Category: Uncategorized

Federal Court Preliminary Enjoins Enforcement of New California Arbitration Law AB 51

On Friday, January 31, 2020, Chief District Judge Kimberly J. Mueller of the federal District Court for the Eastern District of California issued a Preliminary Injunction (PI) against the State of California, enjoining the State from enforcing Assembly Bill 51 (AB 51) with respect to mandatory arbitration agreements in employment to the extent governed by the Federal Arbitration Act (FAA).1

As discussed in the Vedder Price employment law alert, TRO Halts New Arbitration Law AB 51, the District Court had previously issued a Temporary Restraining Order (TRO) on December 30, 2019 temporarily enjoining enforcement of AB 51 pending a preliminary injunction hearing scheduled for January 10, 2020. The Court subsequently continued the January 10 hearing and extended the TRO until January 31 to allow the parties time to submit supplemental briefing. AB 51, the new California law previously slated to take effect on January 1, 2020, purportedly prohibited employers from requiring applicants or employees in California to agree, as a condition of employment, continued employment, or the receipt of any employment-related benefit, to arbitrate claims involving violations of the California Fair Employment and Housing Act (FEHA) or the California Labor Code. AB 51 did not specifically mention “arbitration” but instead broadly applied to the waiver of “any right, forum, or procedure for a violation of [the FEHA or Labor Code], including the right to file and pursue a civil action.”

In issuing the PI, the District Court specifically: (a) enjoined the State from enforcing sections 432.6(a), (b), and (c) of the California Labor Code where the alleged “waiver of any right, forum, or procedure” is the entry into an arbitration agreement covered by the FAA2; and (b) enjoined the State from enforcing Section 12953 of the California Government Code [FEHA] where the alleged violation of “Section 432.6 of the Labor Code” is entering into an arbitration agreement covered by the FAA.

The PI will remain in place pending a final judgment, which would likely occur following a motion for summary judgment rather than a full trial on the merits since there are no material facts in dispute to be tried. However, pursuant to 28 U.S.C. § 1292(a)(1), an order granting a preliminary injunction is immediately appealable. Accordingly, it is likely that the State of California will file an immediate appeal directly with the 9th Circuit Court of Appeals.

In the interim, based on this PI, employers should feel comfortable in continuing to require employees in California to sign mandatory arbitration agreements as a condition of employment without being subjected to criminal prosecution under AB 51, provided that the arbitration agreement is clearly governed by the FAA. Employers are encouraged to consult with legal counsel to ensure compliance in this regard.

1 See Chamber of Commerce of U.S., et al. v. Xavier Becerra, et al., Case No. 2:19-cv-02456-KJM-DB, Dkt. No. 44 (E.D. Cal. Jan. 31, 2020).

2 Federal Arbitration Act, 9 U.S.C. §§ 1-16

© 2020 Vedder Price

For more on recent employment law litigation in California and elsewhere, see the National Law Review Labor & Employment law section.

Congress Tackles PFAS on Multiple Fronts

With the enactment of the PFAS Act of 2019 and related provisions in December, opposing forces in Congress came together to force regulatory action on several different aspects of per- and poly-fluorinated substances (PFAS). Issues on which agreement was not reached are now before the Senate in House-passed legislation. While the PFAS debate continues in Congress, federal agencies are now tasked with multiple obligations related to PFAS. Companies that handle PFAS will have added PFAS reporting obligations under both the Toxics Release Inventory and the Toxic Substances Control Act.

The PFAS Act of 2019 is title LXXIII of the massive National Defense Authorization Act for Fiscal Year 2020 (NDAA), Public Law 116-92 (Dec. 20, 2019). This alert summarizes its six subtitles, as well as other PFAS provisions in the NDAA related to the Department of Defense (DOD). It then provides a preview of future legislative developments.

PFAS Act of 2019 Provisions

Subtitle A – Drinking Water Monitoring

EPA must include certain PFAS and classes of PFAS in the fifth Unregulated Contaminants Monitoring Rule (UCMR 5), expected later this year. EPA’s PFAS Action Plan (Feb. 2019) had called for EPA to take this action, but Subtitle A requires it to do so. EPA had included six PFAS in UCMR 3.

The PFAS to be included are all PFAS and classes of PFAS for which EPA has a validated test method for drinking water and that are not subject to a national primary drinking water standard under the Safe Drinking Water Act (SDWA). EPA has a validated test method for 18 PFAS, which it adopted in 2009 and expanded in 2018, EPA Method 537.1. The PFAS Action Plan had predicted additional test methods in 2019, but this did not occur.

The SDWA limits the number of unregulated contaminants that may be included in each UCMR to 30, but the NDAA excludes the listed PFAS from that limit.

Subtitle A also provides grant eligibility through the Drinking Water State Revolving Funds to address PFAS.

Subtitle B – Toxics Release Inventory

EPA’s PFAS Action Plan had set as a long-term action exploring data availability for listing some PFAS as toxic chemicals for purposes of the Toxics Release Inventory (TRI) under section 313 of the Emergency Planning and Community Right-to-Know Act of 1986 (EPCRA). EPA had begun that lengthy process with an advance notice of proposed rulemaking, published on December 4, 2019.

