- Volkswagen employees at a Chattanooga, Tennessee, facility voted to join the United Auto Workers (UAW). The workers voted 2,628 to 985 to join the UAW. The union has been focusing its organizing efforts at foreign automakers with U.S. facilities following successes with the “Big Three” automakers last year. The UAW won record-breaking pay increases for those workers. Those successes likely increased momentum at Volkswagen. According to a UAW press release, the Volkswagen workers are the first Southern autoworkers outside the Big Three to win a union election. The UAW plans to continue its push to organize at other non-union car manufacturers across the country.
- The National Labor Relations Board’s General Counsel (GC) Jennifer Abruzzo issued a memorandum instructing Board Regional Offices to seek enhanced remedies for unlawful work rules or contract terms. Memorandum GC 24-04 (Apr. 8, 2024). While the GC noted progress in achieving make-whole relief relating to back pay for employees “discharged for engaging in union or other protected concerted activity,” she stated such relief must be expanded to include all employees harmed as a result of an unlawful work rule or contract term — such as in an employment or severance agreement — “regardless of whether those employees are identified during the course of the unfair labor practice investigation.” The GC asserted that “mere rescission” of the rule or term does not provide adequate relief. Rather, discipline must be expunged or retracted to make impacted employees whole. Accordingly, Regions should seek settlements for make-whole relief where the discipline or legal enforcement action stemming from an unlawful rule or term “targets employee conduct that ‘touches the concerns animating Section 7,’ unless the employer can show that the conduct actually interfered with the employer’s operations and it was that interference, and not reliance on the unlawful rule or term, that led to the employer’s action.” Regions should seek and obtain information from employers regarding which employees were impacted with discipline or legal enforcement action..
- The Board reported significant increases in union election petitions and unfair labor practice charges. According to a Board press release, union activity is still on the rise, with both unfair labor practice charges and election petitions increasing at the highest levels in decades. In the first six months of fiscal year (FY) 2024 (which began Oct. 1, 2023), the Board noted a 7% increase in unfair labor practice charges compared to the same period last year. Union election petitions increased 35%, from 1,199 in the first six months of FY2023 to 1,618 during the same period in FY2024. RM petitions by employers have particularly skyrocketed — accounting for 281 of filed petitions — due to the Board’s new framework for when an employer needs to file an RM petition after receiving a demand for union recognition..
- The Department of Labor’s final rule for Occupational Safety and Health Administration (OSHA) inspections raises unionization concerns for employers. The rule aims to clarify (but it instead expands) the rights of employees to authorize third-party representatives to accompany an OSHA compliance safety and health officer during a workplace inspection. As a result, however, the rule seemingly allows a third-party union representative during an organizing campaign to report a safety concern to OSHA and then gain direct access to an employer’s workplace during the inspection that follows. This would give union organizers unprecedented access and broaden unions’ access rights to employer property. The rule is scheduled to take effect on May 31, 2024.
- Law360 reported that the College Basketball Players Association filed an unfair labor practice charge against the University of Notre Dame regarding classification of college athletes. University of Notre Dame, 25-CA-340413 (Apr. 18, 2024). The charge alleges Notre Dame violated the National Labor Relations Act “by classifying college athletes as ‘student-athletes.’” The charge follows the Board GC’s 2021 memorandum, Memorandum GC 21-08, in which she stated her position that student-athletes at private universities are “employees” under the Act because they perform services for their colleges and the National Collegiate Athletic Association in return for compensation and are subject to their respective college’s control. The Board has yet to rule on the issue.
Tag: government
European Union | Latest Immigration Updates
The adopted revision to the 2011 single-permit directive has been published in the Official Journal of the European Union, and the EU Council has temporarily suspended certain elements of EU law that regulate visa issuance to Ethiopian nationals.
Key Points:
- The single-permit directive enters into force on May 21, 2024, and EU member states have until May 21, 2026, to implement the terms of the directive domestically.
- Member states will maintain the ability to decide which and how many third-country workers to admit to their labor market.
- For Ethiopian nationals, the standard visa-processing period has been changed to 45 calendar days instead of 15. In addition, EU member states will no longer be able to waive certain requirements when issuing visas to Ethiopian nationals, including evidence that must be submitted to issue multiple-entry visas and visa fees for holders of diplomatic and service passports.
Background: As BAL previously reported, the directive currently in place was designed to attract additional skills and talent to the EU to address shortcomings within the legal migration system, provide an application process for EU countries to issue a single permit and establish common rights for workers from third countries. The revised law shortens the application procedure for a permit to reside for the purpose of work in a member state’s territory and aims to strengthen the rights of third-country workers by allowing a change of employer and a limited period of unemployment. The new agreement is part of the “skills and talent” package, which addresses shortcomings in legal migration policy and aims to attract greater foreign skilled talent.
