Medicaid programs that cover telehealth services include as part of that coverage access to behavioral health services via videoconferencing, although the scope of coverage varies state-to-state. Generally, most commonly covered services include mental health assessments, individual therapy, psychiatric diagnostic interview exams, and medication management. Although most state Medicaid programs will cover behavioral health services via telehealth if provided by licensed or certified psychiatrists, advanced practice nurses, and psychologists, some states also will cover those services if treatment is delivered by social workers and/or counselors. MACPAC reported that there is a growing number of studies showing that behavioral health care services provided via telehealth is effective, particularly for assessment and treatment of conditions such as depression, post-traumatic stress disorder, substance use disorder, and developmental disabilities. MACPAC reported high patient satisfaction with behavioral health care services via telehealth was on par with non-Medicaid payor populations, although MACPAC indicated that more research is needed.

Oral Health. Oral health services among Medicaid participants are relatively low. Barriers to oral health care include cost, difficulty of finding dentists who accept Medicaid, and inconvenience of location and time. MACPAC reported that the use of telehealth in dentistry has been recognized for its potential in improving access to primary and specialty oral health care services in communities that either lack or have limited provider capacity. Typically a patient is joined by an oral health professional at the originating site during a real-time video consultation with a dentists or specialty dentists for diagnosis and development of a treatment plan. Store-and-forward modality allows the provider at the originating site to send images (i.e., x-rays, photographs, lab results) to the dentist for review. As of 2017, 11 states were identified for including some Medicaid coverage for teledentistry (e.g., Arizona, California, Colorado, Florida, Hawaii, Minnesota, Missouri, Montana, New Mexico, New York, and Washington). Studies have shown that certain teledentistry services such as screening of childhood dental caries and orthodontic referrals appear to be as effective as in-person visits. MACPAC reported that patients expressed satisfaction of these dental health care services provided via telehealth because of greater convenience and improved access to care.

Maternity Care. In 2010, although state Medicaid programs covered nearly half of all births in the U.S., nearly 50 percent of U.S. counties had no obstetrician-gynecologists providing direct patient care. Telehealth can be used to manage pregnancies in several ways including the use of videoconferencing between a patient and her regular maternity care provider or between two providers during labor and delivery. Live videoconferencing could also be utilized during genetic counseling or even neonatal resuscitation. MACPAC reported that pilot studies have tried videoconferencing for prenatal care visits, group prenatal care, and breastfeeding support, which include women with both high-risk and low-risk pregnancies. MACPAC also reported that an emerging practice is the use of telehealth to diagnose congenital heart defects via live videoconferencing between the radiographer and fetal cardiologists, or the use of store-and-forward technology to allow a specialist to review echocardiograms post hoc.

MACPAC Recommendations. Before integrating or expanding telehealth services in their respective Medicaid programs, MACPAC recommended that states weigh the costs and the resource requirements associated with using or implementing telehealth against their goals of improving access for Medicaid recipients to needed health care services. One of the primary concerns voiced against greater use of telehealth services is the inappropriate use or overuse of those services. For example, MACPAC asked the states to consider whether inclusion of facility or transmission fees would increase the overall costs to their Medicaid programs if telehealth services replaced in-person services. MACPAC also asked states to consider whether telehealth services had the potential to increase fragmentation of care if services were provided by different telehealth providers or providers were unable to obtain updated patient medical records. MACPAC emphasized that while there appeared to be growing number of studies showing the effectiveness of telehealth services, there are still very few published studies addressing the effect of telehealth in Medicaid populations.

MACPAC also noted several factors that contributed to limited adoption of telehealth in Medicaid. The combination of lower payment rates for Medicaid and yet potential high costs for licensing across different state lines may deter providers from using telehealth for Medicaid services. Telehealth technology is dependent on reliable and affordable broadband connectivity. Unfortunately many rural areas and Native American reservations still lack such connectivity. An estimated 53 percent of individuals living in rural areas lack access to broadband speeds needed to support telehealth. Furthermore, costs of broadband can be almost three times that in urban areas. Costs associated with the acquisition, installation, and maintenance can be quite cost-prohibitive to providers and affect their ability or willingness to adopt telehealth. Additionally, telehealth-focused remote prescribing laws vary from state-to-state while prescribing of controlled substances are limited by the Ryan Haight Online Pharmacy Consumer Protection Act of 2008. The law generally prohibits prescribing of controlled substances through the internet without a valid prescription, which requires the prescriber to have conducted at least one in-person medical examination of the patient. Although the law includes a telehealth exemption, the exemption requires the originating site to be located at Drug Enforcement Administration (DEA)-registered clinic or hospital. In addition, state medical licensing boards may also limit the circumstances in which providers can prescribe controlled substances via telehealth. As illustrated above, the varying length and degree of Federal and state laws and regulations governing telehealth services is complex and may deter providers from entering into the telehealth service market.

Overall, the MACPAC report illustrates a positive outlook on telehealth’s integration into state Medicaid programs. However, in its recommendation to Congress, MACPAC did not outright push states to adopt telehealth into their Medicaid programs. Rather, the Commission continues to seek more research and collaborative studies among states to gain better insight and understanding of the effects of telehealth on access to care, quality, and cost of care of the Medicaid program.