The NDAA disrupted this process later that month. By its terms, Subtitle B automatically added multiple PFAS to the TRI list as of January 1, 2020, and others will be automatically added as certain milestones are reached. EPA posted a list of 160 PFAS that were added as of January 1, 2020. The reporting threshold for all of the chemicals is set at 100 pounds unless revised by EPA within the next 5 years. Reporting on these 160 PFAS will be due by July 1, 2021.

Future automatic additions to the TRI list (as of January 1 of the following year) are mandated whenever:

  • EPA finalizes a toxicity value for a PFAS. (EPA has a provisional peer-reviewed toxicity value for PFBS, adopted in 2014.) Toxicity values are used in risk assessments under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
  • EPA finalizes a significant new use rule (SNUR) under the Toxic Substances Control Act (TSCA) for a PFAS or class of PFAS.
  • EPA adds a PFAS or class of PFAS to an existing SNUR.
  • EPA designates a PFAS or class of PFAS as active on the TSCA Inventory.

In addition, over the next two years, EPA must determine whether certain listed PFAS meet any of the listing criteria in section 313. If so, EPA must add them to the TRI list within two years of making that determination.

These additions to the TRI list are subject to the provision that, if any PFAS chemical identity is claimed confidential, the PFAS is not added to the list until EPA reviews a substantiation of that claim. If EPA upholds the claim, that PFAS must be added to the list in a manner that does not disclose its identity (such as through a generic name).

Subtitle C – USGS Performance Standard and Sampling

Subtitle C directs the United States Geological Survey (USGS) to coordinate with EPA to develop an appropriate testing methodology for PFAS that is “as sensitive as is feasible and practicable,” with the ability to detect as many “highly fluorinated compounds” as possible. Highly fluorinated compounds are defined to mean PFAS with at least one fully fluorinated carbon atom. USGS must also develop quality assurance and quality control measures to ensure accurate sampling and testing, as well as a training program.

In addition, USGS must carry out nationwide sampling for PFAS. The nationwide sampling program must start with drinking water near locations with known or suspected sources of PFAS. Later stages of sampling will be based on an evaluation by USGS in consultation with the states and EPA to determine where sampling should occur, with an emphasis on direct human exposure through drinking water. The results of the sampling must be sent to EPA and, upon request, the states. In addition, USGS must prepare a report and submit it to certain committees and members of Congress.

EPA’s PFAS Action Plan called for EPA to collaborate with USGS, the Army Corps of Engineers, and universities to lead the science of PFAS.

Subtitle D – Emerging Contaminants

Subtitle D encourages research into “emerging contaminants,” defined broadly to include any physical, chemical, biological, or radiological substance or matter in water for which there is no national primary drinking water standard and that may have an adverse impact on the health of individuals. It mandates several actions to improve the level of technical understanding as well as support for states.

First, EPA, in collaboration with states and other stakeholders, must establish a strategic plan for improving existing federal efforts to identify, monitor, and assist in the development of treatment systems for emerging contaminants and to assist states in responding to human health risks posed by such contaminants.

Second, Subtitle D requires the establishment of a Working Group within 180 days of enactment to coordinate federal activities identifying and analyzing public health effects of emerging contaminants in drinking water. The Working Group will be comprised of representatives from several federal entities, including EPA, the National Institutes of Health, the Centers for Disease Control and Prevention, the Agency for Toxic Substances and Disease Registry, USGS, and others in the discretion of EPA.

Third, it requires the Director of the Office of Science and Technology Policy to establish the National Emerging Contaminant Research Initiative within 180 days of enactment. The goal will be improving the identification, analysis, monitoring, and treatment methods for emerging contaminants, including identifying priority emerging contaminants for research emphasis. Within one year after establishing the research initiative, involved agencies must issue solicitations for grant proposals for research projects consistent with that strategy.

Finally, Subtitle D requires EPA to study the actions it can take to increase technical assistance and support to states with respect to drinking water in emerging contaminants and issue a report to Congress within 18 months. Based on the findings in that report, EPA must develop a program to provide technical assistance to states within three years of enactment. When evaluating applications submitted by states seeking assistance, EPA must give priority to states with affected areas, primarily in financially distressed communities. Emergency assistance may be provided without application. EPA must also establish and maintain a database of available resources developed to assist states with testing for emerging contaminants and make it available to states and stakeholder groups with a scientific or material interest, such as drinking water utilities. The database must be searchable and available through the EPA website.

Subtitle E – TSCA Provisions

Subtitle E requires EPA to take two actions regarding TSCA – finalize amendments to two SNURs for certain PFAS substances by June 22, 2020, and issue a final rule by January 1, 2023, requiring manufacturers of PFAS to report detailed information about their PFAS.

The two PFAS SNURs and the effect of Subtitle E on EPA’s timetable for finalizing them are discussed in another Beveridge & Diamond alert, available here.

Subtitle E also amends TSCA § 8(a) so as to direct EPA to issue a final rule that would require each person who has manufactured a PFAS in any year since 2011 to submit a report that includes, for each year since 2011, detailed information on that PFAS. EPA must issue the rule by January 1, 2023.

