Tag: Office of Management and Budget

BIOSECURE Act: Anticipated Movement, Key Provisions, and Likely Impact

Last night, the House of Representatives passed the BIOSECURE Act (BIOSECURE or the Act) by a bipartisan vote of 306 to 81.

The BIOSECURE Act prohibits federal agencies from procuring or obtaining any biotechnology equipment or service produced or provided by a biotechnology company of concern. Subject to some exceptions, it also prohibits federal agencies from contracting with a company that uses equipment or services produced or provided by a biotechnology company of concern. Further, the Act prohibits recipients of a loan or grant from a federal agency from using federal funds to purchase equipment or services from a biotechnology company of concern.

The Senate version of BIOSECURE, sponsored by Sens. Gary Peters (D-MI) and Bill Hagerty (R-TN), was voted out of the Senate Committee on Homeland Security and Governmental affairs with bipartisan support in March 2024. Given its passage in the House last night, the BIOSECURE Act is likely to be signed into law by the end of the year. The House version of BIOSECURE is likely to be the version that becomes law. President Biden is unlikely to veto the Act given its bipartisan support, his previous executive actions to support domestic biotechnology development, and his Administration’s approach towards competition with China.

The Act defines “biotechnology company of concern” as any entity that:

  • is subject to the jurisdiction, direction, control, or operates on behalf of the government of a foreign adversary (defined as China, Cuba, Iran, North Korea, and Russia);
  • is involved in the manufacturing, distribution, provision, or procurement of a biotechnology equipment or service; and
  • poses a risk to U.S. national security based on:
    • engaging in joint research with, being supported by, or being affiliated with a foreign adversary’s military, internal security forces, or intelligence agencies;
    • providing multiomic data obtained via biotechnology equipment or services to the government of a foreign adversary; or
    • obtaining human multiomic data via the biotechnology equipment or services without express and informed consent.

Somewhat unusually, the Act names specific Chinese companies as automatically qualifying as “biotechnology companies of concern”:

  • BGI (formerly known as the Beijing Genomics Institute);
  • MGI;
  • Complete Genomics;
  • WuXi AppTec; and
  • WuXi Biologics.

Both categories include any subsidiary, parent, affiliate, or successor entities of biotechnology companies of concern.

The Act also has very broad definitions of “biotechnology equipment or service.” The definition of equipment encompasses any machine, device, or subcomponent, including software that is “designed for use in the research, development, production, or analysis of biological materials.” The definition of services is similarly broad.

The BIOSECURE Act also requires the Office of Management and Budget (OMB) to publish a list of additional biotechnology companies of concern. The list is prepared by the Secretary of Defense in coordination with the Secretaries of the Departments of Health and Human Services, Justice, Commerce, Homeland Security, and State, as well as the Director of National Intelligence and National Cyber Director. This list of companies must be published by OMB within one year of BIOSECURE’s enactment and reviewed annually by OMB in consultation with the other Departments.

Guidance and Regulatory Authorities

OMB is also tasked with developing guidance and has 120 days from enactment of the statute to do so for the named companies. For the list of biotechnology companies of concern, OMB’s guidance must be established within 180 days after the development of the list.

Beyond OMB, the Act requires the Federal Acquisition Regulatory Council to revise the Federal Acquisition Regulation (FAR) to incorporate its prohibitions. The FAR regulations must be issued within one year of when OMB establishes its guidance.

For named companies the Act’s prohibitions are effective 60 days after the issuance of the FAR regulations. For companies placed on the biotechnology company of concern list, the effective date for the Act’s prohibitions is 80 days after the issuance of FAR regulations.

Impact on Existing Business Relationships

In response to stakeholder concerns about disrupting existing commercial relationships and triggering delays in drug development, the House version of the BIOSECURE Act provides a five-year unwinding period for contracts and agreements entered into before the Act’s effective dates. Contracts entered into after the Act’s effective dates do not qualify for the five year unwinding period.

