Wednesday, May 13th, 2020
On May 13, 2020, the Department of Treasury issued FAQ #46, which provides a safe harbor for Paycheck Protection Program loans with an original principal amount of less than $2 Million. Below is FAQ #46 in its entirety:
46. Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?
Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates, 20 received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.
SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.
Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.
Thursday, May 7th, 2020
With employers experiencing unexpected shutdowns and facing potential mass layoffs due to the COVID-19 pandemic, the Department of Labor (“DOL”) recently issued COVID-19 guidance for employers regarding the federal Worker Adjustment and Retraining Notification (“WARN”) Act. The FAQs can be found here.
The WARN Act is a federal statute that requires covered employers to provide employees 60 days’ advance written notice before closing a plant or conducting a mass layoff. The WARN Act applies to employers that employ 100 or more full-time employees (not counting workers who have worked fewer than 6 months on the job). Covered employers, unless protected by an exemption, who do not comply with the WARN Act’s requirements can be liable to affected employees for wages and benefits for each missed day of notice.
The DOL’s FAQs provide helpful reminders regarding WARN’s notice requirements if employers experience an unexpected shutdown due to an emergency pandemic. One key reminder is that a temporary layoff or furlough lasting less than six months is not considered an “employment loss” under WARN meaning the employer is not required to provide a WARN notice. However, these employees must be recalled to work within six months to avoid the notice requirement and this may or may not be possible depending upon the uncertainty of when businesses will reopen due to the pandemic.
Another key takeaway from the DOL’s FAQs is that employers may be able to remedy its failure to provide a WARN notice when a mass layoff or plant closing was caused by “unforeseeable business circumstances.” In this scenario, employers must not have reasonably foreseen a mass layoff or plant closing at the time that the 60 days’ notice would have been required. Employers can remedy this issue if it submits a written WARN notice as soon as practicable which also includes a brief statement of the reason for giving less than 60-days’ notice.
Employers should also be aware of state law requirements similar to the federal WARN Act. Although Virginia does not have a state WARN act, some of the surrounding states, such as Maryland, have adopted a WARN-type law which has different requirements than the federal WARN Act. Employers that conduct business in multiple states must be aware of what is required under each WARN-type act if it plans or has already conducted a mass layoff or plant shutdown due to the COVID-19 pandemic.
Importantly, as the DOL’s FAQs dictate, employers are not fully exempt from providing WARN notices due to the pandemic. Employers must remain mindful of their potential WARN obligations to ensure that they do not end up with a lawsuit at the end of the pandemic.
Tuesday, May 5th, 2020
The Virginia General Assembly concluded its 2020 session five days later than planned as a mountain of legislation and a late-breaking budget deal delayed adjournment.
One of the largest agenda items for the new Democratic majority was a clean energy bill called the Virginia Clean Economy Act. The VCEA, along with several other energy reform bills, made the 2020 session a consequential year for energy transformation in the Commonwealth.
Session Background
The 2020 General Assembly started on a historic note, as Democrats took control of both branches of the General Assembly for the first time in 30 years and immediately swore in Virginia’s first female Speaker, Eileen Filler-Corn.
The new majority grappled with the burdens of governing on a learning curve, an adversarial minority party looking to pounce on every failure, and the largest legislative agenda in recent memory.
Gentry Locke’s Government & Regulatory Affairs team provided a “big-picture” overview of the 2020 session in its quarterly “State of Play” presentation. It’s available here.
An Ambitious Energy Agenda
The landmark shift of Virginia’s political landscape in November 2019 set the stage for the new Democratic majority to take on an ambitious energy agenda. That much was clear.
What was not as clear, however, is what that would look like in legislative form. There were competing policy ideas, strategies, and tactics. Omnibus proposals, stand-alone bills, competing legislative patrons, and a slew of third-party coalition groups were just a few of the issues that legislators needed to navigate while in Richmond.
All told, Gentry Locke tracked nearly 200 energy bills this session across five major categories: broad energy policy goals, electric utility regulation, renewable energy deployment, retail customer choice, and climate-related energy initiatives.
Virginia Clean Economy Act
By far the most consequential energy bill considered and passed this session is the Virginia Clean Economy Act.
Carried by Senator Jennifer McClellan and Delegate Rip Sullivan, the VCEA sets Virginia on a path to 100% clean energy by the middle of this century, eliminates carbon emissions, deploys millions of dollars in new renewable energy generation, mandates significant energy efficiency investments, and opens the market for rooftop solar on homes and businesses.
The bill vaults Virginia to one of the nation’s leading states in renewable energy development. Along the way, it is expected to create tens of thousands of new jobs as the Commonwealth transitions away from carbon-based electricity generation to clean and renewable sources of energy.
The bill includes four basic pillars:
- 100% Clean Energy – Adopts a mandatory “Renewable Portfolio Standard” (RPS) that sets Virginia on a path to 30% renewable energy by 2035 and 100% clean energy by 2050. Under this bill, 100% of the electricity produced in the Commonwealth will come from clean energy, taking Virginia to a zero-carbon state in just three short decades.
- Energy Efficiency – Sets mandatory investment goals for electric utilities to achieve a 5% increase in energy efficiency to help reduce energy consumption and lower electricity bills immediately.
- Renewable Energy Deployment – Calls for the deployment of 16,100 MW of wind and solar power over the next decade. When this large increase comes online, it will shift the Commonwealth away from carbon-based energy sources.
- Distributed Solar – Creates a market for distributed solar by requiring rooftop solar to be part of the mandatory RPS and includes specific provisions to provide rooftop solar to low-income customers.
The Clean Economy Act also includes a number of other provisions to strengthen State Corporation Commission oversight, distribute proceeds from the Regional Greenhouse Gas Initiative to fight climate change and create jobs, and close down carbon-emitting power facilities.
It is hard to overstate what this bill means for Virginia. Over the next decade, we will have to build dozens, if not hundreds, of new utility-scale solar facilities. On-shore wind facilities will be constructed. Rooftop solar will become affordable and accessible for families and small businesses.
