Japan Announces Process for Adding “Existing Substances” to PL

The Japanese Ministry of Health, Labour and Welfare (MHLW) has published a request for nominations for “existing substances” be included on the Positive List (PL) of “synthetic resins” for food-contact materials (FCMs) with corresponding submission forms. “Existing substances” include those marketed or used for food-contact utensils, containers and packages (UCP) in Japan prior to the effective date for the PL (i.e., June 1, 2020).  The deadline for filing such nominations is October 30, 2020.

For additional information on the PL system for “synthetic resins” that was MHLW published on April 28, 2020, see the PackagingLaw.com article, A Move to Mandatory: Japan Finalizes its Positive List for “Synthetic Resins”.)

As a component of MHLW’s process for nominating “existing substances,” the Ministry requires that companies include an attestation that such substances were marketed or used in food-contact UCP prior to June 1, 2020.  Submission forms are provided for each of the following materials:

  1. Base polymers (Plastics and Coatings);
  2. Minor monomers polymerized with base polymers; and
  3. Additives (including coating agents).

Additional information, including links to application form and submission instructions, is available here.

© 2020 Keller and Heckman LLP
For more articles on packaging law, visit the National Law Review Biotech, Food, Drug section.

Ongoing Challenges for Fashion Brands in Germany – Legal Issues with Style Names Revisited

Using first names as style names to assist consumers in distinguishing between certain items, styles or washes within a collection is a widespread practice in the fashion industry. Compared to numerical identifiers, names may trigger emotions and are much easier to remember. Style names may be used in manifold ways, e.g. on labels sewn in the inside of garments, hangtags and boxes or in advertising material such as catalogues and offers on the internet. What many companies do not realize is that the use of style names involves legal risks. Many names are already registered as trademarks, which may give rise to trademark conflicts.

Germany has become a popular venue for disputes involving style names in recent years. Only comparatively few claims are raised by actual competitors, though. Rather, there are trade mark owners trying to benefit from the peculiarities of German civil procedure and trade mark law by monitoring the market for possibly infringing style names in order to collect legal fees and damages. In many cases, such claimants will threaten to sue other companies in the distribution chain, including retailers, in order to put pressure on the fashion company to settle regardless of the merits.

In this blog post, we would like to raise awareness for the legal issues involved with style names in Germany and address ways how best to deal with them.

Trade Mark Infringing Use or Mere Model Designation?

According to European case law, the owner of a trade mark may oppose the use of a sign identical with the trade mark for goods identical with those for which the trade mark is registered only if such use is liable to adversely affect one of the functions of the trade mark, in particular its essential function of guaranteeing to consumers the origin of the goods.

Whether a style name is perceived by consumers as enabling them to distinguish that product from those of a different origin, rather than being used as a reference to differentiate between a fashion company’s own styles, may give rise to considerable debate. In fact, many style names have over time become renowned brands – such as Gucci’s “Jackie” or Mulberry’s “Alexa”. Correspondingly, the case law of the German instance courts on whether the use of a sign as a style name constitutes trade mark infringing use has not been uniform. As German law allows for forum shopping, trade mark owners would usually seek the assistance of the courts in Hamburg and Frankfurt, which regularly assumed that style names are understood by the relevant public as an indication of origin and thus as (secondary) trade marks.

Notably, cease and desist letters are often sent by companies which do not manufacture or supply clothing or accessories, or at the very least are not known for this, but rather hold trade marks and engage in enforcing their rights to collect attorney fees and damages. Such right holders will usually not let a party “off the hook,” unless it issues a formal cease and desist declaration (with a contractual penalty clause, as is common practice under German law) and makes a payment to settle the case amicably. To increase pressure, these claimants will threaten to interfere with the fashion company’s distribution system by sending warning letters and/or suing commercial customers.

Guidelines by the German Federal Court of Justice

As at least some courts took an extremely right-holder-friendly approach, such cases were until recently hard to defend. Prospects of defense have improved, however, thanks to the judgments of the German Federal Court of Justice in “SAM”[1] and “MO”[2].

In these decisions, the Federal Court of Justice clarified that the use of a distinctive and non-descriptive sign as a style name does not in itself allow the conclusion that the sign is used as a trade mark. The fact that the style name is perceived as an indication of origin must be positively determined every single time. On that basis, the Court established some general guidelines for assessing whether a style name is used as a trade mark in an individual case:

  • First names used by several manufacturers as style names or particularly common first names – As followed from the Court’s previous case law[3], such names may be understood by the public as mere model designations. It could not be concluded from this, however, that less common first names are always understood as an indication of origin.
  • Directly affixed to the product – The public will typically see an indication of origin when a sign is directly affixed to the product, e.g. on a label sewn in the inside of the waistband or on a leather piece attached on the outside of the waistband.
  • Use on hangtags – The printing of a style name on hangtags attached to the garment could also be understood as an indication of origin under the circumstances.
  • Use in sales offers, e.g. in catalogues or on the internet – If the sign is used in a sales offer, e.g. in a catalog or on the internet, the offer as a whole and the character of the sign must be considered. If it can be assumed that the style name is well known, there is a strong argument in favor of using it as a trade mark, regardless of the further circumstances. Even if the style name is not known, use as a trade mark can be assumed, in particular if the style name is used in direct connection with the manufacturer’s or umbrella brand. In addition, an eye-catching emphasis speaks for use as a trade mark.

Comments

As usual, the devil is in the detail. Whilst it is relatively clear that use of a style name on the product can often be assumed as trade mark use, recent decisions by the courts[4] illustrate that in advertising every single detail of the offer has to be taken into consideration. This includes the overall layout of the offer and the relationship of the sign in suit to the manufacturer’s or umbrella brand and further article designations such as price, size, product description and delivery modalities. Nevertheless, the guidelines developed by the German Federal Court of Justice open up considerable room for argument.