West Virginia Code § 23-4-10 provides that when a personal injury suffered by an employee in the course of and resulting from his or her employment causes death, and the disability is continuous from the date of injury until the date of death, the decedent’s dependents may receive benefits. The West Virginia Supreme Court of Appeals recently affirmed an award of these death benefits, even though the claimant’s disability was not obviously continuous from the time of his work-related injury as he was not in active treatment for any disability at the time of his death.

In the prior related case before the West Virginia Supreme Court of Appeals, the Court found that a dependent’s application for death benefits was timely filed even though it was filed more than six months after the decedent’s death, based on the specific finding that:

Where a claimant to dependent’s death benefits under the Workers’ Compensation Act delays filing a claim because the claimant was unaware, and could not have learned through reasonable diligence, that the decedent’s cause of death was work-related, and the delay was due to the medical examiner completing and making available an autopsy report, the six-month time limitation on filing a claim in W. Va. Code § 23-4-15(a)[2010] is tolled until the claimant, through reasonable diligence, could have learned of the autopsy report finding that the decedent’s cause of death was, in any material degree, contributed to by an injury or disease that arose in the course of and resulting from the decedent’s employment.

The Supreme Court limited its holding to death benefits under the Workers’ Compensation Act where the delay was on the part of the medical examiner and not the claimant. It also explained that this holding does not apply to claimants who delay having an autopsy performed and that the claimant’s failure to timely file a claim within the six months of when he or she could have learned that the employee’s death arose in the course of and resulting from employment will not be excused.

Based upon this decision, the claim was remanded back to the claims administrator for a decision on the merits of the application for dependent’s benefits. In this case, a twenty-four (24) year old coal miner died in his sleep from a seizure on December 7, 2010. At the time, he left behind his mother, who was the petitioner in the Supreme Court case, and his six (6) year old daughter, on whose behalf the mother petitioned the Court.  Prior to his death on December 7, 2010, the decedent suffered a work-related injury on March 24, 2009, when a wrench hit him on the head.  He lost consciousness for one (1) minute, and the injury resulted in a golf ball sized knot on his head.  He was transported to the local hospital but was essentially released with pain medication and told to return for a follow up visit, if necessary.  The claimant did not seek any additional medical treatment for this injury, and his claim was closed for temporary total disability benefits because he was not off work for more than three days.  Twenty-one (21) months after this injury, the decedent died in his sleep.  The medical examiner performed an autopsy on December 8, 2010, the next day.  For reasons that were not developed in the evidence, the autopsy report was not completed and made available to the decedent’s family until August 24, 2011, more than eight (8) months after his death.  The autopsy report declared that the claimant died as a result of a traumatic seizure disorder that resulted from the 2009 work injury.  The autopsy report did not establish when the decedent began to suffer from the seizure disorder, and his death certificate was amended to show that the claimant’s cause of death was a consequence of the traumatic seizure disorder.

Based upon these facts, the claims administrator denied the application for benefits because there was not sufficient credible evidence linking the cause of death to the work incident. The decedent in this claim sustained a head injury working on a roof bolt machine on March 24, 2009.  He was knocked unconscious, complained of a bad headache, and a bump the size of a golf ball on his head.  The decedent was transported by ambulance to the emergency room at Welch Community Hospital where he was diagnosed with a contusion to the head and a concussion with loss of consciousness.  A CT of his head was normal.  He was prescribed medication and told to return to the walk-in clinic for a follow-up, if necessary. Over a year later, on December 7, 2010, the claimant died at his home in his sleep.

As indicated above, the death certificate listed the cause of death as seizure, and it also stated that the claimant was struck in the head while working as a professional coal miner. An anatomic and forensic pathologist prepared an additional report on behalf of the dependent claimant and opined that the decedent died as a result of the accident and injuries sustained while at work on March 24, 2009.  A board certified neuropathologist, forensic pathologist, and  anatomic pathologist also examined the claim on behalf of the employer and indicated her opinion that the records showed that there was an ischemic stroke in the occipital lobe region secondary to hypertension.  She opined that the most probable cause of death was cardiac and cerebral hypertensive vascular disease.  She also opined that the claimant had an arrhythmia, which caused a hypoxic/ischemic event that resulted in brain swelling.

The Office of Judges weighed this testimony and relied on the opinions of the physician who completed the autopsy and the claimant’s expert. The Office of Judges determined that a preponderance of the evidence established that the decedent died as a result of a seizure in the setting of traumatic seizure disorder following a remote head injury at work from March 24, 2009. It reversed the claims administrator’s decision and held the claim compensable for dependent’s benefits.  The Board of Review adopted those findings of fact and conclusions of law and affirmed that decision.

Upon review by the Supreme Court, all five justices found that the decision of the Board of Review in affirming the Office of Judges is not in clear violation of any constitutional or statutory provisions, nor is it clearly the result of erroneous conclusions of law, nor is it based upon material misstatement or mischaracterization of the evidentiary record. Accordingly, the Supreme Court upheld the finding that the award of dependent’s benefits was appropriate, even though the claimant passed away over a year after his head injury, which did not result in any additional treatment between the time of injury until the time of death.  No medical evidence was submitted to show that the decedent suffered a continuous disability, with the exception of the experts’ opinion that the death was related to traumatic seizure syndrome that resulted from the initial head injury.

