Offit Kurman Blogs

Immigration Law

Disappointed That it Did Not Work Out For You in the H-1B lottery? Do Not Despair, There are Other Options!

Did you apply for the H-1B lottery and were not selected? It is not the end of the road, and you have some alternative options. This year we had several H-1B lottery submissions. In prior years competition for limited visa numbers was keen. The number of H-1B visa applications received and the number of applications selected in the lottery process can vary from year to year. The H-1B lottery system is a random selection process that is conducted when the number of applications exceeds the available number of visas. The number of visas available is capped at 85,000 per fiscal year, which includes 65,000 for regular H-1B visas and an additional 20,000 for applicants with advanced degrees from U.S. universities. The USCIS usually announces the number of H-1B visa applications received and the number of applications selected in the lottery after the lottery is completed, which typically occurs in April of each year. For FY 2023, USCIS received 483,927 H-1B registrations. Since the annual limit is only 85,000, that means over 80% of H-1B registrations for FY 2023 and over 70% for FY 2022 did not result in an employer hiring a new foreign national employee chosen in the random selection process. Before you throw in the towel, consider the below options: Nonimmigrant Visa Options: TN Visa: If you are a citizen of Canada or Mexico and have a job offer in the United States that falls under the NAFTA professions list, you may be eligible for a TN visa. E-3 Visa: If you are an Australian citizen and have a job offer in a specialty occupation, you may be eligible for an E-3 visa. H-1B1 Visa: If you are a citizen of Chile or Singapore and have a job offer in a specialty occupation, you may be eligible for an H-1B1 visa. O-1 Visa: If you have extraordinary ability in the sciences, arts, education, business, or athletics, you may be eligible for an O-1 visa. L-1 Visa: If you have worked for a company overseas for at least one year and have been offered a job in the United States with the same company or a subsidiary, affiliate, or branch office, you may be eligible for an L-1 visa. F-1 Visa: If you are a student and want to pursue academic studies in the United States, you may be eligible for an F-1 visa. J-1 Visa: If you want to participate in an exchange program to study, teach, conduct research, or receive training in the United States, you may be eligible for a J-1 visa. Immigrant Visa Options: EB-1 Visa: If you have extraordinary ability in the sciences, arts, education, business, or athletics, or are an outstanding professor or researcher, you may be eligible for an EB-1 visa. EB-2 Visa: If you have an advanced degree or exceptional ability in the sciences, arts, or business, you may be eligible for an EB-2 visa. EB-3 Visa: If you have a bachelor's degree, are a skilled worker, or are an unskilled worker with less than two years of experience, you may be eligible for an EB-3 visa. EB-4 Visa: If you are a religious worker, broadcaster, or Afghan or Iraqi translator, you may be eligible for an EB-4 visa. EB-5 Visa: If you want to invest in a new commercial enterprise in the United States and create at least ten full-time jobs for U.S. workers, you may be eligible for an EB-5 visa. Keep in mind that each visa has its own eligibility criteria and application process. Consider consulting with an experienced immigration attorney to determine the best course of action based on your individual circumstances.

April 24, 2023

Labor and Employment

PUMP Act Changes Protections for Working Mothers

Congress passed the bipartisan Providing Urgent Maternal Protections (PUMP) for Nursing Mothers Act as part of the omnibus budget bill for the fiscal year 2023. The PUMP Act is an extension of the Break Time for Nursing Mothers Act (the pumping break time law), which is part of the Affordable Care Act (ACA). The ACA requires employers to provide reasonable break time to nurse or pump and a private place to pump. Employers must provide “a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.” Also, employers must give “reasonable break time” to their employees to pump for up to one year after the birth of their child. Women whose positions were exempt from overtime were not entitled to these ACA protections; the PUMP Act applies to all working mothers. In addition, the PUMP Act outlines legal remedies if an employer has violated any aspect of the Act or retaliated against an employee for behaving according to the Act. Employees may immediately file suit if employers ignore the break time requirement or have indicated that they don’t intend to provide private space to pump or if they were fired for requesting break time or a private location to pump. As a practical solution, short of court, employees must notify their employers if they have not provided a space to pump, and the employer then has ten (10) days to provide an appropriate space. Keep in mind the specific requirements and take note that putting an employee into a room with a camera (even if it’s turned off) or a private room where she may be viewed through a window or door will not comply with the law. Pumping breaks may be unpaid time and scheduled at employees’ regular break time.

April 20, 2023

One Minute of Overtime

Fluctuating Workweek

Welcome to One Minute of Overtime, where I will share insights on Labor and Employment Law topics, mostly related to minimum wage and overtime compliance issues. Compliance in this area of law is nuanced and technical, so it is critical for employers to audit and adjust their practices to remain compliant, so stop by to stay up-to-date and in-the-know. Under the fluctuating workweek method, an employee receives a fixed weekly salary and overtime pay is based on the average hourly rate in a specific workweek. The average hourly rate will change from week to week depending on how many hours the employee actually worked and must always exceed the minimum wage. While this keeps the overtime premium to 0.5 times the hourly rate, it also prevents the employee from reducing pay below the agreed upon threshold when the employee works less than 40 hours in a week.

April 19, 2023

Family Law

The State of Artificial Reproductive Technology Today

The best way to predict the future is to create it. – Abraham Lincoln. April 23-29, 2023, is National Infertility Awareness Week® (NIAW). NIAW is a movement founded in 1989 by The National Infertility Association. Its mission is to empower us all, change the conversation around infertility, raise awareness about fertility issues and promote better access to fertility care for people who need it. For most individuals and/or couples trying to have a baby, when the conversation of conceiving through natural means ends, a new dialogue begins that which focuses on having a baby with the help of artificial reproductive technology. Introduction The field of artificial reproductive technology, "ART," has made significant advancements since its inception in the mid-20th century. With the ability to manipulate and control the human reproductive system, ART has revolutionized the way we approach infertility and has also presented new ethical and legal challenges. This article will provide an overview of ART, its past, present, and future, and the myriad of legal and ethical issues it faces. Clinical Definitions, Historical Discrimination, Familial Reality and Legal Concerns Clinically/historically/ discriminatorily, infertility is a reproductive disorder defined as the failure to achieve a clinical pregnancy following at least 12 months of unprotected heterosexual intercourse1. It can be related to female factors, male factors, both, or remain unexplained. In women, it is commonly caused by ovulatory dysfunction, tubal obstructions, and/or endometriosis. In men, it is often a result of abnormalities in sperm production and function or sperm duct blockages. In helping people to have the children they desire, ART challenged and altered forever conventional clinical and societal definitions of "family." It threw open the doors for those wanting to be single parents (with no need for a partner) and has broken down the barriers for members of the LGBTQIA+ community to create their own families. The nuclear family is still often considered as an entity defined only by biological ties, even though living arrangements with children (families) have become increasingly diverse in recent decades, with unmarried families, adoptive and stepfamilies, and families with same-sex parents becoming increasingly common. ART adds to this growing complexity by providing treatments to single people and gay and lesbian couples, as well as to heterosexual couples to whom the conventional definition of infertility applies.2 These former groups have also been described as facing "social infertility." 3 The use of ART worldwide has led to the conception and birth of over nine (9) million babies since being implemented in the United Kingdom in 19784. ART, as it is commonly known, refers to any technique used to assist in the conception of a child without sexual intercourse. The most common methods of artificial reproduction include in vitro fertilization (IVF), intracytoplasmic sperm injection (ICSI), and gamete intrafallopian transfer (GIFT). There are various legal considerations when it comes to artificial reproduction. There are various laws and regulations governing these practices, including requirements for informed consent, screening and testing of donors and surrogates, and restrictions on the use of certain types of genetic material. One of the key issues is related to parental rights and responsibilities. In many cases, the child conceived through artificial reproduction will have genetic material from one or both parents who are not legally recognized as the child's parents. This can create complex legal situations, particularly if the parents separate or divorce. Another legal issue that arises in the context of artificial reproduction is the question of who has control over the genetic material used in the process. This includes issues such as sperm and egg donation, surrogacy, and embryo adoption. There are various laws and regulations governing these practices, including requirements for informed consent, screening and testing of donors and surrogates, and restrictions on the use of certain types of genetic material. Additionally, there are ethical considerations to be taken into account. Some people may have moral objections to certain methods of artificial reproduction, such as using donor eggs or sperm or creating embryos for the purpose of research. Overall, the legal landscape around artificial reproduction can be complex and is constantly evolving. It is important for individuals considering these techniques to consult with legal and medical professionals to ensure they fully understand their rights and responsibilities. ________________________________________________ 1 https://www.cdc.gov/reproductivehealth/infertility/index.htm 2 Zegers-Hochschild F., Adamson G.D., Dyer S., Racowsky C., de Mouzon J., Sokol R., Rienzi L., Sunde A., Schmidt L., Cooke I.D., Simpson J.L., van der Poel S. The International Glossary on Infertility and Fertility Care, 2017. Hum. Reprod. (Oxford, England) 2017. 3 Daar J. Yale University Press; 2017. The New Eugenics: Selective Breeding in an Era of Reproductive Technologies. [Google Scholar] [Ref list] 4 https://www.ncbi.nlm.nih.gov/pmc/articles The Past The first successful in vitro fertilization (IVF) was achieved in 1978 by Dr. Robert Edwards and Dr. Patrick Steptoe in the United Kingdom. This groundbreaking event paved the way for numerous developments in ART, including intracytoplasmic sperm injection (ICSI), pre-implantation genetic diagnosis (PGD), and cryopreservation of eggs, sperm, and embryos. Legal regulation of ART began in the 1980s, with the United Kingdom being the first country to pass laws governing ART procedures. The U.S. followed suit with the passage of the Fertility Clinic Success Rate and Certification Act of 1992 and the creation of the American Society for Reproductive Medicine (ASRM) in 1944. This author's home state of New York did not "get with the program" until the Child-Parent Security Act of 2021. Present ART has become more widely available and accessible over the years, with clinics offering a variety of treatments and services to individuals struggling with infertility. In addition to IVF and ICSI, ART now includes egg and sperm donation, surrogacy, and gestational carrier arrangements. The legal landscape of ART is complex and varies from state to state and country to country. In the U.S., there is no federal regulation of ART, with each state having its own laws and regulations. This has led to a patchwork of laws that can be confusing for patients and providers alike. One of the most significant legal challenges facing ART today is the issue of parental rights. With surrogacy and gestational carrier arrangements, the question of who has legal rights to the child can be complicated. Additionally, the use of donor gametes raises questions about the rights of the donor and any resulting offspring. Future Advancements in ART technology are rapidly evolving, with researchers exploring new techniques to improve success rates and decrease risks. One area of focus is the use of artificial intelligence (AI) to analyze large datasets of patient information to identify factors that contribute to successful outcomes. Another promising development is the use of gene editing technology to address genetic diseases and disorders. While still in the early stages of research, this technology has the potential to revolutionize the field of ART by allowing parents to screen for and eliminate genetic diseases before implantation. Back to the Future: Legal Concerns With all the good news about ART, there are some serious issues, namely, the regulation of fertility clinics and other providers of fertility services. In many countries, including the United States, fertility clinics are subject to strict regulations that govern everything from the storage and use of genetic material to the types of services they can offer. These regulations are designed to protect patients and ensure that fertility treatments are safe and effective. Another legal consideration is the use of donor material in assisted reproduction. When donor eggs or sperm are used to fertilize an egg, there may be legal issues related to parental rights and responsibilities. Additionally, there may be questions around the ethical implications of using donor material, particularly when it comes to issues related to identity and family relationships. Another recent development that has significant legal and ethical implications is the use of donor eggs and sperm, which can allow people who are unable to conceive naturally to have children. However, this technology also raises questions about the rights of donors and the potential for unintended consequences, such as the possibility of unwitting incest between donor-conceived siblings. Another important aspect of infertility and the law is the legal rights and responsibilities of parents who conceive through these technologies. For example, in cases of surrogacy, legal agreements must be put in place to establish custody and visitation rights for the intended parents as well as the surrogate mother. Similarly, in cases of egg or sperm donation, legal agreements must be put in place to establish parental rights and responsibilities. Other legal concerns related to infertility may include issues around adoption, paternity and genetic testing, and the use of reproductive materials after death. It is important for anyone dealing with infertility to consult with an experienced attorney who can help navigate the legal landscape and protect their legal rights and interests through the process. It is also important to consider the role of insurance and other financial considerations in fertility care. In many cases, infertility treatments can be expensive, and insurance coverage may be limited or nonexistent. This can create significant barriers to access for individuals and families who need fertility care. Overall, there are many legal and ethical considerations to think about when it comes to assisted reproductive technologies. As we continue to explore the potential benefits and drawbacks of these technologies, it is important to strike a careful balance between innovation and regulation and to prioritize the needs and interests of patients above all else. Back to the Future: Ethical Concerns There have been several recent technological advancements in fertility treatments that have significant implications for the legal and ethical considerations surrounding assisted reproductive technologies. Some people argue that these technologies blur the line between natural conception and artificial intervention and that they represent a potential threat to human dignity and autonomy. Others argue that these technologies have the potential to improve the lives of millions of people around the world who struggle with infertility and other reproductive issues. One of the most important developments in this area is the use of in vitro fertilization (IVF) with pre-implantation genetic testing (PGT). This technology allows doctors to screen embryos for genetic abnormalities before they are implanted in the uterus, potentially reducing the risk of certain genetic disorders and increasing the chances of a successful pregnancy. However, PGT also raises serious ethical concerns, as it allows parents to select embryos based on their genetic characteristics, such as gender and physical characteristics, potentially leading to a future in which only certain traits are valued, and others are deemed undesirable or even unacceptable; which could lead to discrimination or perpetuate harmful societal norms. To balance these competing concerns, it is important for society to engage in open and transparent discussion about the use of PGT and to ensure that regulations are in place to prevent abuse of this technology. This could include limiting the types of conditions that can be screened for, as well as creating oversight committees to review and approve PGT applications. Additionally, it is important for individuals and families to have access to accurate and unbiased information about PGT, so they can make informed decisions about whether or not to use this technology in their own fertility treatment. By considering both the potential benefits and ethical concerns of PGT, we can work towards a more equitable and responsible approach to healthcare. Finally, there has been growing interest in the use of artificial intelligence (Al) and machine learning to improve the accuracy of fertility diagnosis and prediction. While these technologies have the potential to revolutionize fertility care, they also raise concerns about data privacy and the potential for biased algorithms to perpetuate existing inequalities in healthcare. Overall, the recent technological advancements in fertility treatments have significant legal and ethical implications, and it is crucial that we carefully consider these issues as we continue to develop and implement new and innovative technologies in this field. Conclusion Infertility and the law is a complex, multi-faceted issue that encompasses a range of legal and ethical considerations. Laws governing these practices vary state by state and country by county and may include regulations around consent, screening, and financial compensation. ART has come a long way since its inception in the late 1970s, and its future is promising. However, as technology advances, legal and ethical challenges will continue to arise. It is crucial for lawmakers and healthcare providers to work together to create clear and comprehensive regulations that protect the rights of patients and any resulting offspring.