The decision to tighten visa guidelines for Ethiopia is in response to an assessment by the EU Commission, which found that Ethiopian authorities have not fully cooperated with officials regarding readmission requests and difficulties persist in issuing emergency travel documents. The commission cited the organization of both voluntary and non-voluntary return operations as a determining factor in altering Ethiopia’s visa privileges within the European Union.
BAL Analysis: The single-permit directive is directed at non-EU nationals working in the EU and aims to create an environment where these individuals are treated equally regarding their working conditions, social security and tax benefits, and recognizing their unique qualifications.
Congress Extends Statute of Limitations for Sanctions Violations
What Happened:
On April 24, 2024, President Biden signed into law the Fentanyl Eradication and Narcotics Deterrence (FEND) Off Fentanyl Act, as part of a national security legislative package, which, among other things, amended the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) to extend the statute of limitations for the enforcement of sanctions violations from five years to ten years (the Amendment). The ten-year statute of limitations applies to civil and criminal enforcement for all sanctions programs.
The Bottom Line:
The Amendment changes the lookback period for sanctions compliance from five years to ten years, impacting how sanctions compliance is treated internally at companies with international touchpoints, as well as counterparty diligence in corporate transactions. Companies will need to update their compliance programs to account for the extended period.
The Full Story:
IEEPA authorizes the President of the United States to impose economic sanctions by declaring a national emergency in response to any unusual or extraordinary threat to the national security of the United States that originates outside of the United States. IEEPA authorizes both civil enforcement actions and criminal prosecution against persons found to have violated US sanctions and previously established a five-year statute of limitations on enforcement.
As part of a broader national security package, President Biden signed into law the FEND Off Fentanyl Act on April 24, 2024. The Act requires the President to, among other things, impose sanctions under IEEPA on any person involved in the trafficking of Fentanyl through a forthcoming Fentanyl sanctions regime and amends IEEPA to extend the statute of limitations on enforcement to ten years. Critically, the extended statute of limitations under the Amendment applies not only to the forthcoming Fentanyl sanctions regime, but to almost all sanctions programs administered by the US Department of Treasury’s Office of Foreign Assets Control (OFAC). The Amendment also impacts other programs authorized under IEEPA, including some programs administered by the US Department of Commerce’s Bureau of Industry and Security (BIS), such as the Information and Communications Technology and Services (ICTS) Program, as well as other programs administered by the Department of Justice and Department of the Treasury.
The Amendment impacts compliance obligations for US companies and others seeking to comply with US sanctions. For example, OFAC regulations implementing US sanctions include record-keeping requirements for financial institutions with respect to certain transactions that currently track the previous five-year limitations period under IEEPA and it is likely that OFAC will amend its regulations to increase record-keeping requirements to ten years. Similarly, OFAC guidance on effective sanctions compliance has pegged recommended record retention periods to the five year limitations period. For example, the “safe harbor” for service providers under the prohibition on maritime services for Russian oil under the Russian oil price cap sanctions requires that persons retain records for five years. It is likely that OFAC will update its guidance to reflect the new ten-year limitations period following the Amendment and companies should carefully consider updates to sanctions compliance programs accordingly.
The Amendment does not address retroactive application. Retroactive criminal prosecution (i.e., for conduct currently beyond the prior five year limitations period) raises constitutional concerns. It is currently unclear whether OFAC will seek to bring civil enforcement actions for conduct already beyond the five-year limitations period.
The new ten-year limitations period should also be considered in conducting sanctions diligence on external counterparties. Companies will need to consider the longer lookback period when evaluating potential mergers and acquisitions and when seeking or providing representations and warranties involving sanctions compliance.
Understanding the New FLSA Overtime Rule: What Employers Need to Know
Changes to overtime rules under the Fair Labor Standards Act (FLSA) announced on April 23, 2023 affect most U.S. employers. The Final Rule substantially increases the number of employees eligible for overtime pay. It is critical that employers understand the rule and its implications for their business.
Current FLSA Overtime Regulations: The Basics
The FLSA requires employers to pay overtime pay of at least 1.5 times an employee’s standard pay rate for hours worked in excess of 40 hours per week. However, “white collar” and “highly compensated” employees are exempt from this overtime pay requirement if they meet a three-part test:
- Salary Basis Test – an employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed.
- Salary Level Test – the amount of salary paid must meet a minimum specified amount. (Spoiler Alert: The new rules change the salary level.)
- Duties Test – the employee’s job duties must primarily involve executive, administrative, or professional duties.
THE WHITE COLLAR EXEMPTION
The white-collar exemption applies to employees who perform primarily executive, administrative, and professional tasks. Workers who perform these tasks are considered to have more autonomous, managerial, or specialized roles justifying exemption from overtime. Therefore, if an employee’s duties are executive, administrative, and professional, and they satisfy the salary basis and salary level tests in the FLSA, they are not entitled to overtime pay under the FLSA.
