Offit Kurman Blogs

Healthcare

Informed Consent and Risk Waivers

The doctrine of informed consent is based on the principle that adults of sound mind should have the right to decide what can be done to their bodies. Before making a decision about what treatments or procedures to consider, a patient should understand the pros and cons of any treatment/procedure – the benefits and the risks. The risks include any side effects and any complications. To ensure that the patient understands the benefits and dangers of any treatments or procedures, various states, agencies, and medical boards require that the doctor who is responsible for the treatments and procedures should obtain a written informed consent from the patient. The written document should list the benefits and risks of the treatment or procedure. By signing and dating the written informed consent, the patient is acknowledging he/she has been informed of the possible consequences – and agrees that the treatments and procedures can be provided to the patient. The treatments and procedures that require a patient’s informed consent include: Medical research. The Department of Health and Human Services (HHS) requires that researchers obtain the legally effective informed consent of the subject or the subject’s legally authorized representative, unless: The research is exempt under federal law There are appropriate waivers -if waivers are permitted for the type of research being conducted FDA has its own set of informed consent requirements Treatments and procedures performed by a doctor or another type of health provider who has the legal authority to provide the treatment or procedure. What is the relationship between informed consent and a risk waiver? By signing the waiver (if properly worded), the patient does more than acknowledge his/her understanding of the pros and cons of the treatment or procedure. The signature on the informed consent form generally will be used by the doctor, hospital, or another healthcare provider to protect the doctor, hospital or another healthcare provider from liability. The liability protection is generally confined to complaints by the patient that an adverse consequence occurred during the treatment or procedure – that was identified on the informed consent document. Essentially, medical professionals use informed consent forms for more than just providing information. The professionals use the form as a waiver of liability claims by the patient. Informed consent forms are also called liability waivers, risk waivers, medical release forms, release of liability forms, and other similar names. There is a reverse problem for doctors. The signing of an informed consent/risk waiver may protect the physician or healthcare provider that provides the treatment or procedure from a liability claim. Conversely, the physician or healthcare provider may be subject to a medical malpractice claim (for non-emergency treatments or procedures – if the patient suffers as a result of the treatment or procedure. The physician or healthcare provider may even be liable if the physician or healthcare provider does everything correctly – because the patient may argue he/she wouldn’t have had the treatment or procedure if he/she had known of the possible dangers. A physician or healthcare provider may also be liable – if there is a signed informed consent – if the treatment or procedure provided is different than what was identified in the informed consent document. Even with an informed consent, doctors may also be liable for other reasons – such as mistakes that were clearly avoidable such as leaving a surgical instrument in a patient after the surgery is complete. AVOIDING MALPRACTICE THROUGH STRONG INFORMED CONSENT PRACTICES Informed consent is critical in all areas of medicine; it takes on added importance with integrative medicine, functional medicine, anti-aging and aesthetic medicine, and non-mainstream […] When do healthcare providers use informed consent? Some of the common types of informed consent uses include: Surgeries. Generally, doctors and hospitals require that a patient sign an informed consent form before any surgeries are performed. Drug prescriptions. Healthcare providers may also request that a patient sign an informed consent/risk waiver before nonsurgical remedies. For example, doctors and pharmacies regularly require informed consents from patients before the doctor prescribes any medications and the pharmacy fills the prescription. Common risks with drugs include the possible side effects, the dangers involved with taking the prescribed amounts, the dangers with taking amounts other than prescribed amounts, possible interactions with other drugs, and many other adverse consequences. Research. Many doctors, universities, hospitals, agencies, and other entities conduct research on the effectiveness of various drugs and various treatments. The people who volunteer to participate in these clinical studies have the right to be informed of the possible risks and dangers. An informed consent may be required for many other types of reasons. Our experienced healthcare lawyers will explain when informed consents are advisable – whether a healthcare provider is performing surgery, conducting a telemedicine consultation, or for any other reason. HOW TO DRAFT A TELEMEDICINE INFORMED CONSENT In today’s video, we discuss whether you need a specific type of consent form to offer patients telemedicine or telehealth services. What happens if the patient cannot provide consent? Patients may not be able to provide consent for different reasons: During emergencies when the patient is in too much pain or is otherwise unable to give his/her consent When then patient is not mentally competent If the patient is a minor In these situations, the physician, hospital, or another healthcare provider will try to obtain the consent of someone with the authority to give their consent to the treatment or procedure for the patient. The authority may be based on: A power of attorney from the patient to another adult that authorizes an informed consent A guardian of the patient A parent of the patient Other people depending on the circumstances Informed consent and California law The duty to obtain an informed consent is generally defined by California case law – the decisions of judges in prior comparable cases. There are some statutes as well. For example, in our discussion of new healthcare laws for 2021, we discussed the following law: AB-1280 California Hospice Licensure Act of 1990 This law was signed into law on October 4, 2021. The law sets new requirements for hospice referrals. The law prohibits: Hospice providers (and hospice staff and agents for the hospice) from “paying referral sources for the referral of patients to the hospice.” “A hospice salesperson, recruiter, agent, or employee who receives compensation or remuneration for hospice referrals or admissions from providing consultation on hospice services, hospice election, or informed consent to a patient, patient’s family, or patient’s representative.” Certain authorized persons, such as a registered nurse or a medical social work can “complete the election of hospice, informed consent, completed signatures, and counsel on the election of hospice with a patient, patient’s family, or patient’s representative.” The new law also requires that that hospice give a patient or his/her representative a verbal and written notice of the patient’s rights and responsibilities – in a language and manner the patient or representative can understand – before providing any care. Doctors, nurses, and other healthcare providers should understand when an informed consent from a patient is required and the terms and explanations that must be set forth in the informed consent. The need for an informed consent doesn’t just apply to surgeons. The duty to obtain the medical consent doesn’t just apply to a doctor’s office. Nurses, acupuncturists, dentists, medical spas, and other types of health provider should review when an informed consent is necessary for their practice or business. CALIFORNIA HEALTHCARE LAWS THAT WERE PASSED IN 2021 Pharmacies, hospitals, mental health facilities, hospices, and substance abuse facilities need to understand how the recently passed California healthcare laws apply to their practice Physicians and other healthcare providers should contact Cohen Healthcare Law Group, PC to discuss the federal, state, and medical board requirements for obtaining an informed consent. Our experienced healthcare attorneys advise doctors and other types of healthcare providers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.

January 22, 2023

Elder Law and Advocacy

Significant Increase in New York Medicaid Income and Resource Limits to Protect Individuals 65 and Over and Disabled Adults

In the past, Medicaid recipients who received MAGI Medicaid benefits (individuals under the age of 65) could lose their Medicaid benefits when they reached age 65. Once an individual reached 65, he had to reapply for non-MAGI Medicaid benefits with strict income and resource limits. In 2022, Medicaid’s monthly income limit was $934 for an individual and $1,367 for a couple; the resource limit was $16,800 for an individual and $28,133 for a couple. As a result, an individual with a monthly income of $1,500 and assets totaling $25,000 would lose his Medicaid benefits when he turned 65 because he was over the income and resource limits. While his income and resource had no significant increase, he has suffered a significant loss of benefit. Governor Hochul recently expanded coverage for older New Yorkers and disabled adults by increasing the income limits to match the income limits of MAGI Medicaid recipients under the Affordable Care Act, which takes effect this year. As a result of this expansion, the same individual with a monthly income of $1,500 and savings of $25,000 would not lose his benefits once he turned 65.  Starting January 1, 2023, the monthly income limit for a single individual is $1,563 (a significant increase from $934), and for a couple, $2,106 (from $1,367 in 2022). The 2023 resource limit for an individual is $28,133 (up from $16,800 in 2022), and for a couple, $37,902 (up from $28,133 in 2022). For those already receiving Medicaid benefits and utilizing pooled income trusts to protect their excess income, they may continue with their current spend-down plan until Recertification. The increased income limits will apply upon the Medicaid recipients’ renewal. Those Medicaid recipients who prefer not to await rebudgeting upon Recertification may request a rebudgeting of income with the local Department of Social Services or, in New York City, Human Resources Administration. It is important to note that this expansion not only protects those who are currently receiving Medicaid benefits but also allows low-income New Yorkers who have been unable to qualify for non-MAGI Medicaid benefits in the past due to the strict income and resource limits to apply now and qualify for the benefits they need. If you or your loved ones have questions about how these recent significant changes may impact you, please feel free to contact me with any questions and to discuss your options.

January 20, 2023

Labor and Employment

The FTC Has Issued a Proposed Rule Making Non-Competes Unlawful

On January 5th, the FTC issued a proposed rule prohibiting businesses from entering into or maintaining non-compete agreements with workers (employees or independent contractors). While non-disclosure agreements and non-solicitation (of customer and employee) agreements are generally, permitted under the proposed rule, the FTC intends to take a functional approach to enforcement. So, even restrictions that are not denominated as non-competes but effectively restrict an employee’s ability to seek or accept employment will be prohibited. Significantly, the new rule would require employers to rescind existing non-competes and actively inform workers that they are no longer in effect. The only exception contained in the proposed rule is for persons selling a business or their entire interest in a business or persons owning at least 25% of a business as to which all or substantially all of the assets are being sold. The FTC has solicited comments on the proposed rule – which may be filed through March 10th, 2023. Please reach out to me or my colleagues at Offit Kurman regarding questions about the proposed rule or any other employment matter.

January 19, 2023

Labor and Employment

Federal Trade Commission Proposes Rule Banning Non-compete Agreements Between Employers and Workers

As I mentioned in a 2022 post, the Federal Trade Commission (FTC) has been considering a rule banning non-competes for a while now; President Biden has publicly voiced his support for the ban. The current proposal is based on the FTC’s belief that non-competes violate anti-competition laws. The rule would supersede all state, local, and federal laws on this subject. The rule has a sweeping definition of a non-compete: “a contractual term … that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment.” The rule outlaws other provisions which are not labeled “non-competes,” too: if an agreement not to solicit the employer’s customers or not to disclose the employer’s information functions as a non-compete, it is illegal. The FTC rule also intends to forbid employee promises such as repayment of the employer’s training costs if the employee worked for less than a certain period of time, where the repayment is not “reasonably related” to the employer’s actual training costs. The proposed rule would become final 60 days after it’s published in the Federal Register. Employers would have 180 days after publication to comply. The rule states that employers would have until that time to rescind any existing non-competes (including those applicable to ex-employees). This rule would upend centuries of state common law. Many of my clients have agreements that would disappear or change drastically. Drafting agreements to protect business and confidential information would become a whole different game. If you are in Delaware and would like to attend an in-person roundtable at which I’ll speak about this topic, please reply to this email, and I will send you an invitation. If you can’t attend, I am planning to record it; contact me for a copy of my remarks.

January 18, 2023

One Minute of Overtime

Professional 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 (or, in some cases, a sufficient hourly rate) and their primary duty is the performance of work requiring advanced knowledge (predominantly intellectual in character) and which includes work requiring the consistent exercise of discretion and judgment where the advanced knowledge is in a field of science or learning and the advanced knowledge is customarily acquired by a prolonged course of specialized intellectual instruction.