Process for Designating Companies

BIOSECURE specifies the process for designating a biotechnology company of concern. Critically, the Act does not require OMB to notify a company prior to the Department of Defense making the designation. Rather, a company will receive notice that it is being designated and placed on the biotechnology company of concern list. Moreover, the criteria for listing will only be provided “to the extent consistent with national security and law enforcement interests.” Thus, companies may face a circumstance where they are not provided the evidence supporting their designation.

Once a company receives the notice, it will have 90 days to submit information and arguments opposing the listing. The Act does not require a hearing or any formal administrative process. If practicable, the notice may also include steps the company could take to avoid being listed, but it is not required.

Safe Harbor, Waivers and Exceptions

The Act only has one safe harbor for biotechnology equipment or services that were formerly but no longer provided or produced by a biotechnology company of concern. This safe harbor seems intended to allow a biotechnology company of concern to sell their ownership of a product or service to another company without prohibitions applying to the new owner.

Agency heads may waive the Act’s prohibitions on a case-by-case basis, but only with the approval of OMB acting “in coordination with the Secretary of Defense.” Waivers must be reported to Congress within 30 days of being granted. The waiver may last for up to a year with an additional “one time” extension of 180 days allowed if an agency head determines it is “in the national security interests of the United States.” The 180-day extension must be approved by OMB and the agency head must notify and submit a justification to Congress within 10 days of the waiver being granted.

The Act has only two exceptions. First, its prohibitions do not apply to intelligence activities. Second, the prohibitions do not apply to health care services provided to federal employees, members of the armed services, and government contractors who are stationed in a foreign country or on official foreign travel.

Impact and Considerations for Clients

1. Increased Risk of Partnerships with Chinese Companies and Researchers:

Pharmaceutical and biotechnology companies that receive federal funding or contract with federal agencies should be prepared to wind down business ties to biotechnology companies in China. Impacted companies need to begin evaluating the risk to their supply chains, manufacturing capacity, and R&D pipelines in the event a business partner is listed.

Universities in the United States and other research institutes that receive federal funding will also need to undertake a similar assessment of their research partners and collaborators based in China.

2. Loss of CDMO capacity:

Wuxi App Tec is a large, global provider of contract development and manufacturing (CDMO) services to the life sciences industry. According to the New York Times “[b]y one estimate Wuxi has been involved in developing one-fourth of the drugs used in the United States.” BIOSECURE would effectively ban Wuxi from conducting business in the United States, and if passed, risks causing delays, shortages, and cost increases as companies seek to transition to other CDMOs. It will likely take years for competitors to replace the lost CDMO capacity.

3. Fate of Wuxi U.S. Facilities:

Wuxi has a large presence in the United States. It operates 12 facilities and employs almost 2,000 people. Normally, Wuxi would be expected to sell its U.S.-based facilities. However, based on Tiktok’s experience, it is unclear if the Government of China will permit Wuxi to sell its facilities as opposed to dismantling and/or relocating facilities outside of the United States.

4. OMB’s Management of Biotechnology Companies of Concern List

OMB does not typically manage processes like the one envisioned by BIOSECURE. How OMB interprets the broad criteria for listing companies will be critical. Which Departments, beyond the Department of Defense, will have the greatest influence on OMB’s decision making and how open OMB is to evidence from companies seeking to avoid listing will also need to be watched closely. Until OMB starts preparing its guidance and the FAR regulations are proposed, it is hard to anticipate the rate at which new companies will be added to the list. How the process established by BIOSECURE will interact with or leverage existing entity lists will be another development to closely monitor.

5. Retaliation by China

BIOSECURE’s passage is likely to trigger a response from the Government of China. Responses could range from imposing its own export controls to using the country’s sweeping national security laws to harass United States businesses and their employees. Companies doing business in China, particularly those in the pharmaceutical or biotech industries need to be prepared.