Utility-Scale Solar Land-Use & Revenues
There was a large package of legislation relating to local land-use and tax revenues for utility-scale solar. These bills are critical to successfully implementing the goals of the Virginia Clean Economy Act and deploying solar energy development in the years ahead. The package consisted of five pairs of legislation, each with House and Senate bills.
- Conditional Zoning for Solar Projects – Carried by Delegate Steve Heretick and Senator Dave Marsden, these bills clarify that localities may accept cash payments for solar projects through a conditional use permit provided that such payments meet the nexus test, in other words, the payments off-set the impacts of solar project.
- Solar Projects & Comprehensive Plans – Carried by Delegate Heretick and Senator Marsden, these bills deem solar projects to be in accord with comprehensive plans if localities elect to waive a comprehensive plan review.
- Use of National Standards for Solar Projects – Carried by Delegate Heretick and Senator Marsden, these bills authorize localities to incorporate generally accepted national standards for solar projects and battery storage into zoning ordinances for solar projects.
- Extension of M&T Exemption for Solar Projects – Carried by Senator George Barker and Delegate Jay Jones, these bills extend the 80% exemption for solar projects from machinery and tools tax assessments until 2030. The bill also creates a “step down” structure that decreases the exemption over a schedule of the life of the project.
- Revenue Share Program for Solar Projects – Carried by Senator Barker and Delegate Jones, these bills create a local option for localities to adopt a revenue share ordinance to allow localities to assess $1,400 per megawatt capacity to provide a meaningful and reliable revenue stream from the solar project to the localities without impacting their state education funding formula or being subject to a depreciation schedule otherwise applicable to a machinery and tools tax regime.
- Siting Agreements for Solar Projects – Carried by Delegate Hodges, this bill creates another tool for localities and solar developers to negotiate business terms and conditions for approval of solar projects. Under a siting agreement, a solar developer and a locality may provide funding for important local capital projects included in the locality’s capital improvement plan, or for deployment of broadband which is so important to the improving the quality of life in rural Virginia.
These 11 bills all passed and were signed by the governor. Combined, they represent a comprehensive package that will ensure the rapid deployment of utility-scale solar as a renewable and reliable energy source for the Commonwealth while at the same time, providing legal mechanisms to facilitate working relationships with the localities in which solar projects are to be located.
Customer Retail Choice
Customer retail choice was another major category of energy legislation this year that dovetailed the broader push for renewable energy access.
For years, Virginia has allowed customers to purchase electricity from sources other than the incumbent monopoly utility but only under certain conditions. In order to qualify, customers had to either purchase large quantities of electricity at a single site, large quantities at multiple sites aggregated under one customer, or customers had to buy 100% renewable energy that was not available through the incumbent utility.
The option to purchase 100% renewable energy is in jeopardy, however, due to a provision that requires customers to purchase from the utility if the utility can provide the same offering.
Two bills carried by Delegate Jeff Bourne and Delegate Mike Mullin sought to maintain access to customer retail choice by changing the conditions under which customers could competitively shop.
Delegate Mullin’s bill passed in an amended form as a pilot program that applies to a limited number of customers.
Delegate Bourne’s bill, which was presented on behalf of the Renewable Energy Buyers Alliance, as introduced would allow customers to shop for 100% renewable energy from any service provider, even if the utility provides a 100% renewable offering – as both of Virginia’s incumbent utility providers are set to do this year. This broad fix would ensure access to the market that the General Assembly originally created during the 2007 electricity regulation debates.
Delegate Bourne’s legislation, HB 868, was passed with a re-enactment clause that will require the General Assembly to consider the proposal again next year before becoming law.
Both bills represented a significant accomplishment in Virginia’s push for energy reform in that even though they are more limited in scope than originally intended, they were passed despite opposition from Virginia’s utility companies.
Gentry Locke’s Role
Gentry Locke represented a number of key players in the energy debate this year, including the Renewable Energy Buyers Alliance, Advanced Energy Economy (AEE), and the Maryland DC Virginia Solar Energy Industries Association (MDV-SEIA).
We were able to leverage our comprehensive suite of services to support the passage of the Virginia Clean Economy Act, the utility-scale solar legislative package on land use and energy revenues, and legislation on customer retail choice.
Gentry Locke partner Greg Habeeb served as legislative counsel and a lobbyist for Advanced Energy Economy, the lead drafter and coalition leader for the Virginia Clean Economy Act. Greg also served as legislative counsel and lead lobbyist for the Renewable Energy Buyers Alliance. Greg was involved in the final negotiations on the VCEA with the utility companies and worked with Governor Ralph Northam’s administration on the final draft of the conference report.
Gentry Locke partner Chip Dicks served as legislative counsel and lead lobbyist for MDV-SEIA and other companies on the utility-scale solar legislative package, organizing the passage of a half-dozen bills critical to the long-term success of utility-scale solar. Chip’s role included drafting the bills, negotiating changes with local government representatives, lobbying legislators directly, and testifying in committee.
Gentry Locke Government Affairs Director Matt Moran provided strategic communication services to MDV-SEIA, organizing a six-figure digital campaign to support passage of the organization’s priorities, and coordinating multiple press conferences and briefings for reporters on the Virginia Clean Economy Act at critical junctures. Matt also provided direct lobbying on behalf of MDV-SEIA and AEE.
By combining our broad and comprehensive suite of services – legislative counsel, legislative lobbying, and strategic communications – we were able to support our clients’ goals across the board. We believe our resources work best when leveraged together, and this session was case in point for that philosophy.
The energy policy arena will continue to evolve in the years ahead as many of these legislative priorities are implemented and updated. Gentry Locke’s Government & Regulatory Affairs team will continue to closely monitor these issues and work to provide our clients with high-quality service to help achieve their goals.
Outside the policy realm, Chip Dicks leads Gentry Locke’s Solar Land Use Team which represents solar developers in obtaining local zoning approvals in localities all across the Commonwealth. Other members of the Solar Land Use Team include Jon Puvak, Scott Foster and Max Wiegard.
