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What Cuba Wants From Investors

American investors have made their way into Cuba. What Cuba Wants From Investors

Just this week, the U.S. Treasury Department has approved the first significant U.S. business investment in Cuba since 1959: the Oggun tractor factory. This plant represents a $5 million to $10 million investment by an American company in Cuba.

Both countries seem serious about moving their recently-resurrected commercial relationship forward. The U.S. and Cuba have entered into an agreement to resume commercial flights between the two countries the same week Cuba’s Minister of Foreign Trade and Investments, along with other officials from the Ministry of Foreign Affairs, Cuba’s Central Bank, and the Cuban Chamber of Commerce, have come to meet with the U.S. Secretary of Commerce to discuss how the two countries could further bilateral commercial relations.

While the focus of politicians’ rhetoric and scholars’ analysis has been on either what Americans are allowed to do, or on what Americans should want to do in Cuba, attention should be paid to what Cuba wants from its investors.

Cuba Wants Investors

First, there can be no doubt that Cuba wants investors.

In September 2013, Cuba created a Special Development Zone at Mariel (Zona Especial de Desarrollo Mariel). This $900 million port was formed in November 2013, 30 miles west of Havana, with the express purpose of attracting foreign investment. Many Americans are already familiar with Mariel, but remember it for the 1980 mass boatlift that carried thousands of Cuban refugees to America’s shores. Instead of being a point of departure, Mariel is now a destination for foreign capital.

A few months after the creation of the Special Development Zone, Cuba’s National Assembly unanimously passed the Foreign Investment Act (Law 118) on March 29, 2014. Law 118 promises foreign investors tax breaks and legal protections for their investments.

These far-reaching overtures to potential foreign investors were not made, however, without certain conditions.

Cuba Wants Investments in Particular Sectors

The Foreign Investment Act delineates, among other things, which investment vehicles are permissible, how investment shares may be transferred, who may be hired to work on the investment projects, and how disputes may be resolved.

Cuba has also specified in what it wants foreigners to invest. Last year, Cuba published a Portfolio of Opportunities for Foreign Investment detailing 326 projects in twelve sectors ripe for foreign investment:

Tourism – 94 Projects
Oil – 86 Projects
Agriculture and Food – 40 Projects
Renewable Energy – 22 Projects
Industrial – 21 Projects
Mining – 15 Projects
Transportation – 15 Projects
Construction – 14 Projects
Biotechnology and Medicine – 9 Projects
Business – 4 Projects
Health – 3 Projects
Audiovisual – 3 Projects

The highest number of projects was, not surprisingly, in the tourism sector. Cuba’s official policy on tourism investment is to direct foreign capital towards building or reconstructing new hotels and corresponding infrastructures. The President of Cuba’s Chamber of Commerce has noted the need to increase hotel capacities and standards in Havana and other heritage cities. So far, 74 hotel marketing and administration contracts have been signed, and these include almost 20 contracts with foreign firms.

Interestingly, Cuba has expressed a desire to attract foreign chains to its coasts, and is reportedly working on establishing agreements with renowned international chains across 58 facilities. Cuba is also promoting real estate development, including golf courses, marinas, and theme parks. Cuba has predicted that it will be one of the Caribbean’s top golfing destinations, and has already created two joint ventures, with British and Chinese investors, responsible for hotel construction. These projects are said to be worth over $400 million.

Furthering its efforts to attract investment in its tourism sector, Cuba is hosting its 36th International Tourism Fair (FITCUBA 2016) this year, which will be dedicated to Cuba’s culture and will feature Canada as the guest of honor. Canada represents one of the highest sources of visitors to Cuba each year.

Notably, the Beacon Council, Miami-Dade County’s official economic development partnership, has identified seven target industries Miami’s business leaders should focus on:

Aviation
Banking and Finance
Creative Design
Hospitality and Tourism
Information Technology
Life Sciences and Healthcare
Trade and Logistics

The overlap between Cuba’s and Miami’s lists of target industries, along with Miami’s geographical proximity to Cuba and supply of Spanish-speaking professionals make the city an obvious key player in the development of Cuba’s business sector.

There are certain sectors, however, in which Cuba will not allow private ownership.

Cuba Does Not Want Investments in Particular Sectors

Notably, last December, Cuba’s official newspaper, the Granma, published an article titled, “Open Also Your Mind to Foreign Investment,” encouraging the Cuban people to embrace foreign investment. Cuban officials have reiterated that these changes in economic policy will not threaten the country’s socialist regime. Cuba’s policies expressly prohibit investment in sectors that may threaten Cuba’s political landscape.

For example, the Foreign Investment Act makes it illegal for a foreigner to invest in education services for Cubans and in the armed forces. Cuba’s Constitution also states that Cuba’s press, radio, television, film industry, and other mass media can never be privately owned.

These carve-outs are consistent with the Cuban government’s assurances to its people: Cuba is importing only capitalists’ capital, not their ideologies.

While it has been said that profit is apolitical, investors should not ignore the political contours of Cuba’s budding foreign investment regulations, as these may impact their investment opportunities.

ARTICLE BY Jose M Ferrer & Yasmin Fernandez-Acuña of Bilzin Sumberg Baena Price & Axelrod LLP

New Endangered Species Act (ESA) Critical Habitat Rules Expand Federal Authority and Add Uncertainty

On February 11, 2016, the United States Fish & Wildlife Service (“FWS”), together with the National Marine Fisheries Service (“MFS”) (collectively “Services”) published two final rules and a final policy that purport to clarify their procedures for listing species under the Endangered Species Act (“ESA”) and designating and revising critical habitat for listed species. Hundreds of comments were filed opposing the Services’ actions, with the IPAA and numerous other trade organizations expressing significant concerns about the content and scope of the rules. The rules and policy become effective as of March 14, 2016.

The new rules first revise the term “destruction or adverse modification.” This is a fundamentally important term in implementing the ESA. The new rule defines this term as follows:

Destruction or adverse modification means a direct or indirect alteration that appreciably diminishes the value of critical habitat for the conservation of a listed species. Such alterations may include, but are not limited to, those that alter the physical or biological features essential to the conservation of a species or that preclude or significantly delay development of such features.

50 C.F.R. 402.02, Definitions. This shifts the historic endpoint for this factor from “both the survival and recovery” of a species to simply conservation of a species. The Services have even changed the underlying significance of the term “conservation.” The existing Section 402.02 definitions include a definition for “conservation recommendations,” which are “suggestions of the Service regarding discretionary measures to minimize or avoid adverse effects of a proposed action on a listed species or critical habitat.” Under the new rule, Section 402.02’s definitions will include a definition for “conserve, conserving, and conservation”:

To use and the use of all methods and procedures that are necessary to bring any endangered or threatened species to the point at which the measures . . . are no longer necessary, i.e., the species is recovered in accordance with § 402.02 of this chapter.