© 2024 Foley & Lardner LLP
For more on Biotechnology, visit the NLR Biotech Food Drug section

White House Publishes Revisions to Federal Agency Race and Ethnicity Reporting Categories

On March 28, 2024, the White House unveiled revisions to the federal statistical standards for race and ethnicity data collection for federal agencies, adding a new category and requiring a combined race and ethnicity question that allows respondents to select multiple categories with which they identify.

Quick Hits

  • The White House published an updated SPD 15 with revisions to the race and ethnicity data collection standards for federal agencies.
  • The revisions change the race and ethnicity inquiry by making it one question and encouraging respondents to identify under multiple categories.
  • Federal agencies have eighteen months to submit an agency action plan for compliance and must bring all of their data collections and programs into compliance within five years.
  • The race and ethnicity categories are widely used across federal agencies and serve as a model for employers for their own data collection and required diversity reporting.

The White House’s Office of Management and Budget (OMB) published updates to its Statistical Policy Directive No. 15: Standards for Maintaining, Collecting, and Presenting Federal Data on Race and Ethnicity (SPD 15) with major revisions, the first since 1997. The revisions took immediate effect and were formally published in the Federal Register on March 29, 2024.

OMB stated that the revisions—which come after a two-year review process that included input from more than 20,000 comments, ninety-four listening sessions, three virtual town halls, and a Tribal consultation—are “intended to result in more accurate and useful race and ethnicity data across the federal government.”

Background

In 2022, OMB convened the Federal Interagency Technical Working Group on Race and Ethnicity Standard (Working Group) to review the race and ethnicity standards in the 1997 SPD 15 with the goal of “improving the quality and usefulness of Federal race and ethnicity data.” The race and ethnicity standards are used by federal contractors and subcontractors for affirmative action programs (AAPs) and by employers for federal EEO-1 reporting and U.S. Equal Employment Opportunity Commission (EEOC) surveys. Many employers further use the race and ethnicity categories for their own recordkeeping purposes, and federal agencies use the categories for various surveys and federal forms.

In January 2023, OMB published the Working Group’s proposals, observing that the 1997 SPD 15 standards might no longer accurately reflect the growing diversity across the United States and evolving understandings of racial and ethnic identities. During the pendency of the review process, several justices of the Supreme Court of the United States criticized the imprecision of the 1997 race and ethnicity categories throughout the Court’s 237-page opinion in the June 2023 Students for Fair Admissions, Inc. v. Harvard College (SFFA decision) case, in which the Court struck down certain race-conscious admissions policies in higher education.

Revisions to SPD 15

The updated standards closely follow the Working Group’s final recommendations and revise SPD 15 to require that data collection:

  • combine the race and ethnicity inquiry into one question that allows respondents to select multiple categories with which they identify,
  • add “Middle Eastern or North African” (MENA) as a “minimum reporting category” that is “separate and distinct from the White’ category,” and
  • “require the collection of more detailed data as a default.”

Under the 1997 standards, respondents were required to first select an ethnicity (i.e., “Hispanic or Latino” or “Not Hispanic or Latino”), and second, select a race category (i.e., “American Indian or Alaskan Native,” “Asian,” “Black or African American,” “Native Hawaiian or Other Pacific Islander,” or “White”).

The revised race and ethnicity categories for minimum reporting are:

  • “American Indian or Alaska Native”
  • “Asian”
  • “Black or African American”
  • “Hispanic or Latino”
  • “Middle Eastern or North African”
  • “Native Hawaiian or Pacific Islander”
  • “White”

The updated SPD 15 further revises some terminology and definitions used and provides agencies with guidance on the collection and presentation of race and ethnicity data pursuant to SPD 15. Additionally, the update instructs federal agencies to begin updating their surveys and forms immediately and to complete and submit an AAP, which will be made publicly available, to comply with the updated SPD 15 within eighteen months. Federal agencies will have five years to bring all data collections and programs into compliance.

OMB noted that “the revised SPD 15 maintains the long-standing position that the race and/or ethnicity categories are not to be used as determinants of eligibility for participation in any Federal program.”