Even though the applicable code section provides that the disability arising from the personal compensable injury must be continuous from the date of injury until the date of death, this case certainly makes such a requirement easier to prove for dependents. The decedent did not have any obvious disability after the initial treatment in the claim, but the disability was found to be continuous based on autopsy findings.

After years of litigation, including two trips to the U.S. Supreme Court, on whether service advisors who work in an automobile dealership are exempt from overtime under the Fair Labor Standards Act (FLSA), the Court finally has held, in a 5-4 decision, that service advisors are exempt from overtime under the “automobile dealer” exemption applicable to salesmen, partsmen, and mechanics. Encino Motorcars, LLC v. Navarro, 2018 U.S. LEXIS 2065 (Apr. 2, 2018). But the case has implications far beyond the industry-specific exemption.

The Court has finally put to rest the “narrow construction” principle, long a thorn in the side of employers litigating FLSA exemption cases. Under this oft-stated principle, exemptions were “narrowly construed” against the employer due to the FLSA’s status as a “remedial” statute. This canon put a thumb on the scale in favor of employees in exemption cases and is cited routinely in cases involving application of an FLSA exemption. The Supreme Court now squarely rejects this principle, lifting the thumb off the scale and noting that exemptions are just as much a part of the FLSA as is the overtime requirement.

A Brief History of the Automobile Dealer Exemption

First enacted in 1966, FLSA section 213(b)(10)(A), commonly known as the “automobile dealer” exemption, excepts from overtime “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” Shortly after the exemption’s enactment, the Department of Labor (DOL) issued a regulation providing that service advisers were not covered by the exemption and therefore were eligible for overtime. Following contrary holdings by the U.S. Court of Appeals for the Fifth Circuit and a number of district courts, the DOL in 1978 abandoned that position in an opinion letter and stated service advisors are covered by the exemption. This remained the position of both the DOL and the courts for more than three decades.

However, in 2011, the Obama-era DOL reversed course, issuing a final rule stating that service advisors are not covered by the exemption. Notwithstanding that the final rule provided no clear basis for the DOL’s reversal, when first faced with the issue in 2015, the U.S. Court of Appeals for the Ninth Circuit deferred to the final rule and held that service advisors were not exempt.

In 2016, the Supreme Court reversed the Ninth Circuit’s decision, concluding that the Ninth Circuit erred in deferring to the DOL regulation because the Department had not provided a sufficient basis for its sudden reversal of position. However, rather than deciding the service advisor exemption issue on its merits, the High Court remanded the case to the Court of Appeals to reconsider the issue absent reference to the now-voided regulation. (With only eight members at the time following the death of Justice Antonin Scalia, the Court likely was split 4-4 on the merits, as evidence by this week’s decision.) On remand, the Ninth Circuit again concluded that service advisors were not exempt, this time based on an examination of the statutory text and legislative history of the exemption.

“Disjunctive” vs. “Distributive”: A Supreme Parsing of the Automobile Dealer Exemption

As demonstrated by the divergent views taken by the Court’s majority and dissenting opinions, the wording of the automobile dealer exemption can be construed in different ways. When interpreting “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles,” how, if at all, do the three types of jobs match up with the two listed primary tasks?

In reversing the Ninth Circuit for the second time, the Supreme Court, in an opinion authored by Justice Clarence Thomas and joined by Chief Justice John Roberts and Justices Anthony Kennedy, Samuel Alito, and Neil Gorsuch, closely examined the text of the statute and concluded that the most reasonable reading of the exemption is in the “disjunctive,” that is, that the phrase “salesman, partsman, or mechanic” could be combined in any way with the phrase “selling or servicing automobiles,” such that a “salesman” who is primarily engaged in “servicing” automobiles falls within the exemption’s definition. Finding that service advisors “obviously” are a form of salesmen of services, and sometime parts, related to the maintenance and repair of automobiles, the majority concluded that they fall well within the language of the exemption.

In so holding, the Court rejected the Ninth Circuit’s (and the dissent’s) “distributive” interpretation, which would instead pair each of the jobs in the first phrase with one of the activities in the second phrase, i.e., “salesman” with “selling” and “partsman[] or mechanic” with “servicing.” “The exemption uses the word ‘or’ to connect all of its nouns and gerunds, and ‘or’ is ‘almost always disjunctive’” in such circumstances, noted the Court. Moreover, the Court added, given there are three nouns in the first phrase (“salesman, partsman, or mechanic”), but only two gerunds in the second (“selling or servicing”), along with the fact that the word “or” occurs three times in the sentence (when including the final words of the second phrase, “trucks[] or farm implements”), it would require a more strained interpretation to combine the phrases in the manner put forth by the Court of Appeals and the dissent.