50 C.F.R. 402.02, Definitions (Emphasis added). Thus at the outset the level of change that might be considered “destruction of modification” of critical habitat is arguably substantially different. Equally concerning, the remainder of the new definition appear to include current and future habitat features, and uses the newly defined and even broader term “physical or biological features.”

The new rules next change the FWS’ current rules found at 50 C.F.R. sections 424.12(b) and (e). The FWS and MFS plan to eliminate existing limitations on when they can designate unoccupied areas as critical habitat for listed species. Those limitations are generally set forth in Section 424.12(e) which currently states that FWS may include unoccupied area in designating critical habitat “only when a designation limited to its present range would be inadequate to ensure the conservation of the species.” (Emphasis added). Section 424.12(b)(2) of the new rule supersedes this provision, with the ability to designate unoccupied areas drafted as a mandate or general authority as opposed to a limitation. Section 424.12(b)(2) also relies on the new definition of “conservation” that leaves many concerned over whether “conservation” will now be equated with species recovery. The rule states as follows:

(b) Where designation of critical habitat is prudent and determinable, the Secretary will identify specific areas within the geographical area occupied by the species at the time of listing and any specific areas outside the geographical area occupied by the species to be considered for designation as critical habitat.

(2) The Secretary will identify, at a scale to be determined by the Secretary to be appropriate, specific areas outside the geographical area occupied by the species that are essential for its conservation, considering the life history, status, and conservation needs of the species based on the best available scientific data.

See 81 Fed. Reg. 7414 (February 11, 2016), at p. 7439 (Emphasis added). While the rule limits the Services’ reach to exclude foreign countries, 50 C.F.R. 424.12(g), their authorities to designate habitat for new or previously listed species, or to modify designated critical habitat where such habitat was previously designated, is otherwise broad. The Services are explicit in acknowledging their intent to increasingly exercise their discretion to include unoccupied areas outside of a species’ range where those areas “are essential for its conservation.” 50 C.F.R. 424.12(b)(2). New defined terms such as “physical and biological features,” “special management considerations” and “geographical area occupied” add to the uncertainty regarding critical habitat.

As rationale for the new rules, the Services cite past litigation, but also “anticipate that critical habitat designations in the future will likely increasingly use the authority to designate specific areas outside the geographical area occupied by the species at the time of listing.” 79 Fed. Reg. 27,066 (May 12. 2014), p. 27073. The Services go on to explain that “[a]s the effects of global climate change continue to influence distribution and migration patterns of species, the ability to designate areas that a species has not historically occupied is expected to become increasingly important.” For example, such areas may provide important connectivity between habitats, serve as movement corridors, or constitute emerging habitat for a species experiencing range shifts in latitude or altitude (such as to follow available prey or host plants). Where the best available scientific data suggest that specific unoccupied areas are, or it is reasonable to infer from the record that they will eventually become, necessary to support the species’ recovery, it may be appropriate to find that such areas are essential for the conservation of the species and thus meet the definition of “critical habitat.”” Id. The Services have relied on these generalized concepts of climate change to support sweeping new authority over the designation of unoccupied areas as critical habitat, and appear poised to regulate or prohibit changes to those unoccupied lands based on an inference that the lands may eventually become necessary to support the species’ recovery in the future.

The final policy published together with the two new rules addresses the Services’ discretionary authority to exclude areas from a designation of critical habitat pursuant to Section 4(b)(2) of the ESA. According to the Services, “[t]he final policy consists of six elements that the Services consider when determining whether to exclude any areas from critical habitat: (1) partnerships and conservation plans, (2) conservation plans permitted under section 10 of the ESA, (3) tribal lands, (4) national security and homeland security impacts, and military lands, (5) federal lands, and (6) economic impacts.” See http://www.fisheries.noaa.gov/pr/species/critical%20habitat%20files/4b2_faqs_final.pdf. The policy sets a high bar for when areas will be excluded as critical habitat based on private and non-federal conservation plans or agreements. Evaluations pursuant to 4(d)(2) involving non-permitted conservation plans or agreements will be considered using at least eight factors, one of which is the “degree to which the plan or agreement provides for the conservation of the essential physical or biological features for the species.” 81 Fed. Reg. 7226 (February 11, 2016), at p. 7247 (Emphasis added). The policy is also notable in its express intent to focus on non-federal lands, and its statement that “the benefits of designating Federal lands as critical habitat are typically greater than the benefits of excluding Federal lands or of designating non-federal lands. This part of the policy seems not to properly consider the approximately 700 million acres of federal mineral estate lands and the over-300 million acres of surface estate federal lands, many of which are leased for various mining, exploration or other activities. See http://www.blm.gov/public_land_statistics/pls10/pls10.pdf

Given the breadth of the Services’ new rules, and the ambiguity that appears in the new definitions and other rule changes, lawsuits are anticipated challenging the rules. The following is a link to dockets for each final action: http://www.regulations.gov/#!docketDetail;D=FWS-HQ-ES-2012-0096.

ARTICLE BY Allyn G. Turner of Steptoe & Johnson PLLC
© Steptoe & Johnson PLLC. All Rights Reserved.

Department of State Releases March 2016 Visa Bulletin

Employment-based second- and third-preference China categories show significant advancement.

The US Department of State (DOS) has released its March 2016 Visa Bulletin. The Visa Bulletin sets out per-country priority date cutoffs that regulate immigrant visa availability and the flow of adjustment of status and consular immigrant visa application filings and approvals.

What Does the March 2016 Visa Bulletin Say?

The March 2016 Visa Bulletin includes both a Dates for Filing Visa Applications and Application Final Action Dates chart. The former indicates when intending immigrants may file their applications for adjustment of status or immigrant visa, and the latter indicates when an adjustment of status application or immigrant visa application may be approved and permanent residence granted.

If the US Citizenship and Immigration Services (USCIS) determines that there are more immigrant visas available for a fiscal year than there are known applicants for such visas, it will state on its website that applicants may use the Dates for Filing Visa Applications chart. Otherwise, applicants should use the Application Final Action Dates chart to determine when they may file their adjustment of status applications. For March 2016, it is not yet clear whether employment-based (EB) applicants may use the Dates for Filing Visa Applications chart or the Application Final Action Dates chart. USCIS will announce its decision within the next week.

