Welcome to Pillsbury’s Regulatory Playbook, where you’ll find news and insights on the regulatory trends that are driving markets and shaping businesses. Here, Pillsbury’s market-leading regulatory group illuminates critical developments at the intersection of law and policy. If you need to know what’s happening, why it’s happening and how to respond, consult the Playbook.
Trending IssuesCOVID-19 Business Interruption Litigation May Be Consolidated for a Select Few
With hundreds of cases now pending nationwide involving insurance coverage claims for business interruptions stemming from the COVID-19 pandemic, a federal panel has been considering the prospect of consolidating the litigation into one multidistrict litigation (MDL) to promote their efficient resolution. On August 12, 2020, the panel issued a decision ruling out a single nationwide MDL, but leaving open the possibility of smaller, insurer-specific MDLs.
Distressed Real Estate During the COVID-19 Pandemic: Deeds in Lieu of Foreclosure Involving Commercial Real Estate
Often, deeds in lieu are considered or delivered and accepted in the context of a mortgage financing (also including financings which involve a deed of trust or other similar instruments)—when the borrower (typically, a special purpose entity) is in default or at risk of imminent default and there is little to no equity remaining in the project. Viewed through the borrower’s lens, the consequence of an uncured default is losing the property.
Distressed Real Estate During COVID-19: Options Beyond PPP Loans
As a result of the COVID-19 pandemic, businesses across the country have faced severe economic hardship. Congress has responded with initiatives such as the Paycheck Protection Program and the Main Street Lending Program (MSLP), but these programs have not been designed with the commercial real estate market in mind. Recently, Representatives Van Taylor (R-TX), Al Lawson (D-FL) and Andy Barr (R-KY) introduced the “Helping Open Properties Endeavor Act of 2020” (HOPE Act) to provide assistance to this sector. If the bill becomes law, it will work in conjunction with existing provisions of the Main Street Lending Program to lend strong support to commercial real estate owners.
California Releases New Reopening Guidance for Employers
On July 24, 2020, the California Department of Public Health (CDPH) released reopening guidance for employers in a COVID-19 Employer Playbook for a Safe Reopening, which it followed up by publishing Safe Reopening FAQs for Workers and Employers on July 28, 2020.
NLRB Establishes New Test for Employer Discharge of Employees for Abusive Comments
Despite this broadened standard, employers should still be cautious about disciplining or discharging employees who engage in protected concerted activity regarding the terms and conditions of their employment, which can include discussions of COVID-related concerns and race relations, along with other emotionally, politically, or culturally sensitive topics. The National Labor Relations Board (NLRB) has adopted a new standard that will allow employers to more readily discipline employees who have made abusive statements, even when connected to otherwise protected, concerted activity. Under the prior standard, the NLRB had found that employers had engaged in an unfair labor practices on various occasions when they discharged employees who had used profanity against managers or shouted racial slurs while also engaging in activities that are protected by Section 7 of the National Labor Relations Act (NLRA).
EPA Finalizes Toxic Release Inventory Listing for 172 PFAS Substances
The Implications on EPCRA Reporting
The National Defense Authorization Act for Fiscal Year 2020 (NDAA) required that the U.S. Environmental Protection Agency (EPA) add certain poly- and perfluoroalkyl substances (PFAS) to the Toxic Release Inventory (TRI). EPA’s final rule adding these PFAS to the TRI toxic chemicals list took effect on June 22, 2020. This marks the implementation of another important facet of EPA’s February 2019 PFAS Action Plan, which announced the agency’s intent to address the human health and economic impacts from PFAS in the environment.