HIGHLY COMPENSATED EMPLOYEES
A highly compensated employee (HCE) is someone who earns a high annual compensation (according to salary thresholds in the FLSA) and whose role includes one or more executive, administrative, or professional duties. The FLSA exempts “highly compensated employees” from the overtime pay requirement.
Key Changes to the FLSA Overtime Rules
The new rule increases the salary thresholds in the salary level test for highly compensated and white collar employees. As a result of the changes, less employees will be considered exempt and employers will be liable for significantly more overtime pay. Notably, the types of duties eligible for exemption are not impacted.
The new salary thresholds are introduced in two phases with the first increase becoming effective on July 1, 2024, and the second occurring on January 1, 2025. Importantly, the new rule also includes a mechanism for automatically updating these salary thresholds every three years based on current wage data. This means employers will need to stay vigilant for future increases.
THE NEW SALARY THRESHOLDS
In general, the minimum annual salary to qualify for the white collar exemption is increasing from $35,568 to $58,656 and the total annual compensation requirement for the highly compensated employee exemption is increased from $107,432 to $151,164. Here’s a detailed breakdown of the higher salary thresholds and their effective dates:
Why This Rule Matters: Essential Steps for Employers
This rule will have a significant impact on Pennsylvania employers, potentially reclassifying millions of currently exempt employees as non-exempt and eligible for overtime pay. Employers who fail to comply risk costly back pay, penalties, and lawsuits.
There are practical steps that employers can consider to ensure compliance with the new FLSA rule:
- Review Current Employee Salaries, Hours, and Duties: Audit current salaries, hours, and job duties. This review will help identify which employees’ status may be affected by the new salary thresholds for exempt status under the FLSA.
- Reclassify Employees as Non-Exempt as Necessary: Based on the review, determine which employees will need to be reclassified from exempt to non-exempt, or awarded a salary increase, to comply with the new rules. This reclassification will make them eligible for overtime pay, altering how their work hours are managed and compensated. It is advisable to consider an employee’s perception of this reclassification when taking this step.
- Time Recording Policies and Processes: For employees who are reclassified as non-exempt, implement or update timekeeping procedures to accurately track hours worked. This may also require training employees on time-keeping systems. Effective and accurate time recording is essential for managing overtime and ensuring compliance.
- Update Overtime Policies: Revise company overtime policies to reflect changes in employee classifications. Include clear procedures for overtime approval to manage overtime work more effectively and ensure it aligns with budget constraints and business needs.
- Bonuses, Incentive Pay, Commissions: Evaluate how non-salary forms of compensation will factor into the new salary thresholds for exempt status. The FLSA determines how this compensation should be treated in determining total annual compensation, which could influence exemption status.
- Remember Contractual Obligations: The FLSA is a federal law which applies to all U.S. employers. However, any additional salary commitments in an employment contract still legally bind the employer. These should not be ignored.
Despite the quickly approaching compliance date, we also anticipate legal challenges to this rule, which could delay or change the rules. For now, though, employers should proceed on that basis that the updated regulations will take effect on July 1, 2024. Preparing for this deadline ensures that employers will not be caught off guard and can avoid any potential legal and financial repercussions.
Get Off the Beaten Path: Three Ways Outsourcing Can Help Firms Achieve CRM & Data Quality Success
Normally, the path most traveled is thought to be the better road as it represents the path that leads to achieving goals and success while the less traveled path leads to stressful processes and unknowns.
But for firms trying to achieve CRM success, the “beaten path” involves investing tens of thousands of dollars into the latest and greatest technology and hiring internal Data Stewards to maintain the data flowing into the system. This can take up a significant number of firm resources and there is no guarantee that CRM Success will be achieved.
Let’s face it, the traditional approach to CRM and Data Quality Success often leads to more headaches and challenges than it does to success. Without the right experience and expertise, leading a CRM implementation project or a data quality clean-up can be disastrous.
Hundreds of thousands of records flow in from departmental databases which need to be analyzed and categorized properly. Meetings need to be held with firm leadership to understand their expectations for the system, and meetings need to be coordinated with vendors to set up demonstrations along with Requests For Proposals (RFPs).
To add more fuel to the fire, meetings also need to be held with end users to understand their needs and requirements so system selection can be catered to them. In the end, firms are left with high training and implementation costs; limited staffing pools due to required expertise; and increased employee burnout due to the overwhelming nature of the work.
The Path Less Traveled: Outsourcing
Many forward-thinking firms have taken the path less traveled to CRM success and have outsourced many of their core marketing technology positions and data quality work to trusted service providers. Outsourced Marketing Technology Managers and Data Stewards can provide all the benefits of retaining these positions in-house at a cost-efficient price all while reducing managerial headaches.
The route less traveled gives you access to a pool of highly skilled professionals without the additional costs associated with hiring internally. Many outsourced Marketing Technology Managers and Data Stewards have years of industry experience working with the nation’s top firms tackling complex data quality issues and guiding implementations ensuring they are implemented and integrated effectively.