As far as preventive measures are concerned, for fashion companies using hundreds or even thousands of style names, worldwide trade mark clearance is not always an option in view of the considerable costs involved. As soon as it crystallizes that a style name may become important for the company’s business, it is worth protecting it by trade mark registrations. In addition, compliance with a few simple rules when using style names based on the German Federal Court of Justice’s guidelines can minimize the risk of objections significantly.

[1] BGH, judgment of 7 March 2019, case I ZR 195/17 – SAM.

[2] BGH, judgment of 11 April 2019, case I ZR 108/18 – MO.

[3] Cf. BGH, judgment of 19 December 1960, case I ZR 39/59 – Tosca; BGH, judgment of 20 March 1970, case I ZR 7/69 – Felina-Britta; BGH, judgment of 26 November 1987, case I ZR 123/85 – Gaby.

[4] See, for example, Frankfurt Court of Appeals, judgment of 13 August 2020, case 6 U 94/17 – MO; Frankfurt Court of Appeals, judgment of 1 October 2019, case 6 U 111/16 – SAM; Hamburg Court of Appeals, judgment of 28 November 2019, case 5 U 65/18 – Rock Isha; Hamburg Court of Appeals, judgment of 19 December 2019, case 3 U 191/18 – MYMMO MINI.

© Copyright 2020 Squire Patton Boggs (US) LLP
For more articles on intellectual property, visit the National Law Review intellectual property law section.

Building Resilience for the Stressful Times Ahead

Even in perfectly normal years, the last few months seem to be abnormally stressful.  This year, the ongoing pandemic will heighten the stresses your internal clients will experience.  You can help them by communicating that everyone is feeling a bit stressed right now and sharing strategies that your clients can use to help build resilience.

How stressed are we?

Since 2007 the American Psychological Association (APA) has issued an annual report on the “state of the nation,” with a specific focus on stress.  Earlier this year the group decided to take a monthly “pulse” to understand how individuals are processing key events that have occurred.  Thus, far they have issued three separate reports.

Among the key findings are the following:

  • Most Americans are experiencing considerable stress related to the coronavirus.  They also report higher levels of general stress than in recent years.
  • On average, American parents feel higher levels of stress than adults without children.  Parental stress relates to education, basic needs, access to health care services and missing major milestones.
  • Following the May 25th death of George Floyd, more than eight in ten Americans reported that the future of the nation is a significant source of stress.  Around seven in ten Americans reported that this is the lowest point in the nation’s history that they can remember.
  • Stress levels related to the pandemic remained generally consistent throughout the spring and summer.  On a scale of one to ten, the levels of stress reported were 5.9 in April/May, 5.6 in May/June and 5.7 in July.

Among concerns lawyers express in terms of managing work, JD Supra reports 32% worry about managing the current workload during the crisis, 31% worry about a broader slowdown in overall business, and 23% worry about collaboration between and among remote employees.

Should lawyers be particularly aware of the need to manage stress?

Absolutely yes.  Research undertaken by the American Bar Association and the Hazelden Foundation in 2016 found, “[l]evels of depression, anxiety, and stress among attorneys … are significant, with 28%, 19%, and 23% experiencing mild or higher levels depression, anxiety, and stress, respectively.”  The research further noted that “61% reported concern with anxiety at some point in their career…”  Additionally, it revealed “higher levels of depression, anxiety, and stress among those screening positive for problematic alcohol use.”

For additional information, read “The Prevalence of Substance Abuse and Other Mental Health Concerns Among American Attorneys,” Journal of Addiction Medicine, February 2016.

Martin Seligman, Director of the Positive Psychology Center at the University of Pennsylvania, has postulated that American lawyers may be particularly susceptible to depression, anxiety and stress for three significant reasons:

Pessimism – According to Seligman, the “pessimist views bad events as pervasive, permanent, and uncontrollable, while the optimist sees them as local temporary and changeable.”  He further notes that “pessimists are losers on many fronts.  But there is one glaring exception:  Pessimists do better at law.”

Low Decision Latitude in High Stress Situations – Decision latitude refers to the number of choices one believes he or she has on the job. Individuals who work in fields in which high demands are placed upon them and they experience low decision latitude, i.e., there is one right and one wrong option, experience higher levels of depression and cardiovascular disease.

Win-Loss Perspective – Seligman writes, “American law has…migrated from being a practice in which good counsel about justice and fairness was the primary goal to being a big business in which billable hours, take-no-prisoners victories, and the bottom line are now the principle ends.”

For additional information, read M. Seligman, “Why Are Lawyers So Unhappy?” (2016)

What are the signs that someone is stressed?

According to the APA, the coronavirus pandemic “is an epidemiological and psychological crisis.”  Everyone needs to be aware of the signs of anxiety, depression and suicide so that we know when we’re struggling as well as when a colleague, client or family member might be at risk.

The APA cites the following:

Signs of anxiety

  • Persistent worry or feeling overwhelmed by emotions.
  • Excessive worry about a number of concerns, such as health problems or finances, and a general sense that something bad is going to happen.
  • Restlessness and irritability.
  • Difficulty concentrating, sleep problems and generally feeling on edge.

Signs of depression

  • A lack of interest and pleasure in daily activities.
  • Significant weight loss or gain.
  • Insomnia or excessive sleeping.
  • Lack of energy or an inability to concentrate.
  • Feelings of worthlessness or excessive guilt.
  • Recurrent thoughts of death or suicide.