The Court further rejected the “inconclusive” legislative history of the exemption, as well as the DOL’s 1966-67 Occupational Outlook Handbook’s list and definition of common automobile dealer jobs, as overcoming what it perceived to be a straightforward interpretation of the exemption’s language. In short, the Court held, service advisors are “salesman … primarily engaged in … servicing automobiles” and, therefore, the exemption applies.

Rejection of “Narrow Construction” Principle

The undeniably more important language of the Court’s opinion focused on the so-called narrow construction principle, that is, the canon that FLSA exemptions should be narrowly construed against the employer and applied only when they do so plainly and unmistakably.

In numerous rulings over the years, the Ninth Circuit and other courts have relied on this canon — and did so again when Navarro was remanded to the Court of Appeals in 2016. In a short, single paragraph, the Supreme Court unequivocally stated:

We reject this principle as a useful guidepost for interpreting the FLSA. Because the FLSA gives no textual indication that its exemptions should be construed narrowly, there is no reason to give them anything other than a fair (rather than a “narrow”) interpretation. The narrow-construction principle relies on the flawed premise that the FLSA pursues its remedial purpose at all costs. But the FLSA has over two dozen exemptions in § 213(b) alone, including the one at issue here. Those exemptions are as much a part of the FLSA’s purpose as the overtime-pay requirement. We thus have no license to give the exemption anything but a fair reading.

(Internal citations omitted.)

With that, the narrow-construction principle was eviscerated and the myriad of decisions on which it was premised were called into question. As noted in the dissenting opinion by Justice Ruth Bader Ginsburg, “in a single paragraph, the Court reject[s] this longstanding principle as applied to the FLSA without even acknowledging that it unsettles more than a half century of our precedent.” (Justices Stephen Breyer, Sonia Sotomayor, and Elena Kagan joined in the dissent.) The impact of this brief-yet-resounding rejection of the narrow construction principle likely will be significant.

Leveraging its long history and extensive experience in all aspects of the sports arena, the Foley Sports Industry Team is actively immersed in the booming esports industry. Our Esports Insights and Trends will be a recurring post which is designed to deliver to esports industry insiders and watchers up-to-date information on the latest trends and developments in the fast-moving world of esports. To that end, today’s post covers a variety of topics, including the intersection of esports with privacy, traditional sports models, science, gambling, college programs, and investment activity.

The development of high school esports programs and leagues is another sign of esports entering the mainstream.

College esports programs have existed for a relatively short period of time. However, there appears to be a sudden and widespread trend of esports programs forming in colleges across the country. One of the premier esports programs at a public university (also the first public university esports program) is at UC Irvine. The UC Irvine program’s success has generated residual effects that are benefiting a younger generation as high school esports programs start to develop around Southern California. These local high school esports programs have formed the Orange County High School Esports League in an effort to improve student engagement and education. The league is largely funded by a nonprofit foundation and receives a lot of support from UC Irvine.

However, the rise of structured and organized high school esports leagues isn’t just happening on a local level. Nationally, the High School Esports League (HSEL) is focused on improving high school programs around the country while supporting high school esports athletes who want to compete collegiately. As a means to these ends, the HSEL, one of the largest esports leagues in the world, has teamed up with the National Association of Collegiate Esports (NACE) in order to “create a stronger path for high school esports athletes to move into the collegiate ranks as scholarship athletes.” This partnership should benefit both the NACE and the HSEL, as both organizations have a tremendous interest in the recruitment of high school esports athletes into the collegiate ranks.

Esports-focused venues are being built all over the world.

There is no greater monument to the esports industry’s tremendous recent growth than the literal monuments and buildings being built to support and facilitate esports programs and events. As with traditional sports stadiums and arenas, local municipalities are investing in esports by way of esports venues. Recently, Cyberport, a technology start-up incubator managed by a government-owned company in Hong Kong, set aside nearly $6.4 million to invest in venues for esports. The government has done this in the hope of becoming a regional and international destination for esports. A planned 4,000-square foot venue should help accomplish this mission.

While Hong Kong’s investment in esports venues may be setting an example for other cities around the world, it is actually behind the curve compared with the western Chinese city of Chingqing. In December, Chingqing opened the world’s first purpose-built esports arena and is now beginning the second phase of the massive project. The innovative arena seats 7,000 people and features glass walls with LED screens that allow the outside of the building to transform into a giant screen. Eventually, the arena will also include a hotel and an incubation center.

Support for esports in China isn’t just coming from municipalities either. The China Sports Venue Association (CSVA) recently added an esports department to “focus on the establishment of professional esports venues in China.” Organizations like the CSVA act as a catalyst for the formation of esports venues by pairing geographic markets with an interest in esports with development partners that are interested in building new or repurposing existing structures into esports-centric venues.

Massive investments in esports venues aren’t just happening in Asia, however. Back in the U.S., Arlington, Texas, has announced plans to build the largest esports stadium in North America. The city believes this investment will pay off by spurring new development and engaging the community while also attracting esports tourism. It may be only a short period of time before other U.S. cities start to follow suit in a big way.

Esports markets that were once behind the rest of the world are quickly starting to catch up.