April 13, 2023

Labor and Employment

Post-McLaren: How Confidentiality and Non-Disparagement Provisions in Severance Agreements Interact with Section 7 Rights

Confidentiality and non-disparagement clauses are frequently included by employers when negotiating and drafting severance agreements. Several recent challenges, on both the state and federal level, have been made to these types of provisions, specifically, whether they are illegal on their face and/or unduly coercive. The National Labor Relations Board (“NLRB”) recently chimed in, holding in McLaren Macomb, 372 NLRB No. 58, that an employer violates Section 7 of the NLRA “when it proffers a severance agreement with provisions that would restrict employees’ exercise of their NLRA rights,” including agreements containing broad confidentiality and/or non-disparagement prohibitions. Thus, under McLaren, an employer violates the NLRA, which applies to both union and nonunion employees, anytime it offers a severance agreement to an employee that contains an unreasonably broad confidentiality and/or non-disparagement provision – whether the employee signs the agreement is irrelevant. The McLaren decision has sparked significant interest. On March 22, 2023, NLRB General Counsel Jennifer Abruzzo issued GC Memo 23-05 (the “GC Memo”), which addresses questions raised by the decision and provides guidance to employers. The memo confirms that confidentiality clauses that are narrowly tailored to restrict the dissemination of proprietary or trade secret information, have a limited duration, and are based on legitimate business reasons are permissible. Similarly, the memo notes that it is acceptable to restrict employee statements that are “maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity.” The memo also confirmed that the McLaren decision will apply retroactively; therefore, agreements proffered to employees prior to February 21, 2023, may be subject to challenge up to six months after the unlawful proffer if unsigned. Executed agreements containing unlawful provisions are not subject to any time bar if they do not contain an expiration date. Importantly, the GC Memo also clarified that the decision is not limited to severance agreements. The types of provisions that may interfere with Section 7 rights include noncompete clauses, non-solicitation clauses, no-poaching clauses, broad liability releases and covenants not to sue that go beyond the employer and/or employment claims, and cooperation requirements involving any current or future investigation or proceeding involving the employer as that affects the employee’s right to refrain under Section 7, such as if the employee were asked to testify against co-workers that the employee assisted with filing an unfair labor practice charge. Considering the McLaren decision and the GC Memo, employers should review and update their template agreements to mitigate or eliminate risk. This includes not only severance agreements, but also any separation or settlement agreements and other employment-related documents. Employers may also want to consider whether to take the preemptive remedial action of notifying prior recipients of agreements that overbroad confidentiality and non-disparagement restrictions will not be enforced.

April 11, 2023

Labor and Employment

Highly Paid Employee Awarded Overtime

You can’t make enough money to be exempt from overtime. In a surprising decision, the U.S. Supreme Court recently ruled that an employee who made over $215,000.00 per year was entitled to overtime payments. In Helix Energy Solutions Group v. Hewitt, the Supreme Court ruled 6-3 that Mr. Hewitt, a former employee, was eligible for overtime pay because he was paid on a daily basis, not a guaranteed salary basis. Mr. Hewitt’s daily pay varied. So, regardless of the fact that he earned $248,053 in 2015 and $218,863 in 2016, Helix Energy Solutions should have been paying him overtime, per the Court. According to the Court, “salary” as used in the Fair Labor Standards Act (FLSA) “connotes a steady and predictable stream of pay” and must be paid by the week or longer period. Why mention this decision? To highlight that the Court reads the FLSA regulations in a very technical way, and accordingly, employers must educate themselves about the requirements. Employers have to prove in court that employees are exempt from overtime. It doesn’t matter if the payment is very generous. I’ve had a number of clients investigated for violations, even when the pay was more than fair. Shock value. I want to meet the attorney who agreed that Mr. Hewitt should sue and pursue overtime payments all the way to the Supreme Court. Let me know if this raises any FLSA questions about classifying people as exempt or non-exempt and compliance with the overtime law.

April 6, 2023

Litigation

NJ Court Evaluates Enviro Insurance Exclusions Amidst Natural Resource Damages

$3 billion dollars annually. That’s how much US businesses are paying for environmental insurance each year. While environmental insurance is an important risk management tool for a wide variety of industries, insurance is only as good as the terms of the policy, and this applies doubly to environmental insurance, which is written and negotiated on a custom basis to provide tailored coverage. To make things more interesting, there have been precious few decisions regarding the terms of environmental insurance policies. Now, in a recent decision, a New Jersey appellate court has interpreted the terms of an environmental insurance policy to deny coverage to the insured. See Handy & Harman v. Beazley USA Services, Inc., Docket No. A-2068-20 (N.J. App. Div. Mar.  2, 2023). Background A metal etching business operated in New Jersey from March 1984 to November 1985, when it decided to sell the property it operated on. The businesses used hazardous substances and also fell within the industries subject to New Jersey’s Environmental Cleanup Responsibility Act (ECRA), the predecessor of the Industrial Site Recovery Act (ISRA). As a result, the sale of the property triggered the obligation to investigate and remediate historical contamination pursuant to ECRA and subsequently ISRA. The business then entered into an Administrative Consent Order (ACO) to set forth its ECRA obligations and allow the sale to proceed. Thereafter, businesses completed much of the investigation and remediation of the subject property. Many years later, in 2017, and for reasons not disclosed in the decision, the business obtained an environmental insurance policy. The policy contained two relevant exclusions: (1) a Prior or Pending Litigation Exclusion, which eliminated coverage for matters arising from prior claims, proceedings, and litigation; and (2) a Specified Coverage and Contamination Exclusion, which eliminated coverage for certain pollution conditions arising from known pollution conditions, and which the policy defined as all conditions associated with the “ECRA/ISRA investigation/remediation.”  The policy also decreed that New York law would govern its terms, which may have proved fatal to the insured’s hopes of coverage. A few years passed again, until 2021 when the New Jersey Department of Environmental Protection sued the business owner for natural resource damages and other environmental damages arising from the historical contamination. Natural resource damages (NRD) are damages damage to any natural resource (such as groundwater or other media) because of the discharge of hazardous substances and pollutants at the property. These damages can be distinct from the actual cost of remediating the natural resource and include loss of use and/or permanent damage to the resource. The business requested coverage for these damages under its environmental insurance policy, but the insurer refused coverage as a result of the above-referenced exclusions. Interpreting the Exclusions Both the trial court and the appellate court decided that the Prior or Pending Litigation Exclusion barred coverage because the NRD could be traced back to the business’s obligations under the ACO, and the ACO qualified as a prior “claim” that was subject to the exclusion. Although it did not convince either court, the business argued that natural resource damages were different in nature from the investigation and remediation required by the ACE. Policyholders should be troubled by this result because there is a distinction between first-party cleanup costs and natural resource damages. Policyholders should evaluate existing coverage to see how this result would apply to them, and prospective policyholders should attempt to instill more clarity regarding coverage for NRD in future policies. The courts did not need to address the Specified Coverage and Contamination Exclusion, which is unfortunate as there are so few cases interpreting this type of exclusion. However, the breadth of the exclusion is likely to have precluded coverage and is a reminder to businesses to more narrowly define known conditions where possible. At times, it is possible to define known conditions by contaminant or area of contamination so that newly discovered contamination and areas are covered. As a final matter, the business should have pressed for New Jersey law to apply to the insurance policy during its negotiations. This is something that can be easily done, and New Jersey law is much more friendly to policyholders. Conclusion Businesses will continue to use environmental insurance to manage risks and should work with experienced counsel to obtain an environmental insurance policy that provides the expected coverage. This decision highlights a few points for businesses to consider as they pursue coverage, but there are many other important areas of focus as well, and these areas vary by industry and insurance carrier.