Application Final Action Dates

To be eligible to file an EB adjustment application in March 2016, foreign nationals must have a priority date that is earlier than the date listed below for their preference category and country (changes from last month’s Visa Bulletin dates are shown in yellow):

EB	All Chargeability Areas Except Those Listed	China (mainland born)	India	Mexico	Philippines
1st	C	C	C	C	C
2nd	C	01AUG12— (was 01MAR 12)	15OCT08 (was 01AUG08)	C	C
3rd	01JAN16 (was 01OCT15)	01JUN13 (was 01OCT12)	15JUL04 (was 15JUN04)	01JAN16 (was 01OCT15)	15MAR08 (was 08JAN08)
Other Workers	01JAN16 (was 01OCT15)	01FEB07 (was 22DEC06)	15JUL04 (was 15JUN04)	01JAN16 (was 01OCT15)	15MAR08 (was 08JAN08)
4th	C	C	C	C	C
Certain Religious Workers	C	C	C	C	C
5th Nonregional Center (C5 and T5)	C	22JAN14 (was 05JAN14)	C	C	C
5th Regional Center (I5 and R5)	C	22JAN14 (was 15JAN14)	C	C	C

Filing Dates

The chart below reflects dates for filing visa applications within a timeframe that justifies immediate action in the application process. Visit www.uscis.gov/visabulletininfo for information on whether USCIS has determined that this chart can be used in March for filing applications for adjustment of status.

EB	All Chargeability Areas Except Those Listed	China (mainland born)	India	Mexico	Philippines
1st	C	C	C	C	C
2nd	C	01JUN13 (was01Jan13)	01JUL09	C	C
3rd	C (was 01JAN16)	01MAY15 (was 01OCT13)	01JUL05	C (was 01JAN16)	01JAN10
Other Workers	C (was 01JAN16)	01AUG07 (was 01JAN07)	01JUL05	C (was 01JAN16)	01JAN10
4th	C	C	C	C	C
Certain Religious Workers	C	C	C	C	C
5th Nonregional Center (C5 and T5)	C	01MAY15	C	C	C
5th Regional Center (I5 and R5)	C	01MAY15	C	C	C

How This Affects You

The largest changes in the Application Final Action Dates chart are in the EB-3 China category, which has advanced by eight months to June 1, 2013, and in the EB-2 China category, which has advanced by five months to August 1, 2012. The EB-2 India category advanced by three and a half months to October 15, 2008. The EB-3 category for the worldwide preference and Mexico categories advanced to January 1, 2016. The largest changes in the Dates for Filing Visa Applications chart are in the EB-2 and EB-3 China categories, which advanced by six months each. Other classification categories saw only minimal advancement of one week to one month. Read the full March 2016 Visa Bulletin.

Article By Eleanor Pelta, Eric S. Bord, A. James Vázquez-Azpiri, Lisa Stephanian Burton & Tracy Evlogidis of Morgan, Lewis & Bockius LLP

Further Relaxation of Sanctions for Commercial Aircraft Operations in Cuba

cuba_800_11429 On January 27, the US Department of Commerce’s Bureau of Industry and Security (BIS) and the Treasury Department’s Office of Foreign Assets Control (OFAC), took steps to further ease trade restrictions against Cuba, including transactions relating to the export and operation of civil aircraft in Cuba.^[1] In order to sell or lease a commercial aircraft to an airline in Cuba, a US national must obtain licenses for each transaction from BIS and OFAC. The changes by BIS relax its licensing policies for certain transactions with Cuba and Cuban nationals, while OFAC lifted financing and payment restrictions for authorized exports, and broadened the scope of authorizations for travel to and from Cuba.

On February 16, the United States and Cuba announced the resumption of scheduled commercial air services between the two countries, and the US Department of Transportation (DOT) invited US air carriers to apply for permission to operate scheduled flights to and from Cuba.

As outlined below, these actions may lead to easier opportunities to provide aircraft leasing and related services to prospective customers in Cuba. They also will facilitate travel between the United States and Cuba by allowing US and Cuban airlines to fly scheduled flights between the two countries.

BIS Eases Licensing Policy for Exports of Items Necessary to Ensure Civil Aviation Safety

In light of moves earlier in 2015 to loosen restrictions on trade with Cuba, air travel to and from Cuba has significantly increased in that time. The policy change announced by BIS on January 27 emphasizes “the importance of civil aviation safety and . . . recognize[s] that access to aircraft used in international air transportation that meet US Federal Aviation Administration and European Aviation Safety Agency operating standards by Cuban state-owned enterprises contributes to that safety.”

In its notice, BIS indicated that it would move to generally approve license applications for the export of items for the safe operation of commercial aircraft in lieu of reviewing such applications on a case-by-case basis. This policy includes approving license applications for the export of commercial aircraft leased to Cuban state-owned enterprises.

Both commercial passenger and cargo aircraft are eligible for treatment under this revised policy of license approval. However, BIS will continue to generally deny license applications for exports or re-exports of goods (including aircraft) for use by the Cuban military, police, intelligence and security services. BIS also will generally deny such license applications for the export or re-export of goods for use by Cuban government or state-owned entities that primarily generate revenue for the state, including those engaged in tourism and extraction of minerals or raw materials.

BIS also will move from a general policy of denial to a policy of case-by-case review for applications to export certain items to “meet the needs of the Cuban people,” including those to Cuban state-owned entities that provide goods and services for the use and benefit of the Cuban people. This policy covers a number of categories, including goods for agricultural production, artistic endeavors, education, food processing, disaster preparedness, public health and sanitation, and public transportation.

OFAC Authorizes Certain Arrangements With Cuban Airlines to Facilitate Authorized Travel to Cuba

In conjunction with BIS, OFAC published its own regulatory amendments to ease restrictions on certain transactions with Cuba and Cuban nationals, including measures to facilitate air carrier services with Cuban airlines.^[2] OFAC’s amendments authorize the entry by US persons into blocked space, code-sharing and leasing arrangements with Cuban nationals to facilitate the provision of authorized air carrier services. OFAC also is allowing travel-related and other transactions directly incident to the facilitation of the temporary sojourn of aircraft authorized for travel to Cuba. This allows US companies to engage with Cuba for services by personnel required for normal aircraft operation, such as aircraft crew, or to provide services to an aircraft on the ground in Cuba. These allowances are part of a larger expansion of authorized travel to Cuba—from organizing professional meetings, professional sports competitions and other events, to the creation and dissemination of artwork and informational materials.

Resumption of Scheduled Air Service Between the United States and Cuba

The memorandum of understanding signed by the United States and Cuba on February 16 allows for the re-establishment of scheduled commercial air service between both countries. For more than 50 years, there have been no scheduled flights between the United States and Cuba. As a result of the new agreement, a total of 110 daily scheduled round trip flights between the countries will be allowed to be conducted by each country’s carriers. Each country will be able to operate up to 20 daily roundtrip flights between the United States and Havana, and up to 10 daily roundtrip flights between the United States and each of nine other destinations in Cuba.