Japan is one such market that is quickly making strides to become a world leader in esports. After years of suffering from a gambling regulation that inadvertently forbade esports tournaments with any significant prize offerings, Japan has finally legalized esports tournaments with large prize pools. The removal of this legal hurdle should instantly spur growth of the competitive esports scene in Japan. In fact, the chief investment officer of Hong Kong-based Oasis Management Co., is an early believer that competitive gaming can become an extremely lucrative business in Japan. The hedge fund boss Seth Fischer is buying up stock in companies like Capcom and Square Enix Holdings in an effort to capitalize on a market that has yet to recognize the esports trend in Japan. While Fischer doesn’t expect esports to immediately send stocks skyrocketing, he does expect that esports will become a significant earnings driver in the next few years.

Another burgeoning esports market is India. Already one of the top five countries in the world for mobile gaming, India’s blossoming esports scene should soon start to rival the Indian mobile game scene (which is predicted to be worth more than $1 billion by 2020). India is now firmly in the sights of major esports companies and organizations as they start to invest in the country in an attempt to stabilize and grow esports there.

The viability of esports in other global markets has been apparent to those in the traditional sports industry too, and it should be expected that traditional sports entities will try to use esports to penetrate foreign markets. NBA Deputy Commissioner and Chief Operating Officer Mark Tatum has hinted as such by suggesting that future NBA 2K league expansion teams could be based in foreign markets. Tatum’s proclamation of turning the NBA 2K League into a “truly global sport” comes just weeks before the inaugural season of the league is set to tip off. This notion may not be too far-fetched as the game appears to hold some international appeal and other esports franchises have already had success with international leagues.

New esports titles and organizations have the potential to quickly shift the market.

Let’s look at the recent emergence of Last Man Standing-type games such as Fortnite and PlayerUnknown’s Battlegrounds. These are games that have basically come out of nowhere to become some of the most-played games on the planet. Fortnite came out last July and was an instant success. The game’s popularity became evident a few weeks ago when popular streamer Ninja teamed up with artists Drake and Travis Scott, as well as NFL wide receiver JuJu Smith-Schuster, to play Fortnite and, in the process, log 600,000 concurrent viewers, a streaming service record. Obviously, the appearance of some very popular celebrities had a lot to do with the widely watched streaming session, but the fact that this even happened signals a shift in the landscape of pop culture.

Another Last Man Standing-type game, H1Z1, predates Fortnite and PlayerUnknown’s Battlegrounds. However, despite once being fairly successful in terms of its number of daily players, the game has recently experienced an almost 90 percent decline in playership. The timing of this decline is unfortunate, as the publishers of the game look to kick off the H1Z1 Pro League, which should serve as an interesting case study in esports leagues. If the H1Z1 Pro League can find a way to thrive, despite having fewer than 10,000 daily players, it would suggest that there is more to a successful esports league than the inherent popularity of a game. If it fails, then it would appear that organic interest in a game is necessary to support a successful league.

While Last Man Standing-type games and first-person shooters seem to be dominating the esports industry, fighting games appear to be making a comeback in terms of popularity that could lead to some becoming esports staples. Fighting games are experiencing record sales and we’re starting to see sponsors and developers support them in the same fashion as other successful esports titles. The factors pushing fighting games up the esports ladder aren’t all external either. Capcom is a developer that has long been successful for its fighting game titles but has never really pushed an esports agenda . . . until now. Capcom’s CEO announced that the company intends to make 2018 “Esports Year One” as the company “move[s] forward to promote esports with the full force of [the] organization.” That’s a strong statement coming from a company that has the reputation and resources to make significant moves in the esports industry.

The attack on the status quo of esports.

The state of affairs in the esports industry is presently under attack, for better or worse, on a number of fronts. Due to recent events, including several school shootings, violence in video games is being made the scapegoat by some politicians for the fact that some people behave so heinously. One lawmaker in Rhode Island wants an additional 10 percent tax on the sale of violent games that have a rating of Mature. The extra taxes would purportedly go to fund additional counseling and mental health services in schools.

Even the president is getting involved in the discussion of violence in video games and its effect on children. Recently, the White House hosted representatives and critics of the video game industry for a discussion about violence in video games. The meeting started with a compilation of violent video scenes, presented in sequence without context, and was followed up with blame shifting and allegations of agenda pushing. It will be interesting to see whether either the legislative or executive branch assumes a more aggressive stance against violent video games.

Not only is violence in games being questioned, but so are certain gaming mechanisms. Loot boxes have been the topic of debate for several months and the Entertainment Software Rating Board (ESRB) has now taken steps to address the issue. The ESRB is tasked with assigning ratings and content descriptors to video game titles, such as “M” for Mature or “may contain intense violence.” Now the rating agency will include a content descriptor for Loot Boxes in an effort to educate (or warn) consumers, young gamers, and parents. This type of treatment is going to further the perception that Loot Boxes need to be regulated, but perhaps this will be the extent of the regulation required.

A look at some notable numbers from the last month.