The information that a PFAS manufacturer must provide includes, for each such PFAS:

  • Its common or trade name, chemical identity, and molecular structure.
  • Its categories or proposed categories of use.
  • The total amount manufactured or processed, reasonable estimates of the total amount to be manufactured or processed, the amount manufactured or processed for each of its categories of use, and reasonable estimates of the amount to be manufactured or processed for each of its categories of use or proposed categories of use.
  • A description of the byproducts resulting from its manufacture, processing, use, or disposal.
  • All existing information concerning its environmental and health effects.
  • The number of individuals exposed to it, and reasonable estimates of the number who will be exposed to it in their places of employment and the duration of such exposure.
  • The manner or method of its disposal.

Subtitle F – Guidance on Disposal; Research

EPA must publish interim guidance on the destruction and disposal of PFAS within one year of enactment. The guidance must address aqueous film-forming foam (AFFF), soil and biosolids, textiles (other than consumer goods) treated with PFAS, spent water treatment equipment, landfill leachate containing PFAS, and waste streams from facilities manufacturing or using PFAS. EPA must publish revisions at least every three years.

EPA’s Office of Research and Development must examine the effects of PFAS on human health and the environment and make that information public It must also develop a process for prioritizing PFAS and classes of PFAS for additional research. A total of $15 million per year for each of the next five years is authorized for appropriation for this research.

DOD-Related PFAS Provisions of the NDAA

The National Defense Authorization Act includes several PFAS provisions in Title III, related to DOD operations and maintenance at military bases. AFFF containing PFAS, used for putting out fires, is the subject of several provisions. These include prohibiting the uncontrolled release of AFFF containing PFAS, with limited exceptions for emergency response as well as incineration requirements for the disposal of AFFF that must meet the Resource Conservation and Recovery Act (RCRA). The use of PFAS AFFF must be phased out by October 1, 2024, and the use of PFAS in packaging for meals ready-to-eat (MREs) must end by October 1, 2021. There are also provisions for information sharing with municipal drinking water utilities located adjacent to military installations.

Additional PFAS Legislation

During the conference to reconcile the House and Senate versions of the NDAA, the House managers pushed for additional PFAS provisions, but the two sides did not reach agreement on those provisions. On January 10, 2020, the House passed a revised H.R. 535, the PFAS Action Act of 2019, with the votes of 24 Republicans, and sent it to the Senate for its consideration. Senate passage is probably unlikely, particularly in light of the rejection by Senate conferees on the NDAA of some of these provisions.

As revised, H.R. 535 would require a number of regulatory actions on PFAS, including:

  • A requirement that EPA designate PFOA, PFOS, and their salts as hazardous substances under CERCLA § 102(a) within one year of enactment, and determine within five years of enactment whether to designate additional PFAS as hazardous substances.
  • An amendment to TSCA § 4 directing EPA to adopt a rule requiring comprehensive toxicity testing on all PFAS, with a proposed test rule due six months after enactment and a final rule due two years after enactment.
  • An amendment to TSCA § 5 eliminating exemptions for PFAS (such as those for R&D, impurities, and the low-volume exemption).
  • An amendment to TSCA § 5 providing that, for five years after enactment, all PFAS that are the subject of premanufacture notices or significant new use notices are deemed to present an unreasonable risk. EPA would be required to issue orders to prohibit all manufacture, processing, and distribution of those PFAS.
  • An amendment to SDWA § 1412(b) directing EPA to promulgate a national primary drinking water regulation for PFAS (including at last PFOA and PFOS) within two years of enactment. It would also require EPA to publish a health advisory for a PFAS not subject to a national primary drinking water regulation within one year of a finalized PFAS toxicity value or effective quality control and testing procedure for a PFAS, whichever is later.
  • A provision that EPA may not impose a financial penalty for violation of a PFAS national primary drinking water regulation until five years after its adoption.
  • An amendment to the SDWA requiring EPA to establish a program to award grants to affected community water systems.
  • A requirement that EPA adopt a final rule adding PFOA, PFOS, and their salts to the list of hazardous air pollutants under the Clean Air Act § 112(b) within six months of enactment, and to determine within five years of enactment whether to issue final rules adding other PFAS to that list.
  • An amendment of RCRA § 3004 to prohibit unsafe incineration of PFAS.
  • A requirement that EPA revise the Safer Choice Standard of the Safer Choice Program within one year of enactment to identify requirements for certain consumer products to meet to be labeled with a Safer Choice label, including a requirement that they not contain any PFAS.
  • A requirement that EPA issue guidance on minimizing the use of AFFF and related equipment containing PFAS within one year of enactment.
  • A requirement that EPA investigate methods and means to prevent contamination of surface waters by GenX.
  • A prohibition of introducing PFAS pollutants to a treatment works under the Federal Water Pollution Control Act (FWPCA) without first notifying the treatment works of the identity and quantity of each PFAS; whether the PFAS is susceptible to treatment by the treatment works; and whether the PFAS would interfere with the treatment works.
  • A requirement that EPA establish a website containing information on the testing of household well water within one year of enactment.
  • A requirement that EPA develop a risk-communication strategy to inform the public about potential hazards of PFAS.
  • A requirement that EPA publish a plan under FWPCA § 304(m) by September 30, 2021, that contains the results of a review of the introduction into treatment works or discharge of PFAS from categories of point sources (other than publicly owned treatment works). Based on that results of that review, EPA would be required to initiate as soon as practicable the process for adding certain PFAS to the list of toxic pollutants under FWPCA § 307(a), and within two years of publication of the plan to publish human health water quality criteria for other PFAS. EPA would also be required to adopt human health water quality criteria for PFOA, PFOS, and their salts within two years of enactment for each priority industry category, and to adopt a final rule within four years of enactment establishing effluent limitations and pretreatment standards for those PFAS for each priority industry category.