April 5, 2023

Family Law

“Is There Another Me? How Online DNA Websites are Helping Adoptees Learn About Their History and Connect with Relatives”

DNA testing, including through websites such as 23andme.com, has become increasingly popular in recent years for individuals to obtain comprehensive ancestry breakdown, personalized health insights and more. 23 and Me is one of the programs that offers DNA testing through collection of saliva, to test both health and ancestry. Results include insights into health predispositions, carrier status, wellness, and ancestry composition, including tools to enable an individual to connect with relatives who share similar DNA. These testing programs were not always available, and in prior years, adopted individuals had no means by which they could obtain essential information such as medical background and genetic history. The documentary, Three Identical Strangers depicts the story of three identical triplets reuniting in 1980, simply by happenstance. Robert Shafran was beginning his sophomore year of college when students on campus began referring to him as “Eddy.” After lots of confusion and discussion with those referring to him as “Eddy,” Robert discovered he had an identical twin brother, Edward Galland.  When local news outlets began publishing this story, photographs of Eddy and Bobby caught people’s attention, including a woman who recognized her friend David Kellman, identical brother number three. However, what starts as a fairytale story quickly turns dark, depicting the struggle of adoptees and the lack of information they have as to their physical and psychological background. In 1995, after a long struggle with mental illness (specifically, manic depression), Eddy committed suicide. As their story continues to unfold throughout this documentary, viewers learn that the triplets' biological mother suffered immensely from mental health challenges, something that they would have been aware of had they received any information on their birth mother and their biological background. Bobby and David have since pursued the unsealing of their adoption records, but, due to confidentiality laws, access to these records is extremely limited, with a high threshold showing required to obtain even the most minimal, basic information. This film, which was released nationwide on July 13, 2018, left a lot of lingering questions surrounding psychology, science, legislation, and adoptees' rights. Stay tuned in the coming weeks for more on state-specific laws and legislation for change. For more information on Three Identical Strangers, please visit Three Identical Strangers Trailer - YouTube

April 4, 2023

Estates and Trusts

Estate Planning for the College-bound Kiddo

It is college decision time for so many families and their soon-to-be adult children. Most are fretting over the cost of college, what their child will study, and how far from home they will be in six short months. Between those worries, the endless Amazon orders, and trips to Bed Bath and Beyond, is that their college-age kids need a few simple estate-planning documents in place before they leave. Estate planning documents for an 18-year-old? Yes! The two most important documents that your now-adult child needs are a Health Directive and a Financial Power of Attorney, particularly when they are away from home. A health care directive in New York is referred to as a Health Care Proxy. A Health Care Proxy is an “advanced directive” that allows someone else to make health care decisions on your behalf. Most assume that this document is only needed for an older person, but that could not be further from the truth. A Health Care Proxy authorizes you to make decisions for your adult child in the case of a medical emergency when they are away. Most importantly, a Proxy can provide you access to your adult child’s health records and information. Access to your adult child’s health information can be vital to ensure that they are receiving proper care, particularly in light of the collective mental health issues that befall so many of our college-bound children. Every Health Care Proxy should contain a privacy waiver, referred to as a HIPPA waiver, that permits your adult child’s healthcare providers to share your adult child’s private health information with you; without this waiver, doctors and nurses cannot provide you with any information regarding your child’s health including, diagnoses, blood test results, treatment plans, etc. In addition to managing your adult child’s health care concerns, a second advanced directive, commonly referred to as a Financial Power of Attorney, will allow you to assist your child with his finances. Once your child turns 18, they are an adult, and you no longer have access to their child’s bank accounts, their school records, school loans, nor the ability to sign on their behalf. Many parents assume that because they are paying the tuition bill for their child’s college, for example, that they would automatically have access to all of their school information, including transcripts, and that is simply not the case. The power of attorney appoints you as your adult child’s agent to be able to access this information at any time, sign documents on their behalf, open and close bank accounts and renegotiate school loans. While 18 may be the legal age of adulthood, often the financial responsibilities associated with adulthood are best managed with a parent’s assistance, and the Power of Attorney document will provide you the authorization you will need to help your adult child. Certainly, we all wish that there was a guidebook available to help us send our children off safely to their dorms and embark on their new life of independence. In the meantime, having these two simple documents in place, you will be able to provide the assistance and the guidance that your adult child may need when they first leave home.

April 4, 2023

Business

NJBPU Issues Proposal for Permanent Community Solar Program

After two successful pilot years of its nascent community solar program, the New Jersey Board of Public Utilities has released a straw proposal and proposed regulations for a permanent community solar program. As the final program will likely match many of the aspects of the straw proposal, below are some preliminary details on what project developers, investors, financiers, and others can expect: Projects will be required to be placed on rooftops, carports, and canopies over impervious surfaces, contaminated sites and landfills, and man-made bodies of water that have little-to-no established floral and fauna. Rather than the competitive application process used during the pilots, applications will be accepted on a first-come, first-served basis until the annual capacity is reached, provided that if the entire capacity is subscribed within the first ten days of the registration period, a tiebreaker will be used. Program capacity will be set at 225 MW for EY24 and EY 25 and at least 150 in EY26 and beyond. Applications will be subject to enhanced project maturity requirements, as only 44% of projects in pilot year 1 reached commercial operation by the expiration date of their conditional approval, and limited extensions of registration expiration dates will be provided. All projects will be required to serve a minimum of 51% low- and moderate-income subscribers. Consolidated billing will be implemented for pilot and future projects through a working group, and utilities will be authorized to charge a fee in connection with the consolidated billing. Co-location of community solar projects will not be allowed with other solar projects by related entities if the total capacity would exceed 5MW. However, the Board will allow co-location of unrelated projects as well as community solar and net-metered projects and will entertain petitions in other co-location circumstances. Incentive values will be maintained at $90/MWh for all community solar projects. Additional consumer protection measures will be implemented, including a minimum 10 percent guaranteed bill credit, prohibition on termination fees with appropriate notice, and certain marketing disclosures. Automatic enrollment will be an option for a municipality that owns and operates a community solar project, but only once consolidated billing is implemented. Geographic distances will not be considered as long as the subscribers are in the same utility territory as the community solar project. Dual-use solar projects on farmland will not be allowed to participate in the community solar program. The straw proposal contains many questions for stakeholders and will go through a variety of stakeholder discussions. The NJBPU will be holding an initial stakeholder meeting on April 24, 2023, and comments on the straw proposal are due by May 15, 2023. Interested parties can review the notice for information on the stakeholder meetings (including registration) as well as the complete proposed regulations. Consult with counsel regarding the impact of the proposal on future projects, as well as existing projects that have not reached commercial operation.

April 3, 2023

Business

In Delaware – Is Your Business “Essential” or Not? A Deep Dive With Our Guidance

This blog post may contain information that was accurate at the time of publication but could become outdated over time. We strive to provide relevant and timely content, but circumstances, facts, and data can change. Users are encouraged to verify the current status of any information presented and seek updated guidance where necessary. Originally posted on 3/30/2020, no content changes Practice Group: Business Law & Transactions In response to the Coronavirus pandemic, most of us know that governments have ordered certain businesses to close. Delaware Governor John C. Carney declared a State of Emergency starting on March 13, 2020 and has since updated it multiple times, most recently on March 22. On March 22, the Governor ordered Non-Essential Businesses to close at 8:00 a.m. on Tuesday, March 24. The March 22 Order also requires that employers operating “Essential Businesses” maximize telecommuting. Moreover, the Order is a “stay at home” order that requires everyone to stay home, except essential personnel. The Order also puts in place a travel ban except for certain circumstances. The purpose of the Order is to control and direct within the State of Delaware the operation of certain businesses, organizations, and enterprises necessary to maintain life, health, property, or public peace during the State of Emergency. Above all else, we as a firm want everyone to remain healthy and make it through this emergency unscathed. This article provides a general overview. As always, please contact us for specific guidance for your business as the March 22 Order creates a few murky areas for the unwary business. For example, while the Order allows individuals to leave their house to perform “Essential Activities,” which seems to allow for work in the office, the section on “Essential Travel” does not seem to authorize leaving the house to go to the office. Another example is that the Order appears to require employers to exclude workers over 60 years old from the worksite. However, this provision may run afoul of the Americans with Disabilities Act. Another issue presented is what to do about situations in which employees cannot be kept six feet apart, as will happen in many situations. We are here to help. THE MARCH 22 ORDER. In essence, the March 22 Order states that all physical locations of Non-Essential Businesses within the State of Delaware are closed until after May 15, 2020, or after the public health threat of COVID-19 has been eliminated, except that Non-Essential Businesses may continue to offer goods and services over the internet. Here is a link to the 18-page March 22 Order relating to Essential and Non-Essential Businesses. https://governor.delaware.gov/wp-content/uploads/sites/24/2020/03/Fourth-Modification-to-State-of-Emergency-03222020.pdf WHO CAN WORK? Essential Businesses are certain businesses that employ or utilize the following workers: (a) healthcare and public health; (b) law enforcement, public safety and first responders; (c) food and agriculture; (d) certain energy-related industries (electricity, petroleum, natural and propane gas); (e) water and wastewater; (f) transportation and logistics; (g) public works; (h) certain communications and information technology businesses; (i) certain community-based government operations and essential function; (j) manufacturing; (k) hazardous materials; (l) financial services and insurance; (m) chemical; (n) defense industrial base; (o) construction; (p) necessary products retailers; (q) necessary retail and service establishments; and (r) open air recreational facilities. Non-Essential Businesses are certain businesses that employ or utilize the following workers: (a) hospitality and recreational facilities; (b) concert halls and venues; (c) theaters and performing arts venues; (d) sporting event facilities and venues; (e) golf courses and shooting ranges; (f) realtors; (g) business support services, including customer service call centers and telemarketing operations; (h) shopping malls; and (i) retail stores. It is important to note that the above list of Essential Business and Non-Essential Businesses contains many exceptions and clarifications.  The list found at the link above also contains the relevant 4-digit North American Industry Classification System (NAICS) code. All businesses should have a NAICS code or codes on their unemployment insurance forms or on their most recent tax return to aid in determining whether a business is Essential or Non-Essential. If you are unsure as to whether your business is Essential or Non-Essential, you can email covid19faq@delaware.gov or call 302-577-8477 between the hours of 9:00 am and 4:00 pm with any additional questions.  Again, Offit Kurman is also here to help you navigate your business through these troubled waters. CAN YOU APPEAL YOUR BUSINESS CLASSIFICATION AS NON-ESSENTIAL? Yes, but there is not a guarantee that a petition will be successful. A petition must be requested in writing via electronic mail to covid19faq@delaware.gov for consideration. We understand that you can expect to receive a decision within one week of your submission.  If you have questions or need assistance with the preparation of your petition, please contact us at the phone number or e-mail address listed below. ENFORCEMENT. The March 22 Order has the force and effect of law. Any failure to comply with the provisions contained in a Declaration of a State of Emergency or any modification to a Declaration of the State of Emergency constitutes a criminal offense. State and local law enforcement agencies are authorized to enforce the provisions of any Declaration of a State of Emergency. OTHER RESOURCES. Delawareans with questions about COVID-19 or their exposure risk can call the Division of Public Health’s Coronavirus Call Center at 1-866-408-1899, or 711 for people who are hearing impaired, from 8:30 a.m. to 8:00 p.m. Monday through Friday, and 10 a.m. to 4 p.m. Saturday and Sunday, or email DPHCall@delaware.gov For more information go to https://dhss.delaware.gov/dhss/dph/epi/2019novelcoronavirus.html The Delaware Department of Health & Social Services website offers a response to COVID-19, including information on testing, community resources and what you can do to avoid spreading COVID-19.  For more information go to https://coronavirus.delaware.gov/ FURTHER GUIDANCE AND CLARIFICATION. As noted above, Governor Carney has modified the Declaration of a State of Emergency on six occasions and we anticipate that such modifications will continue, seemingly on a daily basis.  For example, on March 24, the Governor issued an order, effective March 25 at 8:00 a.m. that delayed elections, evictions, foreclosures, termination of utility service, and termination of insurance coverage.  Here is a link to the March 24 order as to these issues. https://media1.dsba.org/public/pdfs/GOVR%20Sixth-Modification-to-State-of-Emergency-03242020.pdf Please contact us if you have any questions regarding the Declaration of a State of Emergency generally, the classification, or appeal of a classification, as an Essential or Non-Essential Business, insurance coverage questions, employment law questions, or the most recent order concerning delayed elections, evictions, foreclosures, termination of utility service, and termination of insurance coverage. Stay tuned for more. Charles “Max” McCauley III contributed to this Article.