To achieve CRM and data quality success, sometimes the beaten path won’t get you there. Here are three ways taking the path less traveled can help you achieve CRM and data quality success:
1. Cost Savings
Utilizing outsourced service providers for marketing technology or data quality roles can help firms save a significant amount of money. For firms with around 250 professionals, hiring an internal CRM Manager and Data Steward can cost firms around $116,640.
For firms that have limited resources and budgets, outsourcing providers offer various pricing models for their services. From contracting their workers on an as-needed basis for short-term or long-term projects to paying-as-you-go. This allows firms to allocate more of their investments to higher-priority projects or initiatives. Depending on the rate of the service provider, firms can expect to pay up to 33% less ($77,350) when they outsource their core marketing technology and data quality work.
2. Improved Data Quality
Opposed to internal Data Stewards, outsourced data quality professionals can focus on key responsibilities and can work more efficiently than their internal counterparts who have to focus on other tasks or priorities. These outsourced professionals understand the intricacies of the professional service industry and seamlessly fit into your firm’s day-to-day processes.
Outsourced Data Stewards have the ability and know-how to implement data standardization processes and protocols, minimizing the number of dirty records that may flow into the system. They also have access to industry-leading tools that can streamline and automate data management so your attorneys and professionals can worry less about maintaining their contacts and more about serving their clients.
3. Reduction In Turnover
Traditionally, hiring Data Stewards internally has been a revolving door, where firms would hire a new team member to maintain their data quality, train them, compensate them, motivate them, then, replace them. Given how outsourced service providers are not directly involved with the firm’s core services, they assume the role of finding, hiring, training, motivating and managing the data quality professional.
This frees up your marketing and business development teams to focus on growing the firm and nurturing client relationships rather than chasing down contact data from the organization’s professionals. They can help you with a wide range of data-related activities including:
- Regularly reviewing new records
- Enhancing records with geographical information, financial data, or who-knows-who relationships
- Creation and management of segmented and targeted lists for marketing or business development campaigns
To achieve CRM and data quality success, sometimes the beaten path won’t get you there. So, if you are struggling with your marketing technology or data quality, don’t be afraid to explore alternate routes, like outsourcing. It can open your firm up to a pool of highly skilled professionals who have years of experience solving the same issues you may be going through. An outsourced team can provide your firm with significant cost savings, improved data quality, and a reduction in employee turnover and managerial headaches.
These operational efficiencies lead to greater productivity and returns on marketing spend – meaning greater profitability for the firm.
Business Taxation of Hedging Transactions Part IV: Tax Timing
What are the tax accounting rules for hedges?
Whether or not a qualified tax hedge is properly identified, it must be tax accounted for under a method that clearly reflects income.[1] The timing of gains and losses on hedges must match the timing of income and loss reporting on the hedged items. Aggregate tax hedgers must provide in their Aggregate Programs robust descriptions of the tax accounting methods used for each type of hedge that is part of its Aggregate Program. In addition, the Aggregate Program’s documentation must contain enough detail to sufficiently demonstrate how the clear reflection of income requirement is met.
Which transactions must be tax accounted in a way that clearly reflects income?
As a general matter, a taxpayer must compute all of its taxable income in a way that clearly reflects income. This requirement also applies to qualified tax hedges. Under Treas. Reg. § 1.446-4, a taxpayer must clearly reflect income, regardless of whether the taxpayer properly identified the hedging transaction.[2] A taxpayer cannot avoid the requirement to clearly reflect income by simply failing to identify as a hedge.
Can more than one method of tax accounting clearly reflect income?
Yes. As long as a taxpayer’s hedge accounting method meets the matching requirement to clearly reflect income, the taxpayer has flexibility to adopt an appropriate tax accounting method[3] provided it meets Treas. Reg. § 1.446-4(c).
Do generally accepted accounting principles (GAAP) clearly reflect income for purposes of tax hedge accounting?
No. Although GAAP might clearly reflect taxable income, it might not reasonably match taxable gain and loss on the hedge with that of the hedged item. Regardless of GAAP, a taxpayer must follow the clear reflection of income requirements set out in Treas. Reg. § 1.446-4.
Must all hedges be tax accounted for on the same method?
No. A taxpayer can adopt different methods of tax accounting for different types of hedges if they clearly reflect income and meet two additional conditions.[4] First, once an accounting method is adopted, it must be consistently applied; and second, an accounting method can only be changed with IRS consent.[5]
When is a tax accounting method assumed to have been adopted for hedges?
A taxpayer has adopted a tax accounting method when it has accounted for a “material item” in the same way on two or more consecutively filed tax returns. In this situation, the item “represents consistent treatment of that item” for purposes of satisfying Treas. Reg. § 1.446-1(e)(2)(ii)(a).[6] If a hedge is correctly accounted for in the first year, however, a taxpayer is treated as having adopted an accounting method after the first year.[7] Once a method is adopted, it must be consistently applied and can only be changed with IRS consent.[8]
What happens if the IRS determines that a taxpayer’s method of tax accounting does not clearly reflect income?