Immediately upon the announcement of the agreement, the DOT invited US carriers to apply for allocation of the new flight opportunities.^[3] Applications from the US carriers are due to the DOT by March 2. The DOT is to answer those applications by March 14 and carrier replies are due March 21. The scheduled services are expected to begin in the fall 2016. All US carriers to which frequencies are eventually allocated will still be required to comply with all applicable regulations and requirements of the DOT and other US agencies and all US laws. US carriers’ ability to provide US–Cuba service through licensed charter flights continues unchanged.

Department of Transportation Matters Regarding Blocked Space, Code-Sharing and Wet-Leasing

The new amendments announced on January 27 allow blocked space, code-sharing or wet-leasing arrangements. As is the case with such arrangements with foreign carriers in general, any proposed blocked space, code-sharing or wet-leasing arrangement between a US air carrier and a Cuban carrier will require the DOT’s advance authorization. The DOT must determine whether the proposed operations are in the public interest, by assessing whether such operations meet an acceptable level of safety and security, and whether they will adversely impact competition in the US airline industry.

A US carrier seeking to conduct the activities allowed pursuant to the most recent OFAC amendments must first apply to the DOT for specific authorization for such planned operations.^[4] The DOT will grant authorization only if the foreign carrier is from a country that complies with the safety standards of the US Federal Aviation Administration’s (FAA) International Aviation Safety Assessment (IASA) program and the proposed foreign carrier partner meets the requisite safety standards.^[5] As part of the DOT’s analysis, the FAA will assess the safety oversight functions of the national aviation authority having jurisdiction over the proposed foreign partner’s operations.

Based on publicly available information, to date, the safety oversight function of Cuba’s national aviation authority has not been assessed by the FAA.^[6] In assessing the safety oversight provided by any country’s civil aviation authority, the FAA will determine whether such oversight meets the minimum international safety standards established by the International Civil Aviation Organization (ICAO). Cuba is an ICAO member state and, according to the currently available ICAO information, in regard to the ICAO Universal Safety Oversight Audit Programme (USOAP), was audited by ICAO between February 19, 2008 and February 28, 2008, and meets the ICAO minimum safety standards. If the FAA determines that Cuba’s USOAP rating satisfies the requirements of the IASA program, it should approve the first prong of the safety assessment of the proposed code-sharing arrangement.

With respect to the proposed foreign carrier, the US carrier seeking authorization for such operations must have an existing FAA-accepted code-share safety program and must conduct safety audits on the proposed foreign partner in accordance with that program. The FAA will review the US carrier’s safety audit program, its initial safety audit report on the foreign carrier, and its statement that the foreign carrier is in compliance with international safety standards. Additionally, after authorization is granted, the US carrier must monitor its foreign partner’s safety programs for continued compliance during the existence of the approved arrangement. The DOT authorization process also includes review of the terms of the parties’ agreement for the proposed operations.

As for arrangements with foreign carriers that will provide service directly to the United States or to US territories, the Transportation Security Administration will provide the DOT with information regarding the security of the foreign carrier and its home country to aid the DOT in its assessment.

In assessing the impact of a proposed arrangement on competitiveness, the DOT will determine whether the agreements are adverse to the public interest because they would substantially reduce or eliminate competition.^[7] In addition to serving the application for authorization on the requisite US government agencies, the US carrier seeking such authorization also must serve the application on each US-certificated carrier authorized to serve the general area in which the proposed transportation is to be performed. These other carriers may file any comments for consideration by the DOT.^[8]

Of course, since most of the restrictions under the embargo remain in effect, operations under any such code-sharing, blocked space or wet-leasing arrangement, even if authorized by the DOT, may only be conducted within the scope of authorized US–Cuba transactions noted above.

Conclusion

The actions by BIS and OFAC and the announcements by the DOT will allow for a further expansion of trade activity and facilitate opportunities between the United States and Cuba. However, OFAC and BIS have made clear that they intend to continue enforcing existing sanctions on and trade embargoes with Cuba. Many restrictions will remain in place until US legislators vote to end or modify the embargo against Cuba. For example, the saleor lease by US persons of aircraft or related services to Cuba without a license continues to be restricted. Furthermore, as it stands now, any aircraft owned by the Cuban government arriving in the United States is subject to immediate seizure in settlement of the billions of dollars in judgments reached in US courts against Cuba in connection with Cuba’s nationalization of property owned by Americans and other civil judgments against the Cuban government. Thus, we remind those looking to take advantage of opportunities to sell or lease aircraft or related services to review all licensing applications and potential transactions with Cuba carefully to ensure that they are in compliance with federal laws and regulations.

_{[1] See Cuba Licensing Policy Revisions, 81 Fed. Reg. 4,580 (Dep’t Commerce, Jan. 27, 2016); Cuban Assets Control Regulations, 81 Fed. Reg. 4,583 (Dep’t Treasury, Jan. 27, 2016).}

_{[2] OFAC now allows for financing and payment of authorized transactions through US banks or through sales on an open account. These changes were made to address the inability of customers in Cuba to obtain financing or for authorized transactions with the United States, due to more restrictive payment and financing arrangements.}

_{[3] See, Order Instituting Proceeding and Inviting Applications, 2016 U.S. – Cuba Frequency Allocation Proceeding, issued by the US Department of Transportation, Docket DOT-OST-2016-0021, February 16, 2016.}

_{[4] The foreign carrier also must comply with all other relevant regulations, and hold all requisite DOT authorizations, prior to conducting any of the newly-allowed operations.}

_{[5] See Department of Transportation Office of the Secretary and Federal Aviation Administration Code-Share Safety Program Guidelines, 12/21/2006, Revision 1.}

_{[6] As Cuban carriers have not provided service to the US or participated in code-sharing arrangements with US carriers, and the Cuban national aviation authority has not significantly interacted with the FAA, for a four-year period, Cuba is not included on the publicly available IASA program summary listing, in accordance with standard FAA procedures. Before Cuba can be rated in the IASA program, a full reassessment of its aviation safety oversight must be conducted by the FAA.}

_{[7] 49 U.S.C. 41309(b). Further, in accordance with 49 U.S.C. 41308(b), if it is determined that competition would not be reduced or eliminated, the DOT must approve the proposed agreement. If it is determined that competition would be adversely affected, but the DOT finds that (1) the arrangement is nevertheless necessary to meet a serious transportation need or to achieve important public benefits, including US foreign policy goals, and (2) those public benefits cannot be met or achieved by reasonably available and materially less anticompetitive alternatives, the DOT must approve the agreement.}

_{[8] The DOT, the FAA, the Department of Defense, the Anti-trust division of the Department of Justice and any other US agency the DOT deems necessary must be served, in addition to the other carriers. 14 C.F.R. 212.10(d)(6). See also, Code-Share Safety Program Guidelines, infra at n. 5.}

Article By Jane M. Cavanaugh, Stewart B. Herman & Timothy J. Lynes of Katten Muchin Rosenman LLP

Gluten-Free Go-Round re: Food Labeling

FDA extends comment period on proposed rule for gluten-free labeling of fermented or hydrolyzed foods.