March 31, 2023

Labor and Employment

A Dose of Education Law: Supreme Court Rules Disabled Students May Sue Under ADA After Settling with School District

As you may know, I represent students in education matters (as well as educators in some employment matters.) I help elementary and secondary students with everything from attaining special education services, accommodations, and payment for private schools when public schools aren’t serving students’ needs, provide bullying help to victims, and I defend disciplinary matters such as expulsions. For post-secondary (including graduate) students, I defend Title IX complaints, appeal disciplinary actions and school or program dismissals, and enforce my clients’ Americans with Disabilities Act (ADA) rights to accommodations (enforceable in every post-secondary program that accepts federal student loan money or federal grants). So I am, of course, interested in a recent Supreme Court case on an ADA action brought by a deaf student. Students and parents must proceed with an administrative process before seeking court relief in special education cases for failure to provide a free appropriate education under the federal Individuals with Disabilities Education Act (IDEA). Money damages are not available under the IDEA; courts may order school districts to pay for tutoring or private education as a remedy for failure to provide a proper education, however. The question arose whether, if a special education student settled a complaint against a school district for violating their ADA rights, they may sue in court for monetary damages without going through the administrative process regarding the ADA claim. Mr. Perez, a deaf man, alleges that the district provided him with aids who didn’t know sign language to translate for him and misled the family about the amount of progress he made. The unanimous Court allowed the case under the ADA for money damages to move forward even after Mr. Perez had received a settlement for his violation of IDEA claims. This decision is a game changer, as many students with disabilities will have a threat of an ADA claim hanging over the school district in addition to the threat of an administrative hearing under IDEA. In fact, Justice Gorsuch wrote that the case “holds consequences not just for Mr. Perez but for a great many children with disabilities and their parents.” The case is Perez v. Sturgis Public Schools, et al., No. 21-887, U.S. (2023). Many parents and students don’t know the extent of their rights under the ADA nor the IDEA and don’t know where to get assistance. Education specialists give legal guidance and help students navigate the process of attaining relief for students who were denied education via legal violations. Reach out if you have questions.

March 30, 2023

Elder Law and Advocacy

LGBTQ+: NY’s Goal of Aging Without Discrimination

It is no surprise to LGBTQ+ individuals and their allies that nine out of ten of those who identify as LGBTQ+ fear discrimination in medical settings.  According to SAGE, LGBTQ+ people are two times as likely to age alone and four times less likely to have children who might otherwise serve as caregivers and advocates. This means the LGBTQ+ population is even more vulnerable as they age. As a result, and at long last, Governor Hochul signed a law that is intended to address this discrimination related to the medical care received by the LGBTQ+ community in the home care and nursing home setting.   Beginning in June 2023, New York State will require that all home health aides, certified nurses’ aides and personal care aides – essentially the backbone of a senior’s long-term care team– will receive training focused on providing care to patients of diverse sexual orientations, expressions and gender identities. This ambitious and much-needed law includes several components that will be included in the training program. Much of the training relates to the education of the caregivers to provide comprehensive explanations of various terms related to the LGBTQ+ community and provides an understanding of why patients with diverse sexual orientations and gender identities or expressions may conceal their identities.  The goal of the training is, of course, to incorporate the concerns of these patients and ensure that they receive “person” directed care and to address the unique healthcare needs of LGBTQ+ patients. In light of the nearly 400 anti-LGBTQ+ legislative actions pending in the states across the country, it’s heartening that New York is taking the lead to combat this discrimination, especially for the most vulnerable in the LGBTQ+ population.

March 29, 2023

Labor and Employment

Time to Review Settlement and Severance Agreement Templates

In a surprising decision that reveals the National Labor Relations Board’s (NLRB) position on perceived threats to employees’ right to organize under the National Labor Relations Act (NLRA), the Board held in McLaren Macomb, 372 NLRB No. 58 (2023), that even if an employer (with a unionized or non-unionized workplace) merely offers a severance agreement containing broad confidentiality and non-disparagement provisions, it is illegal. Note: The Board’s ruling only applies to nonmanagerial, nonsupervisory employees with Section 7 rights under the NLRA. The current Board’s view is that agreements are unlawful on their face if they contain terms with a “reasonable tendency to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights” under the NLRA. As such, if an employee files a complaint, the NLRB will now review severance agreements for language that’s too “broad or coercive.” In McLaren Macomb, the NLRB found that asking an employee to agree to keep terms of an agreement confidential (even with exceptions for spouses, lawyers, and tax advisors, and as ordered by a court or agency) violated the NLRA because the former employee would be unable to discuss it with current employees, who might want to organize. The Board also decided that a non-disparagement agreement was illegally overbroad when it required the employee not to make statements that could disparage or harm the image of the “employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.” Note: This restriction has no time limitation and covers other entities and persons, not just the employer. Courts don’t have to follow the rulings of the NLRB. The courts always look to whether a non-disparagement agreement is “reasonable under the circumstances,” and I believe that a non-disparagement clause limited to the company would be reasonable as long as the non-disparagement clause doesn’t purport to last forever and cover too many entities. Would a court agree that it’s illegal to promise not to disclose the agreement’s terms? The ability to require confidentiality serves as the important public policy of encouraging settlements outside of court. That said, having your template severance and settlement agreements with employees reviewed for compliance with the Board’s rationale and holding it is not very time-consuming. I’m recommending this to my clients — tweaks would not be difficult. If you have questions, please reach out.

March 23, 2023

M&A Nuggets

M & A Nuggets: Beware the Four Corners Offense

As the NCAA Basketball Tournament begins this week, it is appropriate to remember the “Four Corners Offense” and tie it to the merger process.  The “Four Corners Offense” was popularized by the University of North Carolina in the 1960s and 1970s.  The offense involved four of five players standing in the corners of the offensive half court with the fifth player dribbling in the middle, often for several minutes at a time.  The result was a big slowdown of the game with no progress.  Sellers of businesses devote substantial time, energy and resources to move a sale transaction to closing, but ultimately, are at the mercy of the purchaser.  At the inception of the relationship between the potential seller and purchaser, all things are rosy. The purchaser lets the seller know how impressive the seller’s business is and how terrific of a fit the seller will be with the purchaser.  As time unfolds during the merger process, sellers need to have an eagle eye for action or inaction by the purchaser that is not so obvious, but that indicates the purchaser intends to slow down the process, and which often results in the purchaser retreating from the transaction.  Here are a few actions or inactions that should trigger concern: Comment from Purchaser: “One or two of our board (or investment committee) members are thinking about the pricing of the transaction or the current economic headwinds.” Real Meaning: The purchaser’s decision making body is rethinking the transaction. Inaction from Purchaser: Purchaser’s counsel is silent on when the purchase agreement will be forthcoming.Real Meaning: Purchaser has told its counsel not to prepare the purchase agreement because the purchaser is rethinking the transaction. Comment from Purchaser: “We are re-examining the valuation based upon current numbers.”Real Meaning: The purchaser intends to lower the purchase price or not proceed. The objective of seller and its counsel is to move the transaction along as fast as possible towards closing, but the above warning signs may indicate that the purchaser is deploying the “Four Corners Offense” and that the purchaser will withdraw.  Being able to recognize this sooner rather than later will allow the seller to save a tremendous amount of time, energy and money and refocus on growing its business until such time as a purchaser with intent to complete a transaction arrives on the court ready to play and finish.

March 16, 2023

Litigation

Virginia Civil Lawsuit Filings Increase in 2022

Civil lawsuit filings in Virginia's General District Courts increased 9% during 2022. The biggest increase? Unlawful detainer (eviction) filings. Meanwhile, civil lawsuit filings in Virginia's Circuit Courts decreased, with domestic case filings (including divorces) seeing a notable decrease. Full data from the Supreme Court of Virginia can be found here & here. If you or your organization are served with a civil lawsuit, don’t make any decisions about how to proceed before talking with a trusted attorney in your area. Offit Kurman attorneys are available to advise and counsel you. Reach out to Anders Sleight | Offit Kurman today to discuss your specific situation.

March 16, 2023

One Minute of Overtime

Executive Exemption

Welcome to One Minute of Overtime, where I will share insights on Labor and Employment Law topics, mostly related to minimum wage and overtime compliance issues. Compliance in this area of law is nuanced and technical, so it is critical for employers to audit and adjust their practices to remain compliant, so stop by to stay up-to-date and in-the-know. An employee is exempt pursuant to the administrative exemption, and not subject to the minimum wage and overtime requirements, if the employee is paid consistent with the salary basis test and their primary duty is managing the enterprise, or division thereof, where the employee customarily and regularly directs the work of at least two or more other full-time employees and has the authority to hire or fire or the employee’s suggestions and recommendations as to hiring, firing, etc. is given particular weight.

