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New York HERO Act Enhanced Workplace Safety Committee Enforcement Provisions Enacted

On December 28, 2022, New York Governor Kathy Hochul signed into law Senate Bill 9450, which added new enforcement provisions to the New York Health And Essential Rights Act’s (NY HERO Act) workplace safety committee requirements. The new law went into effect immediately upon the Governor’s signature.

As a reminder, the NY HERO Act was enacted in response to the COVID-19 pandemic. Section 1 of the NY HERO Act required employers to adopt and distribute an infectious disease exposure prevention plan (“safety plan”) and activate such safety plan upon the designation of an airborne infectious disease as a highly contagious communicable disease that presents a serious risk of harm to the public health. While no current designation is in effect (the designation of COVID-19 ended on March 17, 2022), employers should be prepared to activate their safety plan in the event of a designation, and should review their existing safety plan periodically for any updates as required by the NY HERO Act.

Section 2, the often-overlooked portion of the NY HERO Act, provides employees the right to establish and administer a joint labor-management workplace safety committee. The recent law adds new enforcement provisions, and serves as an amendment to this section of the NY HERO Act. It requires employers to recognize workplace safety committees formed by employees pursuant to the NY HERO Act within five business days of receiving a request from employees for committee recognition. Failure to do so will result in penalties of $50 a day until the violation is remedied. Previously, there was no explicit timeframe required for employers to recognize a workplace safety committee and no related specific civil penalties.

While the New York Department of Labor has issued FAQ guidance related to Section 1 of the NY HERO Act, the new law is the first development or update regarding Section 2 since the NY HERO Act was enacted and subsequently amended.

The new law serves as a reminder that the NY HERO Act, and, relatedly, COVID-19’s impact on the workplace, are not completely in the rearview mirror. Employers should confirm their compliance with the NY HERO Act by:

evaluating their existing safety plans and revising or updating them as needed;
distributing their safety plans to all new hires;
including their safety plans in all updated handbooks;
ensuring their safety plans are posted in a visible and prominent location in the workplace; and
reviewing the workplace safety committee obligations and requirements, especially in light of the added enforcement provisions.

Article By Susan Gross Sholinsky, Steven M. Swirsky, Robert J. O’Hara, Nancy Gunzenhauser Popper, and Christopher Shur of Epstein Becker & Green, P.C.

For more labor and employment legal news, click here to visit the National Law Review.

EPA and Army Corps Issue New “WOTUS” Rule While Supreme Court Considers Jurisdiction Over Adjacent Wetlands

Yesterday, the US Environmental Protection Agency (EPA) and the US Army Corps of Engineers (Corps) (together, the Agencies) published a final rule revising the definition of “waters of the United States” (WOTUS) subject to federal regulation and permitting requirements under the Clean Water Act (CWA). This rule is the latest attempt by the Agencies to craft a durable rule defining WOTUS. The new rule, which largely mirrors the 2021 proposal, asserts a broader geographic scope of federal jurisdiction than the 2020 Navigable Waters Protection Rule (NWPR). In particular, the Agencies adopt the broadest possible interpretation of the Supreme Court’s decision in Rapanos (through incorporation of both the plurality’s “relatively permanent” test and Justice Kennedy’s “significant nexus” test). The final rule would, for the first time, codify aspects of the Agencies’ 2008 Rapanos Guidance and would rely on the significant nexus test’s case-by-case approach for evaluating jurisdiction for tributaries, wetlands, and other waters. The Agencies released the final rule while the Supreme Court considers the scope of CWA authority over a major category of WOTUS, “adjacent wetlands,” in Sackett v. EPA, and the Supreme Court could hand down a decision in the coming months that could require changes to the rule.

For project proponents, the new rule would likely mean more features would be subject to regulation under the CWA, and projects that might have previously qualified for nationwide permits may no longer meet the acreage limits and would instead require an individual permit. Also, case-by-case significant nexus determinations could result in lengthy reviews with uncertain and inconsistent results.

The final rule will go into effect on March 20. While the Agencies previously characterized this rule as Phase 1 of a two-step process to enact a new WOTUS definition, EPA recently indicated that it is not currently planning a major second phase.

Summary of Final Rule

The rule defines WOTUS to include:

Traditional navigable waters (TNWs), the territorial seas, and interstate waters. TNWs include large rivers and lakes and tidally influenced waterbodies used in interstate or foreign commerce. Interstate waters are rivers, lakes, and other waters that flow across, or form part of, State boundaries. The TNW definition (i.e., all waters currently used, or were used in the past, or may be susceptible to use in interstate or foreign commerce, including all waters which are subject to the ebb and flow of the tide) is consistent with the text of the 1986 regulations and the NWPR. However, the preamble indicates that the Agencies plan to include “waters currently being used for … commercial waterborne recreation (for example, boat rentals, guided fishing trips, or water ski tournaments),” which appears to broaden the scope of TNW waters.
Impoundments of WOTUS. The final rule retains the provision in the 1986 regulations that defines WOTUS to include impoundments of WOTUS. The preamble defines impoundments as “created by discrete structures (often human-built) like dams or levees that typically have the effect of raising the water surface elevation, creating or expanding the area of open water, or both.” 88 Fed. Reg. at 3,066.
Tributaries. The final rule extends jurisdiction to tributaries of categories 1 and 2 waters if the tributary meets either the Agencies’ new formulation of the relatively permanent or the significant nexus standards from Rapanos (discussed in more detail below). Ephemeral streams that meet the significant nexus test would be jurisdictional tributaries. In this respect, the rule is much broader than the NWPR, which categorically excluded ephemeral tributaries from jurisdiction.
Adjacent wetlands. The rule retains the definition of “adjacent” from the 1986 regulations meaning “bordering, contiguous, or neighboring” and adds language that adjacent wetlands are considered WOTUSifthey meet the relatively permanent or significant nexus standards. The NWPR had narrowed the definition of adjacent wetlands to include only those wetlands that abutted or otherwise had a direct surface connection to other jurisdictional waters in a typical year. The final rule creates a broader category of adjacent wetlands, leading to additional regulatory requirements for activities that cross or impact such features.
Other waters. The rule asserts jurisdiction over “other waters” under the relatively permanent and significant nexus standards from Rapanos. Under this provision, which essentially serves as a “catch-all” category, “intrastate lakes and ponds, streams, or wetlands” not identified in categories 1-4 can be assessed for jurisdiction under the relatively permanent standard or significant nexus standard. This list is intended to be exclusive, 88 Fed. Reg. at 3,100, but broad enough to include a large variety of water types (e.g., prairie potholes, sloughs, playa lakes, etc.). This category is a clear departure from the 2008 Rapanos Guidance, which did not assert jurisdiction over “other waters” based on the relatively permanent waters or significant nexus standards.