Risk factors for suicide

  • Talking about dying or harming oneself.
  • Recent loss through death, divorce, separation, even loss of interest in friends, hobbies and activities previously enjoyed.
  • Changes in personality like sadness, withdrawal, irritability or anxiety.
  • Changes in behavior, sleep patterns and eating habits.
  • Erratic behavior, harming self or others.
  • Low self-esteem including feelings of worthlessness, guilt or self-hatred.
  • No hope for the future, believing things will never get better or nothing will change.

What can we do to combat stress?

Long-term, chronic stress can affect physical health. The American Medical Association reports that chronic stress contributes to cardiovascular disease (related to high blood pressure, truncal obesity, and high lipid levels) and diabetes (high glucose levels) and osteoporosis (bone density). It also impacts our ability to think clearly.  Throughout the pandemic, several of my clients have reported difficulty focusing on projects for extended periods of time.  They have found that the best way for them to stay productive is to break the day into 15-minute spurts of focused activity, followed by a brief diversion, and then repeat.

According to the APA, the most effective strategies for reducing stress include the following:

  • Maintaining a healthy social support network;
  • Engaging in regular physical exercise; and
  • Getting an adequate amount of sleep each night.

Senior lawyers and other managers should implement the following additional strategies:

Create structured team and individual check-ins – Senior lawyers shouldn’t make the mistake of seeing this additional management responsibility as yet one more item that keeps them from tackling client emergencies and other billable work.  The team and one-on-one conversations that senior lawyers conduct throughout the upcoming winter months may be the single most important thing that they can do to ensure junior associates develop professionally and feel connected.  Even brief check-ins will help the firm retain its best associates long after the pandemic ends.

Communicate when it’s best for others to reach you – Junior associates are desperate to communicate with partners and yearn for the serendipitous conversations that used to occur in hallways and dining rooms.  Many are also hesitant to reach out to senior lawyers, because they know most partners are extremely busy tending to client needs.  Senior lawyers should block out some portion of each workday and let juniors know that you will be available to take their calls during that time.

Offer encouragement and emotional support – Throughout the course of their careers, senior lawyers have withstood several national crises, including the Great Recession of 2008, 9/11, the bursting of the dot com bubble, etc.  When the pandemic emerged, they had the benefit of perspective, something junior lawyers don’t yet possess.  Senior lawyers can help juniors better cope by sharing what they learned from previous crises.

Many junior lawyers feel terribly isolated, expressing concerns that they are losing professional relationships daily.  Remind them to take initiative and affirmatively reach out to others…make one call a day to a peer in their practice group, a colleague in another department who is in their starting class, a law school classmate at another firm, or one of the firm’s newest associates.

If senior lawyers fail to initiate conversations, associates must be encouraged to reach out.  As I recently told one junior associate, a good rule of thumb for succeeding at life is:  if you don’t ask, you won’t get.  If you feel the need for a mental health day, you need to ask for it; if you want to work on a specific client project, be prepared to ask to join the team; and if you need 10 minutes of a partner’s time to better understand the parameters of an assignment, send a meeting request immediately.  Juniors should be reminded that they won’t always “get” everything that they request, but they will increase the sense that they’ve taken control of their careers by asking.

© 2020 Mary Crane & Associates, LLC
For more articles on the workplace, visit the National Law Review Labor & Employment section.

Who is considered “disadvantaged” for purpose of a Disadvantaged Business Enterprise (DBE) and Minority Business Enterprise (MBE) Certification? The answer may surprise you.

For purposes of Disadvantaged Business Enterprise (otherwise known as “DBE”) Certification, the Code of Federal Regulations, 49 C.F.R. §§ 26.5 and 26.67(a)(1) provide that there is a rebuttable presumption of disadvantage for United States citizens (or lawful admitted permanent residents) who are:

  • Women;
  • Black Americans;
  • Hispanic Americans (persons of Mexican, Puerto Rican, Cuban, Dominican, Central or South American, or other Spanish or Portuguese culture or origin);
  • Native Americans (persons who are enrolled members of a federally or state recognized Indian tribe, Alaska Natives or Native Hawaiians);
  • Asian-Pacific Americans (persons whose origins are from Japan, China, Taiwan, Korea, Burma (Myanmar), Vietnam, Laos, Cambodia (Kampuchea), Thailand, Malaysia, Indonesia, the Philippines, Brunei, Samoa, Guan, the U.S. Trust Territories of the Pacific Islands, Samoa, Macao, Fiji, Tonga, Kirbati, Tuvalu, Nauru, Federated States of Micronesia or Hong Kong);
  • Subcontinent Asian Americans (persons whose origins are from India, Pakistan, Bangladesh, Bhutan, the Maldives Islands, Nepal or Sri Lanka); or
  • Other minorities found to be disadvantaged by the SBA.

It may be a surprise to some that persons of Middle Eastern and North African origin are not considered disadvantaged by the DBE program.  In fact, the U.S. Department of Transportation has found that “[p]ersons of Lebanese and other Middle Eastern origins are not presumed disadvantaged under the regulations.”    In re SanUVAire, LLC, No. 20-0029, March 30, 2020.

Persons of Middle Eastern origins may also not be eligible for certain Minority Business Enterprise certifications, though it can be inconsistent from group to group.  While the Southern Region Minority Supplier Development Council allows certification of persons of Middle Eastern origin, the Eastern Minority Supplier Development Council does not, even though both are affiliated with the National Minority Supplier Diversity Council.

©2020 Strassburger McKenna Gutnick & Gefsky
For more articles on disadvantaged business enterprises, visit the National Law Review Labor & Employment section.