January 18, 2023

Litigation

The Virginia Consumer Data Protection Act: Is your Business Ready?

Following California’s lead, Virginia became the second state to enact a data privacy statute.  VA Senate Bill 1392.  The Virginia Consumer Data Protection Act (VCDPA) went into effect on January 1, 2023.  Here’s what you need to know. Personal Consumer Data Rights Each individual Virginia resident may exercise the following data privacy rights: Confirmation: The right to confirm whether or not an entity or individual is processing your personal information and to access such personal data; Correction: The right to correct inaccuracies in your consumer personal data, taking into account the nature of the personal data and the purposes of the processing of your consumer personal data; Deletion: The right to delete personal data provided by or obtained about you; Copies: The right to obtain a copy of your consumer personal data that you previously provided to a Data Processor in a portable and readily usable format; and Opt-out: The right to opt out of any processing of personal data for (i) targeted advertising, (ii) the sale of personal data, or (iii) profiling in furtherance of decisions that produce legal or similarly significant effects concerning you. Who is Subject to the VCDPA? Controllers: a person or entity that determines the purpose and means of processing personal data Processors: a person or entity that processes personal data on behalf of a controller Data Controller Obligations: Limitations: Must limit collection of personal data to that which is adequate, relevant and reasonably necessary; Disclosure: Cannot collect personal data for purposes inconsistent with the disclosed purposes for which data is collected; Data Security: Must establish and maintain reasonable data security practices Anti-Discrimination: Prohibited from discriminating against consumers in processing data, including a consumer’s exercise of rights under the VDCPA Consent: Obtain consumer consent before processing sensitive data Privacy Policy: must be reasonably accessibly and inform consumers of their rights, among other requirements Online Submission: must establish a system for consumers to submit data rights requests. Appeals: consumers have the right to appeal decisions regarding consumer data rights requests if action is not taken in response to a request. Controllers need to establish a system to determine appeals. How is the VCDPA Enforced? Exclusive enforcement by the Attorney General of Virginia Enforcement actions authorized; damages of up to $7,500.00 per violation No private right of action. Individuals and entities cannot sue under the VCDPA. Exceptions and Exemptions A controller or processor is not subject to the VDCPA unless itControls or processes personal data of at least 100,000 Virginia residents; or Controls or processes personal data of at least 25,000 Virginia residents and derives over 50 percent of gross revenue from the sale of personal. Financial institutions regulated by the Gramm Leach Bliley Act are exempt. These are just a few of the requirements of the VDCPA, which could change as Virginia begins its 2023 legislative season.  If you or your organization may be subject to the VCDPA, reach out to Anders Sleight | Offit Kurman today to discuss your obligations and compliance management.

January 16, 2023

Healthcare

Compliance Issues for Consulting Fees, Honoraria, Medical Directorships, and Other Types of Remuneration

Doctors need to be very careful about accepting consulting fees, honoraria, and other compensation and awards. Physicians need to know the source of the remuneration and why the fees and other benefits are being offered. Any payments or compensation that are paid in order to entice the doctor to refer patients to the source of the payments (such as a pharmaceutical company), may result in criminal charges that the doctor violated the federal Anti-Kickback Statute (AKS) or other anti-referral laws. The consequences for violations of the AKS and other anti-referral laws can be quite severe. In addition to being required to return the compensation or awards, the physician may be subject to fines. His/her medical license can be in jeopardy. Criminal charges could be filed which could result in imprisonment. Our skilled healthcare compliance lawyers review the following questions and concerns with physicians. What is the Anti-Kickback Statute? What are the statutory provisions of the AKS? What types of payments and awards may lead to AKS violations? What safe harbors are available for the AKS? Do you have any examples of AKS actions against physicians who wrongfully accept medical compensation or benefits? What laws other than the federal AKS regulate the acceptance of compensation or benefits? What is the Anti-Kickback Statute? The AKS was enacted to ensure that patient care is prioritized over the financial concerns of physicians and the entities the doctors work with – for services and products billed to federal healthcare programs. The law was also enacted to ensure fair competition among healthcare providers and companies. According to the US Office of Inspector General, there are four things physicians should know about the What transactions are illegal. The AKS makes it illegal to “knowingly and willfully offer, pay, solicit or receive anything of value to induce or reward for referrals of Federal health care program business.” While it may be OK in some businesses to have referral arrangements, referrals for federal healthcare programs such as Medicare and Medicaid are generally illegal unless a “safe harbor” applies. The AKS applies to both the physician who receives the compensation and the entity that provides the compensation. Illegal compensation (kickbacks) include the following among other types of compensation: Cash Gifts Vacations “Sham” consulting fees “Sham” medical directorships Bribes Rebates Sham essentially means that the payments are for services that aren’t offered or for payments that are above the fair market value of those services. The penalties for violating the AKS. The AKS is a criminal statute. A violation of the AKS is a felony. If convicted, a physician or an entity that offered the compensation can be imprisoned for up to 10 years and ordered to pay up to $100,000 (or both) for each violation. In addition, the US Department of Justice may file a False Claim Act claim (the FCA is a civil statute) demanding repayment of funds received from the government based on the illegal referral arrangement. In addition, the offender may be penalized up to three times the amount of money the government lost – plus $11,000 for each improper claim. The doctor may be precluded from submitting any future claims to the federal healthcare programs (for a period of time), such as Medicare and Medicaid, covered by the AKS. A civil complaint may also be brought through the Civil Monetary Penalties Law (CMPL). A physician may also be subject to disciplinary action by the state medical boards which could result in the loss of the physician’s license to practice medicine. The types of programs covered by the AKS. The AKS generally applies to federal healthcare programs. Another commonly used federal healthcare program, in addition to Medicare and Medicaid, is TRICARE – the medical program for military members and their families.  CHAMPVA is another commonly used federal healthcare program. What safe harbors can be used so that the compensation is likely to be considered legal? The AKS does have safe harbors that do cover many types of referral arrangements. While you do not have to have a safe harbor arrangement, if you do – then the safe harbor can help protect you a physician from AKS legal actions. For example, there are AKS safe harbors for certain employment arrangements and for the leasing of office space or equipment – provided very specific conditions are met. Our skilled healthcare compliance lawyers understand when you may be able to use a safe harbor and the requirements to meet the safe harbor conditions. Other exceptions may apply which our healthcare lawyers will explain. What are the statutory provisions of the AKS? The US Department of Justice (DOJ) states that The Anti-Kickback Act of 1986 is codified in 42 U.S. Code § 1320a–7b. The prosecution must show the following conditions apply in order to pursue an AKS claim: The prohibited conduct. The Act prohibits attempted as well as completed “kickbacks.” Kickbacks include “any money, fees, commission, credit, gift, gratuity, thing of value, or compensation of any kind. The act also provides that the “inclusion of kickback amounts in contract prices is prohibited conduct in itself.” The purpose of kickback. The government must show that the “purpose of the kickback was for improperly obtaining or rewarding favorable treatment. It is intended to embrace the full range of government contracting. Prior to 1986, the “kickback” was required to be for the inducement or acknowledgment of a subcontract.” Covered class of “kickback” recipients. The AKS prohibits “kickbacks” to prime contractors, prime contractor employees, subcontractors, and subcontractor employees. Physicians are generally part of this covered class. The type of contract. The Act defines kickbacks to include payments under any government contract. Prior to this legislation, the statutes’ applicability was limited to negotiated contracts. A key part of an AKS prosecution is that the government must show that the defendant/physician “knowingly and willfully engaged in the prohibited conduct for the imposition of criminal sanctions.” OIG ADVISORY OPINION REGARDING POSSIBLE AKS VIOLATIONS. PART ONE. A pharmaceutical company sought an advisory opinion to determine if payment for travel, lodging, and other costs are an inducement that violates the federal Anti-Kickback Statute. What types of payments and awards may lead to AKS violations? Some of the many entities that have been involved with providing kickbacks or illegal compensation in return for the expectation a doctor will refer patients are – hospitals, nursing homes, pharmaceutical companies, medical device manufacturers, dialysis centers, diagnostic centers, and other healthcare companies. Illegal incentives include: Cash payments Paying doctors consulting fees or large salaries to serve as medical directors or consultants – where the doctors don’t do any work or very little work of any value or merit. Offering the physicians the opportunity to gain a financial interest in an ambulatory surgical center, joint ventures, or other investments – especially if the financial opportunities are based on the value of the referrals. Providing office space, support staff, and other benefits at below-market value Paying bonuses and salaries based on the volume of referrals Buying medical practices for prices above market value Paying kickbacks to pharmacies and doctors to get the pharmacies and doctors to use a specific pharmaceutical drug Expensive vacations and dinners The AKS can even apply to marketing and sales representatives and patients. What safe harbors are available for the AKS? A physician or other entity requesting payment from Medicare or any other federal healthcare program may be in violation of the AKS: unless there is a safe harbor, when pays for any of the purchase. Covered payments include ordering, or leasing of any service, good, or facility paid by the government – provided the request for payment is based on the improper remuneration. For example, the space rental safe harbor allows a provider to rent space to a potential referral source.  Hospitals frequently lease space to independent physicians, pharmacies, or testing laboratories. Other safe harbors include: Bona fide employment Personal services contracts Discounts Copay and deductible waiver Other safe harbors Generally, the safe harbor arrangements must be in writing, be valid for at least one year, consistent with the fair market value, not tied into the amount of any referrals, and other specific requirements. Our healthcare lawyers will explain whether a safe harbor may be available and the very specific requirements for meeting the requirements. THE NEW STARK AND AKS LAWS Physicians and medical practices should review their MSO and referral arrangements to help comply with the new Stark Law and AKS changes. DO YOU KNOW THE KEY DIFFERENCES BETWEEN THE 4 AMBULATORY SAFE-HARBORS TO THE FEDERAL ANTI-KICKBACK STATUTE (AKS)? There are four types of ambulatory safe harbors in the federal Anti-Kickback Statute. We explain the key differences between the ambulatory safe harbors to the federal anti-kickback statute (AKS) Do you have any examples of AKS actions against physicians who wrongfully accept medical compensation or benefits? A few examples of AKS violations that have also resulted in False Claims Act actions according to the US DOJ included the following: Arriva Medical LLC and its parent, Alere Inc., a mail-order diabetic testing supply company settled a False Claims Act claim based on allegations that Arriva paid “kickbacks to Medicare beneficiaries by providing them ‘free’ or ‘no cost’ diabetic testing glucometers and by routinely waiving or not making reasonable efforts to collect their copayments for glucometers and diabetic testing supplies.” David McCollum and related laboratories and clinics paid $140 million and another $9 million civil consent judgment for paying unlawful kickbacks to providers “to include their referrals of urine drug tests.” Athenahealth Inc., an electronic health records technology vendor paid $18.25 million to settle allegations “it invited customers and prospective customers to lavish all-expense-paid sporting, entertainment, and recreational events to generate sales of its EHR product.” Other matters relating to kickback violations involved psychiatric hospitals and a substance abuse treatment facility (Oglethorpe Inc.), home health care agencies (BAYADA), hospitals (Akron General Health System, Texas Heart Hospital of the Southwest LLP, and Prime Healthcare Services), pharmaceutical companies (Biogen Inc.), diagnostic testing (Alliance Family of Companies LLC) and medical devices (Merit Medical Systems Inc). What laws other than the federal AKS regulate the acceptance of compensation or benefits? California has its own AKS statute. California, Welfare and Institutions Code; Kickbacks, Bribes or Rebates, Cal. Welf. & Inst. Code § 14107.2. Most other states also have some type of AKS statute. Any type of compensation to induce doctors to make referrals to the health companies that provide the compensation may violate the Anti-Kickback Statute – if the doctor or health company submits bills for payment to a federal healthcare program such as Medicare or Medicaid. Before you accept any payments, vacations, consulting fees, or other forms of remuneration that are based on referring patients, you should speak with an experienced healthcare lawyer. The compensation may lead to civil and criminal actions that could cost you much more than the amount of the compensation. Physicians, other health providers, and medical companies should contact Cohen Healthcare Law Group, PC to discuss the laws that govern providing any form of compensation in return for patient referrals. Our experienced healthcare attorneys advise physicians and medical companies about the federal and state Anti-Kickback Statutes. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.