The White House announced on January 7, 2020, that it strongly opposes H.R. 535 and that President Trump’s senior advisors may recommend the bill be vetoed if passed by both Houses.

© 2020 Beveridge & Diamond PC

For more on PFAS regulation, see the Environmental, Energy & Resource section of the National Law Review.

Federal Court Strikes Down HIPAA Fee Limitations for Third-Party Medical Records Requests

On Jan. 29, 2020, OCR released a notice regarding a recent federal court ruling in the case of Ciox Health, LLC v. Azar, et al., where a federal judge in the District Court for the District of Columbia vacated the “third-party directive” within the individual right of access “insofar as it expands the HITECH Act’s third-party directive beyond requests for a copy of an electronic health record with respect to protected health information (“PHI”) of an individual … in an electronic format.”1 Additionally, the court held that the fee limitation set forth at 45 CFR § 164.524(c)(4) should only to an individual’s request for access to their own records, and does not apply to an individual’s request to transmit records to a third party.

The Ciox Health case centered on the restrictions the Department of Health and Human Services (“HHS”) and the Office for Civil Rights (“OCR”) put in place in the 2013 Omnibus Rule 2 and through informal guidance published in 2016 regarding fees that can be charged to patient in searching for, retrieving, and delivering their records and PHI as it pertains to third-party directives. Third-party directives are a mechanism promulgated by the HITECH Act that granted individuals the right to obtain a copy of their PHI maintained electronically, and “if the individual so chooses, to direct the covered entity to transmit such copy directly to an entity or person designed by the individual.”3 Additionally, the HIPAA Privacy Rule permits a reasonable cost-based fee to provide the individual (or the individual’s personal representative) with a copy of the individual’s PHI, or to direct a copy to a designated third party. The fee may include only the cost of certain labor, supplies, and postage (this fee is also referred to as the “Patient Rate”).4

The 2013 Omnibus Rule broadened the third-party directives to PHI maintained in any format, not just electronic records. Moreover, the 2013 Omnibus Rule amended the Patient Rate and required actual labor costs associated with the retrieval of electronic information to be excluded.5

In 2016, HHS issued a guidance document titled Individuals’ Right under HIPAA to Access their Health Information 45 C.F.R. § 164.524 (the “2016 Guidance”).6  The 2016 Guidance made two notable requirements that gave rise to the current litigation. Most significantly, HHS declared that the Patient Rate applies “when an individual directs a covered entity to send the PHI to a third party.”7

“This limitation,” HHS said, referring to the Patient Rate, “applies regardless of whether the individual has requested that the copy of PHI be sent to herself, or has directed that the covered entity send the copy directly to a third party designated by the individual (and it doesn’t matter who the third party is).”8

Additionally, in the 2016 Guidance, HHS provided a methodology to calculate the Patient Rate in requests for an electronic copy of PHI maintained electronically. The methodology would require the entity to determine a fee by calculating the actual allowable costs to fulfill each request or by using a schedule of costs based on the average allowable labor costs to fulfill standard requests. HHS also provided an option for entities to charge a flat rate for requests for electronic copies of PHI not to exceed $6.50 as an alternative to going through the process of calculating these costs.

In this case, HHS was sued by Ciox Health, a medical record retrieval company, over the changes to the Patient Rate set forth in both the 2013 Omnibus Rule and the 2016 Guidance. Ciox Health argued that the $6.50 flat fee is an arbitrary figure that bears no relation to the actual cost of honoring patient requests for copies of their health information, and such a low fee has negatively impacted its business. Ciox Health claims the 2013 Omnibus Rule and the 2016 Guidance, “unlawfully, unreasonably, arbitrarily and capriciously,” restrict the fees that can be charged by providers and their business associates for providing copies of the health information stored on patients.

The district court, in declaring the changes to the Patient Rate set forth in the 2013 Omnibus Rule unlawful, held that HHS cannot rely on its general rulemaking authority to supplement the limited-scope, third-party directive enacted by Congress in the HITECH Act. The court held that the 2013 Omnibus Rule’s expansion of the third-party directive is therefore arbitrary and capricious. Moreover, the district court held that the 2016 Guidance that worked a change into the Patient Rate was akin to a legislative rule that HHS had no authority to adopt without notice and comment. As a result, the court vacated the 2013 Omnibus Rule’s expansion of the HITECH Act’s third-party directive beyond requests for a copy of electronic records with respect to PHI of an individual in an electronic format. The court also declared unlawful and vacated the 2016 Guidance as it extended the Patient Rate to third-party directives without going through notice and comment.

