The National Law Forum

Tri-Agency Health Information Technology Report Issued

On Thursday, April 3rd, the three federal agencies charged with regulating components of health information technology (“Health IT”) issued their long-awaited Health IT Report: Proposed Strategy and Recommendations for a Risk-Based Framework (the “Report”). The Report seeks to develop a strategy to address a risk-based regulatory framework for health information technology that promotes innovation, protects patient safety, and avoids regulatory duplication.

Congress mandated the development of the Report as part of the 2012 Food and Drug Administration Safety and Innovation Act, requiring the Food and Drug Administration (“FDA”), the Office of the National Coordinator for Health Information Technology (“ONC”), and the Federal Communications Commission (“FCC”) to coordinate their efforts to regulate Health IT. Notably, the Report identifies and distinguishes between three types of Health IT: (i) health administration Health IT, (ii) health management Health IT, and (iii) medical device Health IT.

The recommendations in the Report include continued interagency cooperation and collaboration, the creation of a public-private safety entity—the Health IT Safety Center—and a risk based approach to the regulation of Health IT. The Report emphasizes that the functionality of Health IT and not the platform for the technology (mobile, cloud-based, or installed software) should drive the analysis of the risk and the regulatory controls on Health IT.

In very good news for the Health IT community, the Report included a recommendation that, “no new or additional areas of FDA oversight are needed.” The report emphasized that even if the functionality of health management Health IT meets the statutory definition of a medical device, the FDA will not focus its oversight attention in this area. The Report gives additional guidance on clinical decision support (“CDS”) tools, clarifying that a number of CDS tools can be categorized as health management Health IT and do not require further regulation by FDA. However, the Report noted that certain types of CDS tools that are currently regulated as medical devices by the FDA would continue to be so regulated. These FDA-regulated CDS tools include computer aided detection and diagnostic software and robotic surgical planning and control tools.

The agencies intend to convene a public meeting on the proposed strategy within 90 days and to finalize the Report based on public input.

Of:

Ellen L. Janos

Kate F. Stewart

By:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Major League Baseball (MLB) All-Star Weekend Volunteers Not Employees Under Fair Labor Standards Act (FLSA)

Judge John G. Koeltl from the Southern District of New York has dismissed the minimum wage claims of an individual who served as a volunteer at last year’s Major League Baseball All Star Weekend FanFest, held at New York City’s Javits Center, based on the “amusement or recreational establishment” exemption. Chen v. Major League Baseball, 2014 U.S. Dist. LEXIS 42078 (S.D.N.Y. Mar. 25, 2014).

Plaintiff worked three shifts as a volunteer at FanFest, stamping attendees’ wrists, handing out paraphernalia and directing attendees. He argued that this work made him an “employee” of Major League Baseball. Judge Koeltl declined to address whether Plaintiff’s volunteer services made him an “employee”, because even if the court made such a conclusion, Plaintiff’s claim failed as a matter of law as Plaintiff was “employed by an establishment which is an amusement or recreational establishment . . . [which did] not operate for more than seven months in any calendar year.”

While Chen is a victory for the employer community in light of the widespread series of actions brought by individuals classified as outside FLSA protection, principally asserted by interns, many businesses are not seasonal in nature and thus cannot readily avail themselves of this exemption. All potential exemptions and defenses to claims for minimum and overtime wages must be closely analyzed under the FLSA and, as applicable, state law.

Article By:

Noel P. Tripp

Of:

Jackson Lewis P.C.

U.S. Supreme Court Finds Aggregate Limits on Federal Campaign Contribution are Unconstitutional

On April 2, 2014, the United States Supreme Court held in a 5-4 decision that aggregate contribution limits, those limits placed on an individual’s overall direct contributions during a two-year election cycle, were unconstitutional as a violation of the First Amendment. The case, McCutcheon v. Federal Election Commission, No. 12-536 (U.S. April 2, 2014), is the latest case in which the Supreme Court has loosened federal regulation of campaign contributions.