March 15, 2023

So, you’re thinking about a Prenup Agreement

More and more couples and considering entering into a prenuptial agreement before marriage. It’s often concerning that even the mention of exploring an agreement would be detrimental to the relationship. The parties are basically negotiating what would happen should there be a divorce, which can cause a great deal of stress, especially if the discussions are near the wedding date. The divorce rate is generally understood to be 50%, no matter where the parties live, or what their social or economic status may be. A prenuptial agreement is a written agreement where an engaged couple considers what would happen upon separation or divorce, which may happen, if it does, at any time during the marriage. The uncertainty of when a separation may take place creates a great deal of anxiety. What if the parties separated in a few years, vis-a-vis after many years, and potentially when the parties have children? Experts suggest that since finances often contribute to conflict in marriages and may often be the reason for separation and divorce, discussing the financial aspects of an agreement may be helpful in that it may promote a foundation for a better relationship. Here are crucial requirements: Give a great deal of thought to what your goals are and what you want to accomplish in the event of separation, divorce or death. Both parties must be represented. There must be full and complete disclosure of assets and debts at the time the Agreement is executed. It must be agreed upon by both parties, and discussions should begin at least six months prior to the marriage to assure that each party is not under any duress. It must be realistic and equitable.

March 14, 2023

Franchise Law

SBA Exiting Regulation of Franchise Relationships as Part of Effort to Increase Availability of Its Small Business Loan Programs

The U.S. Small Business Administration (SBA) is amending various regulations governing SBA's 7(a) Loan Program and 504 Loan Program, including streamlining determinations of loan applicants’ eligibility as small business owners. As part of the amended regulations, the SBA is removing the provisions relating to affiliation based on franchise and license agreements, along with all other provisions evaluating affiliation based on factors other than actual or indirect (or “beneficial”) ownership. Because of that removal, the SBA is eliminating the SBA Franchise Registry as of May 11, 2023. As stated by the SBA, “These revisions remove the principle of control of one entity over another from consideration of affiliation; therefore, the mere fact that an applicant may be a franchisee is not in itself a reason that would render the applicant ineligible for an SBA loan, and thus there is no longer a compelling reason to maintain the SBA Franchise Directory".  In addition, the SBA will not require franchisors and franchisees to sign any sort of standard or pre-negotiated franchise agreement addendum to obtain an SBA-guaranteed loan. Instead, as is a requirement for all SBA guarantees of loans, lenders must examine the franchised business for affiliation based on ownership. The SBA announcement described the following as an example: “(W)hen lending to a Franchised business, the SBA Lender must determine who owns the applicant business and any businesses the applicant owns in accordance with these regulations. However, neither the SBA Lender nor SBA will review the applicant Franchised business for affiliation with other entities beyond ownership; the applicant business will not be considered affiliated with the Franchisor or other Franchised businesses except by ownership.” What Does This Mean for Franchising? As to regulation of the franchise relationship, this marks a major retrenchment of SBA’s involvement in that area, having required franchise agreement changes as a condition of lending for several decades. However, readers should note that the Federal Trade Commission is scrutinizing franchise relationships due to a large volume of complaints it has received from franchisees in the process of considering updates to its long-standing Franchise Sales Rule. During March 2023, the FTC issued a  “Solicitation for Public Comments on Provisions of Franchise Agreements and Franchisor Business Practices” that may be a preliminary step towards FTC issuing rules restricting franchise agreement terms and/or franchisor business practices that it perceives to be “unfair” to franchisees. In addition, the FTC is accepting comments on extending its proposed rule banning non-competition agreements in employment agreements to include franchise relationships. Finally, bills have been introduced in several state legislatures to substantively regulate aspects of franchise relationships. In terms of franchisee financing, this change may streamline obtaining an SBA-guaranteed loan. However, as the SBA noted in issuing its new regulations, to obtain an SBA guarantee a lender must determine whether the applicant meets all eligibility and other SBA Loan Program Requirements, including: certifying that the applicant does not have the ability to obtain some or all of the requested loan funds on reasonable terms from non-government sources, ensuring that applicants are U.S. citizens or Legal Permanent Residents, obtaining personal and corporate guaranties, confirming that the applicant business has the ability to repay the loan through cash flow of the business, and has eligible uses of proceeds, verifying financial information, obtaining proper collateral and lien position, determining whether there is a direct or indirect impact on historic properties (and) compliance with environmental policies and procedures, and closing the loan in accordance with SBA program requirements. This is a reminder that obtaining an SBA loan is still not the easiest way to finance.  Also, we anticipate that, for the development of new franchise locations, lenders may require heightened business plan verification and support from franchisors, especially for emerging franchise systems and for applicants that are new to the system (even for larger franchisors).  It may be more important than ever for franchisors to have a package of unit-level financial performance information to provide to lenders.

March 14, 2023

Labor and Employment

Adhering to Laws of Every State in Which Employees Are Working Remotely Part II

As I’ve written before, the employment laws of the states where an employer hires employees are applicable to the employment relationship. If you missed those blogs, you may access them here and here. I am listing more types of laws to consider here. If you’re bored by this topic, I promise this is my last blog on the subject. Prior wages inquiries:  The employer can’t do any or all of the following under some state laws: Require, as a condition of employment, that an employee refrain from inquiring about, discussing, or disclosing information about either the employee's own wages or about any other employee's wages (also violates federal law); Seek the wage or salary history of a prospective employee from the prospective employee or a current or former employer or to require that a prospective employee's prior wage or salary history meet certain criteria; provided, however, that: If a prospective employee has voluntarily disclosed such information, a prospective employer may confirm prior wages or salary or permit a prospective employee to confirm prior wages or salary; and A prospective employer may seek or confirm a prospective employee's wage or salary history after an offer of employment with compensation has been negotiated and made to the prospective employee. Employers can’t retaliate against employees who report violations. Wage payment: Employers must pay wages earned by employees within different time periods of a termination; the definitions of “wages” and penalties for failing to pay on time vary from state to state. Medical assistance & family medical leave contributions: Employers in some locations must pay into an account set up by the state, similar to the unemployment insurance fund. Workers’ compensation and unemployment insurance premiums: Employers must pay these, in every state, for each employee performing any work in that state. Contribution to a workforce training fund program: Where a state has such a fund or similar, the employer must contribute. The list is not exclusive. There are other employment-related laws in some states that are not common, so I’ve omitted them here. Please ask if you have questions.

March 9, 2023

Business

Cannabis Manufacturing Complicated by New Jersey Industrial Site Recovery Act (ISRA) and Potential Environmental Liability

New Jersey’s Industrial Site Recovery Act (ISRA) may impose significant environmental liabilities on unsuspecting Class 2 Cannabis Manufacturers, including liability for historical contamination.  ISRA requires investigation and remediation of all historical contamination, whether or not caused by the manufacturer, each time certain business goes through a change of ownership or control or ceases operations including as a result of a lease termination, subject to specific exceptions and limitations.  Cannabis businesses that may be subject to ISRA will want to take additional precautions through due diligence, contracting, and perhaps even obtaining environmental insurance, to limit potential liability. However, ISRA does not apply to all businesses or transactions, and will not apply to all Class 2 Cannabis Manufacturers.  In fact, the provisions of ISRA only apply if the following the place of business must have a North American Industry Classification System (NAICS) code listed in N.J.A.C. 7:26 B – Appendix C of the regulations implementing ISRA.  A Class 2 Cannabis Manufacturer may fall under a few different NAICS codes, including: 311812 – Commercial Bakeries: This industry comprises establishments primarily engaged in manufacturing fresh and frozen bread and bread-type rolls and other fresh bakery (except cookies and crackers) products.” 311991 – Perishable Food Manufacturing: This industry comprises establishments primarily engaged in manufacturing perishable prepared foods, such as salads, sandwiches, prepared meals, fresh pizza, fresh pasta, and peeled or cut vegetables. 325411–Medicinal and Botanical Manufacturing: This industry comprises manufacturing uncompounded medicinal chemicals and their derivatives (i.e., generally for use by pharmaceutical preparation manufacturers) and/or Grading, grinding, and milling uncompounded botanicals 424590– Other Farm Product Raw Material Merchant Wholesalers: This industry comprises establishments primarily engaged in the merchant wholesale distribution of farm products (except grain and field beans, livestock, raw milk, live poultry, and fresh fruits and vegetables). It is possible that a business will have multiple operations at a single location, and then the dominant use must be determined for purposes of ISRA.  The only ISRA-subject code noted above is 325411 (Medicinal and Botanical Manufacturing), but other ISRA-subject codes not listed above could apply in certain situations.   Class 2 Cannabis Manufacturers with medicinal and botanical manufacturing as the dominant use may need to comply with the requirements of ISRA each time a change of ownership or operations, or a cessation of operations, including a lease termination, occurs.  These businesses should protect themselves by conducting due diligence on historical contamination, carefully allocating environmental risks and liabilities in leases and other real estate contracts, and perhaps even obtaining pollution legal liability or other environmental insurance.  Competent local environmental attorneys can assist with the evaluation of whether ISRA applies, and, if it does, advise on risk mitigation.

March 9, 2023

Litigation

Beware Sellers . . . Caveat Emptor May Not Be All You Believe it to Be!

When it comes to buying residential real estate in Virginia, the doctrine of caveat emptor, or “buyer beware,” may not be as onerous as you think. I’ve had numerous potential clients come to me with horror stories of post-purchase discoveries or mishaps occurring shortly after buying a property. Appliances are breaking down, ceilings are collapsing, and water in the basement! – just to name a few. Generally speaking, there’s not a whole lot one can do about it other than get the problem fixed! If you’re smart, you’ve paid for a good homeowner’s insurance (always get an HO policy! and have it in effect the moment you take the title – if not sooner!). If you’re doubly smart, you insisted upon having a pre-purchase inspection (and bordering on brilliant if you did your homework and checked the credentials of your inspector!). You’re atop the smarts pyramid if, in addition to all that, you also managed to sign an agreement with your inspector in which you refused to limit your damages to whatever comparative pittance you might have paid the inspector (g’luck with that one!). Congratulations are still in order if you at least insisted on accompanying the inspector and insisted further that everything gets inspected as thoroughly as possible for the money (to each their own as to how far to take this one, but I suggest you consider the following before you decide the extent to which you take heed . . . . Believe it or not, not every home seller is completely above board when it comes to disclosing shortcomings. This may shock you, but some share less than the full truth about the foibles and/or outright problems with their soon-to-be-someone-else’s-money-pit of a home. In fact, some people lie! NO?! Yes. It’s one thing to be less than completely forthcoming; it is quite another to hide, mislead, deflect, cover-up, and/or outright deny problems that exist. “Have these pipes ever caused you any problems? Have you ever had any water issues in the basement? Any known cracks in the foundation? How’s the roof? Has the place ever been struck by lightning to your knowledge?”  How a seller responds to these inquiries may very well provide a future legal cause of action against them, even if they have seen fit to try to protect themselves as sellers with anything and everything from a “caveat emptor” contract condition to an “as is, where is” clause, and a disavowal of any buyer’s reliance on absolutely anything the seller might have said prior to finalizing the deal. In fact, you can take it up another notch (turn the volume up to eleven, if you will!) and find that you might still have a claim against the sellers even if, after signing a contract with all of these seller protections, you only closed on the deal after having a professional inspector look to find any problems and fail to discover anything. Now, in the event of a major “miss” from your inspector, you might certainly want to get your money back for a negligent inspection, for sure! (And, hopefully, you were savvy enough in advance to have negotiated out of your typical “money back” liability cap on the inspection contract). The key to whether you have any reasonable expectation of recovery from the sellers is if they committed fraud in the process. You see, it’s one thing not to discover problems when you are actively looking for them; it’s another thing entirely when a seller purposefully covers them up and/or affirmatively takes steps to prevent the discovery of the problem altogether. In this regard, I was recently surprised to learn that such cover-up actions can themselves satisfy the “misstatement” element required to establish an actionable fraud claim. In other words, a seller need not affirmatively lie about a problem if acts to “put you off your guard,” i.e., to prevent you from discovering the true nature of the condition. Consider in this regard examples such as damage from an active water leak that gets covered up, painted over, re-plastered, etc.; a “new” roof that was cheaply/improperly installed (with no underlayment by unskilled day laborers); denied access to a problem area (a locked entrance to a boiler room where the allegedly/assuredly “brand new” boiler is located); or, perhaps, a covered-up, foundation wall crack (for instance, with water-absorbent, sawdust packed in the newly-walled over “renovations” – yup, it’s been done!). All of these present possible major problems and potentially unmanageable expenses (not to mention frustration and aggravation!) after the purchase. Should you even bother asking the sellers if any of these potential deal-breakers exist? Undoubtedly, yes. Perhaps they respond truthfully when asked. You won’t know if you don’t try. Alternatively, perhaps they lie and deny it. What then? Trust but verify! But if you do get taken for a ride, you may not be a defenseless victim. Fraudulently inducing someone into a real estate purchase may not only be actionable in particular circumstances, it might also include with it the recovery of legal fees – often the difference between being made whole with a successful case and not being able to afford to bring the case in the first place. So, caveat emptor, for sure . . . but to those would-be fraudsters thinking they can hide safely behind this good-faith seller’s protection, I say, “caveat venditor!”  And to those believing themselves victimized, I say document the seemingly fraudulent statements and actions and have a qualified legal professional look before you opt to do nothing.