Exclusions. The final rule provides a list of features that are excluded even where they would otherwise qualify as jurisdictional impoundments, tributaries, adjacent wetlands, or other waters. Importantly, features that qualify as category 1 waters (TNWs, territorial seas, and interstate waters) cannot be excluded even if they meet the criteria of the exclusions provided. Key non-jurisdictional waters or exclusions include waste treatment systems, ditches, prior converted cropland, artificially irrigated areas, artificial lakes or ponds, and swales and erosional features. The list of exclusions is similar to the list provided in the 2015 WOTUS Rule and 2020 NWPR, although it does not provide the clear definitions that were included in the NWPR and in some instances changes the exemption based on preamble interpretations.

Key Definitions. The rule also includes a number of important definitions.

The “relatively permanent standard” asserts jurisdiction over relatively permanent, standing or continuously flowing waters connected to category 1 waters, and waters with a continuous surface connection to such relatively permanent waters or to category 1 waters. 88 Fed. Reg. at 3,006. The final rule does not define or quantify what constitutes “relatively permanent” flow. The preamble states that the relatively permanent standard encompasses surface waters that have flowing or standing water year-round or continuously during certain times of the year. 88 Fed. Reg. at 3,084.

The significant nexus standard asserts jurisdiction over waters that, either alone or in combination with similarly situated waters in the region, significantly affectthe chemical, physical, or biological integrity of category 1 waters. In a change from the proposal, the final rule defines “significantly affect” to mean “a material influence on the chemical, physical, or biological integrity of [category 1] waters.” To determine whether waters, either alone or in combination with similarly situated waters in the region, have a material influence on the chemical, physical, or biological integrity of category 1 waters, the Agencies will assess the list of functions and factors, including, for example contribution of flow, distance from a category 1 water, and hydrologic connections. The preamble states distance from a category 1 water and hydrology—will generally be given the greatest weight in the assessment. 88 Fed. Reg. at 3,120. The new significant nexus standard will likely allow for broader assertions of jurisdiction because it allows the Agencies to aggregate all tributaries and adjacent wetlands within a particular geographic area and evaluate whether they have a “material influence” on category 1 waters based on a case-by-case application of the enumerated factors and functions. This type of case-by-case significant nexus analysis has resulted in lengthy review times as well as unpredictable and inconsistent results.

Existing Jurisdictional Determinations

Landowners may obtain a jurisdictional determination in the form of either: (1) an approved jurisdictional determination (AJD), which is a Corps document identifying the limits of WOTUS on a parcel; or (2) a preliminary jurisdictional determination (PJD), which is a non-binding document in which an applicant can assume all waters will be treated as jurisdictional without making a formal determination.

The Agencies take the position that AJDs issued pursuant to the NWPR may not be relied upon in making new permit decisions. According to the preamble, because the NWPR was vacated by two district courts, NWPR AJDs “may not reliably state the presence, absence, or limits of [WOTUS] on a parcel and will not be relied upon by the Corps in making new permit decisions.” 88 Fed. Reg. at 3,136. The Agencies take the position that AJDs issued under earlier WOTUS definitions—except those AJDs issued under the NWPR—remain valid until the AJD’s expiration date. Also, the new rule will govern any pending requests for AJDs, if the AJD is issued on or after the effective date of the rule (March 20, 2023).

In contrast to AJDs, PJDs are advisory in nature and have no expiration date. The preamble clarifies that the new WOTUS rule has no impact on existing PJDs.

**Potential Litigation and the Sackett Case**

Multiple challenges to the new rule are likely to be filed in district courts across the country. The state of Texas and an industry coalition immediately filed suits in the U.S. District Court for the Southern District of Texas, and other suits are likely. At the same time, the Supreme Court’s pending decision in Sackett may have implications for the durability of provisions of the rule.

Many commenters recommended that the Agencies defer issuing a final rule until the Supreme Court issues a decision in Sackett—a case in which the issue before the Court is “the proper test for determining whether wetlands are [WOTUS] under the [CWA].” A decision in the Sackett case is expected in the next few months. Perhaps trying to insulate the rule from a potentially unfavorable Supreme Court decision, the Agencies assert in the preamble the severability of the individual provisions of the rule. The preamble states, “if a court were to determine that a wetland cannot be treated as adjacent if it is separated from a jurisdictional water by road or other barrier, the agencies intend that other categories of wetlands within the rule’s definition of ‘adjacent’ would remain subject to jurisdiction.” 88 Fed. Reg. at 3,135. Although it is not clear how the Supreme Court will rule in Sackett, it is possible that the decision could require the Agencies to make changes to the new WOTUS definition or face legal challenges.

Article By Kerry L. McGrath, Brian R. Levey, Andrew J. Turner, Karma B. Brown, Deidre G. Duncan, and Matthew Z. Leopold of Hunton Andrews Kurth

For more environmental legal news, click here to visit the National Law Review.