FDA issued a proposed rule to address the application of “gluten-free” labeling requirements to fermented and hydrolyzed foods and foods that contain fermented and hydrolyzed ingredients. The underlying issue is that uncertainty prevails in interpreting the results of current test methods for detecting gluten in such foods.
On February 12, FDA announced its intent to extend the comment period for this proposed rule. Although the comment period technically closes on February 16, FDA will be reopening it to extend the timeframe for an additional 60 days (to be counted from the date that a notice reopening the comment period appears in the Federal Register).
The proposed rule would affect the labeling of foods and ingredients such as yogurt, hydrolyzed soy protein, distilled vinegar, and FDA-regulated beers (i.e., beers that are not made from malted barley and hops). The rule also could affect beers regulated by the Alcohol and Tobacco Tax and Trade Bureau (TTB), as TTB has indicated that it may revise its own gluten claim policy once FDA has issued a final rule or other guidance. Interested stakeholders are invited to submit comments via Regulations.gov (Docket Number FDA-2014-N-1021).

Article By Food & Drug at Keller and Heckman LLP

EU Policy Update – February 2016 re: Dutch Presidency and Brexit, Digital Single Market Policy, Energy and Environment

Dutch Presidency and Brexit

In January, the Netherlands took over the Presidency of the Council of the European Union from Luxembourg. In line with the political intentions of the Juncker Commission to be ‘big on the big issues but small on the small issues’, the Netherlands promises to focus on the essentials during its Presidency. In particular, the Dutch Presidency would like to focus on migration and international security. Another priority is to strengthen the free movement of services and the free movement of workers, where the Presidency would like to strengthen the protection of workers posted abroad.

Additionally, on February 2, the President of the European Council, Donald Tusk, presented his proposals for a ‘new settlement of the United Kingdom within the European Union’. If accepted, they would allow David Cameron to campaign in the ‘Brexit’ referendum on the continuing membership of the UK in the bloc. The Heads of State and Government will discuss and adopt the text in a meeting on February 18. For Covington’s analysis of the proposals presented and the referendum, please see here.

Digital Single Market Policy

The formal adoption of the EU Network and Information Security (NIS) Directive is a step closer following a vote on January 14 by the European Parliament’s internal market and consumer protection (IMCO) committee. The committee confirmed that the minimum harmonisation requirements under the Directive do not apply to digital service providers. This means that Member States will not be able to impose any further security or notification requirements on digital service providers beyond those contained in the Directive, when transposing it into national law. The NIS Directive will now be put forward for a plenary vote in the European Parliament. Once it is published in the Official Journal of the European Union and enters into force later this year, Member States will have 21 months to transpose it into national law. Member States will then have a further 6 months to apply criteria laid down in the Directive to identify specific operators of essential services covered by national rules. These processes are likely to be complicated, and companies that may fall within scope should participate in consultations and monitor developments across the EU over the coming months.

On January 19, the European Parliament adopted a resolution on the Digital Single Market Strategy of the European Commission. The parliamentarians called for ambitious and targeted actions to complete Europe’s digital single market. Among other things, the MEPs support the end of geo-blocking practices across Europe, the setting of a single set of contract rules and consumer rights for online sales and for digital content, and the modernization of the copyright framework.

On February 2, the European Commission and U.S. Government reached a political agreement on the new framework for transatlantic data flows. The new framework – the EU-U.S. Privacy Shield – succeeds the EU-U.S. Safe Harbor framework. The EU’s College of Commissioners has also mandated Vice-President Ansip, in charge of the Digital Single Market, and Commissioner Jourová, Commissioner for Justice, Consumers and Gender Equality, to prepare the necessary steps to put in place the new arrangement. For Covington’s full analysis of the announcement of the EU-U.S. Privacy Shield, please see here.

Energy and Environment Policy

The European Commission published a proposal to update the approval requirements and market surveillance of new passenger cars and their respective systems and components. The Commission’s proposal aims at strengthening the credibility and enforcement of the applicable safety and environmental requirements for cars, following the controversy regarding Volkswagen last year.

In a significant departure from past EU legislation, the proposal would empower the Commission to impose administrative fines on economic operators who are found not to have complied with the approval requirements, of up to €30,000 per non-compliant vehicle.

The Commission’s proposal focuses on three elements. First, the European Commission proposes to reinforce the credibility of the type-approval assessment of new vehicles by ensuring that the technical services testing the new vehicles are fully independent from car manufacturers. For this purpose, the proposal would enhance the financial independence of such technical services and require Member States to create a national fee structure to cover the costs of type-approval testing and market surveillance activities for vehicles. Moreover, in order to prevent the use of ‘defeat devices’, as in the Volkswagen controversy, the proposal would grant approval authorities and technical services access to the software and algorithms of the vehicles tested.

Second, the proposal includes measures to strengthen the market surveillance of vehicles after they are type-approved and in circulation. Member State authorities and the Commission would be able to conduct tests and inspections on cars available on the market and would be empowered to adopt restrictive measures in case of non-compliance of vehicles. Among other proposed measures, the Commission would establish and chair a forum to coordinate the network of national authorities responsible for type-approval and market surveillance. Member States would also be able to inspect and take measures against vehicles type-approved in a different EU Member State.

Third, the Commission proposes measures to ensure that non-compliant manufacturers are penalized in case of non-compliance. Member States would be required to adopt penalties for non-compliant economic operators, including car manufacturers, importers and distributors, as well as technical services. This may be complemented by administrative fines, imposed by the Commission, of up to €30,000 per non-compliant vehicle, as referred to above.

Finally, the European Commission hopes to ensure a more uniform application of the legislation in the EU by proposing a Regulation as opposed to the current Framework Directive 2007/46/EC. If adopted, the Regulation would be directly applicable in national law with no requirement of transposition.

The Commission proposal is available here; it has been sent to the Council and European Parliament for consideration.

The European Commission is expected to propose a revision of the Fertilizers Regulation (EC) 2003/2003 in March 2016. This revision comes in parallel to the Circular Economy Package announced in December 2015, which aims to create a single market for the reuse of materials and resources.

Under the current EU Regulation 2003/2003, manufacturers and importers of fertilizers may choose to comply with the laws of the Member States where they market their products, or to get their products approved and CE-labeled under the Regulation. However, Regulation 2003/2003 only regulates a limited number of categories of fertilizer products.

According to Commission officials, the proposal aims to create a level playing field between existing, mostly inorganic categories of fertilizers, and innovative fertilizers, which often contain nutrients or organic matter recovered and recycled from biowaste or other secondary raw materials. Therefore, the proposal will make the approval process more flexible for new categories of CE-labeled fertilizers.