Bedrock Principles of Insurance Contract Interpretation May Aid Policyholders Seeking Coverage for Losses Due to COVID-19

Determining how an insurance policy applies to a situation not anticipated by the policy’s drafters often results in disputes between an insurer and a policyholder.  So, it’s no surprise that the COVID-19 pandemic, which is unprecedented in many respects, has led to numerous differences of opinion regarding the extent to which various types of insurance cover a wide array of losses related to COVID-19.  And while the first court rulings on this subject were recently issued, these decisions reached differing conclusions and are largely driven by the specific facts alleged and policy language at issue (as well as controlling law), leaving broader disagreements over the scope of coverage largely unresolved.[1]  In other words, seven months after policyholders began submitting claims, uncertainty continues to hang over a wide array of coverage issues related to COVID-19.

With this uncertainty in mind, policyholders evaluating potential coverage for losses due to COVID-19 should bear in mind a central tenet of insurance coverage law:  the interpretation of insurance policies weighs heavily in favor of coverage when there is uncertainty.  From this basic precept flow a few well-established principles of insurance contract interpretation that all policyholders should bear in mind and that may play a valuable role for those seeking coverage as a result of COVID-19.

First, courts nationwide generally agree that insurance policies should be construed in favor of coverage and any ambiguities should be read in the policyholder’s favor.  A sampling of decisions from around the country illustrate how this rule operates to ensure broad coverage for policyholders in situations that may appear uncertain.  For instance, courts have held that:  (1) a policy that covered acts by a truck driver while “on duty” included events that occurred while the driver was asleep in the passenger berth of the truck[2]; (2) a policy that covered “collapse” of a structure could include sagging of that structure[3]; and (3) a policy that covered “functions incidental to [an auto dealership’s] garage business” included an informal gathering of a few employees after work to drink beer at the dealership.[4]  While these cases all differ significantly in their specifics, they each illustrate the broad manner in which courts will interpret the scope of coverage under an insurance policy, especially when some uncertainty is present.[5]

Second, where an insurer seeks to deny coverage based on an exclusionary clause, that exclusion should be read narrowly and the insurer bears the burden of proof.  Coverage rulings from various courts demonstrate the narrow reading that courts will apply to exclusions when their application is disputed.  For example, courts have rejected insurers’ attempts to preclude coverage by narrowly reading exclusions such that:  (1) an exclusion applying to a “contractor” included only contractors retained by the insured, rather than any contractor performing work that benefits the insured[6]; (2) an exclusion for “owned property” did not apply to groundwater located on an insured’s property[7]; and (3) an exclusion for injury arising “from or during the course of business pursuits of an insured” did not apply to an insured’s posting of allegedly defamatory posters regarding a coworker at their workplace.[8]  Courts will often apply this principle not only to provisions explicitly marked as an “exclusion” but to other limitations on coverage as well.

Third, some courts will resolve disputes in favor of coverage when a policyholder can demonstrate that they had a reasonable expectation of coverage, even if that expectation is arguably inconsistent with certain terms in the policy.  In an illustrative example, a court refused to bar coverage for a fight under a nightclub’s policy with an “assault and battery” exclusion because the nightclub alleged it was not aware of the exclusion and believed that physical altercations were covered by the policy.[9]

Fourth, with respect to third-party liability insurance policies, insurers generally have a very broad duty to defend, and often must defend an entire lawsuit when any allegation pled in a complaint could potentially fall within coverage.  To illustrate how broadly this rule can apply, an insurer under a policy covering a landlord’s “real estate manager” was found to have a duty to provide a complete defense to a tenant watering a few plants as a favor to the landlord.[10]

Of course, these tenets alone will not determine whether a particular claim is covered under a particular policy, and policyholders seeking coverage should be prepared to detail the specific facts and law supporting their demand for coverage.  For instance, a policyholder seeking business interruption coverage under a property insurance policy that requires “direct physical loss” will want not only to cite these favorable general principles but should also consider providing any available evidence regarding the potential presence of COVID-19 at the property.  The policyholder should further look to draw analogies to cases where a similar policy requirement was satisfied by the existence of condition that impacted property but did not result in permanent damage to property, such as bacteria, ammonia, or a loss of power.[11]  But, regardless of the specific facts and policy provisions under which a policyholder is seeking coverage, the key principles of insurance coverage law placing a thumb on the scale in their favor should play a key role in their coverage analysis during these uncertain times.

[1] See Social Life Magazine v. Sentinel Ins. Co., No. 1:20-cv-03311-VEC (S.D.N.Y. May 14, 2020); Gavrilides Mgmt. Co. v. Mich. Ins. Co., No. 20-000258-CB (Mich. Cir. Ct. July 1, 2020); Rose’s 1, LLC v. Erie Ins. Exch., No. 2020-CA-002424-B (D.C. Super. Ct. Aug. 6, 2020); Studio 417, Inc. v. The Cincinnati Ins. Co., No. 20-cv-03127-SRB (W. D. Mo. Aug. 12, 2020); Optical Servs. USA/JC1 v. Franklin Mut. Ins. Co., No. BER-L-3681-20, (N.J. Super. Ct. Bergen Cty. Aug. 13, 2020).

[2] Torres v. Transguard Ins. Co. of America Inc., 2014 WL 3362124, No. CV-13-01578 (D. Ariz. June 20, 2014).

[3] Key Biscayne Ambassador Condominium Association Inc. v. Aspen Specialty Insurance Co., 2018 WL 1863741 No. 16-24564, (S.D. Fla. Feb. 5, 2018).

[4] Sentry Select Insurance Company v. Ruiz, 324 F. Supp. 3d 874 (W.D. Tex. 2018).