First Major Overhaul of Cosmetics Regulation Since FDR Administration

As part of the Consolidated Appropriations Act, 2023, President Biden signed into law the Modernization of Cosmetics Regulation Act of 2022 (“MoCRA”). This is the first major reform of cosmetics regulation since the Federal Food, Drug, and Cosmetic Act (“FDCA”) became law in 1938.[1] MoCRA implements new compliance requirements on the cosmetics industry and also significantly expands the U.S. Food and Drug Administration’s (“FDA”) authority to oversee and regulate cosmetics.

New Obligations for Cosmetics Industry

MoCRA imposes the following new requirements on “responsible persons”[2] and “facilities.”[3] We note that certain of these regulatory requirements may differ for entities considered small businesses under MoCRA.

Facility Registration and Product Disclosure. All facilitates (domestic or foreign) that manufacture or process cosmetic products for distribution in the United States must register with FDA by December 29, 2023. Registration is biennial. Further, responsible persons must annually submit cosmetic product listings to FDA and disclose key product information, such as ingredients.
Adverse Event Recording and Serious Adverse Event Reporting. Generally, responsible persons must keep records of any adverse events related to products used in the United States for six years and submit any “serious adverse events” to FDA within 15 days of the responsible person’s receipt of the report. MoCRA broadly defines what constitutes a serious adverse event, when compared to other FDA regulatory product categories (e.g., dietary supplements).[4]
Labeling Requirements. To improve the reporting of adverse events, responsible persons must include contact information on product labels. Additionally, product labels must identify any fragrance allergens in the product. Labels for products intended for use only by licensed professionals must also indicate that only licensed professionals may use the product.
Safety Substantiation Requirement. Responsible persons must ensure that a product is “safe” and keep records “adequately substantiating” the product’s safety.[5] Products without adequate safety substantiation may be considered adulterated under the FDCA. MoCRA also contains a provision stating that it is the sense of Congress that animal testing should not be used for safety testing on cosmetic products and should be phased out with the exception of appropriate allowances.

Increased FDA Oversight of Cosmetics

MoCRA significantly expands FDA’s enforcement authority over the cosmetics industry.

Issue Mandatory Recalls. FDA now has mandatory recall authority if the agency concludes there is a reasonable probability that a cosmetic is adulterated or misbranded and the use of the cosmetic will cause serious adverse health consequences or death.
Access Records. If FDA has a reasonable belief that a cosmetic product (or one of its ingredients) is adulterated and presents a threat of serious adverse health consequences or death, the agency has authority to access records relating to that product.
Suspend Facilities. FDA may suspend a facility’s registration if the agency determines that a cosmetic product manufactured or processed by that facility has a reasonable probability of causing serious adverse health consequences or death and there is a reasonable belief that other products from the same facility may be similarly affected.
Federal Preemption. MoCRA explicitly preempts any state or local laws that differ from the federal cosmetics framework regarding facility registration and product listing, good manufacturing practices (“GMPs”), records, recalls, adverse event reporting, or safety substantiation.

Forthcoming FDA Rulemakings and Reports

MoCRA directs FDA to promulgate rules regarding the following three issues. Importantly, the cosmetics industry will have opportunities to provide comment on the proposed rules.

GMPs. FDA must establish GMP regulations consistent with national and international standards. Cosmetic products manufactured or processed under conditions that do not meet FDA’s forthcoming GMP regulations may be considered adulterated. The agency must issue a proposed rule by December 29, 2024 and a final rule by December 29, 2025.
Fragrance Allergens. FDA must publish regulations to identify fragrance allergens. Cosmetic product labels that do not include fragrance allergen disclosures required by such regulations may be considered misbranded under the FDCA. The agency must issue a proposed rule by June 29, 2024 and a final rule no later than 180 days after the public comment period.
Talc. FDA must issue regulations to establish required standardized testing methods for detecting and identifying asbestos in talc-containing cosmetic products.

In addition to the above rulemakings, FDA must issue a report within the next three years on the use of per- and polyfluoroalkyl substances (“PFAS”) in cosmetic products.

Footnotes

MoCRA amends Chapter VI of the FDCA.
A “responsible person” is defined as a manufacturer, packer, or distributor of a cosmetic product whose name appears on the label of that product.
“Facilities” are defined as any establishment (including an establishment of an importer) that manufactures or processes cosmetic products distributed in the United States. MoCRA specifically exempts from registration certain facilities, such as those that (i) only label, relabel, package, hold, or distribute cosmetics products; and (ii) manufacture or process products solely for use in research and evaluation.
“Serious adverse events” are defined as adverse events that result in (i) death; (ii) a life-threatening experience; (iii) inpatient hospitalization; (iv) a persistent or significant disability or incapacity; (v) a congenital anomaly or birth defect; (vi) infection; or (vii) significant disfigurement (including serious and persistent rashes, second- or third-degree burns, significant hair loss, or persistent or significant alteration of appearance); or that require – based on reasonable medical judgment – a medical or surgical intervention to prevent one of the outcomes described above.
“Safe” is defined as a cosmetic product (and its ingredients) that is not injurious to users under the labeling or customary/usual usage. A cosmetic product (or its ingredients) should not be considered injurious solely because it can cause minor and transient reactions or minor and transient skin irritations in some users. Further, “adequate substantiation” of safety means tests or studies, research, analyses, or other evidence or information that is considered, among experts qualified by scientific training and experience to evaluate the safety of cosmetic products and their ingredients, sufficient to support the product’s safety to a reasonable certainty.

Article By Christopher Hanson of Nelson Mullins. Paul Clowes, Law Clerk in the Greenville office, contributed to the drafting of this post.

For more biotech, food, and drug legal news, click here to visit the National Law Review.

Future of Non-Competes Up in the Air

The FTC recently announced its proposal to ban non-compete clauses in employment agreements. That proposal is currently in a 60-day period of public comment, and employers are (understandably) nervous. While many employers rely on these provisions to manage competition and protect their IP and confidential information, companies across the country may soon find themselves in the shoes of California employers, having to work around restrictions on non-competes to maximize protection within the increasingly narrow confines of the law.