Wednesday, April 29th, 2020
As this year began, the nation’s attention was riveted on the impeachment proceedings triggered by a whistleblower complaint. Competing efforts to protect and “out” the whistleblower were on full display in the political arena. Fallout was not surprising, and recently the Inspector General who received and forwarded the whistleblower’s complaint was terminated.
This article is not a political one.1 We start here only because it illustrates the increasing frequency of whistleblower complaints, and the power of such allegations once they are made public. These realities are now much more acute for the thousands of businesses which have received some portion of the $3 trillion dollars distributed by Congress in the attempt to mitigate the devastating economic impact of the COVID-19 pandemic. On April 27, the independent oversight committee created to oversee the spending of this $3 trillion dollars launched it’s website and announced that a number of investigations are already underway. See https://pandemic.oversight.gov/.
In addition, every Virginia business, whether or not they receive federal funds, will now be subject to a new wave of complaints by current and former employees once a new whistleblower protection law passed by the General Assembly becomes effective July 1, 2020. With unemployment projected to hit historic highs in the next two weeks, and with the Congressional Budget Office projecting a slower than hoped for economic recovery, the circumstances are ripe for increased claims and litigation involving whistleblowers. In a word, the phrase “timing is everything” has new significance.
Be Proactive
In this context, corporate boards of directors and senior management need to take advantage of this time and be proactive to avoid becoming the next target of a whistleblower claim. Business leaders would do well to consider what studies have shown about whistleblowers. For example, earlier this year, the Harvard Business Review published “Throwing Out Your Assumptions About Whistleblowing“ which concluded that the sudden increase in the willingness to speak out about problems in the workplace is not tied to an increase in criminal activity. Instead, this research on employee whistleblowing showed that a combination of the MeToo movement and the internal accountability systems implemented in the past 5 years are simply starting to work as designed. Data provided by a leading provider of employee hotline management systems, showed more than two million internal reports by employees who worked at more than 1,000 publicly traded companies.
This study, like many others,2 found that whistleblowers play a critical role in keeping companies healthy. Every organization has shortcomings and room for improvement and at times business practices get off the rails into dangerous areas. The sooner problems are identified the better. An effective internal complaint system is a key part of good corporate governance and can be used to learn and address issues early before they evolve into larger more costly problems. This new report identified three (3) lessons for managing whistleblower systems:
1. Contrary to assumptions, the higher number of complaints a company receives the better. This study showed that companies that received more hotline complaints had fewer lawsuits and smaller legal settlements, as this reflected that the company had created a culture that responds favorably to complaints (and where employees felt secure enough to make them). In other words, an active hotline system indicates that management is trusted, and allows the company to efficiently address problems. The key question for companies who implement a hotline system often becomes whether sufficient resources are devoted to investigating reports in a timely manner.
2. Secondhand reports can be valuable. While firsthand information is always preferable as being the most reliable when conducting an investigation, this study found that secondhand reports often serve as a critical initial source of information. It is important that they not be dismissed out of hand. The authors reported that in their review of the data, second-hand reports usually involved less personal bias and emotion, even if the information provided had not been entirely validated. Second-hand reports tend to identify patterns of behavior or highlighted significant incidents of misconduct or serious deviations. In contrast, many first-hand reports brought self-serving claims, which can often be idiosyncratic. As such, the report cautioned against following a practice or policy of disregarding second-hand reports as unfounded or unworthy of further investigation.
3. Don’t expect full details at first. The study also recommended that companies not take an initial lack of detail in a hotline report as a reason not to investigate. The data suggested that many whistleblowers reach out initially with very few details to see who will respond, and only provide detailed information once they can speak to someone they can trust.
In evaluating what steps to take management and corporate boards should ask themselves whether the company really has an effective internal system for receiving and responding to complaints which employees will use before going public. In considering this issue, companies may want to consider the following questions: (i) when was the last time the process for receiving employee complaints was reviewed to determine its adequacy; (ii) when was the last time the complaint process was used; (iii) how frequently has the complaint process been used; (iv) what types of complaints have been received; (v) is there more than one process used depending on the type of complaint – discrimination/harassment,3 safety complaint, pay/benefits, or a financial or business ethics issue – and is this wise; (vi) do employees understand the existing complaint process(es) and how to make a complaint; (vii) how quickly have we responded to complaints in the past; (viii) how equipped are we right now to respond to different forms of complaint; (x) does our system insure an independent review if the complaint involves allegations against a senior officer, and if not, a change be made; (xi) has the company ever disciplined or terminated an employee within a few months of having used the complaint process; and (xii) how are the investigations and any actions taken documented.
Rest assured, complaints of alleged retaliation by whistleblowers and qui tam claims are inevitably going to be filed against many companies in the coming months and years. The only question will be whether the employee uses an internal process to give the company the chance to address the concern first, or whether a disgruntled or former employee will go directly to a federal or state agency, or take the issue directly to court. For just one example, as part of the CARES Act, Congress appropriated $25 million to help beef up the Office of Inspector General for the U.S. Department of Labor (“OIG”) to carry out oversight of the unprecedent expansion of unemployment insurance benefits. On April 15, 2020, OIG released its Pandemic Response Oversight Plan, which will run at least through September 30, 2021, and on April 21, OIG issued its initial Advisory Report identifying “Initial Areas of Concern.” Likewise, there are a host of law firms whose sole focus is on representing whistleblowers and workers who claim to have been retaliated against for reporting unlawful acts or other acts of misconduct, or who are interested in reporting fraudulent activity in government sponsored programs.4 Virginia’s new Whistleblower Protection Ac, will only broaden the arsenal of claims that individuals may now bring.