In a fractured decision, Chief Justice John Roberts authored a plurality opinion that struck down the aggregate limit as a “mismatch” between the government’s goal of curbing corruption and its chosen means of imposing an aggregate limit. Although the government has a valid interest in limiting quid pro quo corruption between contributors and elected officials, the Court explained, an aggregate limit imposed across all candidates does not limit the risk of corruption enough to justify the way it significantly limits the right to support candidates in an election. In the face of core First Amendment guarantees, the aggregate limit could not survive because it was not “closely drawn to avoid unnecessary abridgment of associational freedoms.” Slip opinion at 30 (citation omitted).

The Chief Justice was joined by three of his colleagues: Justices Antonin Scalia, Anthony Kennedy, and Samuel Alito. Justice Clarence Thomas wrote separately to say that he would both strike down aggregate limits and overturn key Supreme Court precedent sanctioning a wide array of campaign finance restrictions.

The Dissent

Writing for the four Justices in dissent, Justice Stephen Breyer argued that aggregate campaign contribution limits had been previously held to be constitutional and that the reversal of existing precedent will come at a grave cost to the U.S. political system. In his view, the decision of the plurality “undermines, perhaps devastates, what remains of campaign finance reform.” Slip opinion at 30 (Breyer, J., dissenting). Justice Breyer was joined by Justices Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan.

Unchanged Rules

Prior to today’s decision in McCutcheon, campaign contributions were subject to two key limitations. The first limit, which remains intact, is the base limit on individual contributions to a single campaign, party committee, or political action committee. That limit remains unchanged, thus there is still a limit of $2,600 that an individual may contribute to a candidate for each election in the two year election cycle. As a result, one may contribute $2,600 for a primary election, $2,600 for a general election, and an additional $2,600 if there is a runoff election. Limits on contributions to other committees may be seen on the below chart.

In addition, the decision has no impact on the operation of a Super PAC, otherwise known as an “independent expenditure-only committee.” Nor does the decision permit corporations to make contributions to federal candidate committees.

New Rule

The limit that was struck down today restricted the overall amount individuals can contribute to election campaigns during a given two-year election cycle. Those aggregate limits were most recently set at $48,600 for federal candidates and $74,600 for other political committees, including national and state party committees, for an overall limit of $123,200 per two-year cycle. As such, prior to this decision a person could give the maximum base contribution of $5,200, for both a primary and a general election, to a maximum of nine federal candidates, whereas now a person can contribute to all federal candidates if she so desires. Similarly, an individual may now contribute to as many PACs as desired, including state and federal committees, such as the Democratic National Committee and the Republican National Committee, as long as each contribution is within the base limit currently set at $32,400 for the national party committees.

In viewing the below chart from the Federal Election Commission, the box in the upper right corner, under Special Limits, has been eliminated. All the other listed limits continue to be the federal legal limits.

Kedar Bhatia contributed to this article.

Article By:

Laurence A. Levy

Of:

Bracewell & Giuliani LLP

Starving the Bear: The United States Restricts Exports to Russia

The pressure on Russia continues to build. As we previously reported here and here, throughout March, the United States and other Western powers implemented a series of sanctions against individuals and entities deemed to be involved in the political destabilization of Ukraine. Those sanctions were restricted to specific parties, including high ranking Russian and Ukrainian officials and – notably – one Russian bank.

The United States has now gone further, implementing restrictions that restrict trade with the entire country of Russia. These sanctions are bound to have more bite.

Specifically, on March 26, the U.S. Department of Commerce announced that, since March 1, 2014 and until further notice, it had not and will not issue licenses for exports or re-exports to Russia. Commerce governs exports and re-exports of U.S.-origin commercial and “dual use” items. While not all such items require a license for Russia, many sensitive items do.

On March 27, the State Department followed suit: it announced that, until further notice, it will not issue any authorizations for exports of defense articles or services to Russia. This is essentially an absolute embargo on defense exports to Russia and Russian nationals: an export authorization is required for virtually any export of a defense article, technical data, or defense service to Russia (or any other country).

These two actions constitute a significant expansion of U.S. trade restrictions on Russia, particularly because the license restrictions apply to exports of both goods and technology. Moreover, the restrictions apply to all Russian individuals and entities, as opposed to the very targeted economic sanctions previously imposed by the Treasury Department.

