President Trump Issues Executive Order Prohibiting “Divisive Concepts” in Federal Contractor Trainings

On September 22, 2020, President Trump issued the Executive Order on Combating Race and Sex Stereotyping (“EO”) establishing requirements aimed at “promoting unity in the Federal workforce,” by prohibiting workplace training on “divisive concepts,” including “race or sex stereotyping” and “race or sex scapegoating” as newly-defined in the EO. The EO is broadly applicable to executive departments and agencies, Uniformed Services, Federal contractors, and Federal grant recipients. The EO expands on a letter issued in early September by the Director of the Office of Management and Budget (“OMB”) that directed all agencies to begin to identify contracts or other agency spending on trainings that include “critical race theory,” “white privilege,” or “un-American propaganda,” in an effort to ensure “fair and equal treatment of all individuals in the United States.”

Following the EO, on September 28, 2020, OMB issued a Memorandum for the Heads of Executive Departments and Agencies (the “Memo”) with additional guidance aimed at assisting agencies in identifying diversity and inclusion trainings for agency employees that may be subject to the EO. The Memo suggests that agencies conduct keyword searches of training materials for specific terms, such as “intersectionality,” “systemic racism,” and “unconscious bias.” Although the Memo primarily explains the terms of the EO, it also provides additional insight concerning the breadth of agency trainings that may ultimately be considered to violate the terms of the EO, which are described below.

Although the EO is likely to be subject to legal challenge (as more fully discussed below), federal contractors, including subcontractors and vendors, could be subject to the compliance requirements outlined below as soon as November 21, 2020.

Prohibition on Teaching “Divisive Concepts” in Workplace Training

The EO prohibits inclusion of “divisive concepts” in U.S. Uniformed Services training and Federal agency or Government contractor workplace training. Federal grant funds are also prohibited from being used to promote such concepts.
“Divisive concepts” include the following list of concepts, as well as “any other form” of race or sex stereotyping or race or sex scapegoating (separately defined below):
1. one race or sex is inherently superior to another race or sex;
2. the United States is fundamentally racist or sexist;
3. an individual, by virtue of his or her race or sex, is inherently racist, sexist, or oppressive, whether consciously or unconsciously;
4. an individual should be discriminated against or receive adverse treatment solely or partly because of his or her race or sex;
5. members of one race or sex cannot and should not attempt to treat others without respect to race or sex;
6. an individual’s moral character is necessarily determined by his or her race or sex;
7. an individual, by virtue of his or her race or sex, bears responsibility for actions committed in the past by other members of the same race or sex;
8. any individual should feel discomfort, guilt, anguish, or any other form of psychological distress on account of his or her race or sex; or
9. meritocracy or traits such as a hard work ethic are racist or sexist, or were created by a particular race to oppress another race.
The EO also defines “race or sex stereotyping” and “race or sex scapegoating.”
1. “‘Race or sex stereotyping’ means ascribing character traits, values, moral and ethical codes, privileges, status, or beliefs to a race or sex, or to an individual because of his or her race or sex.”
2. “‘Race or sex scapegoating’ means assigning fault, blame, or bias to a race or sex, or to members of a race or sex because of their race or sex. It similarly encompasses any claim that, consciously or unconsciously, and by virtue of his or her race or sex, members of any race are inherently racist or are inherently inclined to oppress others, or that members of a sex are inherently sexist or inclined to oppress others.”

New Requirements for Federal Contractors and EO Implementation Timeline

If the EO is implemented on schedule, all Government contracts entered into 60 days after September 22, 2020 (November 21, 2020), with the limited exception for contracts with religious entities exempt from certain nondiscrimination requirements, must contain a prescribed clause that the contractor will not use any workplace training that includes divisive concepts. Unless a Department of Labor (“DOL”) exemption applies, contractors must also flow down and potentially enforce these new requirements for subcontractors and vendors. Contractors must conspicuously post, where it will be seen by employees and applicants for employment, a notice provided by the relevant agency contracting officer of the contractor’s commitments under this EO. Further, contractors must distribute this notice to each labor union or representative of workers with which the contractor has a collective bargaining or any other agreement.

Potential penalties for noncompliance include that the contract may be canceled, terminated, or suspended, in whole or in part. Further, if violations are found, the contractor may be subject to agency conciliation negotiations or administrative enforcement proceedings, or to suspension or debarment proceedings subject to agency discretion. The EO does not appear to be retroactive; however, agency reporting requirements discussed below for FY 2020 funds may implicate contracts currently in effect.