March 8, 2023

Business

Crisis Management – Lessons from the Law, Aviation and Real Life

Originally posted on 03/04/2020, content updated on 03/04/2023 Crises are often self-inflicted, such as the Boeing 737 Max crisis in which Boeing’s executives apparently ignored the very people inside Boeing who knew of the Max’s problems – the pilots.  “After the crash, Boeing issued a bulletin disclosing that this line of planes, known as the 737 Max 8, was equipped with a new type of software as part of the plane’s automated functions. Some pilots were furious that they were not told about the new software when the plane was unveiled.”[1]  “Boeing Pilot Complained of ‘Egregious’ Issue With 737 Max in 2016” was a headline in the New York Times.[2]  Too often a crisis in the cockpit is so urgent that time does not allow for taking out the paper or electronic flight manual to help analyze and solve the problem. Student pilots are taught the “4 C’s” -- when faced with difficulty, “Climb, Communicate, Confess and Comply with instructions.”[3]  In addition to learning what’s in the flight manual for the aircraft being flown, the 4 C’s are part of every pilot’s proficiency check ride.  “A pilot goes through four stages of proficiency when learning a new airplane, a new set of skills, or working in a new environment. Those stages are Cautious, Compliant (or Current), Confident and Complacent.  The last of these can kill you.”[4] Boeing as an institution seems to have gotten “complacent” when it came to Max’s safety because, it appears, those in the C-suite knew better than the pilots in the trenches.  Once a self-inflicted crisis due to whatever cause, such as complacency, escalates, the 4 C’s come into play – Climb to safety, Communicate the problem, Confess what you did and what the problem is, and Comply with instructions from the higher authority of air traffic control. Boeing did what the Iranians did in the crash of a Ukrainian Boeing 737-800 (not a Max).  The Iranians denied there was a problem and blamed someone else.  Boeing blamed pilot error and the Iranians blamed mechanical failure.  The two Boeing Max crashes occurred when foreign pilots were in control of new Boeing Max jets maintained and operated by foreign airlines. The Iranians did what some say they do best – invoke the big lie.  The Iranians had no access to the black box or to cockpit information; there was no distress call; and in lying the Iranians were effectively faulting Ukraine’s pilots, mechanics, and pilot training even though Ukraine has one of the best safety records in terms of aircraft maintenance and pilot training.  Only days later did the Iranians admit their military “unintentionally” shot down the Ukrainian airliner.[5]  Even when “confessing,” the Iranians continued to lie – the missile was fired intentionally at an ascending aircraft, not at a descending incoming anything, and the Iranian’s Russian missile homed in on the airliner’s transponder which is what those missiles are supposed to do to hit their targets.   The “unintentional” word was intended to excuse the incompetence and stupidity of the Iranian missile defense personnel. Bill Clinton in the Monica Lewinsky affair invoked only part of the 4 C’s -- he Climbed by telling America he had to get back to work as President of the United States, and he certainly Communicated that position.  He also did the big lie when he denied he had had “sex with that woman.”  In telling America, “It depends on what the meaning of ‘is’ is,”[6] President Clinton made every American parent of a daughter cringe. Boeing, Iran and President Clinton created these crises, and all mismanaged them.  While it would seem axiomatic that a self-inflicted crisis can be managed more easily than an unexpected crisis, that unfortunately appears not to be the case. In unexpected crises, these rules of aviation also apply.  The obituary of one of America’s foremost crisis management experts, Harold Burson, said: “Mr. Burson advised corporate C.E.O.s to get bad news out quickly and fully, making it a one-day story rather than letting it drag out. He urged them to be candid, and refused to take clients who could not be. He held staff seminars to promote Burson-Marsteller’s ‘vision and values.’ He was less interested in hiring reporters with contacts than he was in finding good writers who could capture the essence of a client. As business and financial news reporting improved in the 1970s and ’80s, he sought writers adept at detailed analysis, not the old puffery about chief executives and companies.”[7] [Emphasis added]  Boeing, Iran and President Clinton could have used and heeded this advice which looks similar to the 4 C’s As a lawyer for over 50 years, I have had the privilege of having clients trust my judgment when a crisis occurs.  Sometimes those have been “bet-the-company” crises.  Boeing’s Max crisis was potentially a “bet-the-company” crisis.  The Iranian shoot-down of a passenger plane and killing all 176 aboard was nothing more than a seeming “public relations” crisis to the Iranian regime.[8]  And the Clinton crisis was a “Bet-the-Presidency” crisis that turned on a 50-50 Senate vote. “Over the years, I learned that the traditional advice of a lawyer to avoid public comment during a legal crisis had become outdated, especially with the impact of the Internet at the turn of the twenty-first century. . . .  It was no longer viable for a lawyer to tell a client, ‘We’ll win it in the courtroom—we won’t litigate this in the media.’ There were too many ways for the judge and the jury to be influenced by public opinion, consciously or unconsciously; too many ways for prosecutors and regulators to be persuaded by adverse media coverage to launch an investigation or to bring a case, as broadcast news, once a day, became 24/7 cable, and then within just a few years, the Internet led to websites and then some blogs and then the blogosphere and then Google, Twitter, YouTube, WiFi, and social networks.  Everything that follows ineffective crisis management – developing a simple message, rapid response to correct misinformation that could hurt a client’s reputation, share values or outcome in the courtroom – and, in the long-term, repairing the damage begins with the need to get the facts, all the facts, good and bad – not just those that attorneys are ready to tell a non-attorney crisis manager or public relations, consultant. And that means getting access to all the facts, first with the protection of attorney-client privilege.”[9] While the author of that advice was one of President Clinton’s advisers in the Paula Jones and Monica Lewinsky matters, his words of today, which may be ironic given what happened some 25 years ago, are valuable: “The first rule of Crisis Management is to get all the facts.”[10]  Some law firms have created crisis management practices, sometimes within their government investigations practices.   One firm “advocates a multifront approach to crisis management. Whether the situation stems from internal problems or external events, we enable our clients to maintain focus on their business objectives while managing a crisis to its best outcome.”[11]  In aviation terms, this law firm is telling clients to continue to fly the airplane – continue to run their businesses, which is the “Climb” mandate of the 4 C’s, and the lawyers will gather the facts and engage other professionals such as public relations or crisis management firms, under the umbrella of the attorney-client privilege, and then advise the client on potential courses of action. An Above-the-Law article explains the critical importance of learning the facts: A hospital manager’s lost laptop with protected patient information on it meant the focus had to be not first on what the potential damage for a HIPAA violation could be, but first on making sure the “fact” the laptop was lost was accurate.  “[T]he only ‘wise’ decision I made that day was to turn over the reins of our response to my colleague who suggested we first ask the manager to retrace her steps over the previous day. And as luck would have it, her laptop turned up in a rarely used conference room a few minutes later. Safe and sound, and most importantly, no violation of HIPAA or our patients’ information.”[12]  There is no substitute for learning the facts as quickly and as accurately as possible. Another aviation crisis management lesson taught to all student pilots and repeated at all phases of pilot training is to “Aviate, Navigate, Communicate.”[13]  The “Aviate and Navigate” part of this mandate is the “Climb” part of the 4 C’s.  The “Communicate” element is shorthand for the “Communicate, Confess and Comply with instructions” part of the 4 C’s.  The client must always Aviate and Climb – run the business.  The Confess part is usually where things get dicey in terms of whether the client will come clean with the lawyers.  Boeing apparently did not.  The global media were the lawyers in the case of the Iranian shoot-down of the Ukrainian aircraft.  And we do not know whether President Clinton Confessed to his advisers at the time all of the facts regarding Paula Jones, Monica Lewinsky and other women accusers. I chose the aviation analogy to crisis management for business because as a licensed pilot for more than 40 years and having owned my own single engine aircraft for more than 38 years, I have had my share of difficult situations just as every plot does.  Having a landing light blow out on approach to an unfamiliar non-tower controlled airport after a multi-hour night cross country to work on an acquisition in Maine; having a very large Seagull dive towards my windscreen and hit my right wing over the New Jersey Turnpike at 500 feet on approach to my home airport; and getting lost when encountering an unexpected snow squall in Western Pennsylvania, many occurring in my aircraft’s pre-GPS days, were all manageable because of my recurrent pilot training to prepare for those potential crises. While the possible crises in aviation are seemingly endless, especially the more complicated the aircraft, training and more training proves the adage that “practice makes perfect.”  There are some crises that cannot be practiced in an aircraft and need to be practiced in a simulator, especially when flying more complicated aircraft.  An airplane is a machine with parts, systems, passengers and crew that can malfunction.  What we do as student pilots and then as pilots is train for contingencies.  Training for a crisis in business is not as easy as training for a crisis in aviation because training for crises is usually not part of a business’s agenda.  Contingency planning can be urged by insurers, and some companies’ management will have risk managers who do engage in contingency planning.  Unenlightened management will often view costly contingency planning as an expense without a quantifiable immediate benefit. How often do we roll our eyes at fire drills in high rise office buildings?  This is contingency planning and practice, or recurrent training, no different from what we do as pilots.  “If you see fire or smoke, follow the four ACES of high rise building fire safety: 1. ACTIVATE the fire alarm immediately by pulling the nearest Fire Alarm Box . . . .   If you cannot pull the Fire Alarm, call 911.  2. COMMUNICATE with the Fire Warden Team and other colleagues on your floor.  3. EVACUATE by using the stairs . . . .  DO NOT USE THE ELEVATORS.  Members of the Fire Warden team will lead the evacuation down two or more floors for re-entry (or if there is the need to evacuate the building completely . . .).  4. SELF-ESCAPE Stay calm, don’t panic.  Stay low in smoke conditions, and close doors to confine fire and smoke.  Feel doors before opening them; if they’re hot, don’t open!”[14]  Isn’t this really a tenant’s variant on “Climb, Communicate, Confess and Comply with instructions?” “I have written before about the necessity of contingency plans, but what if there is simply no time to pull out the book and turn to page 63? You are in a state of emergency, your stomach is in a knot, and the CEO is asking you some very difficult questions. Grab the canoe. Take a breath and do your best.”[15]  The canoe is the business or the aviate and navigate/fly the plane part of dealing with an aviation crisis.  “First, you must ‘grab the canoe’ and get back to floating; only then can you assess what else might be wrong (missing possessions, food, wet socks, etc.). Things are going to go screwy during your tenure as an attorney — they just will. You cannot possibly plan for everything, but you can remember the mantra of ‘grab the canoe.’  The canoe is a metaphor for the stasis that usually surrounds your job. You are first and foremost representing an entity. . . . The entity is what keeps you and the other employees afloat. During a crisis, all of the happenings within the entity are to be worried about after first taking care to right your primary client, the business. Some things that occur in an emergency, or a quickly moving negotiation, can be left behind, such as obsolete contractual language. Other issues are absolutely necessary in a publicly-traded company — reporting requirements, for instance. And in the time it takes to read this column, some of these issues can overturn your company’s sense of balance, and leave you drifting.”