Employers are not without options in responding to the potential changes should they become law–more aggressive retention incentives, intelligent data security, and stricter confidentiality agreements should all be part of the conversation. Even deferred compensation could be on the table, as noted in the article, though beware of the tax implications. Employers should also keep in mind that the FTC proposal, should it become law, will doubtless be subject to legal challenges and could be tied up in the courts for a while before becoming effective.

“Observers on both sides say that limitations on the clauses will compel employers to get more creative about how they retain talent, using everything from compensation to career advancement to keep workers engaged and loyal to the company. Some companies use deferred compensation—such as retention bonuses or rolling stock options that vest after, say, three years—to give people incentives to stay.”

Article By Paul M. Huston of Mintz

Click here to visit the National Law Review for more antitrust and FTC legal news.

Another Lesson for Higher Education Institutions about the Importance of Cybersecurity Investment

Key Takeaway

A Massachusetts class action claim underscores that institutions of higher education will continue to be targets for cybercriminals – and class action plaintiffs know it.

Background

On January 4, 2023, in Jackson v. Suffolk University, No. 23-cv-10019, Jackson (Plaintiff) filed a proposed class action lawsuit in the U.S. District Court for the District of Massachusetts against her alma matter, Suffolk University (Suffolk), arising from a data breach affecting thousands of current and former Suffolk students.

The complaint alleges that an unauthorized party gained access to Suffolk’s computer network on or about July 9, 2022. After learning of the unauthorized access, Suffolk engaged cybersecurity experts to assist in an investigation. Suffolk completed the investigation on November 14, 2022. The investigation concluded that an unauthorized third party gained access to and/or exfiltrated files containing personally identifiable information (PII) for students who enrolled after 2002.

The complaint further alleges that the PII exposed in the data breach included students’ full names, Social Security Numbers, Driver License numbers, state identification numbers, financial account information, and Protected Health Information. While Suffolk did not release the total number of students affected by the data breach, the complaint alleges that approximately 36,000 Massachusetts residents were affected. No information was provided about affected out-of-state residents.

Colleges and Universities are Prime Targets for Cybercriminals

Unfortunately, Suffolk’s data breach is not an outlier. Colleges and universities present a wealth of opportunities for cyber criminals because they house massive amounts of sensitive data, including employee and student personal and financial information, medical records, and confidential and proprietary data. Given how stolen data can be sold through open and anonymous forums on the Dark Web, colleges and universities will continue to remain prime targets for cybercriminals.

Recognizing this, the FBI issued a warning for higher education institutions in March 2021, informing them that cybercriminals have been targeting institutions of higher education with ransomware attacks. In May 2022, the FBI issued a second alert, warning that cyber bad actors continue to conduct attacks against colleges and universities.

Suffolk Allegedly Breached Data Protection Duty

In the complaint, Plaintiff alleges that Suffolk did not follow industry and government guidelines to protect student PII. In particular, Plaintiff alleges that Suffolk’s failure to protect student PII is prohibited by the Federal Trade Commission Act, 15 U.S.C.A. § 45 and that Suffolk failed to comply with the Financial Privacy Rule of the Gramm-Leach-Bliley Act (GLBA), 15 U.S.C.A. § 6801. Further, the suit alleges that Suffolk violated the Massachusetts Right to Privacy Law, Mass. Gen. Laws Ann. ch. 214, § 1B, as well as its common law duties.

How Much Cybersecurity is Enough?

To mitigate cyber risk, colleges and university must not only follow applicable government guidelines but also consider following industry best practices to protect student PII.

In particular, GLBA requires a covered organization to designate a qualified individual to oversee its information security program and conduct risk assessments that continually assess internal and external risks to the security, confidentiality and integrity of personal information. After the risk assessment, the organization must address the identified risks and document the specific safeguards intended to address those risks. See 16 CFR § 314.4.

Suffolk, as well as other colleges and universities, may also want to look to Massachusetts law for guidance about how to further invest in its cybersecurity program. Massachusetts was an early leader among U.S. states when, in 2007, it enacted the “Regulations to safeguard personal information of commonwealth residents” (Mass. Gen. Laws ch. 93H § 2) (Data Security Law). The Data Security Law – still among the most prescriptive general data security state law – sets forth a list of minimum requirements that, while not specific to colleges and universities, serves as a good cybersecurity checklist for all organizations:

Designation of one or more employees responsible for the WISP.
Assessments of risks to the security, confidentiality and/or integrity of organizational Information and the effectiveness of the current safeguards for limiting those risks, including ongoing employee and independent contractor training, compliance with the WISP and tools for detecting and preventing security system failures.
Employee security policies relating to protection of organizational Information outside of business premises.
Disciplinary measures for violations of the WISP and related policies.
Access control measures that prevent terminated employees from accessing organizational Information.
Management of service providers that access organizational Information as part of providing services directly to the organization, including retaining service providers capable of protecting organizational Information consistent with the Data Security Regulations and other applicable laws and requiring service providers by contract to implement and maintain appropriate measures to protect organizational Information.
Physical access restrictions for records containing organizational Information and storage of those records in locked facilities, storage areas or containers.
Regular monitoring of the WISP to ensure that it is preventing unauthorized access to or use of organizational Information and upgrading the WISP as necessary to limit risks.
Review the WISP at least annually or more often if business practices that relate to the protection of organizational Information materially change.
Documentation of responsive actions taken in connection with any “breach of security” and mandatory post-incident review of those actions to evaluate the need for changes to business practices relating to protection of organizational Information.

An organization not implementing any of these controls should consider documenting the decision-making process as a defensive measure. In implementing these requirements and recommendations, colleges and universities can best position themselves to thwart cybercriminals and plaintiffs alike.