If a taxpayer’s accounting method does not clearly reflect income, the IRS can recompute taxable income in a manner that clearly reflects income. Unless the taxpayer can successfully contest this treatment at audit, on appeal, or in subsequent litigation, it must use the IRS’s method to tax account for its hedging gain or loss. To change the method of tax accounting the taxpayer uses for its hedges, it must first obtain IRS consent.[9]
Can a taxpayer change from an impermissible method of tax accounting to a permissible method without first obtaining IRS consent?
No. The taxpayer must obtain consent from the IRS consent in advance of making any tax accounting changes.[10]
What tax timing rules apply to hedges of aggregate risks?
A taxpayer that hedges its risks on an aggregate basis must adopt a tax accounting method that clearly reflects income.[11] As a result, the timing of income, deduction, gain, or loss with respect to hedges must reasonably match that of the items being hedged.[12]
What are the tax timing requirements for hedges of debt instruments?
Hedges of debt instruments, whether held or to be held by the taxpayer, are tax accounted by reference to the period or periods to which the hedge relates.[13] For a debt instrument that provides interest at a fixed or qualified floating rate, constant yield principles generally clearly reflect income.[14] This means that hedging gain or loss is taken into account as if the gain or loss “adjusted the yield of the instrument over the term to which it relates.”[15] For a hedge of an anticipated fixed rate borrowing, gain (loss) is taken into account as if it increased (reduced) the issue price for the debt instrument.[16] It is treated as an adjustment to the debt instrument’s issue price, and it is taken into account over the term of the hedge. If the hedge is entered into but the anticipated debt issuance or obligation is not consummated, the taxpayer will take into account gain or loss from the hedge on a “when realized” basis.[17]
What tax accounting methods are provided in the Treasury Regulations for hedges of inventory?
Four accounting methods are provided in the Treasury Regulations for inventory hedges—the general method, mark-and-spread, and two simplified methods:
(1) General method Gain or loss on hedges of inventory purchases can be taken into account in the same time period as income or loss on the hedged item as if the gain or loss were an element of the cost of the inventory.[18] Gain or loss on hedges of inventory sales can be taken into account as if the gain or loss were an element of the sales proceeds.[19] For specifically identified hedges, this method is easy to comply with because it allows for hedging gain or loss to be taken into account as if it were an element of the cost incurred in (or sales proceeds from) that particular transaction. An aggregate hedger, on the other hand, might not be able to take hedging gains or losses into account directly as part of the cost incurred in (or sales proceeds with respect to) an inventory transaction (an aggregate hedger might not be able to match the hedge with a particular inventory purchase or sale).[20]
(2) Mark-and-spread method To match an inventory hedge to the timing of aggregate hedged items, a taxpayer may account for the hedge under the mark-and-spread method. Mark-and-spread is permissible for an aggregate inventory hedger. With mark-and-spread, a taxpayer periodically marks the hedge to market no less frequently than quarterly, taking the resulting gain or loss into account over the period in which the hedge is intended to reduce the taxpayer’s risk exposure to the hedged item.[21] Gain or loss from marking the hedge to market is then spread over the period that such gain or loss would have been taken into account as if it had been an increase or decrease to inventory cost or gross sales proceeds in that period.
(3) Simplified inventory method Inventory hedgers that do not use the last-in-first-out (LIFO) method of accounting for inventory take into account realized gains or losses on hedges of inventory purchases and sales when they would be taken into account as if the gains or losses were elements of inventory cost during the period realized.[22]
(4) Simplified mark-to-market method Marking hedges to market to take gain or loss into account immediately might clearly reflect income even if the hedged inventory is not on mark-to-market. Mark-to-market hedge accounting might only be appropriate if inventory is not accounted for under the LIFO method or the lower-of-cost-or-market method, and only if the inventory items are held for a short period of time.[23]
[1] Treas. Reg. § 1.446-4.
[2] Rev. Rul. 2003-127.
[3] Treas. Reg. § 1.446-4(c).
[4] Rev. Rul. 2003-127.
[5] Rev. Rul. 2003-127.
[6] Rev. Rul. 2003-127 citing Rev. Rul. 90-38, 1990-1 C.B. 5-7.
[7] Rev. Rul. 2003-127.
[8] Rev. Rul. 2003-127.
[9] Treas. Reg. § 1.446-1(b)(1).
[10] See Rev. Proc. 97-27, 1997-1 C.B. 680 for the procedure to obtain consent.
[11] Treas. Reg. § 1.446-4(b).
[12] Treas. Reg. § 1.446-4(e)(1).
[13] Treas. Reg. § 1.446-4(e)(4).
[14] Id.
[15] Id.
[16] Id.