[16]  “Of course we are not saving lives, or curing dread disease. We practice law. The key is in the word “practice.” As you practice, answers become ingrained, and your expertise begins to grow. After years of “practice,” you enable yourself to right tipped canoes, and assist stressed CEOs quickly, efficiently, and appropriately. But in the recesses of your mind, you must always be aware of the possibilities for crisis. Remember that in the moment you will rely on what you know and keep the primary focus on staying afloat. You can allow yourself to let the what-ifs creep in once you are past the crisis and are happily ensconced at the third seat at the bar, with a martini safely in hand.”[17] Crises can be big or small.  And they can sometimes involve saving lives.  It is not often we as lawyers are called upon to help clients deal with “Bet-the-Company” or life-and-death crises.  Our “practice” for these crisis events usually comes on the job and our performance often turns on the judgment we have developed from experience, from observing more experienced lawyers, from reading as much as we can about as much as possible, and most of all from thinking and analyzing what we read, see and hear and all the what-if’s that never cease in our daily law practices. In my law practice, I have had a few “Bet-the-Company” crises to help clients through.  Fortunately, all turned out fine.  One involved consumer product tampering and the other involved a brother-in-law’s attempt to misappropriate my client’s business. The Product Tampering Crisis:  The CEO of my branded consumer product client called in a panic, telling me a supermarket executive notified the client and FBI that one of its stores had received a call from someone claiming to have put poison in a container of the client's product. The client asked whether he should issue a product recall.  I have used this example in interviewing job applicants. I ascertained the facts by speaking with the client’s CEO, COO and plant manager and by liaising with the FBI.  I learned that wiretaps had been placed on the supermarket's telephone lines and that the FBI agent’s experience was more often than not these were hoaxes.  My advice to the client was to wait, not rush to issue a product recall, and instead to withdraw the product just from the stores in the local area, to test the withdrawn product, and to replace the product with new product produced at a different plant. That was done and testing proved negative.  We waited. This was in the days before computer real-time inventory could tell us how much product had been purchased at each location.  If no poisoned product was out there and the client issued a recall, the company and its brand would have been severely and possibly irreparably damaged.  If a poisoned container was already out there in commerce to an unsuspecting consumer, the company would be severely damaged, and a recall would necessarily follow.  The FBI agent and I thought the odds of a just-purchased container being consumed and harming or killing someone were fairly low. The supermarket received a second call from the same caller a few hours later.  The FBI wiretap led to an arrest that day of a disgruntled teenage supermarket employee who confessed to the hoax.  A public product recall was avoided, and no one was hurt. The Brother-In-Law Crisis:  A prospective client was referred to me to discuss estate planning and his desire to leave his hotel business to his adult child who had joined the business and opened an on-premises restaurant.  The client believed this hotel was “his,” as the client ran this hotel and his brother-in-law ran two other hotels that all four in-laws owned.  I needed to know what the client owned, not what the client told me he owned.  After reading the relevant documents, I learned that the client did not own or control the business he thought he did, and he would not be able to leave the business to his heir.  The client owned 26% of a limited partnership that owned the business, and he was one of two general partners, the other being his brother-in-law, a very controlling and domineering person.  The brother-in-law conditioned his okay for the client’s adult child to open the restaurant on the restaurant providing, at its expense, free breakfasts to the hotel’s guests. The client's then-lawyer and then-accountant were among the dozen or so family and friends limited partners. The partnership's term was contractually scheduled to expire some years earlier, but the brother-in-law, attorney and accountant had advised the client to extend the partnership's term because if the business was sold, they would all have to pay taxes. It was not a coincidence that each limited partner's original investment was yielding an annual 700% cash return, all while the assets of the business had appreciated significantly. Because the client was the nicest person I had ever met and was the kind of man one would choose as your father if that was a matter of choice, the client was not confrontational and did not want to sue despite what I thought were good claims against some of the actors here.  I devised a non-litigation strategy that included the partnership not distributing cash to its partners so the partnership could use its cash for acquisitions and other business matters.  That resulted in the partners having taxable income without cash being distributed to them. The client offered to buy out the limited partners who rejected the offer, commenced arbitration, and sued for an injunction to compel cash distributions.  Although the client would not sue, he would defend himself quite vigorously. The injunction was denied. The case proceeded to pre-arbitration mediation.  Relying on their own "expertise," the former lawyer and former accountant chose not to obtain an appraisal and agreed on behalf of the limited partners to a buy-out at a particular partnership valuation.  I arranged for a bank client to make a loan to the partnership in an amount greater than the buy-out value of the limited partners’ 48%. The bank's appraised value of the business turned out to be about 50% greater than the buy-out value.  After some intra-family transactions, this crisis was resolved with my client owning 100% of his business and having the ability to leave his very valuable asset to his heir. The client said that the decision to make me his attorney was the most significant business decision of his life. It is critical to ascertain the facts in any crisis situation, both for the lawyer and the client, and the lawyer must be able to communicate those facts clearly to the client and ultimately to others involved in the crisis.  “’We are advocates,’ Mr. Burson told The New York Times in 1984. ‘We are being paid to tell our clients’ side of the story. We are in the business of changing and molding attitudes, and we aren’t successful unless we move the needle, get people to do something. But we are also a client’s conscience, and we have to do what is in the public interest.”[18]  While we are advocates to the world outside the client, we need to be truth-tellers to and questioners of the client. “When cyanide-laced capsules of Tylenol, the pain medication, killed seven people in the Chicago area in 1982, its manufacturer, Johnson & Johnson, made the best of a bad situation. After consulting Mr. Burson, the company’s chief, James E. Burke, announced a recall, ordered new tamper-resistant caplets and packaging seals, and mounted a campaign that acknowledged the facts, stressed safety measures and eventually restored his company’s credibility.  ‘Basically, I served to help him think through problems and reinforce his own instincts,’ Mr. Burson said of Mr. Burke. It was not modesty. P.R. people have always tried to keep their hands invisible, allowing clients to take credit and blame, and the Tylenol case is often cited as a textbook model of corporate responsibility in a crisis. No one was ever prosecuted for the tampering, or for an isolated 1986 recurrence.”[19] (Coincidentally, I advised a pharmaceutical packaging company client at that time that repackaged Tylenol in tamper-evident packaging following that crisis.) Sometimes, identifying and articulating the facts suggests a solution.  In my examples, each business needed to continue to be operated while these crisis situations played out and resolved.  “Climb, Communicate, Confess and Comply with instructions” is the client’s job in a crisis.  Our role as lawyers is to focus the client on running the business and ascertaining the facts as rapidly and as accurately as possible, evaluate options with the client, and then together arrive at the solution that makes the most sense for the client and the client’s constituencies.  "Never let a good crisis go to waste" has been attributed to Winston Churchill[20] and to others.[21]  No matter the outcome of a crisis, there is always a lesson to be learned. [1] https://www.washingtonpost.com/business/economy/new-software-in-boeing-737-max-planes-under-scrutinty-after-second-crash/2019/03/13/06716fda-45c7-11e9-90f0-0ccfeec87a61_story.html[2] https://www.nytimes.com/2019/10/18/business/boeing-flight-simulator-text-message.html [3] https://airfactsjournal.com/2018/09/the-other-4-cs-of-aviation/ [4] https://airfactsjournal.com/2018/09/the-other-4-cs-of-aviation/ [5] https://www.nbcnews.com/news/world/iranian-military-says-it-unintentionally-shot-down-ukrainian-plane-n1113996 [6] https://en.wikipedia.org/wiki/Impeachment_of_Bill_Clinton [7] Harold Burson, a Giant in Public Relations, Dies at 98  https://www.nytimes.com/2020/01/10/business/media/harold-burson-dead.html [8] https://en.wikipedia.org/wiki/Ukraine_International_Airlines_Flight_752 [9] Lanny J. Davis, Why Lawyers Are Best At Crisis Management http://www.lannyjdavis.com/why-lawyers-are-best-at-crisis-management/ [10] http://www.lannyjdavis.com/why-lawyers-are-best-at-crisis-management/ [11] https://www.steptoe.com/en/services/practices/criminal-defense-investigations/crisis-management.html [12] https://abovethelaw.com/2017/05/counseling-through-an-in-house-crisis/ [13] For much more on this topic, see https://idea.library.drexel.edu › idea:6094 › datastream › OBJ › download). [14] https://finance.columbia.edu/content/building-evacuation-procedures [15] https://abovethelaw.com/2013/07/grabbing-the-canoe-or-reflections-on-crisis-management/ [16] https://abovethelaw.com/2013/07/grabbing-the-canoe-or-reflections-on-crisis-management/?rf=1 [17] https://abovethelaw.com/2013/07/grabbing-the-canoe-or-reflections-on-crisis-management/?rf=1 [18] https://www.nytimes.com/2020/01/10/business/media/harold-burson-dead.html [19] https://www.nytimes.com/2020/01/10/business/media/harold-burson-dead.html [20] https://realbusiness.co.uk/as-said-by-winston-churchill-never-waste-a-good-crisis/ [21] http://freakonomics.com/2009/08/13/quotes-uncovered-who-said-no-crisis-should-go-to-waste/

March 4, 2023

Labor and Employment

Adhering to Laws of Every State in Which Employees Are Working Remotely

As I’ve written before, the employment laws of the states where an employer hires employees are applicable to the employment relationship. If you missed that blog, you can access it here. I am listing more types of laws to consider. Sexual harassment policies: It may be legally required to adopt a policy against sexual harassment and provide notice of the policy at certain times. Workplace safety laws: Enough said. Non-competition agreements in an employment relationship: Severely limited or forbidden in some states and may soon be federally banned. Please look at my previous blog on this topic and the proposed legislation. Mini-COBRA laws: There are some state laws applying the COBRA requirements to employers with less than 20 employees. Voting leave: In certain cases, employers are required to provide leave to vote for a certain length of time and be paid for this. Lie detector tests: Requiring or requesting one is unlawful in some locations. Requiring the use of certain surnames: In some states, it’s illegal for employers to require employees to use, because of such individual's sex or marital status, any surname other than the one by which such individual is generally known. Veterans’ Day & Memorial Day leave: Employers in some locations must grant unpaid leave to a veteran or a member of a Department of War veteran who desires to participate in a Memorial Day exercise, parade, or service in the employee's community of residence. Volunteer emergency responders’ leave: Employers can’t take any disciplinary action against any employee of some states because they fail to report for work at the commencement of their regular working hours, where such failure is due to his responding to an emergency in their capacity as a volunteer member of a fire or ambulance department. This list is not exhaustive. I will continue the list in my next blog. I’m able to advise on employment laws applicable in other states, as needed.