EO-Prescribed Agency Actions Relevant to Federal Contractors

The Office of Personnel Management (“OPM”) must review all diversity and inclusion training programs for agency employees prior to implementation. If a contractor provides training to agency employees that would include divisive concepts, the contractor would be subject to penalties under the EO, including debarment.
By November 21, 2020, each agency head must report to the Director of OMB a list of any respective grant recipients that may be required to certify that the recipient will not use federal grant funds to promote divisive concepts. By December 21, 2020, all agencies must report all FY 2020 spending on federal employee diversity and inclusion training programs, both conducted internally by the agency and by contractors. Agency reports must include aggregate spending totals and delineate awards to each individual contractor.
DOL’s Office of Federal Contract Compliance Programs (“OFCCP”) must establish a hotline and investigate complaints that a federal contractor is using training programs prohibited by the EO. Within 30 days of the EO (by October 22, 2020), the Director of OFCCP will publish a request for information seeking submissions of workplace diversity and inclusion training information and materials from federal contractors, federal subcontractors, and employees of federal contractors and subcontractors.

Potential Challenges

The EO represents an unprecedented effort to influence speech in the workplace and is likely to draw a number of challenges. In particular, the EO may conflict with federal or state requirements to provide trainings on the topics of race and sex discrimination. Further, the EO’s breadth as drafted—including the requirements for contractors and certain grant recipients to restrict the content of their trainings, send notices to labor unions, and post copies of the notice in conspicuous places for employees and applicants—also presents a number of constitutional concerns that may lead to challenges, especially once agencies begin applying its requirements to federal contractors. Contractors could view these requirements as extending beyond defining the contours of a spending program (which is generally constitutionally permissible) to coercing or restricting private speech, for example. Similarly, the requirements could be viewed as restricting or compelling corporate speech (as opposed to requiring or defining privately-subsidized government speech) in violation of the First Amendment. Apart from the EO’s effects on speech, the EO and agency actions implementing it may draw challenges based on the Administrative Procedure Act, the Federal Property and Administrative Services Act, and other statutes.

Considerations for Employers

The EO applies specifically to “training”, and not policies or other documents that employers may publish as part of diversity and inclusion programs. If the EO is fully implemented, its terms could trigger significant modifications to diversity and inclusion trainings, including how concepts such as unconscious bias and meritocracy are addressed. If it remains in effect, employers will want to begin gathering their various trainings together to prepare for a review of the language used and concepts covered to ensure compliance with the EO. For the most part, sophisticated trainings likely do not stray into the territory prohibited by the EO, but ambiguity in the language may cause difficult analysis. Employers need not discontinue specific training modules immediately, but should carefully monitor the progress of this EO toward implementation.

German court extends legal redress options for pharma companies in the drug pricing and reimbursement system

By Dr. Dr. Adem Koyuncu and Marie Ramm on September 28, 2020 Posted in EU Law and Regulatory, Food and Drug Law, Health Issues

On 10 September 2020, the German Federal Social Court (Bundessozialgericht – “BSG”) has issued an important decision with significant impact on the drug pricing and reimbursement system. It ruled that a pharmaceutical company can file a direct legal action against the early benefit assessment in the so-called AMNOG process. This was not possible so far. The decision therefore significantly broadens the legal redress possibilities of pharmaceutical companies under the German drug pricing and reimbursement regulation.

For drugs with new active substances, the pricing and reimbursement process has three steps: First, an early benefit assessment is performed by the Joint Federal Committee (Gemeinsamer Bundesausschuss – “GBA”) to assess the drug’s “additional benefit” against the relevant comparator therapy. Second, the drug company negotiates the reimbursement price with the health insurances association based on the outcome of the early benefit assessment. If they cannot agree to a price, the third step is an arbitration process. The applicable Social Code V (“SGB V”) allowed legal actions against the arbitration decision and excluded isolated legal actions against the early benefit assessment (Section 35a (8) SGB V).

In this lawsuit, a drug company had launched a prescription drug with an off-patent generic active substance for a skin disease based on own clinical trials. The GBA took the view that the drug has a new active substance and must undergo the early benefit assessment and the AMNOG process. However, the drug company took the position that the product does not have a new active substance and did not submit a product dossier for the early benefit assessment. The GBA nevertheless conducted the early benefit assessment and came to a negative benefit assessment decision. The company filed an action against this decision but during the lawsuit it agreed on a reimbursed price with the health insurance association in order to prevent disadvantages and enable the reimbursement of the drug.

The first instance court (Landessozialgericht Berlin Brandenburg – “LSG”) rejected the action of the company as “inadmissible” and referred to the above mentioned Section 35a (8) SGB V. In contrast, the BSG ruled that despite Section 35 (8) SGB V, a drug company must be allowed to file a legal action against the early benefit assessment even if the company has subsequently agreed to a reimbursement price. Therefore, the BSG annulled the earlier decision of the LSG and referred the matter back to the lower court. The LSG will now have to decide whether the drug indeed had a new active substance and was rightly subjected to the AMNOG process.