January 15, 2023

Family Law

What is Dissipation and How Does the Court Handle It?

Under Maryland Law, and in most jurisdictions, dissipation is the expenditure of marital assets for the principal purpose of reducing the funds available for equitable distribution. It usually occurs when one spouse uses marital property for their own benefit for a purpose unrelated to the marriage at a time when the marriage is undergoing an "irreconcilable breakdown."' The Courts generally do not find dissipation when marital funds are used to pay attorneys' fees. Usually, dissipation is found when one party uses marital funds for things like: a prostitute, gifts for a paramour, or extravagance far more than what would be normal family expenses. The burden of proof in most jurisdictions, both expenditures themselves, as well as the persuasion that the funds were used in a manner that deprived the other spouse in such a way that the court may make that determination, lies with the party making the allegation of dissipation. Generally, the court has great discretion in making that determination.

January 13, 2023

Family Law

My Spouse is an Alcoholic. How Will This Impact My Custody Case?

The goal is to keep the children safe while still maintaining a relationship with their alcoholic parent.  Ideally, both parents and their attorneys are on the same page with implementing safety precautions for the sake of the children.  These may include the alcoholic parent enrolling into a sobriety program and maintaining a treatment plan for sobriety through therapy, support groups, etc.  Subscribing to a live-time breathalyzer like Soberlink to ensure they are sober while the children are in their care is another helpful tool.  Some parents have interlock devices on their vehicles to avoid driving while intoxicated.  The age of the child(ren) is also a factor.  As children get older, they can call 911 should they need help, but younger children are at more risk with an alcoholic parent because they can’t simply call for help. If the alcoholic is in denial, things get more complex, and you will need to strategize with your lawyer how to best protect the child(ren). The goal is not to punish the alcoholic but to keep the children physically and emotionally safe.

January 11, 2023

Healthcare

MSOs For Nursing Businesses

More and more, nurses are starting their own businesses. Some of these ventures include IV hydration, Ketamine infusion, holistic care, health coaching, medical spas, chronic care, concierge nurses, research, and other nursing professions. These ventures are exciting opportunities for nurses to own their own businesses while providing care to those in need. There are many laws that regulate medical businesses in California and other states. For starters, California has a corporate practice of medicine law that regulates who can own and run a medical practice in California. The law is designed to ensure that the health and safety of the patient is prioritized over the financial profits of those who own the medical practice. There are anti-referral laws, including Stark Law and the Anti-Kickback Statute, that regulate when and how referrals between the medical practice and other medical entities can be handled. Many referral arrangements are illegal. There are also privacy laws such as the Health Insurance Portability Accountability Act of 1996 (HIPAA) that govern the handling of electronic patient information. Our healthcare compliance lawyers understand the laws that apply to nursing practices. We’ll review your compliance requirements and the ways you can help show that you are in compliance with these various laws. One common way to address compliance issues is to use a Managed Service Organization (MSO). An MSO is an entity that handles the administrative side of your nursing business while the owners and staff handle the clinical/medical side of the business. In this article, we’ll discuss how an MSO can help your practice meet its compliance requirements. We’ll discuss: What are some of the different types of nursing businesses? What is the corporate practice of medicine doctrine? What is a Managed Service Organization (MSO)? How can an MSO allow your Nurse practice to coexist with your business needs? Can an MSO help a Nurse practice with the obligations of Stark Law and Anti-Kickback Statutes? What are some of the different types of nursing businesses? According to Nursepreneurs, new nursing businesses include: IV hydration clinics. This business provides medical care by licensed, professional concierge nurses. The treatments involve the intravenous injection of vitamin additives to help the client get the nutrients he/she needs. IV hydration may be used for arthritis, depression, dehydration-related illnesses, migraines, skin rejuvenation, and for other conditions. Concierge nurses. These nurses provide in-home care and custom nursing care for clients who generally pay for the nurse’s services out of their own pockets. Medical spas. There are specific California laws for the operation of medical spas.  Some of the procedures include chemical peels, dermal fillers, botulinum toxins, and the use of laser, light, and radiofrequency devices. According to Selfemployed.com, some nursing businesses include: Nurse health coaches. These nurses teach clients how to care for themselves – such as through a holistic approach that reviews the client’s medical, work, environmental, nutrition, and mental health. Registered nurses may find this profession attractive. Fitness nurses. This nurse can work for corporations, spas, heart care rehabilitation, patients recovering from surgery, professional athletes, and others. A fitness nurse helps the client develop a program that includes exercise, wellness, and the prevention of diseases. Specialized care nurses. These nurses provide telehealth nursing, childbirth training, hospice care for end-of-life patients, in-home senior care, and other services. Nurses who teach continuing education classes What is the corporate practice of medicine doctrine? Most states have corporate practice of medicine (CPOM) laws. The purpose of these laws is to ensure that the medical side of a healthcare practice is distinct from the business side of the healthcare practice. California’s corporate practice of medicine laws include the following: Business and Professions Code, Section 2052 states that practicing medicine without a valid license is unlawful. Business and Professions Code Section 2400 states that: “Corporations and other artificial entities shall have no professional rights, privileges, or powers.” Generally, corporations cannot hire physicians because corporations don’t have a license to practice medicine. Corporations don’t have the education, training, and skills needed to obtain a medical license. Corporations are not able to develop a professional relationship of trust with patients. In short, California does not want business to run medical practices. California does permit licensed medical practitioners to incorporate and operate professional medical corporations (PMCs). The law that permits PMCs is the Moscone-Knox Professional Corporation Act. A PMC must generally be formed for a specific type of medical service, not a range of services. Registered nurses can be employed by a PMC. Registered nurses can also own up to 49% of the PMC (by themselves or with others) but at least 51% of the PMC must be owned by a physician or physicians licensed in California. In addition to the corporate practice of medicine laws, California has laws that regulate the supervision of healthcare providers by physicians – including recent laws regarding when supervision of nurses is not required. In California, “Because of the CPM doctrine, a non-physician in California cannot own a medical clinic or hire physicians. However, they can own a management entity which can serve as an administrative and non-medical, management services organization (“MSO”) for the clinic or medical practice, which is frequently organized as a professional medical corporation.” EXCEPTIONS AND ALTERNATIVES TO THE CORPORATE PRACTICE OF MEDICINE California has a strict corporate practice of medicine law. Physicians should consider a professional medical corporation. Doctors need to be aware of Stark Law and the AKS. An MSO may be advisable. CORPORATE PRACTICE OF MEDICINE, PSYCHOLOGY, PHYSICAL THERAPY RISKS TO INVESTORS In today’s video, we discuss how investors can profit from businesses that deliver clinical services—and where they get themselves in trouble. CORPORATE PRACTICE OF MEDICINE: MEDICAL MANAGEMENT ORGANIZATIONS AND PROFESSIONAL MEDICAL CORPORATION–WHO CONTROLS WHAT? The Corporate Practice of Medicine (CPM) doctrine continues to befuddle, beleaguer, and bewilder healthcare companies seeking to venture with physicians and non-physician entrepreneurs. What is a Managed Service Organization (MSO)? A Managed Service Organization is a business that nursing businesses can hire to do the administrative work of the nursing business while the nurses (and doctors) focus on treating the patients. An MSO can also be used to help address the issues raised by Stark Law and the Anti-Kickback Statute (AKS). These laws may apply when a nursing business works with drug companies, lab companies, hospitals, or other medical businesses. The laws address the concern that the nursing practice should refer patients to these other businesses – based on the best needs of the patient and not the profits of the nursing business. Stark Law prohibits referrals if the nursing practitioners have a financial interest in the other medical company (the one that is accepting referrals from the nursing business). The AKS prohibits medical companies from providing compensation or remuneration to the nursing practice in order to receive referrals from the nursing practice. Stark Law and the AKS generally apply when the physician or the related entities submit bills to federal healthcare programs such as Medicare and Medicaid. Our skilled healthcare lawyers will explain when and how an MSO can be used to address corporate practice of medicine concerns, Stark Law, and the AKS. We’ll help negotiate and draft the agreements between the nursing practice and the MSO. How can an MSO allow your Nurse practice to coexist with your business needs? In order to meet any Stark Law exceptions or AKS safe harbors, the financial relationship between the nursing practice and the MSO must comply with very specific requirements. For example, most relationships must be in writing, must be based on fair market value, cannot be based on the value or quantity of the referrals, and the relationship must last for at least one year. MSOs may also be useful to address other healthcare compliance laws such as the Health Insurance Portability and Accountability Act (HIPAA). Some of the Stark Law exceptions and AKS safe harbors and MSO may be able to satisfy include: Personal service arrangements Fair market value exceptions Office space and equipment leases Physician payments for items and services Compliance training Group practice arrangements with a hospital Incidental payments for medical staff Non-monetary compensation Risk-sharing arrangements The isolated transaction exception which can help raise capital for these new services. Some of the tasks that an MSO can do for a nursing practice include: Education and training.  For example. An MSO can educate the owners and staff of the nursing practice about how to implement HIPAA, Occupational Safety and Health Administration regulations, the federal and state Family and Medical Leave Acts, and the Clinical Laboratory Improvement Amendments of 1988. Billing, coding, and collection. An MSO can do the bookkeeping and billing for the nursing practice. Rental leases for office space and equipment for the nursing practice. An MSO can help a nursing practice lease (or purchase) the office space and the equipment the nursing practice needs to run their practice. The credentials. The doctors need to decide what credentials their employees must have. An MSO can review whether the applicants have those credentials. The MSO can also help with the purchase of technology for the nursing practice, the administrative staff, quality assurance, disaster management, and other tasks. STARK LAW EXCEPTIONS THAT MIGHT APPLY TO YOU In today’s video, we discuss some exceptions to Stark Law, which deals with improper referrals by physicians and healthcare practitioners. Our law firm advises nurse practices about their federal and state compliance issues. These issues include the corporate practice of medicine, Stark Law, the Anti-Kickback Statute, HIPAA, and other laws. Our team will explain if an MSO is a good option for your nursing practice. We’ll negotiate and write the contracts necessary to implement the MSO. Nurses and nursing practices that own or run their own enterprises should contact Cohen Healthcare Law Group, PC to discuss their federal and state legal compliance requirements. Our experienced healthcare attorneys advise medical providers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.