While the United States has acted quickly, it is not alone, as the European Union has also taken action, introducing targeted sanctions, including an asset freeze and visa ban, against designated parties responsible for human rights violations, violence, and use of excessive force with respect to Ukraine. In addition, EU Member States have agreed to (i) suspend export licenses on equipment that might be used for internal repression and (ii) reconsider export licenses to Ukraine and Russia related to military technology and equipment.

Collectively, the sanctions imposed to date bring with them a host of practical challenges for companies conducting business in or with Russia. Western banks may scrutinize transactions with Russian banks and other parties especially carefully in light of the new restrictions. In some cases, a Western bank might hold up a legitimate transaction for further review if a Russian counterparty is involved.

Companies with current business ties in Russia must, therefore, consider the commercial and related risks of continuing that business. The United States in particular is implementing sanctions rapidly, piecemeal, and often without much warning. As the landscape of trade restrictions continues to change, companies must perform ongoing diligence with respect to their Russian business. For example, companies should perform periodic rescreening of Russian business partners to ensure they do not appear on any U.S. prohibited parties lists.

Article By:

Thaddeus Rogers McBride

Cheryl Palmeri

Of:

Sheppard, Mullin, Richter & Hampton LLP

Register today for IQPC's Trademark Infringement & Litigation Summit

The National Law Review is pleased to bring you information about the upcoming Trademark Infringement & Litigation Summit hosted by IQPC.

When

Monday April 28 & Tuesday April 29, 2014

Where

San Francisco, California, USA

Trademark law may not be changing, but its application certainly has and will continue to do so. Brands are increasingly global, which opens up new possibilities for companies… but also new trademark issues and potential pitfalls. The online experience adds to this global focus and changes the interaction between brands and consumers dramatically.

IQPC’s Trademark Infringement & Litigation Summit will address the topics that you grapple with on a daily basis, including:

How business and infringement concerns guide strategic registration and vigilance
Methods of enforcing your mark, including a “soft approach,” ICANN dispute resolution, cancellation and opposition
Litigation and enforcement management
Evolving company domain name strategy

Perhaps the biggest benefit of attending, however, is the practical, frank conversation about the legal and business choices involved in protecting and maintaining your brand. Attend the Trademark Infringement & Litigation Summit to work through these issues with your colleagues.

Do not miss your opportunity to network and engage with top in-house and outside counsel working in the area. Register today!

NOTE: IQPC plans on making CLE credits available for the state of California (number of credits pending). In addition, IQPC processes requests for CLE Credits in other states, subject to the rules, regulations and restrictions dictated by each individual state. For any questions pertaining to CLE Credits please contact: amanda.nasner@iqpc.com.

Retirement Plan Fee Litigation Finds Its Way to North Carolina

Over the last few years, we have seen a significant increase in litigation involving the fees paid by retirement plans. However, until recently, no major litigation had occurred in North Carolina. On March 12, 2014, one of these cases was filed against Winston-Salem-based Novant Health, a large hospital system in the southeast. This case and other recent litigation should serve as a reminder to retirement plan fiduciaries of the need to monitor their plans’ service provider arrangements.

The complaint against Novant Health alleges that Novant’s retirement plan paid unreasonable fees to the plan’s recordkeeper and to an investment advisor. The plaintiffs argue that the fees paid by the plan were unreasonable because, among other things, plan expenses increased more than 10-fold in one year without a corresponding increase in services. The plaintiffs also claim that the fiduciaries breached their duties by failing to leverage the size of the plan to negotiate lower fees and by selecting retail mutual fund share classes when cheaper, “institutional” share classes were available.

While this case is still a long way from being decided, it should serve as a pointed reminder to plan sponsors and other plan fiduciaries that they need to routinely monitor the reasonableness of plan fees and expenses.

If the plan document so provides, a plan can pay its own administrative expenses, but only if the appropriate fiduciary determines that those expenses are reasonable. Before entering into a service provider relationship, the fiduciary must first make a determination that the services are necessary and the fees are reasonable. The fiduciary then must monitor the arrangement over time to ensure that it remains reasonable.