Looking Ahead

The new race and ethnicity categories have implications for employers as they use these categories for federal reporting compliance and their own recordkeeping purposes, including potentially influencing their own diversity, equity, and inclusion (DEI) initiatives. Covered federal contractors and subcontractors must also use the categories in meeting their affirmative action obligations.

Still, the updated SPD 15 adds only one new minimum category. OMB recognized the tension with attempting to “facilitate individual identity to the greatest extent possible while still enabling the creation of consistent and comparable data.” One of the issues OMB identified as needing further research is “[h]ow to encourage respondents to select multiple race and/or ethnicity categories when appropriate by enhancing question design and inclusive language.” The agency is also establishing an Interagency Committee on Race and Ethnicity Statistical Standards that will conduct further research and regular reviews of the categories every ten years, though OMB may decide to review SPD 15 again at any time.

Employers may want to take note of the revisions to SPD 15 as these changes will directly impact many employers’ compliance and recordkeeping obligations. They may also want to be on the lookout for additional guidance from federal agencies, such as the Office of Federal Contract Compliance Programs (OFCCP) and the EEOC, on when and how to implement the standards. Relevant agencies will have to take action before employers will be required to implement the new standards. In the meantime, employers may want to consider whether to use the government’s new or existing categories when shaping their DEI initiatives, as racial and ethnic identities and terminology continue to evolve.

© 2024, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
For more on Race and Ethnicity Reporting, visit the NLR Civil Rights section.

New Year, (Potentially) New Rules?

SOMETIMES, THE ONLY CONSTANT IS CHANGE. THIS NEW YEAR IS NO DIFFERENT.

In 2023, we saw several developments in labor and employment law, including federal and state court decisions, regulations, and administrative agency guidance decided, enacted, or issued. This article will summarize five proposed rules and guidance issued by the Department of Labor (“DOL”), the National Labor Relations Board (“NLRB”), the United States Equal Employment Opportunity Commission (“EEOC”), and the Occupational Safety and Health Administration (“OSHA”), which will or may be enacted in 2024.

DOL’s Proposed Rule to Update the Minimum Salary Threshold for Overtime Exemptions

In 2023, the DOL announced a Notice of Proposed Rulemaking (“NPRM”) recommending significant changes to overtime and minimum wage exemptions. Key changes include:

  • Raising the minimum salary threshold: increasing the minimum weekly salary for exempt executive, administrative, and professional employees from $684 to $1,059, impacting millions of workers;
  • Higher Highly Compensated Employee (HCE) compensation threshold: increasing the total annual compensation requirement for the highly compensated employee exemption from $107,432 to $143,988; and
  • Automatic updates: automatically updating earning thresholds every three years.

These proposed changes aim to expand overtime protections for more employees and update salaries to reflect current earnings data. The public comment period closed in November 2023, so brace yourselves for a final rule in the near future. For more information: https://www.federalregister.gov/documents/2023/09/08/2023-19032/defining-and-delimiting-the-exemptions-for-executive-administrative-professional-outside-sales-and

DOL’s Proposed Rule on Independent Contractor Classification under the Fair Labor Standards Act

The long-awaited new independent contractor rule under the Fair Labor Standards Act (“FLSA”) may soon be on the horizon. The DOL proposed a new rule in 2022 on how to determine who is an employee or independent contractor under the FLSA. The new rule will replace the 2021 rule, which gives greater weight to two factors (nature and degree of control over work and opportunity for profit or loss), with a multifactor approach that does not elevate any one factor. The DOL intends this new rule to reduce the misclassification of employees as independent contractors and provide greater clarity to employers who engage (or wish to engage) with individuals who are in business for themselves.