January 8, 2023

Healthcare

MSOs For Oncology Practitioners

There are many different types of oncology practices and many different healthcare workers who work in each type of practice. Some of these practices include medical oncologists, radiation oncologists, surgical oncologists, geriatric oncologists, gynecological oncologists, hematologist-oncologists, and other types of oncologists. Ancillary oncology healthcare professionals include healthcare workers who provide acupuncture, aromatherapy, art therapy, guided meditation and mindfulness, massage therapy, reiki therapy, and yoga. Any type of oncology practice needs to be aware of several key legal issues starting with their state’s laws on the corporate practice of medicine. In California, for example, the corporate practice of medicine laws prohibits corporations from practicing medicine or hiring a physician to provide medical services. This rule was created to prevent the commercialization of the practice of medicine and prevent corporations from interfering with a physician’s medical judgment. In this article, we’ll explain: What is the corporate practice of medicine doctrine? What is a Managed Service Organization (MSO)? How can an MSO allow your oncology practice to coexist with your business needs? Can an MSO help an oncology practice with the obligations of Stark Law and Anti-Kickback Statutes? What is the corporate practice of medicine doctrine? Most states have corporate practice of medicine laws. These laws aim to separate the medical side of a healthcare practice from the business side so that the health and welfare of the patient are prioritized over the financial concerns of the business. California has its own corporate practice of medicine laws: Business and Professions Code, Section 2052 states that practicing medicine without a valid license is unlawful. Business and Professions Code Section 2400 states that: “Corporations and other artificial entities shall have no professional rights, privileges, or powers.” Together, these laws: “Are interpreted as a ban on corporations practicing medicine by employing physicians because corporations and other artificial entities are not granted licenses and therefore have no professional rights, privileges, and powers. Courts, California Attorneys General, and the legislature have since determined how this statute would apply to the practice of medicine. According to the Medical Board of California, limitations on the rights, privileges, and powers of corporate and other artificial entities are intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment.” The corporate practice of medicine laws were enacted because corporations: Cannot have the training, education, and personal characteristics that are needed to receive a medical license. Are unable to develop the relationship of trust and confidence that is necessary for the relationship between a professional and patient or client Must not employ physicians because the physician’s acts would then be attributable to the unlicensed employer. An exception to the corporate practice of medicine laws, that applies to oncology practices as well as other practices, is the Moscone-Knox Act – which is the California law that grants physicians the right to incorporate and operate professional medical corporations (PMCs). These approved PMCs can charge patients for their services and hire or supervise what medical services are rendered – provided the PMC is at least 51% owned by a physician or physicians licensed in California. Up to 49% of the PC may be owned by registered nurses, physician assistants, and other healthcare licensees. A non-physician cannot own any shares of a PC. In California, “the prohibition against corporate practice of medicine imposes strict rules on contractual arrangements between physicians and non-physicians.” “Neither non-physicians nor lay corporations (corporations that are not medical professional corporations) nor limited liability companies (LLC) may contract to provide medical services. Nor may they contract with a physician to have the physician provide medical services, either as an employee or an independent contractor. (Business & Professions Code §§2052 and 2400.)” “Because of the CPM doctrine, non-physician in California cannot own a medical clinic or hire physicians. However, they can own a management entity which can serve as an administrative and non-medical, management services organization (“MSO”) for the clinic or medical practice, which is frequently organized as a professional medical corporation.” EXCEPTIONS AND ALTERNATIVES TO THE CORPORATE PRACTICE OF MEDICINE California has a strict corporate practice of medicine law. Physicians should consider a professional medical corporation. Doctors need to be aware of Stark Law and the AKS. An MSO may be advisable. CORPORATE PRACTICE OF MEDICINE: MEDICAL MANAGEMENT ORGANIZATIONS AND PROFESSIONAL MEDICAL CORPORATION–WHO CONTROLS WHAT? The Corporate Practice of Medicine (CPM) doctrine continues to befuddle, beleaguer, and bewilder healthcare companies seeking to venture with physicians and non-physician entrepreneurs. What is a Managed Service Organization (MSO)? MSOs are a way to separate the medical/clinical side of the practice from the administrative side. An MSO helps clarify that the business side of the practice is not engaged in the practice of medicine. The MSO is also useful to avoid complaints about fee-splitting and referrals which may violate Stark Law and the Antik-Kickback statute. With an MSO the oncology doctor and his/her team of medical care providers can focus on the cancer patient while the MSO pays the bills and performs other administrative tasks. Our experienced healthcare lawyers understand when to consider an MSO, how to implement an MSO, and what an MSO can and cannot do. The initial step in developing an MSO is preparing the contract between the PMC and the MSO. MSOs can benefit an oncology practice in the following ways: Help with numerous administrative tasks including: Patient scheduling Leasing space and equipment to the Professional Medical Corporation (PMC) Paying the bills and bookkeeping Submitting bills for physician and medical provider services Staffing – providing the MSO’s involvement is administrative and not medical. For example, an MSO cannot hire and terminate healthcare providers but the MSO can set up the payment arrangements An MSO can make it easier to establish offices in various locations within a state Help a non-non MD establish a health and wellness practice Help navigate the use of digital healthcare including telemedicine MSOs cannot generally provide any medical services. There are restrictions on the type of marketing of the practice the MSO can promote. The PMC must compensate the MSO at fair market value. The MSO cannot be compensated based on the amount of business the MSO brings into the PMC. An MSO cannot guide what services are available. Any referrals by the MSO to the PMC may violate Stark Law, the AKS, or the California Health & Safety Code, Section 445 (Medical Referral Services). Our experienced healthcare lawyers will explain how an MSO helps address these restrictions. How can an MSO allow your oncology practice to coexist with your business needs? Our skilled healthcare compliance lawyers will review the various legal compliance issues an oncology practitioner needs to review – such as the Corporate Practice of Medicine, Stark Law, AKS, HIPAA, and other federal and state compliance laws. We’ll explain whether an MSO is right for the oncology practice and any related services. For example, generally, an MSO can help Tom, who owns an oncology practice, in the following ways: Education and training. The MSO can explain the compliance issues to everyone involved in the practice, so the medical workers keep electronic patient records secure. The MSO can explain what steps the doctors, licensed healthcare providers, and non-licensed healthcare providers need to meet the requirements of various federal and state laws including: HIPAA (Health Insurance Portability and Accountability Act). Occupational Safety and Health Administration regulations The federal and state Family and Medical Leave Acts Clinical Laboratory Improvement Amendments of 1988 Billing, coding, and collection. The MSO can work with Medicare, Medicaid, other federal and state insurance agencies, and private insurers. Today’s MSO should have software that is readily compliant with all relevant federal and state privacy laws, referral laws (such as Stark Law, the AKS, and California’s referral laws), billing laws, and other related laws. Obtaining office space and equipment for the oncology practice. The MSO can help Tom select the best location for his practice and negotiate office rentals or purchases.  The MSO can also help Tom obtain the medical equipment he needs for all the services he wants to provide. Credentials. The MSO can help review the licensing and certification requirements of each employee and contractor in the practice. Tom or another MD in the oncology practice must be the person who chooses which healthcare professionals to hire. Technology.  The MSO can help choose the best technology (hardware, software, and other computer services) for Tom’s oncology practice and provide technical support – provided the HIPAA and any other regulations are met. The MSO cannot make any medical decisions about which technology to use. Many other services. The MSO can help with quality assurance, disaster management, and other services provided the MSO doesn’t engage in the practice of medicine. In addition, if Tom, an oncologist wants to help cancer patients with more than just diagnosis and the available treatments, an MSO can help Tom with those goals too. For example, Tom may want to help his patients feel better and hopeful while the patients are going through their treatments. He may want to bring in dieticians, nutritionists, people who make people look better when the patients lose their hair, and other healthcare providers. An MSO for these new healthcare services can provide many of the same services an MSO can provide for the oncology practice. We’ll also explain when and how the main oncology practice and the ancillary practice can work together – including addressing the relevant federal and state anti-referral laws. We’ll explain what the MSO can and cannot do and when separate MSOs may be required. Can an MSO help an oncology practice with the obligations of Stark Law and Anti-Kickback Statutes? As discussed, Tom wants to have working relationships other medical service providers. He wants to know what steps he can take to address the anti-referral provisions of Stark Law, the Anti-Kickback Statute, and California’s anti-referral laws. He knows that referrals are a common way of getting business and helping other boundaries – but he wants to make sure he’s in compliance with the anti-referral laws. Generally, Stark is a federal law the prohibits physicians from receiving from and referring to “designated health services” (DHS) that submit Medicare and Medicaid bills – where the doctor (or an immediate family member) has a “financial relationship” in the DHS. Our healthcare compliance lawyers will review whether the referral arrangements are legal or illegal. If they might be considered illegal, we’ll discuss how an MSO might be used to meet an exception to the Stark Law that may make the referral arrangements legal. Stark Law exceptions may be legal if an MSO performs the following tasks: Personal service arrangements Fair market value exceptions Office space and equipment leases Physician payments for items and services Compliance training Group practice arrangements with a hospital Incidental payments for medical staff Non-monetary compensation Risk-sharing arrangements The isolated transaction exception which can help raise capital for these new services. We’ll explain whether an exception applies and the very precise requirements for meeting each type of exception. Our healthcare lawyers will also explain if there are any “safe harbor” arrangements that can be used by the MSO to address concerns the business relationships may violate the Anti-Kickback Statute. The AKS generally makes referrals that provide payments or compensation in return for referring business to Tom’s practice STARK LAW EXCEPTIONS THAT MIGHT APPLY TO YOU In today’s video, we discuss some exceptions to Stark Law, which deals with improper referrals by physicians and healthcare practitioners. Our law firm helps oncology practices and other medical practices comply with federal and state healthcare compliance practices. We review corporate medical compliance, anti-referral law compliance, HIPAA compliance, and many other privacy and consumer protection laws. We’ll explain if an MSO is a good option for your practice. If an MSO is a wise choice, we’ll help negotiate the terms of the MSO for your practice including setting forth the terms, obligations, and available remedies. We’ll also help with any ancillary oncology practices. Oncology practices and healthcare practices that work with oncology practices should contact Cohen Healthcare Law Group, PC to discuss their federal and state legal compliance requirements. Our experienced healthcare attorneys advise physicians, nurses, acupuncture providers, and other healthcare providers about healthcare compliance laws and regulations. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.

January 1, 2023

Bankruptcy

Foreign Proceedings: When is Chapter 15 Out of Reach for Foreign Liquidators?