The following fiduciary risk-management practices are worth considering for any plan committee or other fiduciary involved in the selection or monitoring of service providers:

Regularly identify all service providers that directly or indirectly receive fees from the plan.
Make sure each service provider has provided the plan fiduciaries with fee disclosures required by ERISA.
Regularly calculate the amounts that each service provider directly or indirectly receives from the plan.
Understand what services are provided to the plan for the fees paid. If one vendor provides both services to the plan and non-plan services, make sure that the plan is not subsidizing any non-plan services.
Periodically confirm whether the service provider’s pricing is competitive. This is particularly important as the size of the plan grows because the fiduciary will be expected to leverage the plan’s size to reduce fees. Depending on the circumstances, it might be best to conduct a formal request for proposals from time to time.
If an advisor questions whether a fee arrangement is reasonable, take prompt action to investigate the issue and determine whether the arrangement is reasonable.
Make sure that participant communications accurately reflect how plan expenses are paid.
Document, document, document! Document the decision-making process used to select a service provider, and document the fiduciary’s monitoring and review process.

These practices will assist the fiduciary in meeting its fiduciary duties and, perhaps more importantly, demonstrate fiduciary prudence to any inquiring party.

Article By:

Kelsey H. Mayo

David L. Woodard

Of:

Poyner Spruill LLP

Franchisors Beware: McDonald's Workers Sue for Alleged Wage and Hour Violations by Franchisees

Seven class action lawsuits were recently filed against McDonald’s Corp. and several McDonald’s franchisees in California, Michigan and New York. The lawsuits are a direct result of the coordinated effort by plaintiffs’ attorneys and the Service Employees International Union to pressure fast-food restaurants to pay their employees at least $15.00 per hour. The lawsuits are also part of a new strategy from the plaintiffs’ bar to sue fast-food and pizza franchisors (i.e., the “deep pocket”) for the conduct of independently owned franchisees.

The Michigan and New York class actions were filed in federal court and primarily allege that McDonald’s Corp. and the franchisees violated federal law by shaving hours from employees’ time cards, requiring employees to work off the clock and failing to pay overtime for hours worked in excess of 40 in a workweek. The California class actions were filed in state court and allege a variety of state labor law violations, including minimum wage and overtime violations and missed meal and rest breaks.

The lawsuits allege that McDonald’s Corp. is not only culpable for the suits relating to its corporate-owned stores, but also for its franchisees because of McDonald’s Corp.’s alleged heavy hand in monitoring and guiding the franchisees’ timekeeping, scheduling and other policies. In particular, the Michigan lawsuits allege that McDonald’s Corp. is a “joint employer” and thus also liable because it provides financial tracking computer software to franchisees, which allegedly guides when individual store managers may permit employees to be clocked in or on the clock. The software purportedly sends alerts to the manager when labor costs exceed a certain level of sales. As a result, the plaintiffs allege that managers prevented employees from clocking in (even though the employees were working) until the restaurant experienced a certain level of sales.

Generally, when determining whether a “joint employer” relationship exists, courts examine the totality of the circumstances, focusing on the economic realities of the particular relationship. A joint employment relationship may exist where two companies are deemed to share control of the employee, or one company is controlled by another company. Courts have considered a variety of factors when making this determination, including the ability to hire or fire the employees, supervision of the employees’ schedules and working conditions, determination of wages and the maintenance of employment records.

These McDonald’s lawsuits will need to overcome some very high hurdles before they may be certified as class actions due to the individualized nature of the plaintiffs’ claims and circumstances in the various stores. For example, certification may be inappropriate on a multi-store basis if McDonald’s can show that individual store managers implemented their own procedures and practices for scheduling and timekeeping. Nevertheless, these cases are a good reminder for franchisors to review the policies, training materials, software, etc., that they share with franchisees to ensure that the materials are lawful and will not inevitably lead to employees working off the clock. Lastly, franchisors should review their relationships and interactions with franchisees to ensure that they are not exercising control in a manner that could support a joint employer relationship.

Article By:

Joseph K. Mulherin

Of:

Vedder Price

InsideCounsel 14th Annual Super Conference – May 12-14, 2014 in Chicago, IL

The National Law Review is pleased to bring you information about the upcoming 14th Annual Super Conference hosted by Inside Counsel.