The BSG’s full decision has not been published yet but in its press release about the decision, the BSG has summarized its view by referring to the significant legal effects of this benefit assessment to the drug company and finds that Section 35a (8) SGB V does not generally exclude all legal redress options against early benefit assessments in each scenario.

For this particular case, the BSG also noted that it appears possible that the active substance of the drug is not a new active substance. Against this background, the BSG found that blocking all legal redress against an early benefit assessment in all scenarios would violate the constitutional rights of the pharmaceutical companies. In contrast to earlier decisions of German courts in other pricing and reimbursement disputes, this decision appears to put a lot more emphasis on the constitutional rights of the pharmaceutical companies.

Before this decision, a pharmaceutical company could not seek separate legal redress against the early benefit assessment even if it was already contested whether the drug has a new active substance or not. The GBA had the power to just make that assumption and to subject a medicine to the AMNOG process without facing the risk of being exposed to direct legal action. The system required the drug company to wait until the entire AMNOG process of benefit assessment, price negotiation and arbitration is completed before it could file a lawsuit against the arbitration decision. That caused the companies to lose significant time before it could seek legal redress. Further, a drug company had to tolerate that throughout this time and until it obtained a court decision, the negative benefit assessment was made public and harmed its product plus the product was only reimbursed at a low price level because of the negative benefit assessment.

Overall, this new judgment of the BSG clearly strengthens the position of pharmaceutical companies in the AMNOG process and offers a new opportunity to legally challenge the early benefit assessment. The court has particularly stressed the constitutional rights of the pharmaceutical company. It will be interesting how this particular case will continue and which claims the company could make if the lawsuit finds that the drug was unlawfully subjected to the AMNOG process. Further, and beyond this particular case, it appears possible that the principles and arguments of this BSG decision can also be invoked in other disputes in the German drug pricing and reimbursement system.

This BSG decision will have a significant impact to the German drug pricing and reimbursement system and the respective judicature of social courts. Pharmaceutical companies should carefully analyze the full reasoning of the BSG as soon as the complete judgment is available.

The Covington team in Frankfurt, Germany, will continue following and discussing these and other developments on the “Inside EU Life Sciences” blog.

South Africa Eases COVID-19 Restrictions

By Mosa Mkhize and Shivani Naidoo on September 28, 2020 Posted in Africa, COVID-19

On September 16, 2020, President Cyril Ramaphosa announced that South Africa would move from Alert Level 2 to Alert Level 1 of Risk Adjusted Strategy as of midnight on September 20, 2020. This is in part in response to the relatively low levels of infections and the government led interventions to combat the spread of COVID-19. While South Africa has confirmed over 650,000 infections and has suffered 15,000 deaths, recent data illustrates that the number of new cases has substantially decreased—from nearly 14,000 new daily cases on July 24, 2020 at its peak, to just 1,555 new cases on September 20.

This announcement comes a few days after the Minister of Cooperative Governance and Traditional Affairs (COGTA) announced the extension of the national state of disaster from 15 September 2020 to 15 October 2020, as published in Government Gazette 43713. The reason for the extension of the national state of disaster is to grant government the authority required to continue updating existing legislation and contingency arrangements undertaken to address the impact of the pandemic.

Eased restrictions

The following activities are permitted under Alert Level 1:

Gatherings:

Gatherings will be allowed as long as the number of people do not exceed 50% of the normal capacity of a venue—up to a maximum of 250 people for indoor gatherings and 500 people for outdoor gatherings;
Maximum capacity at funerals has been increased from 50 to 100 people;
Night vigils are still prohibited;
Venues such as gyms and recreational facilities may have 50% of total capacity; and,
Existing restrictions on sporting events remain in place.

Travel:

The government will gradually ease restrictions on international travel for business and leisure from October 1 – subject to containment measures. A list of permitted countries will be published and based on the latest scientific data;
International travel will only be allowed through the main border ports or through OR Tambo International, Cape Town International, or King Shaka International;
Travelers will need to provide a negative coronavirus certificate or will be put into quarantine at their own cost; and
All travelers will be required to install the COVID-19 alert level app, which helps the government facilitate effective contract tracing.

Others:

The evening curfew will apply between midnight and 4:00 a.m.;
Alcohol for home consumption can be sold between 9:00 a.m. and 5:00 p.m., Monday to Friday;
Consumption of alcohol at restaurants, taverns etc. will be allowed subject to adherence to the curfew; and,
More government facilities and services will return.