Health care providers and medical records access companies are no longer required to limit the fees charged to their average costs, or charge a $6.50 flat fee, when a patient requests their medical records be transmitted to a third party. The fee limitations will still apply to individuals when they request their own records, however, as decided in the Ciox Health decision, on January 23, 2020.

OCR released a notice on Jan. 29, 2020 that the right of individuals to access their own records and any fee limitations that apply when exercising this right still apply. However, OCR appears to have at least accepted this ruling for now, as it pertains to third-party directives. OCR stated that it will continue to enforce the right of access provisions in 45 CFR § 164.524 that are not restricted by the court order. The court order can be viewed here.

[1] Ciox Health, LLC v. Azar, et al., No. 18-cv-0040 (D.D.C. January 23, 2020)

[2] See Modifications to the HIPAA Privacy, Security,

Enforcement, and Breach Notification Rules Under the [HITECH] Act and the Genetic

Information Nondiscrimination Act; Other Modifications to the HIPAA Rules, 78 Fed. Reg. 5,566

(Jan. 25, 2013).

[3] 42 U.S.C. § 17935(e);

[4] 45 CFR § 164.524(c)(4)

[5] 78 Fed. Reg. at 5,636.

[6] This guidance is available at this link: https://www.hhs.gov/hipaa/for-professionals/privacy/guidance/access/index.html.

[7] Id. at 16.

[8] Id.

© 2020 Dinsmore & Shohl LLP. All rights reserved.

For more on HIPAA medical-records regulation, see the National Law Review Health Law & Managed Care section.

SEC Investigating Cyberattacks Used to Find Secret Company Mergers

SEC Investigating Cyberattacks and Insider Trading

According to Reuters, the Securities and Exchange Commission (SEC) is investigating hacks of email accounts of associates and executives that reveal information on potential mergers. The hackers use a technique known as phishing where they craft emails that trick recipients into logging into malicious websites to steal their email logins. These hacks pose a threat because fraudsters can easily use the information to engage in insider trading.

The group, known as FIN4, allegedly targeted a list of 60 companies in biotechnology, medical instruments, hospital equipment, and drugs. Fireeye reported these cyberattacks in February 2014 and found that they were performed to “obtain an edge on the stock trading.” This will continue to be a problem as more businesses move over to cloud computing, which could lead to a significant increase in data breaches.

The SEC’s Office of Compliance Inspections and Examinations released a report on observations relating to cybersecurity and best practices by financial market participants. The observations are offered as guidelines for firms considering how to improve their cybersecurity preparedness and response procedures. The intent is to highlight specific examples of cybersecurity and operational resiliency practices and controls that firms are taking to safeguard against threats, and how they respond in the event of a breach. The SEC “encourages organizations to review their practices, policies, and procedures with respect to cybersecurity and operational resiliency.” Cybersecurity and Resiliency Observations report.

New Technology & Whistleblower Tips Root Out Insider Trading

The SEC relies on technological developments to accomplish its enforcement goals, including identifying and pursuing insider trading cases. In FY 2018, the SEC implemented a Consolidated Audit Trail, intended to enhance, centralize, and update the regulatory data infrastructure available to market regulators. Once fully implemented, the Consolidated Audit Trail will give regulators quicker access to all trade and order data, facilitating the detection of illegal trading practices, such as insider trading.

In addition to technology, the SEC has increasingly relied on whistleblower tips to identify and halt insider trading. Whistleblowers have been instrumental to expose fraud and expose insider trading secrets.

SEC Rewards Whistleblowers for Exposing Insider Trading 

Under the SEC Whistleblower Program, whistleblower are eligible to receive a reward if their original information about insider trading leads to a successful enforcement action with total monetary sanctions of more than $1 million. A whistleblower may receive an award of between 10 to 30 percent of the total monetary sanctions collected. If represented by counsel, a whistleblower may submit a tip anonymously to the SEC.

© 2020 Zuckerman Law

For more on SEC Insider Trading enforcement, see the National Law Review Criminal Law and Business Crimes section.

U.S. Halting Travel to the U.S. By All Foreign Nationals Who Have Been in China within the last 14 days

The Trump Administration has publicly announced that on 5 p.m. eastern time Sunday, February 2, 2020, it will deny entry to all foreign nationals who have been in China within the last 14 days (since January 19, 2020). This ban does not apply to the following individuals:

(1) Lawful permanent residents (Green Card holders);

(2) Spouses of U.S. citizens and lawful permanent residents;

(3) The parent or legal guardian of a U.S. citizen or lawful permanent resident who is unmarried and under the age of 21;

(4) The siblings of U.S. citizens and lawful permanent residents, provided both are unmarried and under the age of 21;

(5) The child, foster child, prospective adoptee or ward of a U.S. citizen or lawful permanent resident;

(6) Crew members traveling as air or sea crew;

(7) Any foreign national traveling at the invitation of the U.S. government to assist with containing or mitigating the coronavirus;

(8) Foreign nationals holding diplomatic visas, including dependents of such individuals holding derivative visas;

(9) Foreign nationals the CDC has determined would not pose a significant risk to the U.S.; and

(10) Foreign nationals whose entry is determined to be in the national interest or further important law enforcement objectives.