[17] Treas. Reg. § 1.446-4(e)(8)(i).
[18] Treas. Reg. § 1.446-4(e)(3)(i).
[19] Id.
[20] Treas. Reg. § 1.446-4(e)(1)(i).
[21] Treas. Reg. § 1.446-4(e)(1)(ii).
[22] Treas. Reg. § 1.446-4(e)(3)(ii)(A).
[23] Treas. Reg. § 1.446-4(e)(3)(ii)(B).
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Justice Department has Opportunity to Revolutionize its Enforcement Efforts with Whistleblower Program
Over the past few decades, modern whistleblower award programs have radically altered the ability of numerous U.S. agencies to crack down on white-collar crime. This year, the Department of Justice (DOJ) may be joining their ranks, if it incorporates the key elements of successful whistleblower programs into the program it is developing.
On March 7, the Deputy Attorney General Lisa Monaco announced that the DOJ was launching a “90-day policy sprint” to develop “a DOJ-run whistleblower rewards program.” According to Monaco, the DOJ has taken note of the successes of the U.S.’s whistleblower award programs, such as those run by the Securities and Exchange Commission (SEC) and Internal Revenue Service (IRS), noting that they “have proven indispensable.”
Monaco understood that the SEC and IRS programs have been so successful because they “encourage individuals to report misconduct” by “rewarding whistleblowers.” But how any award program is administered is the key to whether or not the program will work. There is a nearly 50-year history of what rules need to be implemented to transform these programs into highly effective law enforcement tools. The Justice Department needs to follow these well defined rules.
The key element of all successful whistleblower award programs is very simple: If a whistleblower meets all of the requirements set forth by the government for compensation the awards must be mandatory and based on a percentage of the sanctions collected thanks to the whistleblower. A qualified whistleblower cannot be left out in the cold. Denying qualified whistleblowers compensation will destroy the trust necessary for a whistleblower program to work.
It is not the possibility of money that incentives individuals to report misconduct but the promise of money. Blowing the whistle is an immense risk and individuals are only compelled to take such a risk when there is real guarantee of an award.
This dynamic has been laid clear in recent legislative history. There is a long track record of whistleblower laws and programs failing when awards are discretionary and then becoming immensely successful once awards are made mandatory.
For example, under the 1943 version of the False Claims Act awards to whistleblowers were fully discretionary. After decades of ineffectiveness, in 1986, Congress amended the law to set a mandate that qualified whistleblowers receive awards of 15-30% of the proceeds collected by the government in the action connected with their disclosure.
The 1986 Senate Report explained why Congress was amending the law:
“The new percentages . . . create a guarantee that relators [i.e., whistleblowers] will receive at least some portion of the award if the litigation proves successful. Hearing witnesses who themselves had exposed fraud in Government contracting, expressed concern that current law fails to offer any security, financial or otherwise, to persons considering publicly exposing fraud.
“If a potential plaintiff reads the present statute and understands that in a successful case the court may arbitrarily decide to award only a tiny fraction of the proceeds to the person who brought the action, the potential plaintiff may decide it is too risky to proceed in the face of a totally unpredictable recovery.”
In the nearly four decades since awards were made mandatory, the False Claims Act has established itself as America’s premier anti-fraud law. The government has recovered over $75 billions of taxpayer money from fraudsters, the vast majority from whistleblower initiated cases based directly on the 1986 amendments making awards mandatory.
Similar transformations occurred at both the IRS and SEC where ineffective discretionary award laws were replaced by laws which mandated that qualified whistleblowers receive a set percentage of the funds collected thanks to their whistleblowing. Since these reforms, the whistleblower programs have revolutionized these agencies’ enforcement efforts, leading directly to billions of dollars in sanctions and creating a massive deterrent effect on corporate wrongdoing.
Most recently, Congress reaffirmed the importance of mandatory whistleblower awards when it reformed the anti-money laundering whistleblower law. The original version of the law, which passed in January 2021, had no set minimum amount for awards, meaning that they were fully discretionary. After the AML Whistleblower Program struggled to take off, Congress listened to the feedback from whistleblower advocates and passed the AML Whistleblower Improvement Act to mandate that qualified money laundering whistleblowers are awarded.
Monaco states that the DOJ has long had the discretionary authority to pay whistleblower awards to individuals who report information leading to civil or criminal forfeitures and has “used this authority here and there — but never as part of a targeted program.”
The most important step in turning an underutilized and ineffective whistleblower award law into an “indispensable” whistleblower award program has been made clear over the past decades. Qualified whistleblowers must be guaranteed an award based on a percentage of the sanctions collected in connection with their disclosure.
By administering its whistleblower program in a way that mandates award payments, the DOJ would go a long way towards creating a whistleblower program which revolutionizes its ability to fight crime. The Justice Department has taken the most important first step – recognizing the importance of whistleblowers in reporting frauds. It now must follow through during its “90-day sprint,” making sure reforming the management of the Asset Forfeiture Fund works in practice. Whistleblowers who risk their jobs and careers need real, enforceable justice.