Article By Ericka A. Johnson and Julia B. Jacobson of Squire Patton Boggs (US) LLP

For more cybersecurity and data privacy legal news, click here to visit the National Law Review.

B.S.ing with Bob Major [PODCAST]

When Bob Major founded Major, Lindsey & Africa in 1982, he could not have envisioned what the organization would become and the impact it would have on the legal profession. In this episode of B.S.: Beyond Stereotypes, Bob shares his journey with Merle Vaughn, including his childhood in Texas and Oklahoma, his Stanford education, and how both influenced his outlook on life personally and professionally.

Bob Major, founder and Partner at Major, Lindsey & Africa, grew up in Texas and Oklahoma. He received his undergraduate degree from Stanford University and attended The University of Texas at Austin where he received a J.D. degree. Bob spent five years at the Washington, D.C., firm of Wilmer, Cutler & Pickering (now WilmerHale) practicing in its federal administrative practice. Prior to founding his own legal recruiting firm, he spent a year in-house as securities counsel at Saga Corporation (Menlo Park, California).

Article By Merle Vaughn of Major Lindsey & Africa

For more law office management legal news, click here to visit the National Law Review.

Federal PFAS Drinking Water Standards: 2023 Is the Year

On Friday, October 7, 2022, the EPA formally sent its proposed federal PFAS drinking water standards to the White House Office of Management and Budget (OMB) for consideration and approval or rejection. The proposed rule cleared OMB review on November 30, 2022; however, the EPA has not yet released the proposed rule. While the details of the rule under consideration are not yet known, what is evident from the title of the document logged on the OMB website is that the drinking water standards will address PFOA and PFOS. At least from the document title, it does not appear that any other PFAS will be subject to Safe Drinking Water Act (SDWA) regulation at the moment.

The delay in releasing the proposed drinking water standards for over a month now, though, could suggest that the proposed rule may seek to regulate more than just PFOA and PFOS, and the EPA may be looking to shore up language and support language in the proposed rule for such a proposal in light of comments from the OMB. Similarly, many wonder whether the EPA proposed a limit so low that the OMB had concerns as to whether the limits were detectable. With the EPA keeping its proposed language a closely guarded secret for the time being, much of the discussions rest on speculation. What we do know is that he EPA is statutorily required to put forth a proposed standard before the first half of 2023, and it has publicly pledged repeatedly to act more quickly than that statutory requirements.

Thus, 2023 will see federal PFAS drinking water standards for at least two PFAS from the EPA and we predict that it is only a matter of days before the country sees the EPA’s proposal, which will kick off what promises to be an extremely contentious public comment period.

Now more than ever, the EPA is clearly on a path to regulate PFAS contamination in the country’s water, land and air. These regulations will require states to act, as well (and some states may still enact stronger regulations than the EPA). Both the federal and the state level regulations will impact businesses and industries of many kinds, even if their contribution to drinking water contamination issues may seem on the surface to be de minimus. In states that already have PFAS drinking water standards enacted, businesses and property owners have already seen local environmental agencies scrutinize possible sources of PFAS pollution much more closely than ever before, which has resulted in unexpected costs. Beyond drinking water, though, the EPA PFAS Roadmap from 2021 shows the EPA’s desire to take regulatory action well beyond just drinking water, and companies absolutely must begin preparing now for regulatory actions that will have significant financial impacts down the road.

Article By John Gardella of CMBG3 Law

For more environmental legal news, click here to visit the National Law Review.

Will CMS’s Proposed Rule on “Identified Overpayments” Increase Reverse FCA Cases?

On December 27, 2022, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule which, in part, seeks to amend the existing regulations for Medicare Parts A, B, C, and D regarding the standard for when an “identified” overpayment must be refunded, pursuant to the Affordable Care Act (ACA) and the False Claims Act (FCA) reverse false claims provision. As written, the proposed rule would remove the existing “reasonable diligence” standard for identification of overpayments, and add the “knowing” and “knowingly” FCA definition. As a result, an overpayment would be “identified” when the entity has actual knowledge of an identified overpayment, or acts in reckless disregard or deliberate ignorance of an identified overpayment. And, a provider is required to refund overpayments it is obliged to refund within 60 days of such identified overpayment.

If this proposed rule is finalized, the Department of Justice (DOJ) and Health and Human Services (HHS) Office of Inspector General’s (OIG) should be applying the same intent standard to their evaluation of potential reverse false claims and Civil Monetary Penalty liability.

The Lay of the Land

Currently, the applicable overpayment regulations state:

A person has identified an overpayment when the person has, or should have through the exercise of reasonable diligence, determined that the person has received an overpayment and quantified the amount of the overpayment. A person should have determined that the person received an overpayment and quantified the amount of the overpayment if the person fails to exercise reasonable diligence and the person in fact received an overpayment.

42 C.F.R. § 401.305(a)(2). In the 2016 Final Rule, CMS agreed “the 60-day time period begins when either the reasonable diligence is completed or on the day the person received credible information of a potential overpayment if the person failed to conduct reasonable diligence and the person in fact received an overpayment.” This reasonable diligence standard allows entities to not only determine credibility of allegations, or issues relating to, a potential overpayment but also, when credible, to conduct a properly scoped internal investigation, during which an entity also accurately quantifies any associated overpayment due for refund.

In the proposed rulemaking, CMS is suggesting instead the following standard:

A person has identified an overpayment when the person knowingly receives or retains an overpayment. The term “knowingly” has the meaning set forth in 31 U.S.C. 3729(b)(1)(A).

31 U.S.C. 3729(b)(1)(A) defines “Knowingly” as any circumstance in which “a person, with respect to information—(i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard of the truth or falsity of the information.”