Regulations which give effect to the eased restrictions were published on September 17, 2020 under Government Gazette No 43725.

For further information, please reach out to Covington’s COVID-19 Task Force at COVID19@cov.com, Mosa Mkhize at MMkhize@cov.com and/or Shivani Naidoo at SNaidoo@cov.com.

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.

The Week Ahead in the European Parliament – Friday, September 25, 2020

By Sebastian Vos on September 25, 2020 Posted in EU Law and Regulatory

Next week, Members of the European Parliament (“MEPs”) will gather in Brussels for committee and political groups’ meetings. Several interesting debates are scheduled to take place.

On Monday, the Committee on the Environment, Public Health and Food Safety (“ENVI”) will have an exchange of views with Commission Vice-President Frans Timmermans on the 2030 Climate Target Plan. The MEPS from ENVI are proponents of stepping up the EU’s climate ambition and have called for binding targets for emissions to be reduced by 60% in 2030 compared to 1990. The Commission has proposed an “at least 50% towards 55%” approach by 2030. The plenary will vote on ENVI’s position on October 6, 2020. ENVI’s position is available here.

On Thursday, the Legal Affairs Committee (“JURI”) will vote on its recommendations on ethical aspects of artificial intelligence for the upcoming legislative proposal of the Commission. Among many other things, Rapporteur Ibán García del Blanco (ES, S&D) recommends that the use of personal data to micro-target people or exploit predictive knowledge, should be counterweighted by the principles of data minimization, right to obtain explanations of automated decision-making, and privacy by design. He also recommends that a new designated European Agency for Artificial Intelligence develop common criteria and an application process for granting a certificate of ethical compliance for AI systems upon request of a developer or user. The Rapporteur’s draft report is available here.

On Friday, MEPs will examine the qualifications of two Commissioners-designate, following the reshuffle of the Commission after the resignation of Trade Commissioner Phil Hogan in August. The Economic and Monetary Affairs Committee (“ECON”) will hear Commissioner-designate Mairead McGuinness as new Commissioner from Ireland. If confirmed, she would assume responsibility for the financial services and Capital Markets Union portfolio, which was previously held by Commissioner Valdis Dombrovskis. Dombrovskis will take over the trade portfolio. He was already acting Trade Commissioner after Hogan’s resignation. It is not expected that MEPs will object to the new appointments, given Commissioner Dombrovskis’ reputation as seasoned and capable Commissioner and McGuinness’ current position as Vice-President of the European Parliament. The candidates also received (renewed) mission letters from Commission-President Von der Leyen, containing their mandate and objectives. Trade policy will be promoted to the Executive Vice-President level and may become even more important for the EU to support its geostrategic agenda and promote its European values. Commissioner McGuinness will focus primarily on completing the Banking Union and the Capital Markets Union, as well as promoting sustainable finance. Commissioner Dombrovskis’ and Commissioner-designate McGuiness’ mission letters are available here and here.

For the complete agenda and overview of the meetings, please see here.

How Can Corporations Support the Voting Process?

By Derek Lawlor on September 25, 2020 Posted in Campaign Finance

In the midst of the COVID-19 pandemic, voting in the 2020 general election is likely to look different than we have seen in recent times. Election officials across the country are working through in-person voting and vote-by-mail procedures and individual voters are deciding how best to cast their ballots. At the same time, many corporations are recognizing this unprecedented situation and are asking how they can help support the voting process.

This alert discusses the laws that apply to corporate activity in this area, and highlights some options that corporations can consider. Covington’s Election and Political Law Group has significant experience in this area and has advised a number of corporations on their plans leading up to the 2020 general election.

How Can Corporations Support the Voting Process?

China Issues Regulations to Advance Implementation of Its “Unreliable Entity List”

By Christopher Adams, Yan Luo, Ashwin Kaja and Zhijing Yu on September 23, 2020 Posted in China, Regulatory

As tensions continue to rise between China and the United States, the Chinese government has taken a step forward in actualizing the “Unreliable Entity List,” first announced by China’s Ministry of Commerce on May 31, 2019, following the addition of Huawei and affiliates to the U.S. Commerce Department’s “Entity List.” Now, as the U.S. government pursues restrictions on Chinese technology services providers, including social media apps, the Ministry of Commerce has issued new Regulations on the Unreliable Entity List that set out a framework for the operation of that list.

The new regulations—which can be read in their original Chinese here, and in an official reference English translation here—state that the Unreliable Entity List will target foreign entities seen as

“endangering the national sovereignty, security, or development interests of China;” or
“suspending [or terminating] normal transactions with Chinese enterprises, organizations, or individuals, in violation of [commonly accepted] market-based principles, [thus] seriously harming the legitimate rights and interests of Chinese enterprises, organizations, or individuals.”