[5] Additionally, not only must insurers read policies broadly in favor of coverage, they also have a duty to investigate a claim before denying coverage, and failure to investigate may give rise to extracontractual liability.  Given the haste with which many insurance carriers have denied coverage for claims related to COVID-19, it’s little surprise that a number of lawsuits have already been filed alleging that an insurer failed to conduct an adequate investigation before denying coverage for a COVID-19 related claim.

[6] United States Liability Insurance Co. v. Benchmark Insurance Services, 797 F.3d 116 (1st Cir. 2015); Atain Specialty Inc. Co. v. Lusa Construction, Inc., 2016 WL 3452750, No. 14-4356 (D.N.J. June 21, 2016).

[7] Reliance Inc. v. Armstrong World Industries, 678 A.2d 1152 (N.J. App. Div. 1996).

[8] Illinois Farmers Ins. Co. v. Modory, 2019 IL App (1st) 180721-U, ¶ 42 (App. Ct. Ill. March 15, 2019).

[9] Fall v. First Mercury Ins. Co., 225 F. Supp. 3d 842, 849 (D. Ariz. 2016).

[10] Dove v. State Farm, 399 P.3d 400 (N.M. Ct. App. 2017).

[11] Motorists Mutual Ins. Co. v. Hardinger, 131 Fed. Appx. 823 (3d. Cir 2005); Gregory Packaging, Inc. v. Travelers Property Casualty Co. of America, Civ. No. 2:12-CV-04418, 2014 WL 6675934 (D.N.J. Nov. 25, 2014); Wakefern Food Corp. v. Liberty Mutual Fire Insurance Co., 968 A.2d 724 (N.J. App. Div. 2009).

© 2020 Gilbert LLP
For more articles on insurance law, visit the National Law Review Insurance Reinsurance & Surety section.

COVID-19 Telecommuting Tax and Leave Issues for Employers

Months into the COVID-19 pandemic, many employer telecommuting arrangements remain in place, with several large corporations opting to extend these arrangements well into 2021.  The benefits of such arrangements have been clear for many employers during the pandemic, including that they permit continued productivity while keeping employees safe.  However, the longer that employees remain out of the office, the more telecommuting-related issues arise, including with respect to taxation of employee income and leave requirements, which we discuss below.

Tax Implications of an Employee Working Remotely Due to the COVID-19 Pandemic

As a general rule, employees pay income tax in the state in which they perform services for an employer.  For example, if a teleworking employee lives and works entirely in New Jersey despite the fact that her employer is located in Florida, the worker’s income tax would be withheld according to New Jersey law and paid to the State of New Jersey.  Many states have reciprocal agreements with one another on the treatment of taxes when an employee works in one state and lives in another.  Two neighboring states will agree that an employee who works in State A can pay income tax in their home State B, allowing the employee to file one tax return each year.  In the absence of tax reciprocity agreements between neighboring states, employees may be subject to income taxes in two states (for example, New York and New Jersey).  With masses of employees teleworking in a different state from their typical work arrangement, where the employee should pay income taxes becomes increasingly complicated.

Some states have addressed this issue and other business-related tax implications caused by COVID-19.  For example, the Massachusetts Department of Revenue issued emergency regulations concerning telecommuting employees, outlined in a Technical Information Release (“TIR”).  The TIR became effective on March 10, 2020 and remains in effect until Governor Baker gives notice that the state of emergency is over.  The TIR clarifies (1) the treatment of personal income taxes for employees currently working outside the state (i.e., telecommuting) due to COVID-19; (2) sales and use tax nexus for vendors with a “physical presence” in Massachusetts solely due to COVID-19; (3) whether a business is subject to a corporate excise tax with employees currently “conducting business” on its behalf in Massachusetts; and (4) whether to tax employees currently working inside or outside Massachusetts for Paid Family and Medical Leave purposes (more on this piece below).

New Jersey similarly issued FAQ’s addressing telecommuting tax implications.  The state’s Division of Taxation waived the “nexus-creating” impact on out-of-state businesses with employees currently working in New Jersey as a result of COVID-19.  The Washington D.C. Office of Tax and Revenue published similar information stating that it will not impose a corporate franchise tax nexus on employers because employees are telecommuting during the public emergency caused by COVID-19.

In the absence of guidance from each state on remote work tax implications, employers are encouraged to consult legal counsel or their accountants on how out-of-state remote workers impact company tax obligations.

Leave Law Implications of Employee Remote Working

It was hard enough before the pandemic started to untangle the complex web of leave entitlements that may apply to an employer’s workforce in different states.  This web of leave laws becomes even more complicated however, when employees telecommuting in a different state from which they typically work begin to impact the employee’s eligibility for local leave.

For example, how does an employee who regularly works in New York City but is now working remotely from New Jersey accrue sick leave?  Is the employee entitled to New York City Sick and Safe Time and/or New Jersey Sick Leave?  Ultimately (and absent additional guidance) the answer will depend on the eligibility requirements of the leave, and the specifics of the employee’s work history.

In this scenario, New Jersey’s FAQs on sick time provides that “a telecommuter who routinely performs some work in New Jersey is entitled to full earned sick leave covered under [New Jersey’s] Earned Sick Leave Law so long as the employee’s base of operations or the place from which such work is directed and controlled is in New Jersey.”  Based on this guidance, would an employee who typically works in New York City, but who is currently telecommuting in New Jersey as a result of the pandemic be entitled to sick leave under New Jersey law?  As the pandemic, and in turn this telecommuting arrangement, continues, at what point does the employee’s base of operations shift to New Jersey requiring the employer to provide sick leave?