When

Monday, May 12 – Wednesday, May 14, 2014

Where

Chicago, IL

The annual InsideCounsel SuperConference, for the past 13 years, has offered the highest value for educational investment within a constructive learning and networking environment. Legal professionals will gain the opportunity to elevate the quality of their performance and learn ways to become a strategic partner within his/her organization. In two-and-half days attendees earn CLE credits, network with hundreds of peers and legal service providers and hear strategies to tackle corporate legal issues that are top of mind throughout this comprehensive program. SuperConference is presented by InsideCounsel magazine, published by Summit Professional Networks.

Now celebrating its 14th year, InsideCounsel’s SuperConference is an exclusive corporate legal conference attracting more than 500 senior level in-house counsels from Fortune-1000 and multi-national companies. The three-day event offers opportunities to showcase your firm’s industry knowledge and thought leadership while interacting with GC’s and other senior corporate counsel during exclusive networking and educational opportunities. The conference agenda offers the perfect blend of experts and national figure heads from some of the nation’s largest corporations, top law firms, government and regulatory leaders, and industry trailblazers. The conference agenda and educational program receives consistent high marks.

California Proposes Enhanced Prop. 65 Warnings and Possible Online Disclosures – Dietary Supplements and Foods Specially Targeted

The California Office of Environmental Health Hazard Assessment (OEHHA)announced on March 7, 2014, that it is considering implementation of the most significant changes to Prop. 65 regulations in more than two decades. OEHHA has posted the draft regulation and Initial Statement of Reasons on its website.

Passed by voters in 1986, Prop. 65 requires warnings prior to exposures to chemicals listed by OEHHA as “known to the State” to cause cancer or reproductive harm. The law, which carries the potential penalty of $2,500 for each violation, may be and routinely is enforced by entrepreneurial private plaintiffs who are permitted to bring legal actions against alleged violators with minimal evidence. OEHHA’s proposed regulations will affect almost every industry subject to Prop. 65 and nearly every aspect of compliance. In all but a few cases, OEHHA’s changes have the capacity to make compliance with Prop. 65 costlier, riskier, and more disruptive to companies doing business in California.

Four Important Provisions Affecting Food and Dietary Supplements

In its far-reaching proposal, OEHHA aims a number of significant changes directly at food and dietary supplement manufacturers, distributors, and retailers. Four specific proposals stand out as impactful for the industry:

Chemical Identification: Under OEHHA’s proposal, warning labels would have to specifically identify the chemical in question if it is on a proposed list of 12 “common” substances. One substance on OEHHA’s list, lead, is sometimes naturally occurring in the ingredients used to produce dietary supplements and has been the source of considerable litigation and expense for the industry. In OEHHA’s draft regulation, products requiring a warning for lead would have to “conspicuously” state its presence in the product.
Display Requirements: For foods not already subject to a consent judgment, the “safe-harbor” warning language must also be enhanced with specific information about the chemical in question, specific text sizing, and the phrase “Cancer [and/or] Reproductive Hazard.” Even where a food supplier has data showing that the chemical poses no actual health threat, a private plaintiff may still litigate knowing that the costly burden of showing no significant risk is borne by defendants. Unless modified or declared preempted by federal law, OEHHA’s regulation would virtually ensure that this language will be required for food and supplement packaging in California.
Online Reporting: OEHHA would also mandate reporting of exposure data to the agency for its website if a new Prop. 65 warning does not contain 10 details specified by OEHHA. The details include, among others, the name of the chemical at issue, anticipated exposure routes, exposure levels, and options for minimizing exposure. Businesses that fail to provide the required detail, no matter how misleading it might be to the consumer, must disclose the additional information to OEHHA and will likely see such data published online.
More Litigation: Despite statements from the agency to the contrary, OEHHA’s complex rules would encourage even more litigation from an already active community of plaintiffs. OEHHA’s draft litigation reform, a “cure” or fix-it period for retailers with fewer than 25 employees, would do little to stem the current tide of lawsuits, the vast majority of which are ultimately directed at and defended by suppliers. Additionally, by replacing the generic safe-harbor warning with specific requirements, a regulatory safe-harbor warning would no longer provide a safe harbor from liability or deter plaintiffs from alleging violations for exposures to unspecified or newly listed chemicals.

What You Can Do

Businesses which stand to be affected by OEHHA’s plans, including those operated out of state, have an opportunity to voice their concerns to the agency.