The currently proposed provision has similar effect to the language CMS proposed in 2012 and, after consideration of comments, ultimately rejected in the 2014 Final Rule (Medicare Advantage and Part D) and 2016 Final Rule (Medicare Part A and Part B). In that final rulemaking, CMS removed the “actual knowledge,” “reckless disregard,” and “deliberate ignorance” terms in favor of the reasonable diligence standard, leaving practitioners to argue that CMS had lowered requisite intent to a standard less than required by the FCA.

Potential Impact

The FCA is a fraud statute, requiring intent. If a company investigating the credibility, issue, and scope of a matter (i.e., exercising reasonable diligence) also diligently determines the scope of a possible refund obligation, it would be difficult for DOJ to credibly claim an entity has acted recklessly, or with deliberate indifference to repayment under the FCA. DOJ’s general practice has been to bring reverse FCA cases when a provider does not investigate credible allegations and does not refund associated overpayments, after identifying them. For example, in a 2015 case, DOJ attorneys stated in a court conference, “[T]his is not a question … of a case where the hospital is diligently working on the claims and it’s on the sixty-first day and they’re still scrambling to go through their spreadsheets, you know, the government wouldn’t be bringing that kind of a claim.” United States ex rel. Kane v. Healthfirst, Inc., 120 F. Supp. 3d 370, 389 (S.D. N.Y. 2015).

It remains to be seen whether this change will result in an increased pursuit of reverse FCA cases. The proposed rule would eliminate an explicit diligence period (generally not to exceed six months, except in particularly complicated analyses, such as under the Physician Self-Referral or “Stark” Law) to ascertain the validity and amount of a potential obligation to refund an overpayment. The proposed rule does not explain whether providers, suppliers, and others still will have an opportunity to conduct a reasonably diligent inquiry into whether any obligation to refund exists at all, prior to the ACA 60-day clock starting to run. Ideally CMS would make clear in any preamble that the government still expects reasonable and professional efforts be undertaken before making refunds, even if that process may take some time to complete

Absent such clarity, the fact remains that it is difficult to “identify” an obligation to refund, much less any refundable amounts, without first validating the alleged overpayment and quantifying any obligation.

Additionally, this standard may prompt entities to submit an HHS-OIG self-disclosure before all facts are known. While OIG requires a disclosing party to conduct an internal investigation prior to submission, it is near impossible to thoroughly investigate issues and identify any refund 60 days from learning of a possible issue that might result in a refund (especially when multiple payors are involved). Even if a disclosing party notes within a self-disclosure that an investigation is ongoing, the disclosing party must certify that it will complete its investigation within 90 days of the submission date – which still may not be enough time based on the complexity of the allegations or claims review required. The resulting back-and-forth of incomplete information likely would create unnecessary delays in reaching a resolution and frustration among all parties involved.

We encourage all providers, suppliers, Medicare Advantage organizations, Part D participants, and other stakeholders to submit comments on this proposed rule. The public has until 5 p.m. ET on February 13, 2023 to submit comments, which are accepted, electronically or by mail.

Article By Kara (Schoonover) Sweet, Lisa M. Noller, and Lawrence W. Vernaglia of Foley & Lardner LLP

For more healthcare and health law legal news, click here to visit the National Law Review.

New Cosmetic Regulatory Requirements: What Cosmetic Manufacturers Need to Know

On December 29, 2022, President Biden signed into law the “Modernization of Cosmetic Regulation Act of 2022,”¹ which requires increased Food and Drug Administration (FDA) oversight of cosmetics and the ingredients in them. This GT Alert outlines the law’s key provisions, including timelines for FDA actions and enforcement. The law creates new requirements that may generate increased consumer litigation. This GT Alert summarizes the Act’s provisions and does not constitute legal advice. Many provisions are subject to regulatory implementation by a date provided for in the Act.

The new law also includes amendments modifying other FDA requirements. In particular, the law modifies the law as to issues such as improvements and innovations in drug manufacturing, reauthorization of key FDA programs such as the Humanitarian Device Exemption Incentive, the Best Pharmaceuticals for Children Program, and Reauthorization of Orphan Drug Grants. There are also modifications to biologics and drugs, as well as modifications of the Save Medical Device amendments. For information on the potential litigation impacts of the new law, please see this GT Alert published by the Pharmaceutical, Medical Device & Health Care Litigation Practice.

Modernization of Cosmetic Regulation Act of 2022 (MoCRA)

MoCRA, the new cosmetic regulation law, establishes a process, similar to those for other FDA-regulated products, that ensures the cosmetic manufacturers provide assurances that the cosmetic products are safe. This GT Alert provides general information on these new requirements, with effective dates for certain regulatory and other requirements. The law establishes obligations on the “responsible person” that is, the manufacturer, packer, or distributor of a cosmetic and those whose name appears on the products label.

MoCRA is only applicable to importers and entities that manufacture or process cosmetic products. It does not apply to the following entities if they do not import, manufacturer, or process cosmetics: beauty salons; cosmetic product retailers; distribution facilities; pharmacies; hospitals; physicians offices; health care clinics; public health agencies and other nonprofit entities; entities that provide complimentary cosmetic products; trade shows and others giving free samples; entities that are only doing research; and entities that prepare labels, relabel, package, repackage, hold, and/or distribute cosmetic products.

Key Terms

Good Manufacturing Practices: The secretary of the Department of Health and Human Services (HHS) (through the FDA) will propose and finalize regulations to establish good manufacturing practices. The key is to ensure that products are not adulterated and will allow FDA to inspect records to ensure compliance. The proposed rulemaking shall be no later than two years after date of enactment (December 29, 2022) with final regulations no later than three years after date of enactment (December 29, 2022).

Adverse Events: Any health-related event associated with the use of a cosmetic product.

Serious Adverse Event: Any event that is a result of death, life-threatening experience; inpatient hospitalization; persistent or significant disability or incapacity; a congenital anomaly or birth defect; and infection or significant disfigurement OR requires, based on reasonable medical judgment, a medical or surgical intervention to prevent an outcome described in the first definition of serious adverse event.