Whistleblower Claims Related to the COVID-19 Pandemic
On March 20, 2020, Attorney General Barr publicly urged citizens to report suspected fraudulent schemes related to the pandemic and established a new National Center with a hotline and an email address to facilitate whistleblower complaints. As my partners, Jenny DeGraw and Erin Harrigan have pointed out, in concert with this national call, the federal prosecutors for Virginia, the FBI, and Virginia State Police announced the formation of the Virginia Coronavirus Fraud Task Force. Implicit in these announcements is the assumption that when the government quickly distributes close to $3 trillion, there are going to be situations where individuals and businesses seek to profit improperly by engaging in less than ethical practices and even outright fraud. But well-meaning business will undoubtedly make mistakes in navigating these brand-new programs, and their response to discovering these mistakes may create “issues” and new problems that far out-weigh the original mistake. And there will be companies that do everything right, but have a disgruntled employee who is looking for an avenue for either revenge or leverage in a situation.
It is not just the Department of Justice. For several years, OSHA has been aggressively courting whistleblowers to come directly to the federal agency and bypass company procedures by creating a high-visible and dedicated website, www.whistleblower.gov. This site provides detailed information and a very simple on-line process to file complaints under any of the more than 22 federal laws for which OSHA has enforcement authority.5 Thus, it was not surprising that the Washington Post recently reported that, in a matter of weeks, OSHA had received over 3,000 safety related complaints regarding employers’ struggle to provide a safe workplace. State agencies are also begun highly publicized investigations of companies who are operating during the pandemic. For example, on March 31, Virginia’s Attorney General Mark Herring announced that his office had notified 42 businesses that they were being investigated for price gouging based on consumer complaints received, and on April 27 the Attorney General of New York garnered publicity for its workplace safety investigation of Amazon. Beyond these reports to government agencies, lawsuits are also starting to be filed against employers—like Trader Joe’s in Kentucky for allegedly discharging an employee who criticized the company’s response to the virus on his Facebook page.
Virginia’s New Whistleblower Law – Effective July 1, 2020
As protectors of the “well-established” at-will doctrine, Virginia state courts have consistently dismissed whistleblower claims against employers except in vary narrow circumstances. As such, state law whistleblower claims have never been a real concern in Virginia. This traditional zone of protection will evaporate on July 1, 2020.
Governor Northam recently signed into law HB798, which expressly protects workers from all forms of retaliation if they have reported suspected illegal activity internally or externally, or have engaged in other forms of protected activity. This new law also creates a civil action where broad equitable relief (injunction and reinstatement) is available, as well as a recovery of lost wages and benefits along with attorney’s fees.6
The prohibited forms of retaliation under Virginia’s new whistleblower law are quite broad, including any of the following:
1. Reporting in good faith a violation of any federal or state law or regulation to a supervisor, any government body, or law enforcement officer;
2. Being requested by a government body or law enforcement official to participate in an investigation, hearing or inquiry;
3. Refusing to engage in a criminal act that would subject the employee to criminal liability;
4. Refusing an employer’s order to perform an action that violates any federal or state law or regulation when the employee informs the employer that the order is being refused for that reason; or
5. Providing information to or testifying before a government body or law enforcement official conducting an investigation, hearing or inquiry into any alleged violation by an employer of any federal or state law or regulation.
Most whistleblower protection statutes require the employee’s complaint to be tied to specific unlawful conduct regulated by the particular statute. For example, under the False Claims Act, protected activity has to be tied to complaints about the alleged government fraud. In the nuclear field, a whistleblower must complain about a violation of the Energy Reorganization Act. There is no such requirement or limitation in new Virginia whistleblower law. An employee can complain about a perceived violation of any federal or state law and is protected from virtually any form of negative response or a change in his/her terms or conditions of employment. Moreover this new Virginia law expressly allows an employee to seek an injunction and other equitable relief from a court based on a supervisor’s threat to take action.
Although broad, the new Virginia law does not give the whistleblower carte blanc. The law will not protect a whistleblower who: (i) makes statements or disclosures knowing them to be false or in reckless disregard of the truth; (ii) discloses data protected by law or a legal privilege; or (iii) permits disclosures that would violate federal or state law or would impair the right of another to the continued confidentiality of communications provided by common law.
Procedurally, there is no need for the new Virginia whistleblower to first go to OSHA or any other federal or state agency and make a complaint. Instead, the employee can go directly to the court and is encouraged to do so quickly as claims must be filed within one year of the alleged retaliatory act. Encouraging the quick filing of claims appears consistent with the equitable nature of the relief that courts may award. Undoubtedly, we will see early claims under this new statute by existing employees asking a local judge to stop a threatened termination by issuing a temporary injunction, and others where former employees insist on being reinstated.
While this new whistleblower statute does not provide for an award of general compensatory and punitive damages, it seems inevitable that plaintiff lawyers will seek to push the envelope. We expect that they will bring separate common law, wrongful discharge claims alleging a violation of public policy based on this new statutory protection, and seek both compensatory and punitive damages against both the company and individual owners or managers alleged to be the bad actor. See VanBuren v Grubb, 284 Va. 584, 733 S.E.2d 919 (2012) (allowing wrongful discharge claims against the owner and supervisor who is the wrongdoer). In short, this new whistleblower claim is likely to generate a lot of litigation in the next several years.
Consider the New Normal
Even if your company’s policies and procedures satisfy the type of review suggested at the beginning of this article, the current situation is far from “business as usual.” Most internal complaint processes do not contemplate that large portions of the workforce and/or key compliance personnel are working remotely. Likewise, disruptions during the pandemic will likely have adversely impacted a company’s ability to move nimbly and responsively when complaints are received.
Given what appears to be an inevitable increase in whistleblower claims, it is incumbent on companies to ensure that its existing internal complaint system is still a viable one, and to make decisions now to make sure that proper steps will be taken in a timely manner if and when a complaint is filed in the next 3-6 months. Here are a few specific additional steps to consider:
- Complaint System: Looking at the “facts on the ground” at your company see whether changes need to be made to ensure that a whistleblower can file a complaint internally and it will properly be tracked. If an internal complaint line needs to be routed to different numbers or emails, those changes should be put in place quickly and the new information posted so that is easily accessible and is not confusing. If the complaint process normally requires an in-person meeting, reassess whether this type of meeting is required in all instances. Likewise, evaluate other aspects of the “established” procedures to ensure that they will work in the current situation, and not become unintended barriers that push the employee to go to the government. In this regard, if a third-party hotline is being utilized, it is important to periodically verify that it is still available.