Therefore, the ban applies to any foreign nationals holding nonimmigrant visas such as H, L, O, E, among others, who have traveled in China within the last 14 days (since January 19, 2020).

Any foreign nationals who believe they are subject to this ban may want to explore traveling back into the U.S. before the imposition of the ban at 5 p.m. eastern time Sunday, February 2, 2020.

U.S. citizens who have been in the Hubei Province in the last 14 days will be subject to up to 14 days of mandatory quarantine upon return to the United States. U.S. citizens returning from the rest of mainland China who have been there in the last 14 days will undergo screening at US ports of entry and up to 14 days of self-monitoring.

This ban will remain in effect indefinitely. However, every 15 days, the Secretary of Health and Human Services will recommend to the President whether to continue, modify or terminate the ban.

We will provide updates if more information becomes available.

©2020 Greenberg Traurig, LLP. All rights reserved.

For more US Travel Bans, see the National Law Review Immigration Law section.

California Law Creates New Risk Factor

Last year, California enacted AB 5 imposing the so-called A-B-C test for employee status under California’s Labor Code.  The legislation basically extended the California Supreme Court’s holding in Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018) which imposed the test in the more limited context of claims for wages and benefits arising under wage orders issued by the Industrial Welfare Commission.

Although aimed at the gig economy, AB 5 has impacted a wide range of traditional businesses.  For example, it was widely reported last year that Vox media had laid off hundreds of California free-lance writers in response to AB 5.  Not surprisingly, the American Society of Journalists and Authors, Inc., and National Press Photographers Association has filed a lawsuit in federal court challenging the new law (A hearing on California’s motion to dismiss is scheduled for March 23).  A ballot initiative measure is currently in circulation to change for “app-based” transportation and delivery drivers.  This month, the California Trucking Association succeeded in obtaining a federal court order enjoining enforcement of AB 5 as to any motor carrier operating in California.

I am music and I write the songs, but am I an employee?

Great uncertainty still abounds about the applicability, application and even constitutionality of AB 5.  Thus, it is not surprising to see issuers identifying AB 5 as a risk factor in their filings with the SEC.  For example, Warner Music Group Corp.  included this risk factor in its Form 10-K concerning independent songwriters and and recording artists:

“Although we believe that the recording artists and songwriters with which we partner are properly characterized as independent contractors, tax or other regulatory authorities may in the future challenge our characterization of these relationships. We are aware of a number of judicial decisions and legislative proposals that could bring about major reforms in worker classification, including the California legislature’s recent passage of California Assembly Bill 5 (“AB 5″). AB 5 purports to codify a new test for determining worker classification that is widely viewed as expanding the scope of employee relationships and narrowing the scope of independent contractor relationships. Given AB 5’s recent passage, there is no guidance from the regulatory authorities charged with its enforcement, and there is a significant degree of uncertainty regarding its application. In addition, AB 5 has been the subject of widespread national discussion and it is possible that other jurisdictions may enact similar laws. If such regulatory authorities or state, federal or foreign courts were to determine that our recording artists and songwriters are employees, and not independent contractors, we would be required to withhold income taxes, to withhold and pay Social Security, Medicare and similar taxes and to pay unemployment and other related payroll taxes. We would also be liable for unpaid past taxes and subject to penalties. As a result, any determination that our recording artists and songwriters are our employees could have a material adverse effect on our business, financial condition and results of operations.”

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP

For more on California’s AB5 see the National Law Review Labor & Employment Law section.

National Monuments, by Land and by Sea

In 2016, President Obama established an offshore national monument (the Northeast Canyons and Seamounts Marine National Monument) on submerged lands and associated waters in the Exclusive Economic Zone (EEZ) of the United States, i.e., between 12 and 200 miles from the coastline. This preserve covers nearly 5,000 square miles, about 130 miles off Cape Cod. The designation protects deep marine ecosystems, corals, whales, and sea turtles, and prohibits crab and lobster fishing until 2023.

A fishing group challenged the monument designation made under the Antiquities Act, 54 U.S.C. § 320301, which was enacted in 1906 and authorizes the president to declare national monuments by public proclamation. To date, 158 national monuments have been created. In a case of first impression, a panel of the DC Circuit upheld the designation and recognized that the Antiquities Act does not render redundant or nullify the National Marine Sanctuaries Act, which has more procedural hurdles and differing standards in protecting marine sanctuaries than does the Antiquities Act. The court also reiterated that the Antiquities Act protects both surface and submerged lands and that the United States has significant control under domestic and international law over the EEZ to make the designation. Massachusetts Lobstermen’s Association v. Ross, No. 18-5353 (DC Cir. Dec. 27, 2019).

Other pending litigation concerns the authority of the president to remove a monument designation. In 2017, President Trump withdrew monument designations over millions of acres of sacred tribal lands, which opened the areas to mineral leasing and resulted in a lawsuit to challenge the removal of the designation. President Trump’s 85% reduction of the monument designation at the National Monument of Bears Ears in Utah was challenged in US district court. See Wilderness Society v. Trump, No. 1:17-cv-02587. Wilderness Society was consolidated with several similar cases. See Hopi Tribe v. Trump, another DC District Court case, No. 17-cv-02590. These cases are still pending. It is anticipated that the court will address whether the president or the Congress has the authority to withdraw monument designations under the Antiquities Act.