The numbers in these articles are telling of much more than just investment amounts or net profits. The statistics and figures in these articles are suggestive of current or impending trends in the industry. The following articles detail noteworthy investments and revenue successes from various esports organizations:

• Overwatch League Exceeds Revenue Expectations, Gets Bigger and More Expensive
• Supercell Earns $810 Million in Profit in 2017: Esports on Mobile, and Where It’s Headed
• Report: Esports To Grow Substantially And Near Billion-Dollar Revenues In 2018
• St. Louis Cardinals, Kevin Durant And Odell Beckham Jr. Join $38 Million Esports Capital Raise
• NPD Group: Game Industry Sales Up 59 Percent in January, Highest in Seven Years
• Franchising Caused 220 Percent Jump in NA LCS Player Salaries, According to OpTic’s GM
• Fortnite streamer Ninja makes $500,000 per month
• Tencent Q4 2017 Report: Online Game Revenue Up 32% Year Over Year
• Esports Training App Startup Gosu.ai Raises $1.9M in Funding
• Report: City of Katowice Made €22 Million in Advertising Value From IEM

There’s no way around it: Illinois is a complicated state in which to do business. From a tax perspective, there are so many nuances and units of government that form a complicated regulatory web. But as long as Chicago continues as the economic hub that it is, most multi-state businesses will be forced to understand the nuances of the state and local rules in Illinois. This post is the first in a series that will address how to navigate even the most byzantine aspects of Illinois’s tax structure. More specifically, this post will address the unique rules regarding tax audits and appeals throughout each stage in the state. While each business’s facts are unique, this general framework should help any business orient itself in Illinois.

Audit Initiation

Audits conducted by the Illinois Department of Revenue (“DOR”) should begin with a Notice of Audit Initiation. Such notices will typically identify the tax type and audit periods. Frequently, but not always, the notices will also include a list of books and records that are required to initiate the examination.  When the notice includes such requests, it will also include a date by which the taxpayer should respond. This date is not jurisdictional, and the audit is intended to be a collaborative effort whereby the auditor should be willing to grant any reasonable extensions the taxpayer requests. The notice should identify both the revenue auditor as well as the audit supervisor. Of course, as with any jurisdiction, maintaining an open line of communication with the auditor is crucial. Finally, the notice should include an attachment that describes the taxpayer’s rights during audit as well as an explanation of the taxpayer’s options after the audit is resolved.

Informal Conference Board

Whether an audit has been fully resolved, however, can be somewhat tricky in Illinois. During an audit, the DOR might provide a taxpayer with a “Proposed” Notice of Liability, Claim Denial or Deficiency.  Proposed notices do not trigger a taxpayer’s formal appeal rights. Instead, they allow a taxpayer to either agree to an auditor’s proposed changes or to seek review at the Informal Conference Board (“ICB”) prior to a final decision. See  86 Ill. Admin. Code 215.100. Note that the ICB is generally considered part of the audit process. Consequently, a taxpayer may continue to receive information document requests from the auditor during the pendency of the ICB petition. It is typical for issues to arise after the ICB petition is filed such that the scope of the audit may expand.

Where a taxpayer disagrees with a proposed notice, it may file a Form ICB-1, Request for Informal Conference Board Review, within sixty days from the date of the notice. Again, taxpayers need not file the Form ICB-1 in order to preserve their appeal rights. Rather, the ICB may function as a preliminary forum in which to resolve a dispute between the taxpayer and the DOR.

The ICB is composed of the General Counsel for the DOR, the Chairman of the Board of Appeals (which will be addressed in a separate post), the Manager of the Audit Bureau, and at least three employees of the DOR designated by the Director of the DOR.  See 86 Ill. Admin. Code 215.105. Taxpayers may represent themselves at ICB, but an attorney with an executed Power of Attorney may also represent them. The ICB is not subject to the constraints of the Illinois Administrative Procedure Act, and depending on the nature of the issues presented to the ICB, the conferences may vary in the degree of formality. At the conclusion of the ICB process, the ICB will issue an “Action Decision” that will lead to the issuance of a final, appealable notice.

In my experience, ICB can be a very productive avenue for certain disputes, but is not an optimal route for all disagreements with an auditor’s proposed adjustments. To the extent a taxpayer disagrees with how an adjustment is technically accomplished, such as in the case of an auditor utilizing a distortive audit sample, ICB can be a very good means of resolving the issue. However, to the extent a taxpayer seeks to challenge a legal issue, such as the DOR’s interpretation of its own regulations or the constitutionality of a particular approach, the ICB will often not lead to a productive result for the taxpayer. Indeed, such a challenge could adversely affect a taxpayer by providing the DOR an opportunity to fortify an assessment by adding additional reasons for its adjustments or pursuing additional information from the taxpayer. This entire process also comes at an additional cost to the taxpayer.

Protesting a Final Assessment

Upon receipt of a final assessment or claim denial, a taxpayer generally has three potential courses of action in cases where the assessment or claim denial may be appealed. Taxpayers are generally required to appeal within 60 days of the issuance of a deficiency notice, notice of liability, or notice of claim denial (although the possibility of obtaining a discretionary late hearing exists). Keep in mind that the Illinois Taxpayers Bill of Rights provides a foundation or rights for all Illinois taxpayers. In cases where the tax at issue is less than $15,000, a taxpayer has the option to pursue an administrative protest. However, in cases where the tax liability at issue exceeds $15,000, administrative protests with the DOR are not available. Such matters may be resolved in one of two ways: either at the Illinois Independent Tax Tribunal (the “Tribunal”) or the Circuit Court. These two avenues are addressed in turn.