The DOL is currently finalizing its independent contractor rule. It submitted a draft final rule to the Office of Management and Budget (OMB) for review in late 2023. While an exact date remains unknown, the final rule is likely to be announced in 2024. More information about the rule can be found here: https://www.federalregister.gov/documents/2022/10/13/2022-21454/employee-or-independent-contractor-classification-under-the-fair-labor-standards-act

NLRB’s Joint-Employer Standard

The NLRB has revamped its joint-employer standard under the National Labor Relations Act (“NLRA”). The NLRB replaced the 2020 standard for determining joint-employer status under the NLRA with a new rule that will likely lead to more joint-employer findings. Under the new standard, two or more entities may be considered joint employers of a group of employees if each entity: (1) has an employment relationship with the employees and (2) has the authority to control one or more of the employees’ essential terms and conditions of employment. The NLRB has defined “essential terms and conditions of employment” as:

  • Wages, benefits, and other compensation;
  • Hours of work and scheduling;
  • The assignment of duties to be performed;
  • The supervision of the performance of duties;
  • Work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline;
  • The tenure of employment, including hiring and discharge; and
  • Working conditions related to the safety and health of employees.

The new rule further clarifies that joint-employer status can be based on indirect control or reserved control that has never been exercised. This is a major departure from the 2020 rule, which required that joint employers have “substantial direct and immediate control” over essential terms and conditions of employment.

The new standard will take effect on February 26, 2024, and will not apply to cases filed before the effective date. For more information on the final rule: https://www.federalregister.gov/documents/2023/10/27/2023-23573/standard-for-determining-joint-employer-status

EEOC’s Proposed Enforcement Guidance on Harassment

A fresh year brings fresh guidance! On October 2023, the EEOC published a notice of Proposed Enforcement Guidance on Harassment in the Workplace. The EEOC has not updated its enforcement guidance on workplace harassment since 1999. The updated proposed guidance explains the legal standards for harassment and employer liability applicable to claims of harassment. If finalized, the guidance will supersede several older documents:

  • Compliance ManualSection 615: Harassment (1987);
  • Policy Guidance on Current Issues of Sexual Harassment(1990);
  • Policy Guidance on Employer Liability under Title VII for Sexual Favoritism (1990);
  • Enforcement Guidance on Harris v. Forklift Sys., Inc. (1994); and
  • Enforcement Guidance on Vicarious Employer Liability for Unlawful Harassment by Supervisors(1999).

The EEOC accepted public comments through November 2023. After reviewing the public comments, the EEOC will decide whether to finalize the enforcement guidance. While not law itself, the enforcement guidance, if finalized, can be cited in court. For more information about the proposed guidance: https://www.eeoc.gov/proposed-enforcement-guidance-harassment-workplace

OSHA’s Proposed Rule to Amend Its Representatives of Employers and Employees Regulation

Be prepared to see changes in OSHA on-site inspections. Specifically, OSHA may reshape its Representatives of Employers and Employees regulation. In August 2023, OSHA published an NPRM titled “Worker Walkaround Representative Designation Process.” The NPRM proposes to allow employees to authorize an employee or a non-employee third party as their representative to accompany an OSHA Compliance Safety and Health Officer (“CSHO”) during a workplace inspection, provided the CSHO determines the third party is reasonably necessary to conduct the inspection. This change aims to increase employee participation during walkaround inspections. OSHA accepted public comments through November 2023. A final rule will likely be published in 2024.

For more information about the proposed rule to amend the Representatives of Employers and Employees regulation: https://www.federalregister.gov/documents/2023/08/30/2023-18695/worker-walkaround-representative-designation-process

Preparing for 2024

While 2023 proved to be a dynamic year for Labor and Employment law, 2024 could be either transformative or stagnant. Some of the proposed regulations mentioned above could turn into final rules, causing significant changes in employment law. On the other hand, given that 2024 is an election year, some of these proposed regulations could lose priority and wither on the vine. Either way, employers should stay informed of these ever-changing issues.

© 2023 Ward and Smith, P.A.. All Rights Reserved.
       
For more news on 2024 Labor and Employment Laws, visit the NLR Labor & Employment section.