This article provides an update on trends in the case law recognition of foreign insolvency proceedings under Bankruptcy law. Global Cord Blood Corp. (the “Company”) is a company registered in the Cayman Islands with headquarters in Hong Kong and primary operations in the People’s Republic of China (“PRC”). The Company is in the business of collecting and storing umbilical cord blood for the stem cells. Two major shareholders had differences about a transaction the Company entered.  One of these shareholders challenged the transaction, which purported to transfer millions of new shares of stock and over $600 million in corporate funds to two other companies. The objecting shareholder commenced a proceeding before the Grand Court of the Cayman Islands to challenge the transaction. The Grand Court appointed Joint Provisional Liquidators (“JPLs”) as fiduciaries to investigate and, if appropriate, seek to recover misappropriated funds. Among other things, the petition to the Grand Court asked that the Company be wound up pursuant to section 92(e) of the Companies Act if winding up was  “just and equitable.” The order appointing the JPLs authorized them to take any action as may be necessary to obtain recognition of their appointment in the PRC and in any other relevant jurisdiction and to make applications to the courts of such jurisdictions for that purpose or for the purpose of obtaining information to assist them in their investigations. While the proceeding before the Grand Court was pending, the shareholder that petitioned the Cayman Island Court filed an application with the United States District Court for the Southern District of Texas seeking judicial assistance pursuant to 28 U.S.C. § 1782.[1] The Texas Court granted the application, but the transferee of the Company’s funds and shares moved to vacate the order. Shortly thereafter, the JPLs petitioned the Bankruptcy Court for the Southern District of New York for recognition of the proceeding pending in the Grand Court of the Cayman Islands as a foreign main proceeding. The JPLs also sought related relief, including authorization to conduct discovery in the United States in connection with assertedly fraudulent misconduct, including what the JPLs assert was a possible misappropriation of more than $600 million in corporate funds. Judge Jones answered this question in a 2022 opinion in the In this case of Global Blood Cord Corporation; Judge Jones of the Southern District of New York denied recognition of the foreign proceeding under Chapter 15 [2] because he found that the proceeding in the Cayman Islands at that stage fell outside the range of types of proceedings that had been found eligible for assistance under Chapter 15 and outside the meaning of applicable provisions of the Bankruptcy Code. In re Glob. Cord Blood Corp., No. 22-11347 (DSJ), 2022 WL 17478530, at *1 (Bankr. S.D.N.Y. Dec. 5, 2022). At the time of the petition, the JPLs had not taken any steps to wind up the company and no steps related to classification, adjustment, or resolution of specific debts. Accordingly, Judge Jones held that the Cayman Islands proceeding lacked two essential characteristics of a “foreign proceeding” pursuant to Section 101(23). It was not a collective proceeding, and it was not a proceeding for fixing or adjusting debts or creditors rights. The JPLs were not seeking to identify creditors, quantify and classify Global Cord Blood Corp.’s debts, or determine a scheme of distribution to creditors on account of those debts. The creditor body had not even received formal notice of the Cayman Proceeding, and no claim submission or review process was in place. Considering the nature of their appointment, i.e., the investigation of officers and directors conduct in connection with the transaction subject to attack, it appears that pursuing 1782 discovery would be the only avenue for the JPLs at this stage of the Cayman Island Proceedings. For more information about seeking recognition of foreign insolvency proceedings in the U.S. or seeking to collect evidence in the U.S., please contact a member of Offit Kurman’s Creditors’ Rights, Reorganization and Bankruptcy Group. For further information, please feel free to reach out to Albena Petrakov. ___________________________________________ [1] Section 1782 provides foreign parties litigating outside of the U.S. unique access to U.S.-style discovery. Under 28 U.S.C. section 1782 (section 1782), an “interested person” may request that a district court authorize discovery in the United States “for use in” foreign litigation even without the foreign tribunal’s knowledge or involvement. A district court has power to order section 1782 discovery where “(1) the person from whom discovery is sought reside[s] (or [is] found) in the district of the district court to which the application is made, (2) the discovery [is] for use in a proceeding before a foreign tribunal, and (3) the application [is] made by a foreign or international tribunal or ‘any interested person.”’ [2]  Chapter 15, enacted pursuant to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), incorporates the Model Law on Cross-Border Insolvency promulgated by the United Nations Commission on International Trade Law (UNCITRAL). 11 U.S.C. § 1501 (a) sets forth the objectives of chapter 15, i.e., cooperation between U.S. courts/authorities and those of foreign countries involved in cross-border insolvency cases, greater legal certainty for trade and investment, fair and efficient administration of cross-border insolvencies that protects the interests of all creditors, and other interested entities, including the debtor; protection and maximization of the value of the debtor’s assets and (5) facilitation of the rescue of financially troubled businesses, thereby protecting investment and preserving employment.

December 30, 2022

Labor and Employment

HUD Clarifies Dual Employment Limits

In Mortgagee Letter 2022-22, dated December 15, 2022, FHA Commissioner Julia Gordon has clarified FHA’s position on what dual employment and compensation is permitted for employees of FHA-approved lenders. The Mortgagee Letter outlines changes to the Handbook, which will now permit loan originators to have dual employment, including working as a real estate sales agent. Prior to the Mortgagee Letter, the Handbook provided that the Mortgagee’s employees had to work exclusively for the lender unless the company determined that the outside employment did not create conflict of interest. Further, employees were prohibited from having multiple roles or multiple sources of compensation from a single FHA transaction. Most FHA lenders concluded that this prohibited their loan officers from acting as an agent or receiving compensation as a real estate agent in an FHA transaction. Further, there was ambiguity as to whether the loan originator could act as a sales agent when even originating a conventional Fannie/Freddie loan. The prior Handbook, 4060.1, REV-2, Section 2-9(G), had clearly prohibited other outside employment in the mortgage lending, real estate or a related field. The Mortgagee Letter now provides that “[p]articipants that have a direct impact on the mortgage approval decision” are prohibited from having multiple roles or sources of compensation. These participants include underwriters, appraisers, inspectors and engineers. Participants that do not have a direct impact on the mortgage approval process are now permitted to have multiple roles and sources of compensation for services actually performed. Of course, a sales agent also acting as a loan originator will need to be properly licensed or registered to perform both activities. Further, the lender should ensure that dual employment is permitted by state law. Finally, any such employment must be treated consistent with RESPA requirements. The Mortgagee Letter is effective immediately for case numbers assigned after the date of the Mortgagee Letter. For more information about this topic, contact Wayne Watkinson.

December 27, 2022

Family Law

New D.C. Law Will Remove Divorce Waiting Requirements

The Council of the District of Columbia has passed a law that will eliminate the requirement that spouses live separate and apart without cohabitation before filing for divorce. On December 3, 2023, the Council passed D.C. Act 25-322, which deletes from the D.C. Code the requirement that spouses either be separated for six months if the separation is mutual and voluntary or for one year if the separation is not mutual and voluntary. The bill is awaiting congressional review and should be approved in early 2024. After the bill is approved by Congress, parties seeking divorce need only establish that they no longer wish to remain married. The new legislation is significant because it will allow parties to seek court intervention immediately rather than having to wait six months or a year before filing for divorce. D.C. Act 25-322 is also significant because it adds a new requirement that the Court take into consideration the history of physical, emotional, and financial abuse by one party against the other in awarding alimony and distributing marital property and debt. Finally, the legislation adds a provision to the D.C. Code that gives the court discretion to award exclusive use of the family home or any other dwelling unit available for use as a residence while the divorce case is pending. A copy of D.C. Act 25-322 is available online at B25-0042 – Grounds for Divorce, Legal Separation, and Annulment Amendment Act of 2023 (dccouncil.gov).

December 18, 2022

Family Law

Kim Kardashian and Kanye West settlement: is $200,000 a Month in Child Support Reasonable?

Child support is an obligation established by the Court to ensure that both parents, regardless of their relationship with each other, financially support their children to the best of their ability. Alternatively, as did Kim and Ye, the parties are permitted to agree to a number so long as it comports with the State specific guidelines. Depending on the State in which the children reside, the Court will use State specific guidelines and formulas to calculate a parent’s basic child support obligation. While the guidelines provide a presumptive amount of child support for parties with a combined net income that falls within the guidelines, most States provide exceptions for parents with extreme income (high or low). High net worth child support cases are more complicated and involve consideration of all expenses of the child(ren) in light of the parents’ extreme income (i.e., high incomes exceeding the guidelines). In New Jersey, the parties’ respective incomes are subject to a formulaic calculation and consideration of the factors set forth in N.J.S.A. 2A:34-23(a). The New Jersey Rules of Court Appendix IX-A, Considerations in the Use of Child Support Guidelines defines extreme parental income as a combined after-tax income in excess of $187,200 annually. In such circumstances, the Court is obligated to supplement the basic child support amount after consideration of the aforementioned factors. In New York, the parties’ respective incomes are subject to a formulaic calculation pursuant to the Child Support Standards Act [DRL §240, FCA §413] to determine the presumptively correct child support obligation. The C.S.S.A. applies up to the applicable combined income cap. Effective March 1, 2022, the income cap for child support calculations was set at a combined income of $163,000 (not adjusted for Federal or State income taxes). This income cap is subject to an adjustment every two years. In New York, the Court may choose to apply the formulaic percentage to the income in excess of the cap, or it may choose to specifically supplement support based upon the above-capped income pursuant to the enumerated factors. While there is no way to know whether or not the agreed-upon monthly child support in the Kardashian matter is reasonable, in New Jersey, the Court would engage in a fact-intensive analysis of the children’s needs and lifestyle to supplement the basic child support. That is, “where the parties have the financial wherewithal to provide for their children, the children are entitled to the benefit of financial advantages available to them.” Isaacson v. Isaacson, 348 N.J.Super. 560, 579 (App.Div. 2008). In fact, “children are entitled to not only bare necessities, but a supporting parent has the obligation to share with his children the benefit of his financial achievement.” Id. at 580. However, as the Court held in Isaacson, “no child, no matter how wealthy the parents, needs to be provided [with] more than three ponies.” Id. at 584. Calculating and determining a child support obligation can be a complicated process with long-term consequences, affecting your finances for years to come. Our firm is well-equipped to handle all divorce and family law matters, no matter your circumstances. You can contact Emily to discuss your child support matter in New York or New Jersey by email at Emily.Ingall@offitkurman.com or by phone at 929-476-0046.

December 8, 2022

Healthcare

Are Per-Patient Bonuses Legal?