- Review Protocols: Determine if protocols and systems used when responding to complaints or conducting investigations need to be updated to reflect changed circumstances. The reality is you company may now have less capability to respond in a timely manner to a whistleblower complaint. With key individuals working remotely, it may be very difficult to utilize pre-existing protocols. Figuring out how to conduct an investigation while maintaining confidentiality and the need for in-person interviews is important. If key people normally relied upon to conduct investigations have been furloughed or otherwise unavailable due to COVID-19 issues, additional steps, such as lining up third party investigators may be needed. While some delay is certainly reasonable, it is important that whistleblower complaints are not ignored. Each complaint must be acknowledged and a time table should be set for investigating so the whistleblower knows that s/he is not being ignored.
- Communications to the Workforce: If changes in reporting channels or protocols are implemented, it is critical that they be communicated out to the workforce, and done in a manner that drives home the company’s non-retaliation policy.
- Internal Education: The pandemic is changing the law in a number of different areas and it is happening overnight. As my white collar defense colleagues have pointed out,7 “routine” business actions that have been followed for years may now be illegal and fall under intense scrutiny as these new federal loans, laws, and regulations related to COVID-19 have created new levels of exposure for companies, as well as their officers, directors and managers.
- Retaining Documents: For businesses that converted to a remote work environment almost overnight, employees may be using personal devices for business purposes. Likewise, if a reduction in force is about to occur, steps need to be put in place to ensure that all key information (email, texts and other electronically stored information) held by all key employees, including those who are to be or were terminated, is preserved and to prevent them from taking documents in violation of confidentiality agreements. Document retention is a key issue especially if a whistleblower complaint has been received.
- Key Advice: When a whistleblower claim is received, especially one that uses the company’s internal reporting system, it will become more important than ever that the company determine which complaints are significant enough to involve outside counsel versus those that can be handled internally. Certainly any situation involving allegations against senior officers, complaints about the possible misuse of federal funds, an allegedly false report to a government agency, or an alleged cover up of past mistakes, warrant a prompt call to outside counsel Additionally, where an employee has already engaged outside counsel, it makes sense to engage counsel to advise the company who will be able to direct any investigation.
Conclusion
Life as we knew it prior to March, 2020 has changed drastically, and time will tell how lasting some of those changes will be. What is clear is that employment law in Virginia will change dramatically as of July 1, 2020, and these changes will radically alter the longstanding business friendly climate that was accepted as “normal.”8 Among the most important, and underreported changes, is Virginia’s new Whistleblower Protection Act which will apply to employment decisions made after July 1, 2020. The best antidote for disarming this change in the law is to have both: (i) an effective and easy to use internal complaint system that encourages whistleblowers to come forward to the company with concerns and (ii) a well-trained management team that does not view every complaint as a personal attack but takes each seriously and ensure that each is investigated promptly and identified problems are addressed.
Now is the time for senior managers and boards of directors to make sure the systems in place are working, and if there is no system for internal complaints beyond an open door policy to consider implementing one. The stakes are especially high for organizations who have taken loans from the federal government or who have or enter into contracts to provide goods and services to the federal or state government. Federal and state prosecutors and enforcement agencies are on high alert to detect and route out fraudulent behavior. In this process good companies can easily find themselves under scrutiny, and creating a system that encourages internal reporting of concerns and free flow of information is critical to avoiding serious accusations of wrongdoing.
The pandemic has impacted every organization to one degree or the other, even those which have continued to operate as a critical industry. As Virginia and other neighboring states begin to adjust and relax the stay-at-home directives and other business restrictions, each organization is going to be facing a flood of important business decisions. It would be easy to put a review of the internal whistleblower system on the back burner and to assume it will work just fine. Resist this impulse. Take the time now – before it is needed – to make sure you system works and that the “current” reality has not changed the ability to respond quickly should a complaint be raised.
One of the first areas likely to generate a complaint is from an employee who is concerned that the company is not providing a safe work environment. Complaints of this nature could come when employees are recalled to return to work or even sooner if the company has a worker develop COVID-19.9 This is an immediate area of concern for all businesses, and managers must be trained to respond appropriately to complaints of this kind. When emotions run high, statements can be made in the heat of the moment can create needless legal problems – supervisors who are unable or unwilling to be trained to handle this responsibility without generating bigger problems must be removed.
There are also going to be claims under the new Family Friendly Coronavirus Relief Act, which provides paid sick leave and extended Family Medical Leave Act, especially if schools do not reopen in August. There also likely to be claims by employees who are not rehired or who are laid off later this year if the economy does not rebound as hoped. Given the dramatic changes in the laws that will govern employment in the Commonwealth and the EEOC’s recent decision to rescind its long-standing Policy Statement which challenged the use of mandatory pre-dispute arbitration agreements, Virginia business may also decide that now is also the time to re-evaluate the benefits of adopting a comprehensive dispute resolution plan which will result in the resolution of most employment-related claims outside the court system, through the use of mediation and mandatory binding arbitration.