At the same time, would this employee still be entitled to accrue sick leave under New York City’s law (and New York State’s new law, discussed in our previous post)?  New York City’s law, which was recently amended, has interpretive guidance (applicable under the old law) stating that an employee only accrues sick leave under the New York City law when they perform services in New York City.  If they are subject to a temporary telecommuting arrangement, do they lose eligibility to accrue New York City sick leave?  Will New York City update its guidance to address this issue?  Will New York State issue guidance under its new law to address this issue as well? Employers should also be mindful that employees may be able to maintain multiple accruals depending on where they perform services.

In Massachusetts, the state has thankfully clarified how to treat employee eligibility for the Massachusetts Paid Family and Medical Leave Act.  Employers and employees began contributing to the Commonwealth’s trust for paid family and medical leave benefits back in 2019, and most leave entitlements will become available in a few short months on January 1, 2021 (see our blog posts on preparing for Massachusetts Paid Family and Medical Leave here and here).  However, many employees regularly working in Massachusetts commute in from neighboring states including Rhode Island and New Hampshire.  With such employees now living and teleworking outside of Massachusetts, should employers still deduct contributions from employee paychecks?  Fortunately, the Massachusetts DOR addressed this issue in its Technical Information Release described above:  An employee who previously performed services outside of Massachusetts and was not subject to PFML will not become subject to PFML solely because the employee is temporarily working from home in Massachusetts.  Likewise, an employee who previously performed services in Massachusetts but is temporarily working from home outside of Massachusetts solely due to COVID-19 continues to be subject to the PFML rules.  However, if employers decide to extend teleworking arrangements beyond the pandemic, this guidance will no longer apply.  Employers will need to determine if and when an employee becomes subject to (or is no longer subject to) Massachusetts Paid Family and Medical Leave.

Employers may be able to conduct a quick analysis to determine whether an employee is or is not entitled to a certain leave benefit while COVID-19 state of emergencies remain in place in many states.  However, if long-term telecommuting arrangements become the norm after the pandemic ends, employers must reevaluate applicable leave policies to ensure they align with their new remote workforce.

Parting Shot

As the last several months of telecommuting has taught us, working from home can have both benefits and drawbacks.  Employers are encouraged to consult with counsel before making tax and leave-related decisions that impact employees, as they relate to remote working during the COVID-19 pandemic.

©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
For more articles on tax and labor topics, visit the National Law Review Labor & Employment section. 

U.S., 11 States Sue to End Google’s Reign as “Monopoly Gatekeeper for the Internet”

Suit says company improperly uses market power to achieve exclusivity.

The U.S. Department of Justice and 11 states have sued Google LLC in federal court in Washington, D.C. for unlawfully maintaining its position as “monopoly gatekeeper for the internet” by blocking competitors in Internet search and search advertising markets. “For many years, Google has used anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising, and general search text advertising — the cornerstone of its empire,” the government suit alleges. Google immediately responded via web post, calling the suit “dubious” and “deeply flawed.”

Download the complaint.

The complaint pays special attention to internet searches on mobile devices, an activity that has by far overtaken searches initiated by consumers on desktop computers. Mobile searches are now “the most important avenue for search distribution in the United States.” Mobile and desktop devices that default to the Google search engine gives the company “de facto exclusivity,” according to the complaint.

Google is alleged to maintain its dominance in general search by entering into “exclusionary agreements, including tying arrangements” to “lock up distribution channels and block rivals.” Google uses its considerable resources and revenue to help make this happen. “Google pays billions of dollars a year to distributors … to secure default status for its general search engine …” The company even prohibits device makers and distributors from dealing with Google’s competitors. Deals have been struck with Apple, LG, Motorola, Samsung, AT&T, T-Mobile, Verizon, Mozilla, Opera, and UCWeb, the suit alleges. And some agreements require distributors to take and feature “a bundle of Google apps” to make sure Google is a consumer’s first click for popular services.

These exclusionary agreements are alleged to cover just under 60 percent of all search queries, while almost half of the remaining queries go through Chrome, also a Google product. “Between its exclusionary contracts and owned-and-operated properties,” the suit says, “Google effectively owns or controls search distribution channels accounting for roughly 80 percent of the general search queries in the United States. Largely as a result of Google’s exclusionary agreements and anticompetitive conduct, Google in recent years has accounted for nearly 90 percent of all general-search-engine queries in the United States, and almost 95 percent of queries on mobile devices.”

“Google has thus foreclosed competition for internet search,” the government says.

Moreover, “Google monetizes this search monopoly in the markets for search advertising and general search text advertising, both of which Google has also monopolized for many years,” the complaint says. Google generates $40 billion a year from advertisers, part of which it uses to get distributors to favor Google’s search engine. These payments discourage distributors from switching and create a barrier to entry for rival search engines, especially small, innovative players.

“Google’s anticompetitive practices are especially pernicious because they deny rivals scale to compete effectively,” the DOJ and the states explain. Google’s products run on complex algorithms that “learn” which ads to present to which users. The “volume, variety, and velocity of data,” which Google has more of than anyone, “accelerates the automated learning of search and search advertising algorithms.” The scale of the data it feeds into these algorithms is something Google has acknowledged is the key to its success.

The complaint adds that Google’s grip on distribution “thwarts potential innovation.” The government plaintiffs noted two rivals — one that is using a subscription model and DuckDuckGo, which has strict privacy protection policies – “are denied the tools to become true rivals: effective paths to market and access, at scale, to consumers, advertisers, or data.”

The government notes that the once scrappy Google claimed Microsoft’s practices were anticompetitive. “Almost 20 years ago, the D.C. Circuit in United States v. Microsoft recognized that anticompetitive agreements by a high-tech monopolist shut off effective distribution channels for rivals, such as by requiring preset default status (as Google does) and making software undeletable (as Google also does), were exclusionary and unlawful under Section 2 of the Sherman Act.”