The draft legislative text is structured in four parts: (i) a list of materials that could be used for the production of CE-marketed fertilizing products under the conditions included in the annexes of the proposal; (ii) a list of product function categories for fertilizers, rules for blends of different product categories, and respective safety and quality requirements for each category included in the annexes; (iii) an annex with the labelling requirements by product function; and (iv) a section with the different conformity assessment procedures. Fertilizers that follow the harmonized EN standards will be presumed to conform with the requirements of the regulation.

Moreover, the proposal would continue to allow Member States to regulate national fertilizing products. Products that are not in compliance with the EU Fertilizers Regulation and do not carry the CE label would be able to marketed in a particular Member State if they comply with its national legislation.

Importantly, the revised Fertilizers Regulation is also likely to include an EU-wide limit on the presence of cadmium in fertilizers. In November 2015, the Scientific Committee on Health and Environmental Risks published an opinion concluding that new scientific information available justifies an update of the 2002 opinion on Member State Assessments of Risk to health and the Environment from Cadmium – see here.

The draft proposal is currently in inter-service consultation among the different Directorates General of the European Commission. Fertilizer manufacturers wishing to voice their opinion regarding the future Regulation on fertilizers should reach out now to the different services of the Commission.

Internal Market and Financial Services Policies

On January 15, the European Commission launched a public consultation on non-binding guidance for reporting non-financial information by certain large companies, following Article 2 of Directive 2014/95/EU – see here. Directive 2014/95/EU aims at improving the transparency of certain large companies related to Environmental matters, social and employee matters, human rights, and anticorruption and bribery matters. The feedback gathered during the consultation will be used to prepare the guidelines and facilitate the disclosure of non-financial information by undertakings. The public consultation will run until April 15, 2016.

On January 28, the European Commission presented its so-called Anti-tax Avoidance Package – see here. The initiative includes: (i) a new communication on tax avoidance in the EU; (ii) a proposal for an Anti-Tax Avoidance Directive; (iii) a proposal for a Directive implementing the G20/OECD Country by Country Reporting (CbC Reporting); (iv) a Recommendation to the Member States on Tax Treaties, and (v) a Communication on an External Strategy regarding tax avoidance.

The Anti-Tax Avoidance Directive includes six measures, which aim at limiting the abuse of six well-established practices used to avoid taxes in various jurisdictions in Europe. These include the mismatch in legal characterisation of financial instruments or legal entities between Member States, excessive inter-group interest charges, and a general anti-abuse rule against arrangements the essential purpose of which is to obtain a tax advantage.

The legislative proposal on CbC Reporting aims to strengthen the existing mandatory and automatic exchange of information between the Member States in the field of taxation. The proposal also requires the parent entity of a multinational group to report to the competent authorities the aggregated information on the revenue, profit (or loss) before income tax, income tax paid, income tax accrued, stated capital, accumulated earnings, number of employees, and tangible assets other than cash equivalents, in respect of each jurisdiction in which the group operates.

Finally, because tax avoidance has a strong global dimension, the EU will also cooperate better with third countries on tax issues. The Commission therefore proposes to adopt a common EU system to screen, list and put pressure on third countries that refuse to adopt policies to limit tax avoidance. In addition, before the end of 2016, the Commission and Member States will consider whether to put in place sanctions to incentivize third countries to improve their tax systems.

Life Sciences and Healthcare Policies

At the beginning of February 2016, the Dutch presidency will resume trilogues on the legislative proposals regarding the medical devices Regulation (“MD proposal”) and the in vitro diagnostic medical devices Regulation (“IVD proposal”). The European Commission presented this pair of proposals in September 2012, and recently called upon the Council of Ministers and the European Parliament to reach an agreement in the first half of 2016. The Dutch delegation therefore intends to ramp up the number of trilogues between the institutions to five political meetings and 10 to 15 technical meetings during its presidency. Nonetheless, important differences remain between the negotiators on the reprocessing of single use devices, liability insurance for manufactures, and the classification of devices in the framework of the IVD proposal. It is understood that the Dutch presidency hopes to achieve an agreement by the Employment, Social Policy, Health and Consumer Affairs Council of June 17, 2016.

Trade Policy and Sanctions

On January 1, the Deep and Comprehensive Free Trade Area (“DCFTA”) between the EU and Ukraine became operational. According to the Commission, the implementation of the DCFTA will improve the Gross Domestic Product of Ukraine by circa 6% and increase economic welfare for Ukrainians by 12% over the medium term.

On January 13, the European Commission held an initial orientation debate on Market Economy Status for China in anti-dumping proceedings. Under the current WTO rules, the EU can calculate potential anti-dumping duties on the basis of data from another market economy country rather than the domestic prices used in China, because there is a presumption that market economy conditions do not prevail in China. However, this provision, included under Article 15(a)(ii) of China’s Protocol of Accession to the WTO, will expire on December 12, 2016. The Commission is therefore considering its options for changing the methods used to calculate dumping margins in respect of China. It is important for the Commission to start the process on time, because any change in the anti-dumping rules are likely to require legislation to be adopted by the Council and the European Parliament. Given the delicate nature of such negotiations, the process is expected to take a year.

January 16, 2016, saw the Implementation Day of the Joint Comprehensive Plan of Action (“JCPOA”) – the historic deal reached among China, France, Germany, Russia, the UK, the U.S., the EU and Iran to ensure the exclusively peaceful nature of Iran’s nuclear program. As part of that agreement, the Council of the EU lifted all nuclear-related economic and financial EU sanctions on Iran. It did so by bringing into force the EU legislative package adopted on October 18, 2015, following the verification by the International Atomic Energy Agency (“IAEA”) that Iran had complied with the requirements laid down in the JCPOA. As of January 16, many sectors and activities have been reactivated, including, among others: financial, banking and insurance measures; oil, gas and petrochemical; shipping and transport; gold and other metals; software; and the un-freezing of the assets of certain persons and entities. Note that proliferation-related sanctions, including arms and missile technology sanctions, will remain in place until 2023 (subject to various conditions). For the Council press release, see here. For more details, see the Council Information Note here.

Article By Sebastian F.A. Vos of Covington & Burling LLP

USCIS Proposal May Increase Strike Zone for Professional Athletes

The U.S. Citizenship and Immigration Services (USCIS) has proposed new guidance for adjudicating O-1 visa petitions for athletes and other individuals of extraordinary ability in certain fields. If the proposal becomes effective, athletes will have greater flexibility in satisfying the O-1 visa criteria.

Under current USCIS regulations, an athlete may qualify for an O-1 visa by demonstrating extraordinary ability in his or her field in one of three ways: (A) by reason of a nomination or receipt of a significant national or international award; (B) by meeting a certain number of listed criteria; or (C) by submitting “comparable evidence” when the listed criteria in part (B) do not readily apply.