The costs of responding to these employment-related claims will be significant, but will pale in comparison to the expense and distraction that will come from a federal or state audit or investigation into the work done on a federally-funded project or use federal funds received under a pandemic loan program. Now is the time to make the time to review your internal process to make sure that you have a system you can rely on in light of the new realities of remote work by so many employees. Time invested now in this effort will help you avoid a much larger investment of time in the future, and equally important encourage your employees to come to the company with their concerns rather than immediately taking the issue to a lawyer or a government enforcement agency.10
1 This is not to say that politics will not impact this area. When Congress returns next week a new issue – whether businesses who reopen during the pandemic should be protected from liability- will become the latest battleground between the two parties. https://www.bloombergquint.com/politics/pelosi-schumer-reject-liability-limit-for-companies-that-reopen
2 See https://hbr.org/2018/11/research-whistleblowers-are-a-sign-of-healthy-companies; https://knowledge.wharton.upenn.edu/article/whistleblowers-in-business/;
3 In FY 2019 alone, the EEOC’s Offices in Richmond and Norfolk, Virginia received a total of 2,265 charges alleging various forms of discrimination or harassment, and in 1,055 of those charges (46.6%) claimed retaliation for engaging in protected activities. In 2009, claims of alleged retaliation were made to the EEOC in only 31.8% of all charges filed. https://www1.eeoc.gov/eeoc/statistics/enforcement/charges_by_state.cfm#centercol.
4See https://www.zuckermanlaw.com/ ; https://www.employmentlawgroup.com/what-we-do/whistleblower-protection-rewards/whistleblower-retaliation-attorney/; https://www.spigglelaw.com/virginia-whistleblower-lawyer/
5 We have significant experience in defending whistleblower complaints filed with OSHA and decided through an administrative system instead of the courts. See, Whistleblowers in the Workplace: A New World Order
6 The Governor separately signed into law the Virginia Values Act which, among other sweeping changes, repeals a provision added to the Virginia Human Rights Act in 1995 to prohibit common law public policy wrongful discharge claims based on allegations of employment related discrimination, harassment and retaliation claims. This change will likely lead to efforts to have the Supreme Court of Virginia reconsider whether there is now a common law public policy wrongful discharge claim that protects whistleblowers in Virginia. See, e.g., Lawrence Chrysler Plymouth Corp. v Brooks, 251 Va. 94, 465806 (1996); Conner v Nat’l Pest Control Ass’n, 257 Va. 286, 513 S.E.2d 398 (1999), Dray v New Mkt Poultry Products, 258 Va. 187, 518 S.E.2d 312 (1999) Rowan v Tractor Supply Co., 263 Va. 209, 559 S.E.2d 709 (2002) (whistleblower cases where court found no common law claim existed)
7 See articles by my partners, Jenny DeGraw and Erin Harrigan:https://www.gentrylocke.com/news/doj-and-commonwealth-of-virginia-to-investigate-potential-hoarding-of-coronavirus-medications-and-other-essential-medical-supplies/; and https://www.gentrylocke.com/news/when-it-comes-to-covid-19-criminal-implications-prosecutors-are-casting-a-wide-net/ .
8 In addition to the Virginia Values Act reference above (which creates a new set of state law anti-discrimination claims which are not subject to the federal caps on damages), the General Assembly passed new law prohibiting the use of noncompete agreement with “low wage” employees (those making less than $59,000), created a claim for new wage theft when dispute arise about pay, created a claim to challenge independent contractor/employee classifications, and raise the minimum wage in Virginia. The last provision will not be effective until May 1, 2021.
9 Remember too that when two or more employees act in concert to address safety concerns in the workplace they may claim protection under Section 7 of the National Labor Relations Act. This protection applies even when there is no union involved.
10 It should be pointed out that the implementation of a dispute resolution plan that requires the use of mandatory arbitration will not prevent the filing of a whistleblower complaint to a state or federal agency or lessen the costs of a government investigation into such a complaint. The arbitration will simply keep the employee from seeking monetary and equitable relief in a public forum where the civil court system will resolve the issues and determine damages.
Tuesday, April 28th, 2020
On Monday, April 27, 2020, Lynchburg Circuit Court Judge F. Patrick Yeatts issued an order granting a temporary injunction that allowed SafeSide Lynchburg to reopen its indoor shooting range. The owners of SafeSide Lynchburg, joined by the Virginia Citizens Defense League, Gun Owners of America, and the Association of Virginia Gun Ranges filed suit against Governor Northam challenging the inclusion of indoor shooting ranges as businesses ordered closed by Executive Order 53. Judge Yeatts enjoined and prohibited the Commonwealth from enforcing the prohibition on public access to SafeSide Lynchburg’s range as set forth in paragraph 4 of Executive Order 53, provided that SafeSide Lynchburg operates in a manner consistent with Paragraph 7 (follows social distancing and sanitizing guidance from federal and state authorities). Judge Yeatts’ order only concerns SafeSide Lynchburg’s indoor range. The Plaintiffs are considering options to expand the injunction to indoor ranges statewide.
In a written opinion, Judge Yeatts held that although “Virginia Code § 44-146.17 allows the Governor to declare a state of emergency under when the State Health Commissioner issues an ‘order of isolation concerning a communicable disease of public health threat’ as defined in Virginia Code § 44-146.16…Virginia Code § 44-146.15(3) constrains the Governor from ‘limiting or prohibit[ing] the rights of the people to keep and bear arms as guaranteed by Article I, Section 13 of the Constitution of Virginia or the Second Amendment to the Constitution of the United states, including the otherwise lawful possession, carrying, transportation, sale or transfer of firearms.” In addressing the Commonwealth’s argument, Judge Yeatts noted that “ The Governor appears to argue that, when he declares a state of emergency, he can ignore any law that limits his power, even laws designed to limit his power during a state of emergency. Such an interpretation would defeat the reason for making § 44-146.15(3) and render the statue meaningless.” Judge Yeatts held that the ability to obtain firearms training is sufficiently close to core Second Amendment concerns that a restriction on the ability to obtain such training could impose substantial burdens on core Second Amendment rights.
A copy of Judge Yeatts’ order and ruling can be found here.
Thursday, April 23rd, 2020
On April 21, 2020, OSHA issued a list of tips for Construction industry employers to follow so that they can reduce the risk of exposure to the coronavirus on the jobsite. That list can be viewed here. Many items on the list are familiar at this stage of the pandemic, including allowing employees to wear masks during work, continuing to use normal control measures including PPE, avoiding physical contact and practicing social distancing where possible, and cleaning shared tools and equipment.
The full list of OSHA tips includes:
- Encourage workers to stay home if they are sick.