Senate Republicans Unveil Proposed COVID-19 Liability Shield
Senate Republicans have recently unveiled their proposed liability protection measures intended to be included with the next Congressional COVID-19 pandemic response bill. Republicans have long signaled that providing businesses a federal liability shield is a top legislative priority for future relief bills, and Senate Majority Leader Mitch McConnell’s office has now released the text of the SAFE TO WORK Act, a legislative measure that could provide key liability protections for an array of businesses and organizations for COVID-19-related lawsuits. While the measure will likely face partisan opposition to its enactment, if passed, the liability shield would preempt many of the state law measures currently in place, and provide uniform protections for not just businesses, but also nonprofits, state and local governments, schools, and other organizations currently facing unknown liability risks from the COVID-19 pandemic.
Oregon COVID-19 Law Halts Foreclosures, Expands Borrower Protections
On June 30th, 2020, Oregon governor Kate Brown signed into law HB 4204, providing sweeping protections to mortgagors and putting a moratorium on foreclosure proceedings. This law also requires all lenders operating within the state to provide written notice by mail to every borrower by August 29, 2020 of the protections added by the bill. This law applies to all lenders who hold a collateral interest in property or a retail installment contract within the state of Oregon, regardless of the lenders’ location. These protections will remain in place until 90 days after the end of the state’s COVID-19 “emergency period,” which is currently ends on September 30th but is likely to be extended.
Virginia Adopts COVID-19 Workplace Safety Mandates
After it recently announced plans to issue the first statewide Coronavirus workplace safety rules in the U.S., the Virginia Department of Labor and Industry (DOLI) has published emergency temporary regulations under the authority of the Virginia Occupational Safety and Health (VOSH) Program. The regulations, which are expected to take effect during the week of July 27, 2020 after being published in a Richmond newspaper, will remain in effect for six months. Violations of these standards will subject Virginia employers to penalties under the existing VOSH penalty standards, which range from up to $13,047 for serious and certain other violations, to up to $130,463 for willful and repeated violations. This alert summarizes key provisions of the regulations, but Virginia employers should review the detailed regulatory requirements in full.
Generational Reform of the National Environmental Policy Act Has Weighty Implications for the Nuclear Industry
On July 15, 2020, the White House Council on Environmental Quality (CEQ) promulgated a final rule amending the implementing regulations (40 CFR § 1500, et seq.) of the National Environmental Policy Act, 42 U.S.C. § 4321, et seq. (NEPA). The final rule largely tracks proposed amendments, which the CEQ issued on January 10, 2020. The amendments aim to align NEPA’s implementing regulations with underutilized principles embedded in statutory provisions, agency guidance, and court decisions to streamline the environmental review process. These regulatory changes represent the culmination of Trump administration efforts to modernize NEPA dating back to August 2017, when the White House issued Executive Order 13087 to mitigate the delays that environmental reviews present to infrastructure development, including the licensing and development of nuclear facilities. The final rule will become effective on September 14, 2020.
Going Dark: Deregistration in the COVID-19 Era
In the wake of the recent economic downturn and resulting liquidity concerns, companies subject to public reporting requirements are reconsidering whether the advantages of a public listing outweigh the burdens of ongoing reporting and compliance obligations. Deregistration, or “going dark,” is an increasingly appealing alternative for companies seeking to avoid Securities and Exchange Commission (SEC) reporting obligations and associated costs.
Virginia Adopts First COVID-19 Workplace Safety Mandates
The Nation’s First Coronavirus Workplace Safety Rules
On Wednesday July 15, Virginia’s Department of Labor and Industry’s Safety and Health Codes Board (the Department) announced the first coronavirus-related workplace safety regulation in the United States (Workplace Rules). This mandate follows an executive order issued by Governor Ralph Northam in late May that directed the Department to create infectious disease regulation. The Workplace Rules will require businesses under the jurisdiction of the Virginia Occupational Health and Safety Administration to implement safety measures to protect those who have been exposed to and infected by COVID-19 at the workplace. The Workplace Rules will likely come into force toward the end of July once they are published in a newspaper of general circulation. They will then remain in effect for a period of six months, after which they could become permanent if adopted through legislative enactment.