A Paradigm Shift in Legal Practice: Enhancing Civil Litigation with Artificial Intelligence
A paradigm shift in legal practice is occurring now. The integration of artificial intelligence (AI) has emerged as a transformative force, particularly in civil litigation. No longer is AI the stuff of science fiction – it’s a real tangible power that is reshaping the manner in which the world functions and, along with it, the manner in which the lawyer practices. From complex document review processes to predicting case outcomes, AI technologies are revolutionizing the way legal professions approach and navigate litigation and redefining traditional legal practice.
Streamlining Document Discovery and Review
One of the most time-consuming tasks in civil litigation is discovery document analysis and review. Traditionally, legal teams spend countless hours sifting through documents to identify relevant evidence, often reviewing the same material multiple times, depending on the task at hand. However, AI-powered document review platforms can now significantly expedite this process. By leveraging natural language processing (NLP) and machine learning algorithms, there platforms can quickly analyze and categorize documents based on relevance, reducing the time and resources required for document review while ensuring thoroughness and accuracy. AI in the civil discovery process offers a multitude of benefits for the practitioner and cost saving advantages for the client, such as:
• Efficiency: AI powered document review significantly reduces required discovery, allowing legal teams to focus their efforts on higher value tasks and strategic analysis;
• Accuracy: By automating the initial document review process AI helps minimize potential human error and ensures a greater consistency and accuracy in identifying relevant documents and evidence;
• Cost-effectiveness: AI driven platforms offer a cost-effective alternative to traditional manual review methods, helping to lower overall litigation costs for clients
• Scalability: AI technology can easily scale to handle large volumes of data making it ideal for complex litigation cases with extensive document discovery requirements;
• Insight Generation: AI algorithms can uncover hidden patterns, trends, and relationships within the closed data bases that might not be apparent through manual review, providing valuable strategy and decision-making.
Predictive Analytics for Case Strategy
Predicting case outcomes is inherently challenging, often relying on legal expertise, jurisdictional experience of the lawyer and analysis of the claimed damage. However, AI-driven predictive analytics tools are changing the game by providing hyper-accurate data-driven insights into case strategies. By analyzing past case law, court rulings, and other relevant data points, these tools can forecast-model the likely outcome of a given case, allowing legal teams and clients to make more informed decisions regarding jurisdictionally specific settlement negotiations, trial strategy and resource allocation.
Enhanced Legal Research and Due Diligence
AI-powered legal research tools have become powerful tools for legal professionals involved in civil litigation. These tools utilize advanced algorithms to sift through vast repositories in a closed system of case law, statutes, regulations and legal precedent, delivering relevant information in a fraction of the time it would take through manual research methods. Additionally, AI can assist in due diligence processes by automatically flagging potential legal risks and identifying critical issues within contracts and other legal documents.
Improving case Management and Workflow Efficiency
Managing multiple cases simultaneously can be daunting for legal practitioners and could lead to inefficiencies and oversight. AI-driven case management systems offer a solution by providing centralized case-related information, deadlines and communications. These systems can automate routine tasks, such as scheduling document filing and client communication schedules, freeing up valuable time for attorneys to focus on legal substantive tasks and proactive case movement .
Ethical Considerations and Challenges
While the benefits of AI in civil litigation are undeniable, they also raise important ethical considerations and challenges. Issues such as data privacy, algorithmic bias, and the ethical use of AI in decision-making processes must be carefully addressed to ensure fairness and transparency in the legal system. Additionally, there is a growing need for ongoing education and training to equip legal professionals with the necessary skills to effectively leverage AI tools while maintain ethical standards and preserving the integrity of the legal profession.
Take Away
The integration of AI technologies in civil litigation represents a paradigm shift in legal practice, offering unprecedented opportunities to streamline processes, enhance decision-making and improve client satisfaction. By harnessing the power of AI-driven solutions, legal professionals can navigate complex civil disputes more efficiently and effectively, ultimately delivering better outcomes for clients and advancing the pursuit of just outcomes in our rapidly evolving legal landscape.
The 80/20 Rule is Here: CMS Finalizes HCBS Care Worker Payment Requirements
In May 2023, the Centers for Medicare and Medicaid Services (“CMS”) proposed a series of rule changes intended to help promote the availability of home and community-based services (“HCBS”) for Medicaid beneficiaries. Chief among these proposals was a new rule that would require HCBS agencies to spend at least 80% of their Medicaid payments for homemaker, home health aide, and personal care services on direct care worker compensation (the “80/20 Rule”). Intended to help stabilize the HCBS workforce, the proposal faced immediate backlash from HCBS providers and Medicaid agencies, who expressed concern that the 80/20 rule would harm HCBS providers by mandating specific allocations to worker compensation and bogging down providers and Medicaid agencies with burdensome reporting requirements.