- Allow workers to wear masks over their nose and mouth to prevent them from spreading the virus.
- Continue to use other normal control measures, including personal protective equipment (PPE), necessary to protect workers from other job hazards associated with construction activities.
- Advise workers to avoid physical contact with others and direct employees/contractors/visitors to increase personal space to at least six feet, where possible. Where work trailers are used, all workers should maintain social distancing while inside the trailers.
- Train workers how to properly put on, use/wear, and take off protective clothing and equipment.
- Encourage respiratory etiquette, including covering coughs and sneezes.
- Promote personal hygiene. If workers do not have immediate access to soap and water for handwashing, provide alcohol-based hand rubs containing at least 60 percent alcohol.
- Use Environmental Protection Agency-approved cleaning chemicals from List N or that have label claims against the coronavirus.
- To the extent tools or equipment must be shared, provide and instruct workers to use alcohol based wipes to clean tools before and after use. When cleaning tools and equipment, workers should consult manufacturer recommendations for proper cleaning techniques and restrictions.
- Keep in-person meetings (including toolbox talks and safety meetings) as short as possible, limit the number of workers in attendance, and use social distancing practices.
- Clean and disinfect portable jobsite toilets regularly. Hand sanitizer dispensers should be filled regularly. Frequently-touched items (i.e., door pulls and toilet seats) should be disinfected.
- Encourage workers to report any safety and health concerns.
Additional OSHA information and guidance concerning the coronavirus can be found at its website: www.osha.gov/coronavirus.
Stay safe and healthy out there.
Thursday, April 23rd, 2020
Today, Friday, April 24, 2020, President Trump signed into law the “Paycheck Protection Program and Healthcare Enhancement Act,” providing an additional $484 Billion in relief, with a focus on small businesses and health care providers. Although it is hard to believe, it was less than a month ago that President Trump signed into law the “CARES Act,” a $2 Trillion relief package.
The CARES Act contained $349 Billion in funding for the Paycheck Protection Program and an additional $10 Billion in SBA funding for the Economic Injury Disaster Loan Program. These funds were quickly depleted, with the need far outpacing the supply of dollars. Many banks were overwhelmed with the demand from potential borrowers, and by the time processes were put in place to better handle applications, the SBA announced it was out of funds. In response, Secretary of Treasury Mnuchin began working with Congress to approve additional funds for these programs. This most recent legislation provides an additional $310 Billion for the Paycheck Protection Program and an additional $10 Billion in SBA funding for the Economic Injury Disaster Loan Program.
It remains to be seen whether these additional funds will meet the existing demand for the program dollars. Some in the banking industry have estimated that these additional funds will quickly be exhausted by applications that were already in process at the time the initial funds were depleted.
The initial round of funding saw a number of large and public companies receive covered loans under the Paycheck Protection Program, which has drawn increased criticism. In response, the Department of Treasury issued additional guidance regarding the required applicant certifications, including that “it is unlikely that a public company with substantial market value and access to capital” can certify in good faith that the covered loan under the Paycheck Protection Program is necessary to support ongoing operations of the borrower. These borrowers are permitted to repay the funds by May 7, 2020 without consequence, and the repaid funds should then be made available to other qualifying businesses. While the Wall Street Journal reports that at least 100 public companies received funds under the Paycheck Protection Program, it is unclear the amount of deployed funds that will be repaid.
The past month has seen the Department of Treasury and the SBA focus primarily on the deployment of the funds and the replenishment of the programs when it became apparent the need was far greater than anticipated. As a result, there is very little guidance on the process of calculating and requesting forgiveness, and many questions remain. While many applicants under the Paycheck Protection Program were frustrated during the initial round of funding, a number of applicants were approved and have received loans. For these borrowers the eight week covered period to use the funds in accordance with the program requirements and to request forgiveness has already begun. We anticipate that the Department of Treasury and the SBA will now turn their attention to providing additional guidance to borrowers and lenders on the use of the funds and on requirements to achieve full forgiveness.
We also anticipate additional guidance regarding the interplay of multiple programs. The CARES Act contained a number of ancillary programs, as does this most recent legislation. Particularly borrowers who are also recipients under other programs, e.g. health care providers who have received funds under the Provider Relief Fund, should be paying particular attention to the separate and distinct program requirements and the way that these requirements will interact with each other. Documentation will be key for all borrowers, and particularly for borrowers who receive funds with varying usage and reporting requirements.
Much of the guidance we have received thus far in connection with the Paycheck Protection Program is in the form of additional “Frequently Asked Questions.” Borrowers should continue to monitor www.treasury.gov and www.sba.gov for additional information and guidance on the program including the requirements and process for applying for covered loan forgiveness. For health care providers, we anticipate additional guidance will also continue to be issued by the Department of Health & Human Services at www.hhs.gov.
Tuesday, April 21st, 2020
Unfortunately, the current pandemic state has given rise to various forms of hoarding of certain medications and other essential medical supplies. As reports about potential stockpiling of hydroxychloroquine and chloroquine by physicians began to surface, the Department of Justice announced that it would be investigating instances of this type of activity.
In late March, US Attorneys in Ohio issued a public statement indicating their commitment to address situations where physicians who are prescribing anti-viral medications such as hydroxychloroquine to healthy friends or associates because there is some anecdotal evidence the drugs could treat the novel coronavirus.
All US Attorneys’ Offices have been directed to designate lead prosecutors in their offices to handle COVID-19 related hoarding and price gouging cases that are expected to be brought.
Meanwhile, pharmacists have expressed concerns about potential shortages of drugs including chloroquine and hydroxychloroquine. They have noted increased volume of prescriptions of these medications, which could result in shortages of these medications to treat conditions for which they are typically prescribed, such as lupus, malaria, and rheumatoid arthritis, and if needed to treat patients who have confirmed diagnoses of COVID-19.