Google’s exclusionary strategy is being applied more harshly in newer technologies, such as voice assistants and the “internet of things,” such as smart speakers, home appliances, and autonomous cars. Without a court order, the government says, “Google will continue executing its anticompetitive strategy, crippling the competitive process, reducing consumer choice, and stifling competition.”

The suit asks the court to declare that Google has acted unlawfully to maintain monopolies in the search services, search advertising, and search text advertising markets. It seeks unspecified structural relief and an order prohibiting future exclusionary practices.

Google: It’s a “Dubious Complaint”

Kent Walker, VP of Global Affairs for Google, apparently saw the suit coming. In a well-illustrated response, he wrote: “Today’s lawsuit by the Department of Justice is deeply flawed. People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives.”

“This lawsuit would do nothing to help consumers. To the contrary, it would artificially prop up lower-quality search alternatives, raise phone prices, and make it harder for people to get the search services they want to use,” Walker said.

“Our agreements with Apple and other device makers and carriers are no different from the agreements that many other companies have traditionally used to distribute software,” the response continues. “Other search engines, including Microsoft’s Bing, compete with us for these agreements. And our agreements have passed repeated antitrust reviews.

Read Google’s full response.

Edited by Tom Hagy for MoginRubin LLP.

© MoginRubin LLP
ARTICLE BY Jonathan Rubin  of MoginRubin
For more articles on antitrust suits, visit the National Law Review Antitrust & Trade Regulation section.

A Social Contract – Terms to Consider for Influencer Advertising Agreements

Whether you’re paying big bucks for a Kardashian or providing discount coupons to a local star, hiring “influencers” to promote your company, products or services has become commonplace. But it’s not yet common to contract with influencers for their services. And that’s a mistake! If you’re hiring an influencer, you should strongly consider a written agreement.

But first, what is an influencer?

An “Influencer” is: An individual who has the power to affect purchase decisions of others because of his/her authority, knowledge, position or relationship with his/her audience. For legal purposes, an influencer is anybody your company is compensating to post, print, or otherwise disseminate information for a commercial purpose.

Ok, so you’re hiring an influencer and you’re going to use a contract. Here are some of the terms to consider including in your influencer agreement:

1. Define Performance and Content Ownership

Provide as much detail as possible relating to the content the influencer is going to create and include who ultimately owns the content. Include how many posts are expected and specifically on what accounts and platforms the posts need to be made. Most influencers have more than one social media account. If their public Twitter account has 1.5 million followers but their private Instagram account only has 500, you will probably want to make sure the posts are primarily made on the public Twitter account. Depending on which party owns the content, a license may be needed for the non-owning party to use the content. It is also smart to include a payment schedule (Hint: don’t pay the influencer all up front).

2. Morals Clause

Determine the sort of content with which your brand can and cannot be associated. If you’re selling children’s toys, you likely don’t want posts of your product to include vulgarity, drugs and alcohol. This clause should be broad, and it may be wise to have it apply to the influencer and their family. Including family members may seem odd, but there have been several instances this year where family members of popular influencers participated in criminal and otherwise unsavory activity that could reflect poorly on your brand.

3. Fraudulent Follower Trigger

A big part of what you’re paying for is the reach of the influencer. If it’s ultimately determined that a portion of the influencer’s followers are fake, you’re losing the impact of the influencer’s network and paying to reach people that don’t exist. This is a big problem. A study released by the University of Baltimore determined that fake followers in influencer marketing will cost brands $1.3 billion this year. Think about asking the influencer to include a clause that allows you out of the agreement and a return of payment in the event it is determined the influencer’s followers are not genuine. Services including Social Audit Pro, IG Audit, Hypr and Famoid can help you determine the authenticity of followers prior to engaging.

4. Non-Disparagement Clause

Your brand is paying influencers because they have the ability to influence consumers—that influence can go both ways. Think about including a non-disparagement clause.

5. Right to Approve/Remove Content

This is one of the most important clauses to consider—giving yourself the right to approve content and have content removed. Many companies don’t like dealing with the burden of pre-approving content, so instead they include a clause that allows for absolute authority over the removal or revision of content. Be sure to define the amount of time the influencer has to remove content after a request is made (e.g., within 6 hours of a request).

6. Compliance with FTC Guidelines

The FTC has been paying attention to influencer advertising and has released easy-to-read guides on how to comply with the law. Including a clause requiring compliance with all FTC guidelines is often a good idea.

7. Exclusivity

It’s common for successful influencers to work with more than one brand at a time. If you want an exclusive partnership with a content creator, that needs to be included in your agreement. Many successful influencers won’t agree to broad exclusivity terms, so you may need to narrow the exclusivity to the category (e.g., only one beer brand) and apply time limits (e.g., no competing brands for at least three months).

Finally, authenticity matters! Pick an influencer that actually likes your brand/products. Just because a person has reach doesn’t mean they’re the right pick for your brand. The reason consumers respond to influencer advertising is because it feels more authentic than traditional advertising. While this is not an exhaustive list of terms, hopefully you can use it as a checklist of key terms to include in your written agreement when negotiating with all of your influencers moving forward. Did I mention it’s usually a good idea to have a written agreement for your influencers?

© 2020 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.
For more articles on influencers, visit the National Law Review Communications, Media & Internet section.

172 Immigrants Arrested in Sanctuary Cities by ICE in Six Days

The Department of Homeland Security (DHS) and United States Immigration Customs and Enforcement (ICE) concluded a targeted enforcement operation, which lasted for a week. The operation resulted in 170+ at-large illegal immigrants arrested throughout the United States in states with sanctuary policies.