The Chinese government has not yet named companies that it plans to investigate, but the regulations are broadly worded so as to leave substantial discretion in the hands of government decision makers.

For details on this new regulation, read Covington’s client alert on the topic here.

California Mandates COVID-19 Supplemental Sick Leave for Larger Employers

By Carolyn Rashby and Michelle Barineau on September 23, 2020 Posted in COVID-19, Employment Law

California Governor Gavin Newsom has signed Assembly Bill (AB) 1867, to create COVID-19 supplemental paid sick leave (CPSL) requirements for employers with 500 or more employees, filling a gap left by the federal Families First Coronavirus Response Act (FFCRA) which applies only to employers with under 500 employees. The new law also codifies existing supplemental paid sick leave requirements for certain food-sector workers that were implemented in April under California Executive Order E.O. N-51-20.AB 1867 took effect on September 19, 2020. It will expire on December 31, 2020, although if Congress extends the emergency sick leave provisions of the FFCRA, the provisions of AB 1867 would automatically be extended for the same period.Supplemental Paid Sick Leave (Not Including Food-Sector Workers)

AB 1867 adds new California Labor Code section 248.1 to provide up to 80 hours of supplemental paid sick leave for “covered workers.” “Covered workers” are employees who: (1) leave their residence to perform work for their employer; and (2) are employed either by a private “hiring entity” with 500 or more employees in the United States, the District of Columbia, or any U.S. territory, or an entity that employs health care providers or emergency responders and elected to exclude those employees from FFCRA emergency paid sick leave. The law also has special rules pertaining to certain firefighters. (Covered workers do not include food-sector workers, who are covered by separate provisions discussed below.)

Covered workers are entitled to 80 hours of CPSL if the employer considers the worker to work “full time” or the worker worked or was scheduled to work, on average, at least 40 hours per week for the hiring entity in the two weeks preceding the date the worker took CPSL leave. Covered workers who are part time and have a normal weekly schedule receive an amount of CPSL equal to the total number of hours they are normally scheduled to work over two weeks. Part-time workers with a variable schedule receive 14 times the average number of hours they worked each day in the six months preceding the date they took CPSL leave. If their employment tenure is shorter than six months, but more than 14 days, the calculation should be made using the entire period of the employment. If the employment period is shorter than 14 days, then the total number of hours worked must be used.

Covered workers can use CPSL when they are unable to work because they are: (1) subject to a federal, state, or local quarantine or isolation order related to COVID-19; (2) advised by a health care provider to self-quarantine or self-isolate due to concerns related to COVID-19; or (3) prohibited from working by the hiring entity due to health concerns related to the potential transmission of COVID-19. Notably, unlike FFCRA emergency paid sick leave, CPSL is not available to care for or assist another individual, e.g., because a child’s school closes or a childcare provider is unavailable due to COVID-19.

A worker may determine how many hours of CPSL to use, and the employer must make CPSL available for immediate use upon a worker’s oral or written request. CPSL must be paid at an employee’s regular rate of pay for the last pay period or at the state or local minimum wage rate, whichever rate is highest. The law caps the maximum amount of pay an employer must provide at $511 per day and $5,110 overall. Payment must be made no later than the payday for the next regular payroll period after leave was taken.

If a business already provides a covered worker with a supplemental paid leave benefit that can be used for the same reasons as CPSL and would compensate the worker in an amount equal to or greater than what Labor Code 248.1 requires, the business may count the other paid benefit or leave hours towards the total number of CPSL hours it must provide the covered worker. This includes any supplemental COVID-19 leave required by a local ordinance. If the employer already provided supplemental paid leave between March 4, 2020 and September 19 for the reasons covered by CPSL, but compensated the worker less than would be required under the new law, the employer may retroactively provide supplemental pay to the worker to satisfy the CPSL compensation requirements and then count those hours towards the total number of hours of CPSL required by the new law. Note that regular California paid sick leave may not be used to offset the CPSL requirement.

The new law also imposes two notice requirements on employers. First, employers must immediately provide notice to employees of the new CPSL provisions by way of a new workplace poster, available here. Workers who do not frequent the workplace should be provided the notice by email or other means. Second, Labor Code 248.1 incorporates provisions of the existing California paid sick leave law that requires employers to report sick leave balances on employee wage statements. Thus, employers are also now required to include CPSL balances on wage statements, or in a separate writing provided on the designated pay date with the payment of wages.