In today’s video, we talk about the thorny question of whether bonusing staff on a per-patient business is legal or legally risky. I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare industry clients just like you navigate healthcare and wellness legal and regulatory landscape so you can launch, or scale, your business or product or service. Let’s say you have a medical office that does plastic surgery, a medical spa, a telemedicine practice, something else.  You’re the physician and the Registered Nurse or Physician Assistant whom you supervise is super-personable and popular.  Because of this mid-level, patients come back again and again.  So, they come back for an IV infusion, or Botox, an injectable or laser treatment, hair removal, or some other aesthetic medicine or anti-aging, functional medicine, integrative medicine, or some other therapeutic procedure or approach. In fact, let’s just say it’s the RN or the PA that is responsible for 90% of your business.  They are the magnet. They are expert at marketing and customer relations.  You want to retain them long-term, obviously.  Can you bonus them based on patient retention and return? Could you pay them as an independent contractor, with variable compensation depending on revenues? The answer is a two-letter word: No, you shouldn’t bonus clinical staff based on the financial story of their financial success with patients.  Anti-kickback laws prohibit any compensation that varies based on the VALUE or VOLUME of patients.  So, compensation that varies with the dollar revenue figure or number of patients returning, would violate these laws. And an employment arrangement is much less risky than an independent contractor arrangement for two reasons: first, bona fide employment is a safe harbor to anti-kickback law; and second, supervision implies control, and control means the person should be classified as an employee. Now, if you would want to bonus your staff person, what can you do? You can reward performance and productivity.  The clearest way to do this, is to establish KPI, Key Performance Indicators.  The KPI should not be tied to the value or volume of patients.  So, for example, let’s take patient satisfaction. It’s a measure of performance. The more satisfied the patients the more likely they will return; you’ll have more revenue – but you are measuring satisfaction and not the number of patient visits or how many dollars they generated. You can apply this same approach to your marketing staff, and we’ve got blog posts on that.  Set objective KPI that reward actual performance, not revenue results. And last, ensure that compensation as always reflects fair market value for the services rendered.  Fair market value should be set according to performance—in other words, effort—not results. As one formulation of the black-letter law, in California, Business & Professions Code Section 650(b) requires that the bonus be: “for services other than the referral of patients” and “commensurate with the value of the services furnished.” Thanks for watching. If you still have questions, click on the link below, cohenhealthcarelaw.com/contact, to send us a message or book an appointment. Here’s to the success of your healthcare venture, we look forward to speaking with you soon. Testimonials

December 8, 2022

Executive Playbook: How to Find Time as a Business Owner

On this month’s episode of the Executive Playbook, Mike Cammarata and Russell Berger discuss one of the most persistent challenges facing business owners and professionals: finding time.  As the floodgates have opened and we are all stretched to our limits, it is important to have a plan, to have sufficient support, and to be thoughtful about managing where you spend your time.  Mike and Russell share their personal strategies for dealing with the fact that there are only 24 hours in a day.  Listen in to learn more.

December 7, 2022

International

The New European Supply Chain Regulations

In February 2022, the European Commission issued a new proposed Directive to all 26 EU countries setting forth a new legal framework to govern human rights and environmental concerns and issues in vertical supply chains. The European Parliament and the Council of the EU must still adopt this proposed Directive. Adoption is expected within about one year (2023), and each EU member state will have two years to implement the final Directive into its national legislation. The Directive will set minimum but not maximum standards for national legislation. Some countries in the EU have already passed initial supply chain legislation. Most so far are of limited scope, but a new extensive German statute becomes effective January 1, 2023. While the German law will have to be modified to meet the standards outlined in the final EU Directive, we can assume the remaining EU countries will pass legislation similar to the German law since it is already so extensive and detailed. Attached is a comparison of the various legislative schemes as currently established. Since compliance with the existing German statute, if applicable, and the future EU Directive criteria, when implemented, will be so demanding, we have prepared an initial guide to serve as a starting point for companies that expect to comply. This guide should provide a reasonable basis for developing a compliance program. Click HERE to read the guide. For more information, contact Steven Thal.

December 1, 2022

Healthcare

What Physicians Need to Know about Physician Contracts with Hospitals

Both physicians and hospitals need to be aware of the numerous legal compliance issues when these health providers enter into contractual relationships. Violations of the federal laws and state laws along with violations of local medical board requirements can result in fines, suspension of a medical license, and other consequences. Our experienced healthcare compliance lawyers review hospital/physician contracts before you sign the contracts. Often, we negotiate changes to help you meet your compliance obligations. We also advise physicians when problems arise for noncompliance with the laws, regulations, and the contract itself. Some of the many issues we review are the following: Stark Law and AKS compliance Stark Law and the Anti-Kickback Statute (AKS) are both laws that are designed to ensure physicians place the healthcare of their patients first – before any financial benefits for the physician are considered. Stark Law and the AKS apply when either entity seeks reimbursement from government agencies such as Medicare and Medicaid for health services. Experienced healthcare lawyers review when these laws apply, the consequences for non-compliance, and what exceptions or safe harbors can be included in the contract to help show the healthcare providers are in compliance. Stark Law is a civil law that regulates referrals by a physician to a designated healthcare facility – when the physician or a family member has a financial interest in the designated healthcare facility. A common example is the referral of patients to diagnostic centers or ambulatory service centers (ASCs). The AKS is a criminal law that regulates referrals to any entity in which the physician has received some type of financial incentive (cash, vacations, a directorship, or other benefits) in order to entice the physician to make the referral to that entity. A common example is when physicians recommend certain medications based on the pharmaceutical that made those medications paying the physician to recommend the pharmaceutical company’s drugs. Other compliance laws include the False Claims Act and the Civil Monetary Penalties Law. The False Claims Act governs the fraudulent/dishonest submission of medical bills to governmental agencies. The Civil Monetary Penalties Law regulates forms of abuse involving Medicare and Medicaid. Other compliance laws include the state corporate practice of medicine laws. The corporate practice of medicine laws are designed to separate the practice of medicine from the profit of medicine. Corporations that are subject to the corporate practice of medicine laws cannot hire physicians to provide medical services and the corporations cannot provide the medical services themselves. Can I Own a Medical Practice if I am Not a Doctor? An Overview of Corporate Practice of Medicine We spoke about a series of webinars talking about a trending topic in the legal aspects of corporate medicine, Management Services Organization. And with much anticipation, we bring you – Part II […] The Stark exception and AKS safe harbor exceptions for personal service arrangements Stark Law generally provides a specific exception for physician agreements with hospitals if the following conditions are met: In general, the remuneration from the hospital for physician services must be: In writing, signed, and must identify the services to be provided. The contract should cover all the services to be provided. The “aggregate services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement.” The contract must be for at least one year. The compensation should be set in advance, should not exceed fair market value, and except for physician incentive plans (defined in another part of the statute), and should not take into account the volume or value of any referrals or other business generated between the parties. The services should not involve “the counseling or promotion or a business arrangement or other activity that violates any State or Federal law.” Should comply with other requirements necessary to protect the program or patients from abuse.’ The Physician incentive plan exception. This provision of Stark Law provides that a physician incentive plant that “takes into account directly or indirectly the volume or value of any referrals or other business generated between the parties,” should meet the following conditions: “No specific payment is made directly or indirectly under the plan to a physician or a physician group as an inducement to reduce or limit medically necessary services provided with respect to a specific individual enrolled with the entity.” Many other conditions A ‘physician incentive plan’ means any compensation arrangement between an entity and a physician or physician group that may directly or indirectly have the effect of reducing or limiting services provided with respect to individuals enrolled with the entity [hospital]. Other requirements and conditions may also apply that experienced healthcare lawyers will review. Physician recruitment inducements Generally, Stark Law also provides for exceptions for hospital remuneration “to a physician to induce the physician to relocate to the geographic area served by the hospital in order to be a member of the medical staff of the hospital, if— “The physician is not required to refer patients to the hospital, The amount of the remuneration under the arrangement is not determined in a manner that takes into account (directly or indirectly) the volume or value of any referrals by the referring physician, and The arrangement meets such other requirements as the Secretary may impose by regulation as needed to protect against program or patient abuse.” The AKS has a similar (but not identical) safe harbor for certain hospital/physician arrangements. Stark exceptions and AKS safe harbors which can benefit doctors if properly created and documented require that the contracts with the physicians be in writing – if the physician is an independent contractor. It is also good practice to also have written contracts between physicians and hospitals when physicians are employees of a hospital. We’ll explain what Stark, AKS, and practical legal issues apply to contractor and employment contracts. The terms of the physician-hospital contract In addition to addressing Stark and AKS issues, written contracts provide numerous other benefits such as determining the length of employment, when a physician can and cannot be discharged, how much the physician will receive in wages and other benefits, the duties of the physician, the duties of the hospital, the right to patient contact information, and many other issues. The contract should establish: Who the parties to the contract are. The contract should clarify whether the party to the contract is a hospital or a medical practice/physician group. Stark Law does require that the contract clearly identify when a practice group is providing the medical services and the relationship between the group and the individual doctors. Other types of contracts we handle include physician contracts with community mental health centers, long-term care facilities, school-based health centers, and hospices. The status of the physicians. The contract should specify whether the doctor who is performing the medical services is an employee or a contractor. The contract is an indicator of status but not conclusive. Generally, the IRS standards for determining employment status will control. A key factor is whether the hospital controls the hours and work performance of the physician. What services will be provided? The physician/hospital contract should set forth the clinical services, administrative functions, and other services the doctor will provide. The contract should identify when and how these services can be assigned to others. The times of service. The contract should set forth whether the physician works full-time, part-time, or when the doctor is needed. The ability to change these schedules should also be written in the contract. Where the services will be provided. The contract should clarify where the physician will work – especially when the hospital has multiple locations. Independent judgment. The contract should make clear that the physician’s primary duty is to the patient and that the physician should be able to use his/her independent professional judgment. This provision may help address any corporate practice of medicine issues. Intellectual property. Experienced healthcare contract lawyers help physicians keep the rights to any intellectual property the physicians generate during the scope of their employment. Credentials. Generally, the hospital will want the doctor to keep current with their medical requirements including board certifications, insurability, DEA registration, and the ability to participate in government programs such as Medicare. The doctor’s credentials may also include any restrictions on the right to practice, Stark or AKS complaints, or any other items on their medical record which might limit their ability to provide the requested medical services. Work performance. The contract should require that the physician and hospital comply with the appropriate rules and regulations, the proper standards of care, and payer requirements. The contract should also set forth the physician’s obligations to participate in various medical staff duties, comply with any investigations, and act on behalf of the patient first. Medical records. The hospital should require that doctors comply with the appropriate medical requirements – including compliance with the Healthcare Insurance Portability and Accountability Act (HIPAA). Doctors will be required to complete any open medical records when the contract ends in a timely manner. Other medical requirements may apply including compliance with the Social Security Act. The contract should indicate who owns the medical records. Supplies and staff. The duties of the hospital. The contract should provide terms for what equipment, supplies, and staff the doctor can use – along with what office and surgical space can be used. For example, the safe harbor provisions of the AKS provide that leasing agreements must be in writing and signed by the hospital and the physician. The lease must specify that premises and equipment that are included. “If access to the space or equipment is for periodic intervals, a schedule for the use and exact lease payments must be set out in advance.” The lease must be at least for one year. The lease payment obligations must be written in advance and based on fair market value. Compensation. Doctors deserve to be paid for their medical services. The compensation should, to comply with various federal laws and rules, be based on the fair market value of the services given the doctor’s qualification and experience. The compensation generally should not be based on the volume of the practice or the amount of any referrals. The contract should also document any signing bonuses, relocation expenses, loan repayments, and any other benefits the doctor is receiving. Hospitals, physician groups, and individual physicians should understand the Stark and AKS requirements. For example, generally, doctors cannot be paid by a hospital or physician group practice based on “ancillary services” such as lab tests that the doctor orders. There are many other considerations that affect the compensation part of the contract – such as tax considerations. Additional benefits. In addition to a salary, financial payments, and other cash considerations; the contract should include such benefits as insurance benefits, pensions and other retirement benefits, vacation time, and sick time. Another common benefit point is that Continuing Medical Education (CME) benefits (payment for the courses). Referrals. Stark Law may allow some referrals provided the specific terms of any exceptions are met. Any discussion of the referral arrangements should be in writing. Other physician/hospital contract issues include patient collections issues, liability insurance coverage, worker’s compensation payments, the contract term, indemnification issues, how the contract can be terminated, confidentiality requirements, and post-termination requirements. Generally, California does not authorize covenants not to compete (noncompetition clauses). Other states may authorize noncompetition clauses. The contract may also have a non-solicitation clause to ensure that the physician can’t solicit patients – though there are laws that ensure that the best interest of the patient comes first that we’ll explain. There are many other provisions we’ll review such as how disputes are resolved and other issues. Physician service agreements with hospitals must comply with Stark Law and the AKS. There are specific rules for physician service agreements in both statutes. Doctors should review with skilled healthcare lawyers the full range of legal, practical, and medical issues that each contract should address. Physicians should contact Cohen Healthcare Law Group, PC before signing any employment contracts with a hospital or a physician’s group. Our experienced healthcare attorneys advise physicians about their federal and state healthcare compliance requirements. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.