© 2020 Jones Walker LLP

IRS Penalties Assessed Against Your Client May Not Be Valid

Internal Revenue Code section 6751(b) provides that no penalty shall be assessed under the Code unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination, or such higher level official as the Secretary of the Treasury may designate.  This section defines penalty as any addition to tax or any additional amount.  The requirement for prior written approval does not apply to penalties for failure to file a return or pay tax, or to penalties that are automatically calculated through electronic means, but does apply to negligence and substantial understatement penalties, as well as the “responsible party” penalty for failure to withhold or remit payroll taxes.

In Graev v. Commissioner, 140 T.C. 377 (2013), the IRS imposed accuracy related penalties on a taxpayer.  The taxpayer argued that the penalties were invalid because no supervisor’s approval was obtained.  The Tax Court ruled in favor of the IRS, stating that the taxpayer’s challenge was premature because the IRS could comply with approval requirement any time before the Tax Court issued a final determination.  The Graev case was appealable to the Second Circuit Court of Appeals.

In Chai v. Commissioner, 851 F. 3d (2nd Cir. 2017), the Second Circuit Court of Appeals held that Code Section 6751(b) requires the IRS to obtain written approval of an initial penalty determination no later than the date that the IRS issues a notice of deficiency or files an answer asserting the penalty.  In light of the Second Circuit decision in Chai, the Tax Court issued a supplemental opinion in Graev v. Commissioner, 149 T.C. 485 (2018)  and reversed its prior holding regarding Code Section 6751(b).  In the supplemental opinion the Tax Court held that under Code Section 6751(b), the IRS must obtain  written supervisory approval of an initial penalty determination no later than the date that the IRS issues a notice of deficiency or files an answer and that the Government bears the burden of showing that it has complied with Code Section 6751(b).

It is likely that the IRS is now aware of this requirement and will seek the required supervisory approval.  However,  taxpayers should challenge any penalty covered by Code Section 6751(b) and require the IRS to provide proof that the required written supervisory approval was timely obtained.

© 2020 Mitchell Silberberg & Knupp LLP

For more on IRS Code guidance, see theNational Law Review Tax Law section.

The Promise and Peril of Autonomous Vehicles

The possibility of self-driving cars on our roads is prompting both excitement and anxiety. Advocates point to the possibility of increased safety, lower pollution, even less congestion. Critics aren’t sold on many of the supposed advantages.

So, what happens when driverless vehicles start hitting our roads? As with so many innovations, there are likely to be pluses and minuses.

Let’s consider safety. The United States Department of Transportation estimates that roughly 95% of road accidents are caused by human mistakes; driving too fast for conditions, not paying attention to the road, or illegal maneuvers such as driving through red lights. Given human tendencies to get distracted, one would expect that autonomous vehicles will be safer.

Autonomous vehicles are outfitted with sensors and cameras, which enable them to “see” their surroundings and react to traffic and pedestrians. Companies working on these vehicles have been testing these vehicles in simulated settings as well as on real roads. There is much to tout about their safety aspects: they’re not distracted like humans, they obey speed limits and traffic signs, they don’t drive fatigued.

But driving in traffic has turned out to be more challenging than expected, and a few well-publicized accidents – one involving a Tesla and one an Uber vehicle that killed a pedestrian – have prompted concerns the self-driving technology is not ready for prime time. In particular, that sensors and cameras may not be able to react in real-time to cope with humans who behave like, well, humans.

More choices or less?

“We’re moving to a future where people don’t own cars,” says Dr. Daniel Sperling, director of the Institute of Transportation Studies at the University of California, Davis. “You’ll have a subscription service, maybe, that emphasizes smaller vehicles, or you might want a cheaper service where it’s a van,” he adds.

Dr. Alain Kornhauser, director of the program in transportation at Princeton University, agrees to a point, saying privately owned cars are not likely to vanish completely — especially in rural areas, where getting a driverless taxi may be more challenging. Still, he says, the number of people who own cars — and the number of cars owned per family — will drop sharply.

In many cities with ridesharing services like Lyft or Uber, owning a vehicle has become less urgent. Autonomous vehicles could multiply ridesharing options.

But what if you’re in a rural area without these services? Should rural communities consider investing in self-driving vehicles as a form of public transport? What if you’re in a major city but can’t afford to either own an autonomous vehicle or even subscribe to the service?

There’s also the question of what happens to public transport as self-driving vehicles increase. Will we continue to support and improve the infrastructure for public transportation?

Public transport systems in the U.S. are not as robust as in some European nations. One of the main concerns for Seleta Reynolds, General Manager of Department of Transportation for Los Angeles, is managing access for people in different parts of Los Angeles because she understands how much that can impact one’s financial well-being.

“You can get to about 12 times as many jobs in an hour in a car as you can by transit in L.A.,” she said.

If autonomous vehicles end up reducing access, the financial and social impact could ripple across communities.

Then there is the question of what autonomous vehicles will do to people who drive for a living. According to the U.S. Bureau of Labor Statistics, more than 2.5 million people earn their living from driving – employed as tractor-trailer truck drivers, taxi and delivery drivers, and as bus drivers. If those jobs disappear, that could represent a potential loss of employment equal to what we saw during the Great Recession of 2008.