Supplemental Paid Sick Leave for Food-Sector Workers

The law also creates new California Labor Code section 248 to codify and extend the food-sector COVID-19 paid sick leave provisions of E.O. N-51-20, was issued in April 2020. The food-sector sick leave provisions are similar to those under Labor Code 248.1. A food-sector worker is an employee or independent contractor who leaves the person’s home to perform work and is either: (i) in an industry or occupation covered by California Industrial Welfare Commission wage orders 3, 8, 13 or 14; (ii) for a hiring entity that operates a food facility, as defined in Section 113789 of the Health and Safety Code; or (iii) delivers food from a food facility, as defined in Section 113789 of the Health and Safety Code, for or through a hiring entity.

Notably, paid leave already provided under E.O. N-51-20 or pursuant to supplemental paid leave provided under federal or local law for the same reasons will satisfy the new statutory requirement. Employers with food-sector workers must post a notice of the new provisions or email the notice to workers who do not frequent the workplace. The poster is available here.

AB 1687 also codifies a requirement in E.O. N-51-20 that food-sector workers working in any food facility to be permitted to wash their hands every 30 minutes and additionally as needed.

Steps to Take Now

California employers covered by AB 1687 should immediately review their COVID-19 sick leave programs to determine whether they will need to offer additional leave for COVID-19 reasons. Employers should also post the new workplace poster, and email it to any employee who is not at the workplace, and work with their payroll provider to ensure that the new sick leave is reflected on wage statements.

DOL Revises FFCRA Regulations in Response to Federal Court Decision Invalidating Parts of the FFCRA

By Lindsay Burke, Carolyn Rashby and Teresa Lewi on September 23, 2020 Posted in Employment Law

On September 11, 2020, the U.S. Department of Labor (“DOL”) issued revised regulations to clarify certain rights and employer responsibilities under the paid sick leave and expanded family and medical leave provisions of the Families First Coronavirus Response Act (“FFCRA”). The revisions were made in response to a recent decision of the U.S. District Court for the Southern District of New York (“SDNY”), which invalidated certain provisions of the FFCRA regulations.

The FFCRA, which we discussed here, requires employers with fewer than 500 employees to provide emergency paid sick leave (“EPSL”) and emergency Family and Medical Leave Act leave (“EFMLA”) to employees who meet certain COVID-19-related conditions. DOL issued regulations implementing the FFCRA on April 1, 2020.

In response to the SDNY decision, DOL made the following clarifications (#1-2, below) and revisions (#3-5, below) to the FFCRA regulations, effective September 16, 2020:

Employees are eligible for FFCRA leave only if their employer has work available for the employee to perform; in other words, the qualifying reason for the leave must be the “but-for cause of the employee’s inability to work.”
Employees may take FFCRA leave intermittently only with their employer’s consent.
Employees must provide their employers with the required documentation (including information about their qualifying reason for leave and any other supporting documentation such as a quarantine or isolation order) that supports their need for EPSL and/or EFMLA leave “as soon as practicable.”
Employees who need to take leave must provide the required documentation “as soon as practicable” and not necessarily “prior to” taking the leave.
Employees do not need employer approval to take FFCRA leave to care for their children whose schools are operating on an alternate day basis (or other hybrid attendance schedule), because such leave technically is not intermittent leave. The revised rule explains that “intermittent leave is not needed because the school literally closes [. . .] and opens repeatedly,” and “each day of school closure constitutes a separate reason for FFCRA leave that ends when the school opens the next day.”

Finally, in response to the SDNY striking down the FFCRA’s definition of “health care provider” as being too expansive, DOL revised the definition to narrow the category of individuals who are considered a “health care provider” and who thus can be excluded by their employer from taking FFCRA leave. The FFCRA’s revised regulations adopt the more narrow definition of “health care provider” under the Family and Medical Leave Act regulations (29 C.F.R. 825.102) and include those who are employed to provide diagnostic services, preventative services, treatment services, or other services that are integrated with and necessary to the provision of patient care which, if not provided, would adversely impact patient care. Notably, the revision did not change the definition of “health care provider” for purposes of determining who can advise an employee to quarantine or self-isolate.

The DOL’s FFCRA FAQs page has been updated to reflect the new changes to the regulations. The regulations remain in effect through the FFCRA’s expiration date of December 31, 2020.

The Week Ahead in the European Parliament – Friday, September 18, 2020

By Sebastian Vos on September 18, 2020 Posted in EU Law and Regulatory

Next week, Members of the European Parliament (“MEPs”) will gather in Brussels for committee meetings. Several interesting debates are scheduled to take place.