Part (A) is fairly straightforward. For example, winning a Gold Glove award would qualify the athlete. The same goes for league MVP or an Olympic gold medal. If an athlete does not meet Part (A), Part (B) requires meeting at least three of the USCIS criteria, such as receiving lesser but still nationally or internationally recognized prizes or awards, membership in associations requiring outstanding achievements, being written about in major media, making athletic contributions of major significance, being employed in a critical capacity for a prestigious organization, and commanding a high salary.

If an athlete does not meet Part (B), then Part (C), the catch-all “comparable evidence,” aka “alternate but equivalent,” should be considered. But here’s the rub: the regulatory text is not clear as to exactly when comparable evidence may be considered. Can applicants go directly to Part (C) or must they meet a certain number of the Part (B) criteria before comparable evidence could be considered? Moreover, must an athlete show that all or a majority of the Part (B) criteria do not readily apply?

The proposed guidance attempts to clarify this ambiguity, stating that comparable evidence can be considered on a criterion-by-criterion basis. That is, to an athlete need not first satisfy a minimum number of the Part (B) criterion before moving on to Part (C). An athlete must show only that any single criterion does not readily apply to his or her field before offering comparable evidence as to that criterion, as well as why the submitted evidence is “comparable” to the Part (B) criterion listed in the regulations. In addition, a petitioner relying upon comparable evidence still must establish the beneficiary’s eligibility by satisfying at least three separate evidentiary criteria, as required under the regulations.

According to the proposal, even if awards aren’t given for the league’s best on-base percentage or for singlehandedly increasing ticket sales, it’s certainly comparable evidence. It’s time to start thinking outside the batter’s box. This proposed guidance would make the path to an O-1 visa a little clearer.

Article By Gregg E. Clifton of Jackson Lewis P.C.

Foreign Correspondent Banking – The Good, The Bad and The Ugly

Foreign correspondent accounts have long been used by financial institutions to facilitate cross-border transactions. However, as a result of its susceptibility to money laundering and terrorist financing, this practice is encountering heightened concern among U.S. banking regulators. In this rigorous environment, it is increasingly important for financial institutions to take positive actions designed both to safeguard their operations against illicit transactions and, in the event their correspondent business comes under regulatory scrutiny, to establish a defensible position.

What is a foreign correspondent account?

A “correspondent account” is statutorily defined as “an account established to receive deposits from, make payments on behalf of a foreign financial institution, or handle other financial transactions related to such institution.”¹ Laying the foundation for its Anti-Money Laundering (AML) guidance on foreign correspondent accounts, the Federal Financial Institutions Examination Council (FFIEC) adds some detail explaining, “An ‘account’ means any formal banking or business relationship established to provide regular services, dealings, and other financial transactions. It includes a demand deposit, savings deposit, or other transaction or asset account and a credit account or other extension of credit.”² Moving from that neutral view, the FFIEC later takes a more positive tone, stating, “Foreign financial institutions maintain accounts at U.S. banks to gain access to the U.S. financial system and to take advantage of services and products that may not be available in the foreign financial institution’s jurisdiction. These services may be performed more economically or efficiently by the U.S. bank or may be necessary for other reasons, such as the facilitation of international trade.”³

The Good: Benefits of foreign correspondent banking

The concept of foreign correspondent banking is an accepted practice that can be very beneficial to financial institutions and their customers. Correspondent banks essentially act as a domestic bank’s agent abroad in order to service transactions originating in foreign countries. Championing a positive view, the Bank for International Settlements observes, “Through correspondent banking relationships, banks can access financial services in different jurisdictions and provide cross-border payment services to their customers, supporting international trade and financial inclusion”.⁴

The Bad: Challenges of foreign correspondent banking

Notwithstanding the benefits related to foreign correspondent banking, this practice also presents significant challenges, with regulatory burden featured prominently. Extensive rules governing foreign correspondent accounts implement the provisions found in USA PATRIOT Act sections 312 (imposing due diligence and enhanced due diligence requirements on U.S. financial institutions maintaining foreign correspondent accounts), 313 (preventing foreign shell banks from having access to the U.S. financial system) and 319(b) (authorizing federal law enforcement to investigate any foreign bank maintaining a U.S. correspondent account). The decline in correspondent banking relationships has much to do with the challenge of regulatory compliance, as recently noted by the American Bankers Association, “[O]ne key factor leading to the decline in correspondent/respondent banking relationships is the heightened regulatory burden on banks related to anti-money laundering and counter terrorism compliance.”⁵

The Ugly: Foreign correspondent banking as a means to launder money and finance terrorism

The regulatory strictures are not without good reason. There have been instances of foreign correspondent accounts being used to launder money and to potentially finance terrorism. Even in the early rush to implement the USA PATRIOT Act, the OCC, though taking a balanced view, expressed its concern, stating, “Although [correspondent] accounts were developed and are used primarily for legitimate purposes, international correspondent bank accounts may pose increased risk of illicit activities.”⁶ In recent years, the U.S. government has sent a strong message to financial institutions that fail to create a process to prevent criminal behavior. Financial institutions that disregard their obligations under the Bank Secrecy Act or operate without effective anti-money laundering programs have been the subject of enforcement actions resulting in hefty penalties. In 2012, a Virginia-based bank that allowed itself to be used to launder drug money flowing out of Mexico agreed to pay a record $1.92 billion to U.S. authorities, including hundreds of millions of dollars in civil money penalties to the Office of the Comptroller of the Currency, the Federal Reserve, and the Treasury Department.⁷ In 2015, a German-based bank and its U.S. branch accused of violating laws barring transactions with Iran, Sudan, Cuba and Myanmar, as well as abetting a multi-billion dollar securities fraud, agreed to pay $1.45 billion in fines.⁸ In both of these high-profile cases, government authorities cited Bank Secrecy Act violations including: (1) failure to have an effective AML program, (2) failure to conduct adequate due diligence or to obtain “know your customer” information with respect to foreign correspondent bank accounts, and (3) failure to detect and adequately report evidence of money laundering and other illicit activity. Mirroring the U.S. actions, the international Financial Action Task Force has sounded this stern warning in addressing the cross-border financial activities of Iran and North Korea: “Jurisdictions should also protect against correspondent relationships being used to bypass or evade counter-measures and risk mitigation practices … .”⁹

The Solution: How financial institutions can best protect themselves from a harmful correspondent banking relationship

In order to meet its obligations to measure, monitor and control risks, a financial institution should consider the following actions:

1. Ensure BSA/AML policies and procedures are reviewed at least annually and adjusted to address any new risks related to correspondent banking activities.

2. Perform an annual risk assessment to determine the adequacy of its BSA/AML/OFAC program, especially as it relates to correspondent banking.