Many of the people driving vehicles for a living are classified as low-skilled workers. It will be difficult for such unemployed workers to quickly find new work, and the cost of re-training them could be high.

Autonomous vehicles have the potential to spur a massive and exciting paradigm shift. But there are darker clouds on the horizon too. The question is: will we be able to manage the changes wrought by self-driving vehicles in a positive way?

Copyright © 2020 Godfrey & Kahn S.C.

For more on autonomous vehicle developments, see the National Law Review Utilities & Transport Law section.

FTC Announces 2020 Thresholds for Merger Control Filings Under HSR Act and Interlocking Directorates Under the Clayton Act

The Federal Trade Commission (“FTC”) has announced its annual revisions to the dollar jurisdictional thresholds in the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”); the revised thresholds will become effective 30 days after the date of their publication in the Federal Register.  These changes increase the dollar thresholds necessary to trigger the HSR Act’s premerger notification reporting requirements.  The FTC also increased the thresholds for interlocking directorates under Section 8 of the Clayton Act, effective as of January 21, 2020.

Revised HSR Thresholds

Under the HSR Act, parties involved in proposed mergers, acquisitions of voting securities, unincorporated interests or assets, or other business combinations (e.g., joint ventures, exclusive license deals) that meet certain thresholds must report the contemplated transactions to the FTC and the Antitrust Division of the U.S. Department of Justice (“DOJ”) unless an exemption applies.  The parties to a proposed transaction that requires notification under the HSR Act must observe a statutorily prescribed waiting period (generally 30 days) before closing.  Under the revised thresholds, transactions valued at $94 million or less are not reportable under the HSR Act.

A transaction closing on or after the date the revised thresholds become effective may be reportable if it meets the following revised criteria:

Size of Transaction Test

The acquiring person will hold, as a result of the transaction, an aggregate total amount of voting securities, unincorporated interests, or assets of the acquired person valued in excess of $376 million;

or

The acquiring person will hold, as a result of the transaction, an aggregate total amount of voting securities, unincorporated interests, or assets of the acquired person valued in excess of $94million but not more than $376 million, and the Size of Person thresholds below are met.

Size of Person Test

One party (including the party’s ultimate parent entity and its controlled subsidiaries) has at least $188 million in total assets or annual sales, and the other has at least $18.8 million in total assets or annual sales. If the acquired party is not “engaged in manufacturing,” and is not controlled by an entity that is, the test applied to the acquired side is annual sales of $188 million or total assets of $18.8 million.

 The full list of the revised thresholds is as follows:

Original Threshold

2019 Threshold

2020 Revised Threshold
(Effective 30 days after publication in the Federal Register)

$10 million

$18 million

$18.8 million

$50 million

$90 million

$94 million

$100 million

$180 million

$188 million

$110 million

$198  million

$206.8 million

$200 million

$359.9 million

$376 million

$500 million

$899.8 million

$940.1 million

$1 billion

$1,799.5 million

$1,880.2 million

The filing fees for reportable transactions have not changed, but the transaction value ranges to which they apply have been adjusted as follows:

Filing Fee

Revised Size of Transaction Thresholds

$45,000

For transactions valued in excess of $94 million but less than $188 million

$125,000

For transactions valued at $188 million or greater but less than $940.1 million

$280,000

For transactions valued at $940.1 million or more

Note that the HSR dollar thresholds are only part of the analysis to determine whether a particular transaction must be reported to the FTC and DOJ.  Failure to notify the FTC and DOJ under the HSR Act remains subject to a statutory penalty of up to $43,280 per day of noncompliance.

Revised Thresholds for Interlocking Directorates

Section 8 of the Clayton Act prohibits one person from simultaneously serving as an officer or director of two corporations if: (1) the “interlocked” corporations each have combined capital, surplus, and undivided profits of more than $38,204,000 (up from $36,564,000); (2) each corporation is engaged in whole or in part in commerce; and (3) the corporations are “by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws.”1

Section 8 provides several exemptions from the prohibition on interlocks for arrangements where the competitive overlaps “are too small to have competitive significance in the vast majority of situations.”2  After the revised thresholds take effect, a corporate interlock does not violate the statute if: (1) the competitive sales of either corporation are less than $3,820,400 (up from $3,656,400); (2) the competitive sales of either corporation are less than 2 percent of that corporation’s total sales; or (3) the competitive sales of each corporation are less than 4 percent of that corporation’s total sales.

The revised dollar thresholds for interlocking directorates of $38,204,000 and $3,820,400 will be effective upon publication in the Federal Register; there is no 30-day delay as there is for the HSR thresholds.

1   15 U.S.C. § 19(a)(1)(B).

2   S. Rep. No. 101-286, at 5-6 (1990), reprinted in 1990 U.S.C.C.A.N. 4100, 4103-04.

© Copyright 2020 Cadwalader, Wickersham & Taft LLP

ARTICLE BY Joel Mitnick and Ngoc Pham Hulbig of Cadwalader, Wickersham & Taft LLP.
For more on Hart-Scott-Rodino thresholds, see the National Law Review Antitrust Law and Trade Regulation section.