December 1, 2022

Bankruptcy

Wrinkles in Bankruptcy Court’s Jurisdiction: Assumption of Executory Contracts in A Foreign Company’s Chapter 11

Foreign companies frequently choose to reorganize in the United States under Chapter 11 of the Bankruptcy Code. Examples include various airlines that were forced into bankruptcy because of the pandemic’s effects on the industry, including LATAM Airlines, AeroMexico, and Scandinavian Airlines. Among the often-cited reasons why the U.S. is the jurisdiction of choice for foreign companies are: 1) it has the most well-developed law of any insolvency regime in the world for helping troubled companies restructure their affairs; 2) it allows management control of the restructuring; 3) it provides for approval of prepackaged workouts; 4) U.S. bankruptcy courts can handle corporate groups, and 5) debtors can confirm a reorganization plan with less than unanimous stakeholder support. Another essential feature of the U.S. insolvency regime is the debtor’s right to assume or reject executory contracts and leases with binding effect on the counterparties. The U.S. bankruptcy court’s jurisdictional reach in connection with a motion to assume a contract between a foreign debtor and its foreign counterparty was questioned in early 2022 in the Alto Maipo case. The Court agreed with the counterparty that it did not have personal jurisdiction to approve the assumption of an agreement between Alto Maipo and its counterparty. Alto Maipo SpA and Alto Maipo Delaware L.L.C. sought bankruptcy protection in Delaware to carry out a prepackaged restructuring plan. Alto Maipo SpA is a Chilean company involved in developing, constructing, and operating a run-of-river hydroelectric project in Chile. The counterparty that challenged the Court’s authority to approve the assumption of its executory contract with Alto Maipo SpA, Minera Los Pelambres (“Minera”), is a Chilean company that runs a copper mine. It had a long-term power-purchase agreement with Alto Maipo signed back in 2013. Alto Maipo claimed that the power-purchase agreement was central to the debtors’ reorganization efforts and was the core of their business plan because Minera was obligated to purchase power from the debtors’ hydroelectric project on favorable, predictable, and long-standing terms. The agreement was governed by Chilean law, was written in Spanish, and required Chilean arbitration. Minera had no presence or business activities in the U.S. and was not subject to general or special jurisdiction in the U.S. In response to the Debtor’s Motion for Entry of an Order Pursuant to Sections 363 and 365 of the Bankruptcy Code Approving Assumption of Agreement with Minera (the “Motion”), Minera asserted that the Court could not grant the requested relief without finding and exercising in personam jurisdiction because Alto Maipo had defaulted. The Debtors’ position, supported by the senior secured lender, equity owner of Alto Maipo, the parties to a restructuring support agreement and the unsecured creditor’s committee, was that the requested relief was in rem because (i) the Court had statutory in rem jurisdiction over all property of the Debtors’ estates, wherever located, under 28 U.S.C. § 1334(e)(1), and (ii) separately, it had statutory authority to determine questions of contract-breach under Section 365(b) of the Bankruptcy Code. Minera challenged the position that the Court had the power to address contract breach questions under Section 365(b) exclusively as in rem matter or concerning anyone, including a non-debtor that is not subject to personal jurisdiction in the United States. The Court agreed with Minera because the Debtors sought findings that, among other things, there were no existing defaults and, thus, no required cure under the agreement to comply with Section 365(b). Therefore, the action was not traditionally in rem. “Making the requesting findings regarding default and cure required a determination of the party’s contractual rights and responsibilities in the agreement and would constitute an in personam action. A breach of contract action is a common example of an in personam action and, effectively, the findings sought here would require the same determination whether a breach of contract occurred and the appropriate remedy, if any.” April 26, 2022, Hr’g Tr. at 59, E.C.F. No. 548. This ruling raises the question of whether a bankruptcy court should make an individualized determination on personal jurisdiction for each contract that a foreign debtor is trying to assume and a counterparty raises breach of contract issues, and if it would deter foreign debtor filings in the U.S. For further information, please feel free to reach out to Albena Petrakov.

November 30, 2022

Labor and Employment

New Federal Contractor Rule

The question of who’s an employee with protections and benefits under labor law and who is a contractor not covered by those laws has always been important for many reasons. New trends favoring more flexibility to classify workers as contractors have highlighted the issue even more. The Department of Labor has now proposed a new rule designed to favor the classification of workers as employees. Secretary of Labor Marty Walsh said, “misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.” There is a comment period (make your organization’s position known); then, the DOL reviews them and prepares to finalize the rule. The new proposal from the Department of Labor would change the current test to determine worker status, which had been greatly simplified and had the effect of permitting more workers to be classified as contractors. This proposed rule uses a six-factor test to determine the working relationship. The test is consistent with the analysis federal courts use in making the decision. The proposed DOL test considers the nature and degree of the worker’s control over the work; the worker’s opportunity for profit or loss; investments by the worker and the employer; the degree of permanence of the working relationship; the extent to which the work performed is an integral part of the employer’s business; and the degree of skill and initiative exhibited by the worker. What are the problems if workers are falsely designated as independent contractors? Businesses have to face multiple types of potential claims, including failure to pay employment taxes, failure to provide unemployment and workers’ compensation insurance, Obamacare issues, and the biggie: failure to pay overtime and provide breaks if the worker would have been entitled to overtime and break laws.  So this is worth some serious consideration.

November 10, 2022

Labor and Employment

Delaware Non-Compete Update

As you may know, I provide employment law advice to our teams here at Offit Kurman, assisting our clients in company sales. In that capacity, and because I also draft restrictive covenants for businesses, I try to update my business clients on the latest news regarding non-competition clauses. The Delaware Court of Chancery recently gave us some good information regarding limits that buyers may place on sellers in terms of competing with the sold business. Many deals across the United States are written in accordance with Delaware law, so it has a wide-ranging impact. Recently the Court of Chancery clarified that non-competes which try to prevent a seller from competing with a buyer’s pre-existing business are not enforceable. Kodiak Building Partners, LLC v. Adams, C.A. No. 2022-0311 (Del. Ch. Oct. 6, 2022). Such promises are only enforceable to the extent that they protect the buyer’s interest in the assets or company purchased in the deal. Even more interesting because of its larger potential effect on employment agreement non-competes is the Court’s holding that a seller’s promise in a purchase agreement not to challenge the reasonableness of a restrictive covenant means nothing. It is up to the Court to determine the reasonableness of the terms according to Delaware law. If your company wants a binding agreement, it is worthless to have a party promise that the non-compete is reasonable. I’d argue that this decision extends to employment agreement non-competes because the Court made the ruling based on public policy, which applies to all areas of law. Consult a Delaware lawyer with up-to-date non-compete knowledge to draft your sales and employment agreements. The Court continues to move in favor of allowing free competition.

November 4, 2022

Construction

Pennsylvania State Design Professional Boards Adopt New Regulations and Rules for Digital Signatures & Seals

On October 20, 2022, The Pennsylvania State Architects Board, The State Registration Board for Professional Engineers, Land Surveyors and Geologists, and The State Board of Landscape Architects adopted new rules and regulations governing signatures and seals.  The final form of regulation approved by the Independent Regulatory Review Commission (IRRC) provides new guidelines and requirements applicable to licensed design professionals in Pennsylvania. Generally, state law governs the use and application of a design professional’s seal on work performed by the licensed design professional or under immediate supervision or responsible control.  The changes to the regulations are to protect public health, safety, and welfare.  The overall intent of the new regulation of Digital Signatures and Seals is to assure the public, including clients and authorities having jurisdiction, that work product (drawings, plans, and specifications) were prepared by or under the personal supervision of the Registered Architect, Professional Engineer, Professional Land Surveyor, or the Registered Landscape Architect. The regulations generally require mechanisms to allow the design professional, client, or code official to detect modifications by requiring standards for electronic authentication.  The desire is to decrease the incidence of forged or fraudulent sealed documents by unlicensed design professionals.  Because the regulation of licensed design professionals and the use of seals on technical drawings, plans, and specifications is regulated at the State rather than federal level Architects, Engineers, Professional Land Surveyors and Landscape Architects must carefully consult each State design professional Board in order to ensure compliance with the existing licensing laws and regulations. Impact for Architects, Engineers, Land Surveyors and Landscape Architects The new regulations in Pennsylvania generally recognize three separate mechanisms for affixing a signature and seal to final or complete technical drawings, plans, or specifications issued to a client or to a governmental agency for final review. The three methods are as follows: Physical placement of a seal and handwritten signature in permanent ink; Digital placement of a seal and a handwritten signature in permanent ink; and Digital placement of a seal and a digital signature; The second and third categories related to digital sealing with a manual signature and digital sealing with an electronic seal will now require some additional verification and authentication requirements.  To this end, if the licensed design professional is affixing a digital seal or digital seal and signature, the electronic document is required to have an electronic authentication process attached to the digital document.  Thus, under Pennsylvania law, if any data within the digital technical drawing, plan, or specification, which has a digital signature or seal affixed, the digital signature or seal will be invalidated and voided. The practical implication for licensed design professionals practicing in Pennsylvania is that if an Architect, Engineer, Professional Land Surveyor, or Registered Landscape Architect is affixing a digital signature or seal, they will be required to utilize software that will void or invalidate the signature or seal if an alteration is made to a technical drawing, plan, or specification. I have worked on the digital signature and seal regulations in connection with the various Licensure Boards since the summer of 2013.  The regulations will take effect upon publication in the Pennsylvania Bulletin, which is anticipated to occur within the next month.  If you have questions regarding the new Digital Signature and Seal regulations, please reach out at 717-980-3140 or apotter@offitkurman.com.