Process for Reporting Adverse Events: In compliance with the HHS secretary’s regulations, the responsible person shall file a report within 15 days and may supplement the report within one year. A serious adverse event report is similar to other safety reports and can include a statement released to the public (without any personal health information). The HHS secretary may exempt certain reports that do not involve a significant public health issue. Records must be kept by the responsible person for six years; three years for small businesses. There is a Rule of Construction that the submission of any report shall not be construed as an admission that the cosmetic product involved, caused, or contributed to the relevant adverse event.

Fragrance and Flavor Ingredients: If an ingredient(s) has caused or contributed to a serious adverse event, the HHS secretary may request a list of such ingredients, and such list must be provided within 30 days of the request.
Safety Substantiation: Records must be maintained that demonstrates adequate substantiation of the safety of the cosmetic product. Adequate substantiation means tests, studies, or other evidence to support a reasonable certainty that the product is safe.

Inspection: The responsible person shall permit an officer or HHS employee (with credentials) to have access to inspect records, manufacturing and other issues.

Registration and Product Listing: Cosmetic manufacturers must submit a registration no later than ONE YEAR AFTER ENACTMENT (December 29, 2022). New facilities must register within 60 days (or 60 days after deadline). Renewal is every two years. Updates or changes must be submitted within 60 days of the change. The content of the information required for registration is outlined in the law. The registering company must also list all cosmetic products it imports, manufactures, or processes and include product category or categories, list of ingredients (fragrances, flavors, or colors), and product listing number (if previously assigned). Flexibility is given to the listing of multiple products with identical formulations or those that differ only to colors, fragrances, flavors, or quantity. Annual updates are to be submitted. FDA will withhold confidential information included in a listing when a request for information is filed.

The HHS secretary may suspend a cosmetic entity’s registration if there is a reasonable probability that a product is causing serious adverse health or deaths, and the secretary has reasonable belief that other products made or processes may also be affected and for which health concerns are raised about the products manufactured. Notice of suspension is to be provided and an opportunity within five days to provide corrective action; or a hearing may be held. The secretary may conclude (a) the suspension remains necessary or (b) the registrant must submit a corrective action plan to demonstrate remediation of the problem conditions. The plan will be reviewed not later than 14 business days or such other time agreed upon by the parties. If the secretary vacates the suspension, FDA will then reinstate the registration. If the facility is suspended, no person shall introduce or deliver in the United States cosmetic products from such facility. The secretary can only delegate this authority to the FDA Commissioner.

Labeling: Each cosmetic product shall have a label that includes a domestic address, domestic phone number, or electronic contact information. In addition, the following applies to labeling.

Fragrance Allergens: The responsible person shall identify on the label each fragrance allergen included. The secretary shall propose a rule on June 29, 2024 (18 months after date of enactment) and final rule 180 days after the public comment period closes. The secretary shall consider international, state, and local requirements for allergen disclosure and threshold amount levels.
Cosmetic Products for Professional Use: A professional is an individual licensed by a state authority to practice in the field of cosmetology, nail care, barbering, or esthetics.
Professional Use Labeling: A cosmetic product introduced into interstate commerce and intended to be used only by a professional shall bear a label that contains a clear and prominent statement that the product shall be administered for use only by a licensed professional; and is in conformity with the requirements for cosmetics labeling.

Records: Records are to be available to authorized personnel to examine products if there is reason to believe a cosmetic product is adulterated or an ingredient could cause harm or run afoul of other standards. The authorized personnel must provide written notice to have access to records at a reasonable time to determine whether the product poses a threat. The records to be reviewed do not include recipes or formulas for cosmetics, financial data, pricing data, personnel data (except qualifications) research data (other than safety substantiation) or sales data (other than shipment data regarding sales).

Rule of Construction: Nothing in this section shall be construed to limit the secretary’s ability to inspect records or require establishment and maintenance of records under any other provision of the law.

Mandatory Recall Authority: If the secretary determines there is a reasonable probability that a cosmetic is adulterated or misbranded and the use or exposure will cause serious adverse health consequences or death, the secretary shall provide the cosmetic manufacturer an opportunity to voluntarily cease distribution and recall such article. If the entity refuses or does not recall the cosmetic within the time and manner prescribed, the secretary may order that the product not be distributed.

Hearing: A hearing may be held, no later than 10 days after the date of issuance. A process for resolution is provided by the law to either recall the product and cease distribution based on evidence provided or permit the product to continue distribution. Notice to affected individuals may be required.
Public Notification: If a recall is required, a press release is to be published, and alerts and public notices are to be issued, as appropriate. The materials must include the name of the cosmetic; a description of the risk; to the extent practicable, information for consumers about similar cosmetics that are not affected by the recall and ensure publication on the FDA website of the image of the cosmetic. The secretary can only delegate this authority to the Commissioner of the FDA.
Rule of Construction: Nothing in this section shall affect the authority of the secretary to request or participate in a voluntary recall or to issue an order to cease distribution or to recall under any other provision of this chapter.

Small Businesses: Responsible persons and owners and operators of facilities whose gross annual sales in the United States of cosmetic products for the previous three-year period is less than $1,000,000 shall be considered small business and not subject to Good Manufacturing Practices, registration, and listing requirements.

Exemptions: The small business exceptions do NOT apply to (1) cosmetic products that contact the mucus membrane of the eye under conditions of use that are customary or usual; (2) products that are injected; (3) products that are intended for internal use; or (4) products that are intended to alter appearance for more than 24 hours under conditions of use that are customary or usual, and removal by the consumer is not a part of such conditions of use that are customary or usual.

Preemption. No state or political subdivision of a state may establish any law, regulation, order, or other requirement for cosmetics that is different for registration and product listing, good manufacturing practice, records, recalls, adverse event reporting or safety substantiation. Nothing prevents any state from prohibiting the use of an ingredient in a cosmetic product, or continuing requirement of any state in effect at time of enactment.