OEHHA will hold a public workshop on April 14, 2014 to discuss the proposed regulations. In addition, OEHHA is accepting written comments from the public until May 14, 2014. Unless OEHHA is convinced to delay or withdraw its plans, formal regulations will likely be proposed in the summer of 2014.

Because OEHHA’s proposals are currently in the preliminary stages, interested parties have a time critical opportunity to engage the agency and encourage it to address specific concerns. Companies that manufacture distribute, or retail dietary supplements in California should consider retaining experienced counsel to analyze the impact of the proposals on their business and to participate in the public comment period on their behalf. Given the potentially far-reaching consequences of the proposed changes on the individual companies and the industry at large, interested parties should be diligent in bringing their concerns to OEHHA as early and as persuasively as possible.

Article By:

James Mattesich

Justin J. Prochnow

Anthony J. Cortez

Greg Sperla

Of:

Greenberg Traurig, LLP

EPA’s Proposed Waters of the U.S. Rule: Does It Regulate Puddles? – Environmental Protection Agency

In a leaked draft, EPA was seen to have been contemplating explicitly excluding puddles from regulation, but, in the end, didn’t do so. EPA provided an explanation as to why, but the rule is so broad, we think EPA’s explanation may not be completely relevant. In other words, because the rule is so broad, many puddles actually might fall under federal jurisdiction. The reason is the host of new definitions proposed by EPA. Previously undefined terms like tributary, neighboring, and floodplain are all now defined, and in a way that creates a web of federal jurisdiction. Here’s how:

The rule starts with an initial list of jurisdictional areas, which includes (a) waters that are, have been, or could be used in interstate commerce, (b) interstate waters, and (c) the territorial seas.
The rule then adds to this list all tributaries of these waters. Tributary gets defined for the first time as any feature with a bed and bank that contributes flow to any water on the initial list. Many features, like dry arroyos and mountain channels, have bed and bank even though they only flow when it rains or the snow melts:
The rule then continues, adding to the list of jurisdictional waters all waters that are adjacent to the initial waters and their tributaries. Adjacent is “bordering, contiguous or neighboring.”
EPA then defines neighboring for the first time to include any water in the floodplain or a riparian area of the initial waters and their tributaries. These also get new definitions. Floodplain is an area along a water, formed by sediment deposition and inundated during moderate to high flows. Riparian area is one bordering any water where surface or groundwater “directly influence the ecological processes and plant and animal community structure in that area.”

The end result is that areas are jurisdictional, as far upstream as one can find a bed and bank, and as far outward from that bed and bank as the area “directly influences” the area’s ecology or is formed by sediment and gets inundation from high flows. That is a lot of area. To give you a sense of the potential breadth of areas “subject to inundation,” this map shows in blue the flooding along the Mississippi River in 2011 and the counties/parishes at risk of significant flooding:

Fully one-third of Arkansas was covered. One half of the counties in Illinois were at risk.

This brings us back to puddles. In the proposal’s preamble, EPA says it removed puddles from the “not jurisdictional” list for clarity, not to imply they are jurisdictional.

Some puddles, it says, are not jurisdictional. The language of the rule, however, suggests that puddles are arguably jurisdictional if they are in floodplains or riparian areas. The fact that puddles aren’t always wet may not be decisive: EPA considers streams which flow only when it rains or snow melts to be jurisdictional and identifies dry features as “water”:

We’re not saying that EPA would take the position that puddles are jurisdictional – our only point is that the language of the proposed rule is so broad that it could. And we haven’t even started on the “significant nexus” test.

This is the second in a series of posts regarding EPA’s proposed rule redefining “waters of the United States” under the Clean Water Act.

For Part One, click here.

Photo credits, from top: Photo of the Las Cruces Arroyo from Wikipedia. Mississippi River map from the US Census Bureau. Photo of a wetland from the Arid West Region Regional Supplement to the Corps’ Wetland Delineation Manual.

Article By:

Lowell M. Rothschild

Of:

Bracewell & Giuliani LLP

The National Law Forum

Tri-Agency Health Information Technology Report Issued

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Major League Baseball (MLB) All-Star Weekend Volunteers Not Employees Under Fair Labor Standards Act (FLSA)

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