On Monday, MEPs of the Foreign Affairs Committee (“AFET”) will have an exchange of views with China’s Ambassador to the EU, Ming Zhang. It is likely that MEPs will discuss the outcomes of the EU-China summit of September 14, 2020, and pose critical questions regarding, for example, the ongoing negotiations on a bilateral investment treaty (“BIT”) between the EU and China. At the press conference after the summit, Commission President Von der Leyen mentioned that the EU and China had reached agreement on several chapters of the BIT, such as disciplinary rules for state-owned enterprises, forced technology transfer, and transparency rules for subsidies. However, important differences persisted concerning market access and China’s industrial overcapacity. President of the European Council Charles Michel also stated that the EU reiterated its concerns over China’s action in Xinjiang and Tibet and that the parties agreed to discuss these issues in detail during the EU-China Human Rights Dialogue in Beijing later this year. Both the EU and China hope to conclude negotiations on the BIT before the end of the year, but they will need to make substantial progress to be able to convince MEPs of the merits of the BIT. Traditionally, the Parliament has been a strong advocate for human rights and is, for example, pushing for mandatory human rights and environmental due diligence for companies with global supply chains. Commission President Von der Leyen’s remarks are available here and European Council President Charles Michel’s remarks are available here.

On Tuesday, the Committee on the Environment, Public Health and Food Safety (“ENVI”) and the Committee on Industry, Research and Energy (“ITRE”) will hold a joint public hearing on the access to future COVID-19 vaccines. It is expected that MEPs will ask a panel of researchers and representatives of the pharmaceutical industry about the status quo of the development of the numerous vaccines, their clinical trials, and challenges to the production and distribution of prospective vaccines. So far, the European Commission has signed two contracts with pharmaceutical companies and continues discussions with four others.

On Wednesday, several new Special Committees will have their constitutive meetings and elect their chairs and vice-chairs. There will be five new Special Committees, among which, a Special Committee on Artificial Intelligence and the Digital Transformation. The Special Committee has been established to draft a roadmap with specific objectives in the medium- and long-term for the EU in the field of AI. MEPs from multiple regular Committees will take place in the Special Committee to ensure a coordinated approach to the upcoming EU legislative proposal, which is due to be introduced by the European Commission in Q1 2021. More information on the Special Committee on AI can be found here.

For the complete agenda and overview of the meetings, please see here.

UK: new “world-leading” deforestation and ecosystem supply chain law

By Daniel Feldman, Sinéad Oryszczuk, Hannah Edmonds-Camara, Atli Stannard, Paul Mertenskötter and Summreen Mahween on September 18, 2020 Posted in EU Law and Regulatory, Human Rights, Sustainability

The UK Government recently announced that it is developing legislation that would make it illegal for large businesses operating in the UK to use certain commodities that have not been produced in line with local laws, and require in-scope companies to conduct due diligence to ensure that their supply chains are free from illegal deforestation and ecosystem change. A failure to comply could result in significant fines (the precise levels of fines are yet to be determined).

The legislation has the potential to impose market restrictions and extensive supply chain due diligence obligations, but it appears that it will be limited to certain “forest risk” commodities — including those embedded within products — whose rapid expansion is associated with deforestation. The UK Government is currently consulting on the potential law. The UK Government anticipates that the law will particularly impact supermarkets and fashion houses, meat and dairy producers and businesses using palm oil and other natural ingredients; and has suggested that legislating might offer legal certainty and clear obligations for businesses.

The UK Government’s proposed legislation seeks to clamp down on illegal deforestation and ecosystem change and to complement the current initiatives of producer country governments and businesses. In its announcement, the UK Government stressed the importance of forest protection in tackling climate change, noting specifically that:

deforestation accounts for circa 11% of global greenhouse gas emissions;
an estimated 80% of deforestation is caused by the production of agricultural commodities; and
much forest clearance to produce these commodities is not considered legal.

The impetus for this UK legislation comes from recommendations published earlier this year by the Global Resource Initiative (“GRI”), a UK independent taskforce. In this blog post, we consider the scope of the proposed legislation and what this could mean for in-scope businesses, and provide some context on the wider GRI recommendations and the international sustainability due diligence drive.

The scope of the proposed legislation

If promulgated, the UK’s “world-leading” legislation would forbid in-scope businesses from using products, unless they overcome an evidential burden to prove that they have been responsibly produced in a sustainable manner, and comply with local laws to protect natural ecosystems. According to the consultation paper, the proposed law would effectively make it illegal for businesses in-scope to use, either in production or trade within the UK, forest risk commodities that have not been produced in accordance with the relevant laws in the country where they are grown.