Supply Chain Threats and Cybersecurity Compliance Issues on the Horizon
U.S. government agencies continue to implement new rules to guard against supply chain threats and mitigate cybersecurity risks. We have previously discussed regulations aimed at excluding, and in some cases removing, Chinese-origin equipment from U.S. telecommunication networks and supply chains. In addition to discussing recent developments related to those regulations, this alert examines how the Department of Defense (DoD) and other agencies plan to mitigate cybersecurity risk at the contractor level.
Court Holds COVID-19 Executive Order Triggers Lease’s Force Majeure Clause, Excusing Some Rent Obligations
In June 2020, the United States Bankruptcy Court for the Northern District of Illinois issued its decision, In re Hitz Restaurant Group (No. 20-B-05012, 2020 WL 2924523 (Bankr. N.D. Ill. June 3, 2020)). The Court held that the Illinois Governor’s Executive Order, issued in response to the ongoing COVID-19 pandemic, triggered the force majeure clause of a lease and excused part of the tenant’s rent payment obligations. For some, this decision was surprising because force majeure clauses usually do not excuse, wholesale, payment obligations.
New Privacy Laws in California and New York Are on a Collision Course with the COVID-19 Technology Boom
Stay-at-home and shelter-in-place orders prompted by the COVID-19 pandemic have already led to a dramatic increase in the reliance on technology—and the generation and collection of extensive personally identifiable information (PII)—for myriad personal and professional purposes. As businesses now contemplate how to safely welcome customers, guests and employees back to their physical premises, the collection of PII is only likely to increase in the form of virus and antibody testing, temperature taking, video monitoring to ensure social distancing, contact tracing via location tracking, and similar preventative measures based on the collection of biometric and other personal data.
The Limited Pandemic Federal Liability Protections
With the continued public health threat posed by COVID-19, many businesses that have remained open or that are planning their reopening face legal risks of civil liability relating to employees and consumers who are injured as a result of the coronavirus contracted on their premises. As part of the federal pandemic response, the federal government has included legislation and issued administrative declarations providing limited liability protections aimed specifically at health care providers and manufacturers and distributors of health care products used for the current public health crisis.
DoD Memorandum Discusses Contractor Reimbursement for COVID-19 Expenses
A memorandum released on July 2, 2020 by Acting Principal Director for Defense Pricing Kim Herrington provides guidance on some of the action taken by the Department of Defense (DoD) in its efforts to support its contractors with reimbursement for the related impacts and costs incurred by DoD contractors in response to the COVID-19 pandemic. The memorandum highlights the possibility of contractor cost recovery for measures that may have been taken by industry to prevent the spread of COVID-19 and allow facilities to remain open and productive during the pandemic. It further directs contracting officers to use their experience and skill to find innovative solutions to both protect government interests and ensure the continued health of the defense industrial base.
The Economic Recovery: States Offer Varied Liability Protections for Businesses
Pre-pandemic, well-advised business owners could have a good understanding of their potential liabilities to customers and employees for safety and health risks in their workplace. Now, in the midst of a pandemic, businesses are uncertain what their potential liabilities may be to customers or employees who contract COVID-19 and suffer harm as a result. Instead of clear and uniform guidelines for proper precautions, businesses face evolving and difficult-to-apply laws and guidance, and a correspondingly increased risk for lawsuits.
Impact of Remote Working on End User Computing Solutions and Services
Twitter and Square have announced that all of their employees may remain working from home “forever.” Facebook expects half of its 48,000 employees to be working remotely in the next five to 10 years. And it is not only leading tech companies that are contemplating a major shift toward remote working. A recent Gartner survey of 317 CFOs and finance leaders revealed that 47% of respondents will move at least 10% of their on-site employees to permanent remote positions, while 74% will move at least 5% of their previously on-site workforce to permanently remote positions. Overall, the Gartner survey showed that 48% of employees will likely work remotely at least part of the time after COVID-19.