After reviewing thousands of comments, CMS released an advance copy of the final rule this week. Defying stakeholder anticipation that the 80/20 Rule would be relaxed, or updated to provide more flexibility for providers, CMS finalized the 80/20 Rule largely as originally proposed, including the following key requirements:
- HCBS providers must spend at least 80% of Medicaid payments on direct care worker compensation;
- HCBS providers will have six years (increased from four) from the effective date of the final rule to demonstrate compliance with the 80/20 Rule;
- States must begin collecting and tracking data on direct care worker compensation within four years of the effective date of the final rule; and
- States are permitted to establish different standards for smaller HCBS providers and to establish hardship exemptions – in both cases based on objective and transparent criteria.
Under the broad mandate of the 80/20 Rule, there are a number of key definitions that HCBS providers must consider as they evaluate these new requirements:
Direct Care Workers
Because the 80/20 Rule was adopted largely to stabilize the HCBS workforce, a key component is whose compensation qualifies for inclusion. CMS’s proposed definition encompassed almost any person with a role in providing direct care to patients (e.g., RNs, LPNs, individuals practicing under their supervision, home health aides, etc.). Under the final 80/20 Rule, CMS clarified that “direct care workers” also include those whose role is specifically tied to clinical supervision (e.g., nurse supervisors).
Compensation
Compensation of direct care workers means:“[s]alary, wages, and other remunerations as defined by the Fair Labor Standards Act and implementing regulations; [b]enefits (such as health and dental benefits, life and disability insurance, paid leave, retirement, and tuition reimbursement); and [t]he employer share of payroll taxes for direct care workers delivering services authorized under section 1915(c) of the Act.” CMS clarified that “compensation” also includes:
- Overtime pay;
- All forms of paid leave (e.g., sick leave, holidays, and vacations);
- Different types of retirement plans and employer contributions; and
- All types of benefits: CMS intentionally used the phrase “such as” to indicate the list of benefits was non-exhaustive, and indicated technical guidance to states on this subject is forthcoming.
Excluded Costs
CMS expressed concern that HCBS providers would include training costs for direct care workers as “compensation,” and that calculating compensation in this way could result in negative outcomes, such as diminished training opportunities. To address these concerns, CMS created the concept of “excluded costs,” which are excluded from the percentage calculations under the 80/20 Rule. See § 441.302(k)(1)(iii) (“costs that are not included in the calculation of the percentage of Medicaid payments to providers that are spent on compensation for direct care workers.”). Excluded costs are limited to:
- Costs of required direct care worker training;
- Direct care worker travel costs (mileage, public transportation subsidy, etc.); and
- Personal protective equipment costs.
Medicaid Payments
CMS largely adopted its expansive view of what qualifies as a “Medicaid Payment” for purposes of 80/20 Rule calculations. CMS clarified that the 80/20 Rule encompasses both standard and supplemental payments and applies regardless of whether HBCS services are delivered through fee-for-service or managed care delivery systems. CMS also declined to create a formal carve-out for value-based care or pay-for-performance arrangements, despite recognizing their value.
What Comes Next?
HCBS providers and state Medicaid agencies have six years to sort out their compliance with the 80/20 Rule (though data tracking and reporting begins after year three). On the provider side, this means carefully evaluating the business and economic impacts of compliance with the 80/20 Rule and monitoring CMS and state-level guidance on implementation as it develops over time. For multi-state providers, this process becomes even more complicated, as there is a high likelihood that states will choose to implement the 80/20 Rule in different, and potentially contradictory, ways.
Providers also need to work with the state agencies to address the adequacy of HCBS rates generally. CMS recognized the important role that the underlying rates play in HCBS sustainability but declined to mandate specific payment rates or methodologies. As a result, positive momentum on the rates themselves must come from state initiatives.
United States | Labor Department Posts Final H-2A Regulation
The U.S. Department of Labor announced a final H-2A regulation Friday, saying the rule was crafted to target the “vulnerability and abuses experienced by workers under the H-2A program that undermine fair labor standards for all farmworkers in the U.S.”
The H-2A program allows employers to hire temporary agricultural workers when there is a lack of “able, willing and qualified” U.S. workers. The new rule includes sections:
- Adding new protections for worker self-advocacy.
- Clarifying “for cause” termination.
- Making foreign labor recruitment more transparent.
- Ensuring timely wage changes for H-2A workers.
- Improving transportation safety.
- Preventing labor exploitation and human trafficking.
- Ensuring employer accountability.
The final rule is scheduled to take effect on June 28; however, H-2A applications filed before Aug. 28, will be processed according to federal regulations as is in effect as of June 27. Applications submitted on or after Aug. 29, 2024, will be processed in accordance with the provisions of the new rule.
Additional Information: The 600-page rule is scheduled to be published in the Federal Register on Monday, April 29. A pre-publication version is available here.