Illinois Independent Tax Tribunal

The primary difference between the Tribunal and the Circuit Court is the Tribunal is not a “pay to play” forum.  Formed pursuant to the Illinois Independent Tax Tribunal Act of 2012, the Tribunal is currently composed of one Chief Administrative Law Judge and one other Administrative Law Judge (“ALJ”).  These ALJs are appointed by the Governor with the advice and consent of the Senate, and the Tribunal is a distinct agency from the DOR. Another important distinction between the Tribunal and the Circuit Court is that claims for refund must be pursued at the Tribunal; a taxpayer may not choose between the forums in the context of a refund claim. 35 ILCS 1010/1-45(d). Similarly, when a taxpayer obtains a discretionary late hearing from the DOR, the appeal must be made through the Tribunal.

In order to initiate an action at the Tribunal, a taxpayer must file a petition accompanied by a $500 filing fee. 35 ILCS 1010/1-55(a). If the taxpayer is a corporate taxpayer, it must be represented by an attorney authorized by practice before the courts of the State of Illinois. Partnerships or individuals may represent themselves, however. 86 Ill. Admin. Code 5000.305. In instances where a petition is filed by a party not represented by an attorney where required, the Tribunal will generally grant the petitioner an additional thirty days to file a corrected petition. See Safari Express, LLC v. Illinois Dep’t of Revenue, 15 TT 88 (12/18/2015).

At the Tribunal, the DOR will be represented by the Attorney General. All discovery, requests for admission, and pre-trial procedures comport with the requirements of the Illinois Supreme Court Rules and the Illinois Code of Civil Procedure. 35 ILCS 1010/1-60; 86 Ill. Admin. Code 5000.325. Practice before the Tribunal is generally similar to practice at circuit court, the one primary difference being the convenience of appearing for statuses and the like. While certain, substantive hearings will generally be held in person, statuses, including the initial status, will generally be held via telephone. An initial status conference will be set within 60 days after the filing of the petition, and the ALJs will generally require additional status hearings every 30 to 60 days to keep cases on pace. See 86 Ill. Admin. Code 5000.320. Note that in addition to the standard procedures at the Tribunal, at any point in the proceedings, but prior to a hearing on the matter, the parties may jointly petition the Tribunal for mediation in an attempt to settle any contested issues or the case in its entirety.  In such instances, an ALJ other than the one initially assigned to the case will serve as the mediator.

All filings with the Tribunal are public, subject to certain privacy restrictions. Final decisions are rendered within 90 days of the final brief submitted in a matter, although the Tribunal may extend that period for good cause. Decisions of the Tribunal become final 35 days after the issuance of a notice of decision.  35 ILCS 1010/1-70. Appeals from the Tribunal are pursued according to the Administrative Review Law, and are made to the Illinois Appellate Court.  35 ILCS 1010/1-75.

Circuit Court

In order to protest an assessment at the Circuit Court, a taxpayer must follow the State Officers and Employees Money Disposition Act (the “Protest Monies Act”). Judicial appeals may be made in one of three potential courts: Sangamon County, Cook County, or the county in which the dispute arose. The majority of tax cases are heard in Cook County Circuit Court.  Protests in Cook County Circuit Court are heard in the Tax and Miscellaneous Remedies Section of the Law Division. At any given time, approximately four judges, one of which functions as the supervising judge, might hear tax cases.

Initiating a Protest Monies Act complaint can appear somewhat daunting at first. In order to enter circuit court, a plaintiff must make a payment in full under protest on the DOR’s forms. Within 30 days of the protest payment, the plaintiff must then file a complaint with the Circuit Court and obtain a preliminary injunction from the circuit court, enjoining the DOR and the State Treasurer from moving the protest payment made into the protest fund. The preliminary injunction must also be ordered within 30 days of the payment under protest or the Treasurer will be required to transfer the amount paid out of the protest fund into the general revenue fund. See  30 ILCS 230/2a.

In Cook County, judges will generally require the parties to convene for a status hearing on 30 to 60 day intervals. No such timeline is typically required in Sangamon County. As with the Tribunal, the DOR is represented by the Attorney General.

Practice at the circuit court is governed by the Illinois Supreme Court Rules. The rules relating to defendant’s requirement to answer, as well as rules of discovery and evidence, apply to tax cases in the same manner as other civil cases at circuit court. Appeals are generally made to the Illinois Appellate Court.

Conclusion

Like many other states, Illinois provides a number of opportunities to protest tax determinations at the audit level, in the form of administrative hearings (both with the DOR and the Tax Tribunal), and at state court. Each taxpayer is different, and the right choice for each taxpayer will be heavily dependent on the facts of each case. However, this brief introduction to the various procedural hurdles both in audit and on appeal should help taxpayers make a more informed decision as to how to proceed upon receipt of a notice of audit initiation or an assessment.