About the Immigrants Arrested

ICE officers from the field offices of New York; Seattle; Denver; Philadelphia; Baltimore; and Washington, D.C., conducted the enforcement actions from October 3 through October 9. The arrests were targeted on aliens who have criminal convictions and were arrested but released by state or local law enforcement agencies despite having immigration detainers placed on the immigrants. In a press release, ICE announced that out of the 170+ arrested, more than 80% of the aliens arrested had criminal convictions or pending criminal charges at the time of the arrest.

The immigrants arrested include 54 in New York; 35 in Seattle; 34 in Denver; 26 in Philadelphia; 12 in Baltimore; and 11 in Washington, D.C. Just at the end of September, ICE announced the arrest of 128 aliens in California from where the operation was conducted from September 28 to October 2, as part of immigration enforcement actions. The news released by ICE also had data of the arrested aliens in the fiscal year 2019: ICE arrested more than 1,900 convictions and charges for homicide, 1,800 for kidnapping, 12,000 sex offenses, 5, 000 sexual assaults, 45,000 assaults, 67,000 crimes involving drugs, 10,000 weapons offenses, and 74,000 DUIs.

Acting DHS Secretary Chad F. Wolf said, “Last fiscal year, 86 percent of people arrested by ICE had criminal convictions or pending charges. ICE focuses its resources on those who pose the greatest threat to public safety. The men and women of ICE put their lives on the line every day to keep these individuals off the streets,” He further stated that, “The Department will continue to carry out lawful enforcement actions in order to keep our communities safe, regardless of whether or not we have cooperation from state and local officials. Politics will not come before safety when enforcing the law and keeping our citizens safe.”

Though the arrests made by ICE hints that it primarily targets immigrants with a criminal record, the press release by ICE stated that it does not exempt classes or categories of removable aliens from potential enforcement.

About Sanctuary States

Sanctuary states are states with immigrant-friendly laws, that restrict cooperation with federal immigration authorities. The non-cooperation by the state or local law enforcement agencies acts as an impediment in ICE’s ability to arrest criminal aliens in such communities. It further stated that all those in violation of immigration laws can be subject to arrest, detention, and subsequently removable based on a removal order. Additionally, ICE stated that cooperation with local law enforcement is essential to maintaining public safety.

©2020 Norris McLaughlin P.A., All Rights Reserved
For more articles on ICE, visit the National Law Review Immigration section.

Divorce Rates and COVID-19

With divorce rates spiking, some couples want to know their options for separating in 2020.

All relationships involve a degree of conflict—and it’s normal to argue more during stressful times. From worrying about your health and the health of your loved ones to facing increased financial uncertainty, all of the classic marital stressors have been amplified by the events of 2020.

For some couples, pandemic friction has involved a few more fights about the laundry or the savings account. For others, lockdown has exposed issues that run deeper and offered ample time for reflection, leaving them to wonder about their options for pursuing separation during the pandemic.

Covid’s Impact on Relationships

Relationship counselors consistently rank financial stress, boredom, disagreements about parenting, and arguing about household chores as the most common sources of relationship trouble.

With many couples stuck in the house, homeschooling children, and facing added financial uncertainty, it should come as no surprise that the coronavirus pandemic is placing additional strain on relationships that were already struggling.

Additionally, support systems have become more difficult to access. Venting to friends over coffee or spending a night out on the town just isn’t an option right now. If you’ve been using these outlets to manage stress—or, perhaps, to avoid dealing with deeper problems—-you may find yourself suddenly in the position of having to confront your difference head on.

It’s no surprise that given this, many marriages have reached their breaking point.

Although the recognition of real, substantive problems in a marriage can be a sobering moment, it is also a necessary and hopeful turning point on the road to a healthy future. One of the pandemic’s brighter spots may be that it may prompt a refocusing on values and on what really matters, clarifying when the healthiest and wisest path forward for two people involves separation.

The Pandemic and Divorce Rates

The evidence that the pandemic might lead to an uptick in divorce rates came early this year.

By April, the interest in divorce had already increased by 34% in the US, with newer couples being the most likely to file for divorce. In fact, a full 20% of couples who had been married for five months or less sought divorce during this time period, compared with only 11% in 2019.

Some predict a continuation of this trend, anticipating that divorce rates will increase between 10% and 25% in the second half of the year.

One way of understanding this timeline is through the collective disaster response curve, a model charting the phases through which a community moves in the wake of trauma. The curve shows increased energy and a sense of community cohesion in the period of time immediately following a disaster —it’s the “We’ll get through this together!” phase of disaster response. After a few weeks, the energy wears off, and disillusionment and depression can set in. During this period, couples may begin to struggle.

Experts also observe that when people are experiencing greater stress from sources external to a relationship, they struggle more to problem-solve within their relationships, and may inadvertently take out this stress on each other.

In the most serious cases, tensions can lead to violence, and 2020 saw a 9% increase in outreach to the National Domestic Violence Hotline compared to the same period last year. If you are experiencing domestic violence, there’s help just a phone call away with the National Domestic Violence Hotline here.

Can I still get divorced during the pandemic?

If you’re wondering whether or not you can still get divorced with everything going on, the answer is yes. Deciding to end a marriage is never easy, and with the pandemic altering the rhythms of life, it may feel particularly daunting. But there are many options to start the divorce process in 2020, and finding which path is best for you and your family is essential.

COPYRIGHT © 2020, STARK & STARK
For more articles on family law, visit the National Law Review Family Law / Divorce / Custody section.

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