Savings Clause: Nothing in the amendments shall be construed to modify, preempt, or displace any action for damages or the liability of any person under the law of any state, whether statutory or based in common law.

Talc-containing cosmetics: The HHS secretary shall propose regulations one year after December 29, 2022 and finalize the rules 180 days after the comment period to establish testing for detecting asbestos in talc products.

(1) Not later than one year after date of enactment of this act, the secretary shall promulgate proposed regulations to establish and require standardized testing methods for detecting and identifying asbestos in talc-containing cometic products and

(2) Not later than 180 days after the date on which the public comment period on the proposed regulations closes, the secretary shall issue such final regulations.

PFAS in Cosmetic. The HHS secretary shall assess the use of perfluoroalkyl and polyfluoroalkyl substances (PFAS) in cosmetic products and the scientific evidence regarding the safety in cosmetic products, including risks. The secretary may consult with the National Center for Toxicological Research. Report must be issued not later than three years after enactment summarizing the results of the assessment conducted.

Sense of the Congress on animal testing: It is the sense of the Congress that animal testing should not be used for the purposes of safety testing on cosmetic products and should be phased out except for appropriate allowances.

Funding: $14,200,000 for 2023, 25,960,000 for 2024, and $41,890,000 for 2025-2027 have been identified for these activities. The new law provides no industry user fees.

FOOTNOTES

¹ This legislation was included in H.R. 2617, the “Consolidated Appropriations Act, 2023,” as part of a year-end bill.

Article By Nancy E. Taylor and Eleanor (Miki) A. Kolton of Greenberg Traurig, LLP

For more biotech, food, and drug legal news, click here to visit the National Law Review.

Companies Gear Up For Mass Production of Cultured Meat

Could cultured meat be available in your U.S. grocery store in the new year? A previous article focused on the topic of “cultured meat” – meat made from the cells of animals and grown in a nutrient medium. While no cultured meat has yet been approved for sale in the U.S., companies are positioning themselves for mass production once needed approvals, licensing, inspections, etc., are obtained.

Earlier this month, Believer Meats broke ground on a $123 million plus facility in Wilson, North Carolina. The facility will be able to produce 10 metric tons of meat a year and will be the largest cultured meat facility in the world. The new facility will be Believer Meats’ second production facility. Last year it opened its first facility in Rehovot, Israel, with the capacity to make 500 kilograms of cultured meat a day. Believer Meats has developed processes to create cultured chicken, beef, pork, and lamb.

Investment in the cultured meat industry has been massive. For example, Believer Meats has $600 million in funding, and its investors include ADM Ventures, part of Archer-Daniels-Midland Co., and Tyson Foods.

Investment in the cultured meat industry has been massive.

So, with all of the investment and building of facilities, is the sale of cultured meat in the U.S. imminent? Cultured meat was first introduced in 2013. The eventual sale of cultured meat in the U.S. seems inevitable, but the timing is not yet clear. Before any cultured meat can be sold in the U.S., the FDA and USDA must approve the processes, license the facilities, inspect the facilities, inspect the meat, and approve labeling for the meat. Recognizing the rapid development of cultured meat products, the FDA established a premarket consultation process for companies to work with the FDA to start the process of regulatory approval for their cultured meat products. This premarket consultation process permits the companies to, voluntarily, work with the FDA, and to share information about their processes. The FDA premarket consultation does not, itself, “approve” the products, but evaluates the information shared by the companies – in order to determine if the meat is safe for human consumption. Specifically, as part of the premarket consultation, the FDA considers the cells used to make the cultured meat, the processes and materials used to create the cultured meat, and the manufacturing controls under which the cultured meat is created.

Recently, UPSIDE Food Inc. became the first cultured meat company to complete the FDA’s premarket consultation process. In November of this year, the FDA issued a No Questions letter to UPSIDE Food Inc. for its cultured chicken. The letter stated that information provided by UPSIDE Food Inc. to the FDA demonstrated that UPSIDE Food Inc.’s cultured chicken is safe and its production process prevents the introduction of contaminants that would adulterate the product. Last year, UPSIDE Food Inc opened a facility in Emeryville, California capable of producing 50,000 pounds of meat per year.

UPSIDE Food Inc.’s No Questions letter from the FDA is just the first step in the regulatory process. Pursuant to a 2019 agreement between the FDA and USDA, the FDA and the USDA will share oversight of the production of cultured meat. In addition to the premarket consultation, FDA will oversee the creation of the cultured meat up until the time of harvest, including licensing facilities, and inspecting the creation of the cultured meat. Inspections will ensure approved processes are being used and that the cultured cells are grown in a fashion that complies with Good Manufacturing Processes and food safety regulations.

When the cultured meat is harvested and processed into its final form, regulatory oversight will shift to the Food Safety Inspection Service (FSIS) of the USDA. As with traditional meat producers, cultured meat producers will have to apply for Grants of Inspection and be subject to similar inspections and food safety requirements. Labels for the cultured meat will also have to be preapproved by FSIS.

Before Believer Meats can sell any of its products manufactured in the North Carolina facility, Believer Meats will have to navigate the regulatory hurdles necessary to obtain approval of its products for sale to consumers. Believer Meats has indicated that it has been working with the FDA, but the FDA has not yet issued any statement on Believer Meats’ processes or products. However, with the start of construction on the world’s largest cultured meat facility, Believer Meats will be well-positioned to begin commercial production when regulatory approvals are obtained. We will be following this emerging new market and the regulatory rubric designed to oversee these cutting-edge food products.

Article By L. Christine Lawson of Womble Bond Dickinson (US) LLP

Click here to read more biotech, food, and drug legal news from the National Law Review.

Tag: business

New York HERO Act Enhanced Workplace Safety Committee Enforcement Provisions Enacted

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