3. Conduct due diligence on counterparties to understand the nature and extent of the various aspects of the correspondent’s business, including, but not limited to, ownership, products, services, customers, locations, etc. Due diligence should be ongoing based upon the nature and scope of the correspondent activities and should include periodic validation of the counterparties and their activities by the correspondent bank.

4. Ensure that adequate expertise and resources are available to establish a BSA/AML/OFAC program capable of effectively and timely monitoring the volume and nature of activities processed through the correspondent account.

5. Ensure that the correspondent bank, and not the initiating bank, administers the systems used to process correspondent banking transactions, thus allowing the correspondent bank to independently identify exceptions, generate reports and analyze data to support its BSA/AML/OFAC program.

6. Perform monitoring of processed correspondent banking transactions in a timely manner, preferably through the use of an automated system that can effectively aggregate transactions and create “alerts” in order to identify potentially suspicious transactions.

7. Ensure that the correspondent bank establishes an enhanced due diligence (EDD) protocol that will be followed for investigative purposes when transactions trigger a BSA/AML alert in the monitoring system.

Steven Szaroleta and Walter Donaldson are co-authors of this article.

Article By Frank A Mayer, III, Richard M. Berman, Jonathan L. Levin & Molly K. Lampe of Dinsmore & Shohl LLP

Steven Szaroleta and Walter Donaldson are co-authors of this article.

_{¹ 31 U.S. Code § 5318A(e)(1)(B)

² https://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_027.htm

³ http://www.ffiec.gov/bsa_aml_infobase/pages_manual/olm_047.htm

⁴ http://www.bis.org/cpmi/publ/d136.pdf

⁵ http://www.aba.com/Advocacy/commentletters/Documents/cl-BIS-CorrespondentBanking2015Dec.pdf

⁶ http://www.occ.gov/topics/bank-operations/financial-crime/money-laundering/money-laundering-2002.pdf

⁷ http://www.reuters.com/article/us-hsbc-probe-idUSBRE8BA05M20121211

⁸ http://www.justice.gov/opa/pr/commerzbank-ag-admits-sanctions-and-bank-secrecy-violations-agrees-forfeit-563-million-and

⁹ http://www.fatf-gafi.org/documents/documents/public-statement-october-2015.html#DPRK}

Dave & Busted? Reductions in Employee Work Schedules May Not Negate Employer’s ACA Health Coverage Mandate

Under the Affordable Care Act (ACA), employers with at least 50 full-time employees (“FTEs) must generally offer qualifying health insurance to all employees who work at least 30 hours or more per week. A company that fails to satisfy this so-called “employer mandate” faces the possibility of significant penalties under the ACA. As a result, the ACA amplifies many risks for companies with respect to their employment classifications and the delivery of health care benefits to their employees.

ACA Implications for Employers

In response to these uncertainties, some employers have gone so far as to reduce the hourly work schedules of some employees to less than 30 hours per week to avoid any additional costs under the ACA employer mandate. In what is believed to be a case of first impression, the plaintiffs in Marin v. Dave & Buster’s, Inc., S.D.N.Y., No. 1:15-cv-036081 challenged their employer over the reductions to their work schedules by filing a class action suit in federal court in May 2015. Specifically, current and former employees alleged that Dave & Buster’s, the national restaurant chain, violated the protections under Section 510 of the Employee Retirement Income Security Act (“ERISA”) by intentionally interfering with their eligibility for benefits under the company’s health plan. They also claimed damages for lost wages and demanded the restoration of their health coverage, as well as reimbursement of their out-of-pocket medical costs.

In response to the lawsuit, Dave & Buster’s filed a motion to dismiss and argued that the plaintiffs’ ERISA Section 510 claim failed as a matter of law because there was no guaranteed “accrued benefit” over future health insurance coverage for hours not yet worked. On February 9, 2016, the United States District Court for the Southern District of New York denied the company’s motion to dismiss. The court found that the complaint “sufficiently and plausibly” alleged enough facts to support a possible finding that Dave & Buster’s intentionally interfered with the plaintiffs’ rights to receive benefits under the company’s health plan. The court noted that the complaint referenced specific e-mails and other communications that the plaintiffs allegedly received when their work schedules were reduced, as well as public statements by senior executives and disclosures in the company’s securities filings, which overtly explained that the workforce management protocols were instituted to thwart the potential impact of the ACA on the company’s bottom line.

While the decision on the motion to dismiss does not necessarily mean that the employer will ultimately lose, it does signal the court’s willingness to allow the plaintiffs to develop their legal theories in subsequent court filings. One can also question the impact to the court, at least initially, of the company’s open and obvious disclosures about its reasoning for reducing the employees’ work schedules. Based on the strong wording of the court’s ruling, however, these obvious and seemingly bold statements certainly did not help the company’s request for an early exit from this case. As a result, the court may eventually allow robust discovery which could, of course, be cumbersome and expensive for the company.

Takeaways for Employers

In light of this case development, companies that are subject to the ACA employer mandate should review their compliance strategies now to address any risks with their employment classifications and the delivery of future health care benefits to their FTEs, and also take heed in the manner as to how they communicate any reductions in employees’ work schedules.

Article By W. Andrew Douglass & Brian M. Johnston of Polsinelli PC

Dave & Busted? Reductions in Employee Work Schedules May Not Negate Employer’s ACA Health Coverage Mandate

ACA Implications for Employers

Takeaways for Employers

Article By W. Andrew Douglass & Brian M. Johnston of Polsinelli PC

Cuba Wants Investors

Cuba Wants Investments in Particular Sectors

Cuba Does Not Want Investments in Particular Sectors

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Employment-based second- and third-preference China categories show significant advancement.

What Does the March 2016 Visa Bulletin Say?

Application Final Action Dates

Filing Dates

How This Affects You

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BIS Eases Licensing Policy for Exports of Items Necessary to Ensure Civil Aviation Safety

OFAC Authorizes Certain Arrangements With Cuban Airlines to Facilitate Authorized Travel to Cuba

Resumption of Scheduled Air Service Between the United States and Cuba

Department of Transportation Matters Regarding Blocked Space, Code-Sharing and Wet-Leasing

Conclusion

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Dutch Presidency and Brexit

Digital Single Market Policy

Energy and Environment Policy

Internal Market and Financial Services Policies

Life Sciences and Healthcare Policies

Trade Policy and Sanctions

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What is a foreign correspondent account?

The Good: Benefits of foreign correspondent banking

The Bad: Challenges of foreign correspondent banking

The Ugly: Foreign correspondent banking as a means to launder money and finance terrorism

The Solution: How financial institutions can best protect themselves from a harmful correspondent banking relationship

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ACA Implications for Employers

Takeaways for Employers

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ACA Implications for Employers

Takeaways for Employers

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