Businesses in-scope of the legislation may be required to carry out extensive due diligence on their supply chains, publishing information denoting from where key commodities — currently anticipated to include beef, cocoa, leather, palm oil, pulp and paper, timber, rubber and soya — have been sourced. More specifically, businesses would be obliged to: collate information on exposure to specific risks within their supply chains; assess and take action to mitigate those risks and impacts; and publicly report on the steps they are taking. Importantly, “forest risk commodities” will likely include those embedded within products, intended to cover, for example, meat and dairy from soya-fed animals, and products containing palm oil.

The proposals currently focus on “large” businesses, to be determined by turnover and employee number. It is possible that the law might follow other EU and UK environmental and sustainability initiatives that define large undertakings as those that are not small-medium enterprises (“SMEs”) in accordance with international and national accounting legislation. The Government anticipates that supermarkets and fashion houses are most likely to be impacted by the proposed legislation, in addition to “companies that place agricultural and forestry commodities or derived products on the UK market”. The determination of which businesses fall in-scope under similar diligence and reporting frameworks has proved complicated for many businesses, especially those with complex corporate structures and those going through expansion.

The Government intends to ensure that the legislation augments and aligns with existing UK non-financial corporate reporting and due diligence frameworks. Sanctions for non-compliance are still to be determined, but current high level proposals suggest that the Government will be able to levy fines and other civil sanctions against businesses that continue to use forest risk commodities that have not been produced legally and/or that do not have a robust system of due diligence in place.

The proposal against the backdrop of GRI’s Recommendations

The proposed legislation follows recommendations put forward by the GRI to the UK Government in March 2020. Formed in 2019 to consider how the UK could ‘green’ international supply chains and leave a lighter footprint on the global environment by slowing the loss of forests, the GRI is constituted of leaders from the private sector, the public sector and NGOs and formed in 2019.

One of the key GRI recommendations was the introduction of a mandatory due diligence requirement. Some of the important scoping aspects of this GRI recommendation included that:

due to diligence obligations should cover both human rights abuses and environmental risks and impacts, which will need to be carefully and clearly defined; and
obligations for companies should be commensurate with the size of the organisation, their impact and ability to influence change;
the financial sector should also be covered by a similar mandatory due diligence obligation, undertaking due diligence in order to avoid their lending and investment activities funding deforestation.

The extent to which any eventual legislation will incorporate these suggestions is currently unclear.

The GRI also recommended the introduction of a legally binding target to end deforestation within UK agriculture and forestry supply chains as soon as practicable, by no later than 2030.

Next steps: consultation

The UK Government — in particular, the Department for the Environment, Food and Rural Affairs (“Defra”) — has launched an online consultation on the draft legislation to solicit views from the UK and international stakeholders (closing on 5 October 2020). Feedback to the consultation will inform the Government’s response to the GRI’s due diligence recommendation, and assist in weighing the potential impacts of the proposed legislation on businesses and other interests.

If the Government decides to legislate, the intention currently seems to be to that the legal framework will be established in primary legislation, followed by more detailed secondary legislation, and subject to further consultation.

Wider context: the proliferation of due diligence obligations

Following the UN’s adoption of the Guiding Principles on Business and Human Rights (“UNGPs”), there has been an increasing trend of national and regional regulatory initiatives, including human rights and environmental due diligence and reporting requirements.

One such significant initiative is in motion an at EU level. On 29 April 2020, the EU announced that it would introduce legislation in 2021 to make human rights and environmental due diligence mandatory for EU companies (see our May 2020 blog post here). The European Parliament is currently preparing a Legislative Initiative Report on the topic and we are expecting a Commission consultation in the coming months. EU Commissioner for Justice and Consumer Affairs recently confirmed that the Commission will include the regulation in the next official Commission Work Program for 2021 (expected to be published in October 2020). These efforts are taking place in the context of the EU’s wide suite of regulatory initiatives that are part of the “European Green Deal” (see an overview webinar here).

The UK Government considers that by introducing a mandatory deforestation and ecosystem supply chain law, it will provide businesses with some legal certainty by setting a “floor” and minimum standards to meet. However, against a backdrop of a rapidly evolving patchwork of due diligence requirements — including the more comprehensive, potential EU human rights and environmental due diligence regulation — it is possible that, for in-scope businesses, the UK’s introduction of further issue-specific due diligence obligations will exasperate the compliance challenges caused by a piecemeal approach.

If you have any questions concerning the material discussed in this client alert, please contact the following members of our Business and Human Rights, Environmental & Product Stewardship, Global Public Policy, and Compliance teams:

Dan Feldman
Sinead Oryszczuk
Hannah Edmonds-Camara
Atli Stannard
Paul Mertenskötter
Summreen Mahween (trainee)