November 2, 2022

Labor and Employment

New York City’s Pay Transparency Law Takes Effect November 1, 2022

In what is becoming a growing trend among local and state legislative bodies – New York City passed the Pay Transparency Law (the “Law”), otherwise known as Local Law 32 of 2022. The Law was passed in an effort to improve wage transparency, balance the bargaining power between applicants and employers and narrow the wage gap. The Law requires covered employers to list minimum and maximum potential salary amounts in job postings. What You Need to Know: Effective Date:  The Law, which amended the NYC Human Rights Law and was enacted on January 15, 2022, was initially scheduled to take effect on May 15, 2022 – but was later amended to take effect on November 1, 2022. Required Information/Disclosures:  Employers must state the minimum and maximum salary range for the advertised position that the employer, “in good faith,” believes at the time of the posting it would pay for the position. Open-ended salary ranges (i.e., “a maximum of $50,000” or “15/hour and up”) are not acceptable. Salary ranges should be posted for each opportunity where advertisements cover multiple positions. “Salary” refers to base annual or hourly wage. It does NOT include:  (a) health, life or other insurance, (b) paid or unpaid time off, sick or vacation days or employer-funded pension plans, (c) severance pay, (d) overtime, (e) commissions, tips, bonuses, stock or the value of employer-provided meals or lodging. Covered Employers:  All employers with four (4) or more employees or at least one domestic worker. Not all employees must work at the same location, as long as at least one employee works in NYC. Owners and individual employers count toward the four (4) employee minimum, as do independent contractors, part-time employees, paid interns and domestic workers. Temporary employment agencies are exempted from the Law. The Commission defines temporary agencies as businesses that recruit and hire their own employees and assign those employees to perform work at or perform services for other organizations or businesses. Covered Postings:  Any advertisement for a job, promotion or transfer opportunity for a job that would be performed in NYC. An “advertisement” is any written description of an available job, promotion or transfer opportunity –regardless of how disseminated. Importantly, the Law applies not only to public advertisements but also to any internally advertised job, promotion and transfer opportunities. And the Law applies equally to temporary and part-time positions as it does to “permanent” and full-time positions. Employers are not required to post for a position they seek to fill. Geographic Scope:  Positions that can or will be performed, in whole or in part, in New York City, whether from an office, in the field, or remotely from the employee’s home. Violations and Enforcement:  Violation of the Law is considered an unlawful discriminatory practice. The NYC Commission on Human Rights has the authority to enforce the Law. There will be no penalty for first-time violations if the employer corrects the violation within 30 days. However, an employer’s submission of proof that the violation was corrected “shall be deemed an admission of liability for all purposes.” Future violations will subject an employer to monetary damages and civil penalties of up to $250,000. We Can Help: Should you have any questions regarding NYC’s Pay Transparency Law or any other employment matter – please feel free to reach out to Offit Kurman’s Employment Group.

November 1, 2022

Family Law

Dividing Stocks in Divorce

If your spouse has stocks, they will need to be identified as marital or non-marital, valued and divided or offset with another marital asset. Public stock is simple to value.  Once a valuation date is determined, the answer lies in the market’s figures.  Assuming the stock is all marital, and the parties agree to divide it equally, I recommend the parties work with an accountant or representative from the financial institution to ensure the division is as equal as possible considering the cost basis, so one party is not left with a major tax liability. Restricted stock units (RSU) can be a bit trickier because there is no market price to look up.  RSUs are a common incentive for employees in private companies.  They are granted to employees to incentivize them to grow with the business.  RSUs do not have a value when they are granted; instead, they have a vesting schedule.  Once they vest, they have value.   The vesting schedule is important in your divorce and your jurisdiction.  For instance, if the RSUs were granted before the marriage and vested after the marriage, there is some marital component, and you may need an expert to trace the amount.  What comes up more often is when the RSUs are granted during the marriage but do not vest until after the marriage.  Some states consider the unvested RSUs marital, and some do not.  RSUs are also taxed, so that will need to be considered when dividing or negotiating RSUs. There are several ways to divide stocks in a divorce.  The spouse who has the stock may keep them in exchange for another marital asset or offsetting the marital estate somehow.  The parties may decide to divide the public stock.  The parties may agree to equally divide the net value of the stock if, as and when it vests.  Some parties agree to sell and divide the stock prior to divorcing for tax purposes.  There are many other ways to slice the stock pie, but the best option will vary in different divorce cases.  Bottom line is that stocks can become complex, and you need an attorney who knows to ask the right questions, gather the right documents, and reach out to a competent accountant when necessary.

October 31, 2022

Bankruptcy

Bankruptcy 101 for Mortgage Lenders

In the summer of 2022, First Guarantee Mortgage Company filed for bankruptcy in the District of Delaware. Mortgage market analysts forecast a string of mortgage companies to file for bankruptcy in the months or years ahead. Hence, this is an excellent time to remind mortgage lenders and those that might be impacted by their bankruptcy proceedings of the limitations that the Bankruptcy Code places on sales of consumer credit transactions and the cloud hanging over the mortgage lenders’ metaphorical heads after the decision denying confirmation of the Second Amended Joint Chapter 11 Plan of Ditech Holding Corporation and its Affiliated Debtors (the “Second Amended Plan”) In re Ditech Holding Corp., 606 B.R. 544 (S.D.N.Y. 2019). The vast majority of Chapter 11 cases involve early sales of all assets to a strategic or financial buyer free and clear of liens, encumbrances and interests under Section 363 of the Bankruptcy Code. With a 363 sale, a distressed company can expeditiously and effectively separate the debtor’s past troubles from its future success without going through the process of proposing a Chapter 11 plan and meeting all prerequisites to confirm a plan. The benefit for a potential buyer is that a 363 sale can “cleanse” the assets and eliminate or, at least, minimize successor liability claims. In the context of a mortgage lender bankruptcy, this benefit is somewhat limited. In 2005, Congress added Section 363(o) to the provisions governing asset sales outside of a Chapter 11 plan. Under that section, (a) if a person purchases (i) any interest in a consumer credit transaction that is subject to the Truth in Lending Act or (ii) any interest in a consumer credit contract (as defined in section 433.1 of title 16 of the Code of Federal Regulations (January 1, 2004), as amended from time to time), and (b) if that interest is purchased through a sale under section 363 of the Bankruptcy Code, then, notwithstanding the “free and clear” language in section 363(f), such person remains subject to all claims and defenses assertible by the consumer that is related to such consumer credit contracts and transactions to the same extent as such person would be subject to such claims and defenses had the person acquired the interest pursuant to a sale not under section 363. The reasoning behind the amendment is illustrated with a statement by Sen. Chuck Schumer (NY-D). We have a new problem with these predatory lenders . . . In recent months, several large subprime lenders have obtained orders from bankruptcy courts, providing for the sale of their loans or the servicing rights associated with them under section 363 of the bankruptcy code. Consumers who have attempted to challenge these loans or their servicing obligations based on violations of fair lending laws have been told by the purchasers of these loans they were sold free and clear of any consumer claims and defenses. The fact that innocent borrowers can be left in the lurch is flat-out wrong. 147 CONG. REC. 2018, at *2032 (March 8, 2001). Accordingly, the buyer of a mortgage lender business would inherit consumer claims and defenses to the same extent it would under applicable non-bankruptcy law. Then one may ask, “could a mortgage lender accomplish a free and clear sale through a full-blown confirmation process by incorporating the sale in the Chapter 11 plan?”  Judge Garrity said, “maybe” with some caveats when Ditech Holding Corp. and its affiliated debtors (“Ditech”) were pursuing such a sale. Ditech operated as an independent servicer and originator of mortgage loans and servicer of reverse mortgage loans. Accordingly, the bulk of the assets to be transferred were consumer credit transactions. Ditech offered a variety of residential mortgage loans to consumers for its own portfolio and for government-sponsored enterprises, government agencies, third-party securitization trusts, and other credit owners. Ditech was comprised of three primary segments: (i) forward mortgage originations through Ditech Financial LLC (“DFL”); (ii) forward mortgage servicing through DFL; and (iii) reverse mortgage servicing through Reverse Mortgage Solutions, Inc. The Consumer Creditors Committee appointed by the U.S. Trustee in the Ditech case objected to the confirmation of the Second Amended Plan because it did not comply with Section 363(o). Ditech countered that it was free to sell the consumer credit contracts free and clear of consumer claims and interests not expressly assumed by the buyers pursuant to Sections 1123(b)(4) and 1141(c) of the Bankruptcy Code. While the Court agreed that Section 1123 and Section 1141(c) provide an independent basis to accomplish free and clear sale, the plan did not meet the best interest test under Section 1129(a)(7). Judge Garrity held: To satisfy the best interest test, the Debtors must prove that the holders of Class 6 claims will “receive or retain property having a present value, as of the effective date of the plan, not less than the amount such holder would receive or retain if the debtor were liquidated under Chapter 7.” In re Drexel Burnham Lambert Grp., Inc., 138 B.R. at 761. It is undisputed that if the Debtors were liquidated under chapter 7, sections 363(f) and (o) would apply to a sale of the Consumer Creditor Agreements. The Court must apply those provisions in determining whether the Debtors have met their burden under section 1129(a)(7), notwithstanding that the Court has determined that sections 363(f) and (o) are not applicable to the Plan Sale Transactions, and nothing in the Code says otherwise. In a liquidation under Chapter 7, the liquidation analysis has to take into account the consumer claims because these claims: (i) fit the definition of “property,” (ii) have “value,” and (iii) although they are unliquidated, they are “neither speculative nor incapable of estimation.” Ditech’s liquidation analysis failed to do so. The takeaway is that mortgage lenders and buyers of mortgage lenders want to keep in mind that a free and clear sale might be attainable through a planned sale if the liquidation analysis factors in the limitations of Section 363(o). For further information, please feel free to reach out to Albena Petrakov.

October 31, 2022

Family Law

Can My Spouse Take My Business?

The law may differ slightly from jurisdiction to jurisdiction. Generally, businesses started during the marriage will be determined to be marital property to be divided upon divorce. If the business is a partnership or a corporation, ownership by title will be determined. Suppose a spouse owns 100% of the business because of the stock ownership or the partnership interest or because of other evidence of ownership. In that case, the Court will generally require that the business be valued, and then a determination will be made as to whether the spouse who does not have an interest in the business will receive a buyout or an offset from other assets. Business valuations are performed by experts. Often the parties will agree to use one business valuation expert as a neutral. However, in the spouses cannot agree on one valuation expert, there may be substantial variance in the opinions of the experts representing the interest of the parties. Those situations require the assistance of an attorney who has specific knowledge regarding business valuations and who has the ability to work with experts in the field. Often there is a determination of personal goodwill. In those cases, an expert may opine that the value of the business is, in whole or in part, attributable to the owner of the business. In that case, the personal goodwill will not be divided upon divorce. This determination can be hotly contested in a divorce situation. If the spouses each own an interest in a business, it is often partitioned in some way by a transfer of ownership between the spouses, with an offset for other assets or a buyout. When dealing with businesses that began prior to the marriage, the entire business is not necessarily marital. Once again, a business valuation may be hired to determine the value of the business at the time of the marriage and the current value of the business. The spouse who does not own an interest in the business may argue that the increase in value is marital and should be divided equitably or equally between the parties, depending upon the applicable statutes and case law.

October 28, 2022