SBA Discloses Identities of PPP Borrowers
SBA, in conjunction with the Department of the Treasury, announced in a June 6, 2020 press release that it would disclose “detailed loan-level data” regarding all of the 4.9 million PPP loans made to date. Recent legislation, which we summarized here, extended the deadline to apply for new PPP loans to August 8, 2020.
Tour de Force: Do the Current Economic Conditions Caused by COVID-19 Constitute a Force Majeure Event?
Past Economic Crises Typically Have Not Constituted Force Majeure Events
In most jurisdictions, courts have been reluctant to find that an extreme economic downturn, such as the Great Recession of 2008 or the earlier post-9/11 downturn, constitutes a force majeure event excusing performance of a party’s contractual obligations.
The Main Street Lending Program – Avoiding the Potholes on the Road to Recovery
Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Congress authorized the Treasury Department to provide more than $450 billion for loans, loan guarantees, and investments in support of the Federal Reserve’s lending facilities.
Tour de Force: What Constitutes an “Act of God,” and Other Developments in Force Majeure Law
What is an Act of God?
Absent an express reference to “epidemics” or “pandemics,” a contracting party seeking to invoke a force majeure clause is most likely to look to catch-all language like “Acts of God” or events “not within the parties’ reasonable control” as the most likely language to cover COVID-19. Historically, courts indeed defined “Act of God” to encompass sickness. See, e.g., Herter v. Mullen, 159 N.Y. 28, 37 (1899) (“The disability of a party to do the particular thing, or to perform the contract by reason of sickness is held to be a disability by the act of God.”); Love v. Barnesville Mfg. Co., 19 Del. 152, 50 A. 536, 537 (Del. Super. Ct. 1901) (“The defendant would not be liable for damages caused solely by the act of God, such as an epidemic of sickness in the defendant’s factory.”).
President’s Executive Order to Expedite Environmental Reviews of Infrastructure Pushes the Envelope on the Interpretation of Emergency Authorities
The Key Environmental Laws at Issue
Citing the economic downturn caused by the outbreak of COVID-19, on June 4, 2020, President Trump signed an executive order (EO) directing federal agencies to invoke emergency powers available to them to expedite the environmental review and permitting of infrastructure projects. The EO explicitly enumerates the emergency provisions of the following federal laws:
Compliance Programs Must Track and Adapt to Changes and Risks
On June 1, 2020, DOJ updated its Guidance (2020 Update), once again, on how it will evaluate corporate compliance programs in deciding “whether to bring charges, and negotiating plea or other agreements.” The 2020 Update builds on the 2019 Update from April 30, 2019, and emphasizes three questions:
Fed Expands and Enhances Main Street Lending Program
Larger loans available, and more small and medium-sized businesses may qualify for support with new changes to minimum loan amounts and amortization schedule.
Key Changes to Paycheck Protection Program Await President’s Signature
Both the House and Senate have passed a bipartisan bill to modify elements of the PPP established by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The legislation is intended to provide a “quick ﬁx” to obstacles faced by small businesses seeking relief under the forgivable loan program.
Senate Bill Could Result in De-Listing of Certain Chinese Companies and Non-Chinese State-Owned Enterprises from U.S. Securities Exchanges
On May 20, 2020, the U.S. Senate unanimously passed S. 945, the Holding Foreign Companies Accountable Act (HFCAA). If enacted, the bill would amend the Sarbanes-Oxley Act of 2002 (15 U.S.C. §7214) to require additional disclosures from certain issuers regarding foreign jurisdictions that prevent the Public Company Accounting Oversight Board (PCAOB) from performing inspections of auditors of public companies.
TopicsCOVID-19 (Coronavirus) Congressional and Agency Debates Cybersecurity, Privacy & Data Protection Employee Relations Energy and Climate Change Global Trade and Investment Innovation and Trends Government Contracts Internet & Social Media White House Actions
Pillsbury’s Washington Weekly Briefing – June 17