March 3, 2023

Bankruptcy

How Not to Violate the Automatic Stay

The automatic stay is "one of the fundamental debtor protections provided by the bankruptcy laws" of this country.”[1]. It is viewed as a very broad protection that "stops all collection efforts, all harassment, and all foreclosure actions . . . meant to provide “complete, immediate, albeit temporary relief to the debtor from creditors, and also to prevent dissipation of the debtor's assets before orderly distribution to creditors can be effected.”[2] Certain actions (like bringing or continuing a breach of contract action against the debtor) fit neatly in the prohibitions of the Bankruptcy Code while some more nuanced circumstances prove trickier to label as violations, yet they can put a creditor or a counterparty on the naughty list. Here are five examples: 1. The automatic stay applies outside of U.S. geographical borders. A declaration of a setoff and a foreign creditor’s refusal to return the receivables to the debtors upon request was an improper exercise of control over the property of the Debtor's estate, and thus a violation of Section 362(a)(3) of the Bankruptcy Code. [3] 2. The enforcement of provisions in a condominium's bylaws that prohibit a chapter 11 debtor with a pre-petition delinquency in the payment of condominium fees from voting at an annual meeting or holding office as a director of the condominium association violates the automatic stay.[4] 3. A lender proceeding with a foreclosure sale against a limited liability company in which the debtor held 99% of the equity willfully violates the automatic stay under Section 362(a)(1), and to the enforcement of an earlier judgment in that proceeding or action, under Section 362(a)(2) when the foreclosure action named both the company and the debtor as parties in the proceeding.[5] 4. A mortgage company’s attempt to perfect lien against estate property by registering a deed of trust on the debtor’s property, when the stay had not been lifted by the bankruptcy court and when the mortgage company and its counsel had actual knowledge of the bankruptcy filing is a willful violation of the automatic stay.[6] 5. Threatening a debtor with criminal prosecution is a willful violation of the automatic stay. In a case involving a landlord in Tennessee, the Sixth Circuit affirmed the bankruptcy court and the district court in finding that the landlord cannot hide behind the criminal prosecution exception to the automatic stay in Section 362(b)(1).[7] Before the commencement of the bankruptcy case, the debtor had written to the landlord a check that bounced. After the debtor filed for bankruptcy, the landlord wrote letters to the debtor and her mother, claiming he was not attempting to collect back rent but threatened that he would initiate criminal proceedings for the bounced check. __________________ [1] Melanotic Nat'l Bank v. N.J. Dep't of Envtl. Prot., 474 U.S. 494, 503 106 S.Ct. 755, 88 L.Ed.2d 859 (1986) (quoting S. Rep. No. 95-989, at 54-55 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5840, 5963, 6296) [2][2] SEC v. Brennan, 230 F.3d 65, 70 (2d Cir. 2000). [3] In re Arcapita Bank B.S.C.(c), 628 B.R. 414, 480 (Bankr. S.D.N.Y. 2021), aff'd sub nom. In re Arcapita Bank B.S.C.(C), 640 B.R. 604 (S.D.N.Y. 2022); Section 362(a)(3) of the Bankruptcy Code provides that a filed bankruptcy petition filed operates as a stay, applicable to all entities, of any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate. 11 U.S.C. § 362(a)(3). [4] In re Gordon Properties, LLC, 460 B.R. 681, 685 (Bankr. E.D. Va. 2011). [5] Bayview Loan Servicing LLC v. Fogarty (In re Fogarty), 39 F.4th 62 (2d Cir. 2022). Section 362(a)(1) bars the commencement or continuation ... of a judicial, administrative, or other action or proceeding against the debtor ... to recover a claim against the debtor that arose before the commencement of the case. [6] In re Medlin, 201 B.R. 188 (Bankr. E.D. Tenn. 1996). [7] Weary v. Poteat, No. 15-5159, 2015 WL 5712191 (6th Cir. Sept. 30, 2015).

February 28, 2023

Labor and Employment

Consider Labor Laws When Hiring in Other States

Please be aware that the employment laws of the states where an employer hires employees are applicable to the employment relationship. Many companies continue to hire remotely without this consideration. Some states have very complex laws favoring employees, and employers should be alert to this issue. I am mentioning some types of laws to consider so that employers can review this list when considering hires in other states. This is a rather lengthy list to be continued. Written notices: This is a commonly overlooked legal requirement. Check to be sure which legal notices must be provided in each state. Anti-discrimination laws based on protected status: There are various classifications on which an employer may not legally discriminate. These might include the classes protected by federal law or exceed them. For instance, it is illegal in Delaware to discriminate against an employee because they are a firefighter. Disability accommodations: In some states, it’s illegal for an employer to require documentation from an appropriate health care or rehabilitation professional in certain situations, such as a request to lift less than 20 pounds. Pregnancy accommodations: In some states, employers must grant reasonable accommodations requested by employees for their pregnancy or related conditions unless employers can show that these accommodations would impose an undue hardship on their business. Parental leave & sick leave: Some states’ laws grant employees parental leave, unpaid sick leave, or paid sick leave. To be continued next blog. In the meanwhile, if you have questions, please reach out.

February 24, 2023

Business

FTC Seeks to Ban Non-compete Clauses: What This Really Means for Your Business

Today we will cover how the FTC seeks to ban non-compete clauses and what this means for your business. On January 5, 2023, the Federal Trade Commission (“FTC”) proposed a new rule banning employers from imposing non-competes on their workers. The rule is undoubtedly politically motivated as it was issued in response to President Biden’s Executive Order that encouraged the FTC to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” The FTC believes a non-compete is a “widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses.” By stopping this practice, the FTC erroneously estimates wages would increase by nearly $300 billion per year, and it would expand career opportunities for 30 million Americans. By stopping this practice, the FTC erroneously estimates wages would increase by nearly $300 billion per year, and it would expand career opportunities for 30 million Americans. Scope of Proposed Rule to Ban Non-compete Clauses The FTC’s proposed rule would prohibit employers from using non-compete clauses – i.e., any contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, within a specific geographic area and period of time after the conclusion of the worker’s employment with the employer. It would make it illegal for an employer to: enter into or attempt to enter into a non-compete with a worker; maintain a non-compete with a worker; or represent to a worker, under certain circumstances, that the worker is subject to a non-compete. The proposed rule would apply to “workers,” broadly defined by the FTC to include employees, individuals classified as independent contractors, externs, interns, volunteers, apprentices, and sole proprietors who provide a service to a client or customer. The rule also includes a “functional test” for determining what constitutes a “de facto” non-compete clause that has the same effect as an express non-compete clause – the same test employed by courts in states that already have express prohibitions on non-compete clauses. Effective Date of Proposed Rule Importantly, this is a proposed rule that is not in effect. The proposed rule is in a comment period until March 20, 2023. We do not believe it will go into effect, if at all, until after a lengthy court battle ending with a ruling from the United State Supreme Court. Then, even if the proposed ban becomes law, employers will have 180 days to revise their agreements to conform with the law. Moreover, there are a variety of tools, such as reasonably tailored non-disclosure agreements and confidentiality provisions, employers can use to accomplish their goals without violating the proposed ban. The proposed rule is the first step in a long process that will take years to complete. We expect the FTC will receive thousands or hundreds of thousands of comments to consider. Based on the comments, the rule will be revised. It could take the FTC until late 2023 or even the end of 2024 to issue a final rule. After the final rule is set forth, it will be subject to a legal challenge (or challenges); this will undoubtedly delay the effective date into 2025 or later, assuming the final rule survives any legal hurdles it faces. During this challenging period, a presidential election will occur, and the political winds will likely change, potentially further reversing the course of the FTC. Criticism of the Proposed Rule The U.S. Chamber of Commerce has opined that the FTC lacks the authority to issue the rule and ignores the benefits of non-competes. A senior vice president for the U.S. Chamber of Commerce has stated: “Attempting to ban non-compete clauses in all employment circumstances overturns well-established state laws which had long governed their use and ignores the fact that, when appropriately used, non-compete agreements are an important tool in fostering innovation and preserving competition.” An FTC Commissioner issued a dissenting statement when the proposed ban was announced. The dissenting statement outlined potential legal challenges noting the FTC lacks the legal authority to issue the ban, and the rule is barred by a recent United Supreme Court decision. Even if the FTC has authority, it is an impermissible delegation of that authority. The proposed rule must overcome extensive case law upholding the use of non-compete clauses that are determined to be reasonable unless they are unreasonable as to time or geographic scope. Even if the FTC has authority, it is an impermissible delegation of that authority. Exemptions to Proposed Rule to Ban Non-compete Clauses The proposed rule would exempt non-compete agreements that a person entered in connection with the sale of a business, but only if that person owned 25% or more of that business. The FTC is also seeking comments as to whether: non-compete clauses between employers and senior executives should be subject to a different standard; the rule should apply uniformly to all workers; and the rule should impose a categorical ban on non-compete clauses. Alternatives to Non-compete Clauses Employers are not without options. The FTC’s proposed rule’s definition of a non-compete clause does not include other types of covenants. Accordingly, employers should begin analyzing their confidentiality clauses, non-solicitation, and non-disclosure provisions. Carefully drafted provisions can ensure that employers are able to protect confidential information and customer relationships, as well as the poaching of current employees by former employees. Employers should also use this as an opportunity to strengthen trade secret protection plans. Employers should also use this as an opportunity to strengthen trade secret protection plans. What Should I Do as an Employer? There is no need to panic. The proposed rule will not go into law in its final form, if at all. However, now is the time to implement proper planning techniques into agreements with employees. As noted previously, with proper legal counsel, non-compete, non-solicitation (vertically and horizontally), confidentiality, non-disclosure, and other restrictive covenants can be used to accomplish the goals of employers, most of which are not within the scope of the current version of the proposed rule. With proper legal counsel, non-compete, non-solicitation, confidentiality, non-disclosure, and other restrictive covenants can be used to accomplish the goals of employers. Conclusion Thank you for reading our blog on how the FTC seeks to ban non-compete clauses and what this means for your business. Please contact us immediately so that we can assist you in your planning and contract drafting process to properly implement such restrictions to protect your business. Charles McCauley can be reached at cmccauley@offitkurman.com or 484-531-1712, and Sarah Goodman can be reached at sarah.goodman@offitkurman.com or 267-338-1319.

February 24, 2023