On March 21, 2018, South Dakota Governor Daugaard signed S.B. 62, enacting the state’s first data breach notification law, which will go into effect July 1, 2018. Previously, Alabama and South Dakota were the only U.S. states without data breach notification. As of July 2018, Alabama will be the last state without a data breach notification law, though this may soon change. The District of Columbia and three U.S. territories – Guam, Puerto Rico and the U.S. Virgin Islands – also have data breach notification laws in place.

South Dakota’s law requires that any person or business that conducts business in South Dakota and owns or licenses computerized “personal information”^[1] or “protected information”^[2] of the state’s residents (such persons/businesses referred to as “information holders”) disclose any “breach of system security” to any South Dakota resident whose personal or protected information was, or is reasonably believed to have been, acquired by an unauthorized person.

The law gives information holders a sixty-day window (from date of discovery or notification of the breach) to notify individuals, unless law enforcement determines that the notification should be delayed. However, if the information holder holds an appropriate investigation, reasonably determines that the breach will not likely result in harm to the affected residents and notifies the South Dakota attorney general of its determination, then the information holder is not required to notify affected residents.

Additionally, information holders must notify (1) all consumer reporting agencies and (2) if the breach affects over 250 South Dakota residents, the South Dakota attorney general. This consumer reporting agency notification obligation is unique, as most state breach notification laws only require such notification if a high number of residents, for example 500 or 1,000 residents, are affected.

The law provides the state Attorney General (and, potentially, affected residents) with imposing remedies. A violation of the breach notification law is considered a deceptive act or practice under South Dakota Codified Laws (“SDCL”) § 37-24-6, South Dakota’s consumer protection law. The South Dakota attorney general may (1) “prosecute each failure to disclose” under the breach notification law’s provisions as a deceptive act or practice under SDCL § 37-24-6, (2) impose a civil penalty of up to $10,000 per day per violation and (3) avail himself of any of the remedies provided under chapter 37-24 of SDCL. South Dakota Attorney General Jackley reportedly stated that failure to be notified under the breach notification law entitles affected residents to a private right of action under SDCL § 37-24-31.

_{[1] “Personal information” is defined as a person’s name in combination with any of the following: (a) Social Security numbers, (b) driver’s license numbers or other government-issued unique identification numbers, (c) account, credit card or debit card numbers, in combination with any required code, PIN or information that would permit access to a person’s financial account, (d) health information as defined by HIPAA, and (e) employee identification numbers in combination with any code or biometric data required for authentication.}

_{[2] “Protected information” is defined as (a) user names and email addresses in combination with any associated passwords or security question answers which would provide access to online accounts, and (b) account, credit card or debit card numbers in combination with any required code or password that permits access to a person’s financial account. Please note that (b) overlaps with part of the definition of “personal information,” but not completely.}

For every believer, there is a skeptic.

For the better part of 25 years, I have been questioned and challenged about sexual harassment, leading (I hope) to my deeper understanding about the everyday difficulties of tackling workplace conduct. Recently, in the wake of speaking engagements, training sessions, and panel discussions, those questions have multiplied and accelerated. Most of them are thoughtful inquiries, and I never have enough time to answer them.

Here are a couple questions that I keep hearing and my theories in response.

Why do we always talk about the women? Aren’t men victims too?

Although precision is difficult and numbers vary widely, it is universally accepted that women are more likely to experience harassment in the workplace.  In 2017, more than 83 percent of the sexual harassment complaints filed with the EEOC were brought by women. Anecdotally, most professional women have experienced conduct that could be described as sexually inappropriate.

That non-scientific evidence aside, one of the problems is that harassment has long been underreported. According the EEOC’s 2016 Select Task Force Report on Harassment, about 75 percent of women never formally report it. Additionally, the research of an Oklahoma State professor, Heather McLaughlin, reveals that by the age of 31, 46 percent of women will experience harassment.

And yes, men are victims, too. One-third of working men reported at least one form of sexual harassment according to a 2015 survey, in response to inquiries at Psychology Today.

For men or women, conduct that is unwelcome, severe or pervasive, or that interferes with an employee’s working environment is not acceptable. Not only is it against the law, it leads to lower productivity in the workplace.

Why did they wait so long to come forward?

This question tends to be code for “I don’t believe it,” or, “If it was true, she would have complained at the time,” or, “There must be some money in it now.”

As noted earlier, however, most women would rather not file a formal complaint of harassment.  And there are many reasons:  fear of retaliation, whether professionally or socially; fear of being labeled as a tattle-tale; legitimate worries that the inevitable and legally required investigation will lead to blaming the accuser. The most likely response of women to inappropriate conduct is to ignore it, do nothing, and pretend it didn’t happen.

The reason that some women are coming forward now (and trust me that many women are still not coming forward) is because courage is contagious. There is a support system of #MeToo. That does not mean that every accusation is a legally supportable claim of harassment, but it does mean that women who were once afraid, today, are less so.

When we first started examining these issues in depth several months ago, I noted the complexity of the topic and even these answers only scratch the surface. Please keep the thoughtful questions coming, and we’ll continue the conversation.