The Department of Health and Human Services and other regulatory agencies have received reports of physicians attempting to hoard these drugs or to write prescriptions to family members and friends who do not currently have a need for these medications. Some of the indicators that have raised concerns are instances of prescriptions of unusually high numbers of pills or prescriptions being called in for out-of-state patients. In some states, pharmacy boards have begun to impose restrictions on the prescription and distribution of these medications in an attempt to prevent shortages of these medications.
The focus of law enforcement appears to be on ensuring that these medications are being prescribed and used appropriately. This means that investigators will likely be reviewing prescription data for cases where physicians may have given a false diagnosis or included false information to cause a prescription to be dispensed.
In Virginia, a Coronavirus Fraud Task Force has been created to address these issues which are arising during the current pandemic. This task force is spearheaded by the US Attorneys in the Western and Eastern Districts of Virginia. The Virginia Health Commissioner Dr. Norman Oliver, in response to increased demand for potential treatments for COVID-19 for drugs, reminded physicians and pharmacists by letter on March 25, 2020 that these medications should only be dispensed under specified limited circumstances based on legitimate medical need. Dr. Oliver, in consultation with the Virginia Department of Health Professions, the governing body for physicians and pharmacists practicing in the Commonwealth, also cautioned against improper dispensing and potential hoarding of these medications.
The U.S. Attorney’s Offices for the Eastern and Western Districts of Virginia issued a statement confirming that federal prosecutors are aware of Dr. Oliver’s warnings regarding this increased demand and potentially improper behavior by physicians and other health-care providers who may be improperly prescribing these drugs to themselves, their families, and others without a legitimate medical purpose. They confirmed that their offices, as part of a joint COVID-19 Fraud Task Force, will be closely monitoring this situation and are prepared to investigate and prosecute potential violations of federal and state law committed by any individuals or entities, including physicians, dentists, and other healthcare providers, related to these prescription drugs.
This Virginia COVID-19 Task Force has sent letters to the CEOs of all major hospital systems in the state, alerting them to the potential for fraudulent or illegal activity associated with the pandemic. Hospital leadership was specifically informed about the potential criminal consequences that could arise from hoarding of certain medical supplies, including those identified as scarce in the March 23, 2020 Executive Order signed by President Trump. Among the medical supplies designated as scarce are N-95 masks, portable ventilators, chloroquine and hydroxychloroquine, and a variety of other protective equipment utilized by medical personnel. The letters went a step further, requesting that hospital administrators identify individuals or entities who may have acquired medical supplies in quantities beyond what they would reasonably use or for the purpose of charging exorbitant prices for these items.
The Virginia Secretary of Public Safety and Homeland Security has echoed a similar focus on the state level, stating that Governor Northam and his administration will not tolerate any fraudulent activity taking place in Virginia related to the pandemic.
Providers should be mindful of the increased focus on prescription activity of these medications. Prescriptions that raise concerns or do not appear to be for a legitimate medical purpose may result in a criminal investigation or potential criminal charges. Providers should also be aware that these type of allegations often result in complaints to the Virginia Board of Medicine and other specialty boards which can lead to investigations and potential disciplinary action against the providers’ license such as suspension or revocation.
If you have concerns about prescription activity or any of these related issues of hoarding or price gouging, please contact our Criminal and Government Investigations team for more information. If you have been notified of a Board of Medicine or other specialty board investigation or have questions about licensure implications, please contact our Board of Medicine and Healthcare Professions team.
See also: When it comes to COVID-19 criminal implications, prosecutors are casting a wide net
Sunday, April 19th, 2020
Federal and state prosecutors are casting a wide net for potentially fraudulent and illegal activity associated with the COVID-19 pandemic, which could catch businesses and industries, who are not accustomed to such scrutiny, off guard.
According to recent public pronouncements from federal and state officials, investigations into fraud, bribery, kickbacks, price-gouging, and supply-chain practices all will receive heightened attention in the coming weeks and months.
The nature and scale of the coronavirus outbreak means many industries not typically in the glare of federal prosecutors or state Attorneys General could be subject to criminal investigations. What many businesses may consider to be typical responses to supply and demand or ordinary commercial practices could suddenly be subject to a lengthy and costly legal fight.
A State of Emergency
Declarations of emergency – both at the state and national level – trigger a particular set of potential criminal investigations and increased scrutiny of business and commercial practices. Typically, these declarations follow natural disasters.
Hurricanes, tornados, and severe storms hit different regions of the country throughout the year. Businesses in construction, building repair, and insurance industries respond to these disasters regularly, and so are better prepared to implement anti-price-gouging, anti-bribery, and anti-fraud policies as part of their normal operations during disaster response. Because of the frequency of these events, protective policies are integrated into business plans for many within these industries, and lawyers advising these clients anticipate the need for these policies.
The COVID-19 pandemic, however, poses an entirely new challenge – declarations of emergency are in place in every state, and throughout the nation, and the nature of this particular emergency is unprecedented in the industries affected by the declaration.
The possibility of criminal prosecution faces industries that are ill-equipped to confront it, because this pandemic is far outside the norm of what these industries see in their businesses each year. The last such widespread health epidemic happened more than 100 years ago, long before prosecutions of business and disaster task forces became part of the norm of criminal practice.
The same criminal implications that follow businesses operating after natural disasters are now being focused, like a laser, on industries that are not typically in its glare. These industries may not have the protective policies and measures in place to guard against a criminal investigation into what they would view as ordinary commercial practices responding to traditional forces of supply and demand.
The signals from federal and state prosecutors are loud and clear, and the net will be wide. Elected leaders have laid the ground work for strong actions by prosecutors with executive orders, warning letters, and public statements..
On March 20, 2020, the United States Attorneys for the Western District of Virginia and the Eastern District of Virginia announced a joint federal and state task force, the “Virginia Coronavirus Fraud Task Force.”
Led by designated federal prosecutors in each district, teams of investigators from federal and state law enforcement agencies including the FBI and the Virginia State Police are taking and pursuing individual complaints of fraud, price-gouging, bribery, and supply chain issues throughout the state.
As part of the mission of this joint task force, the US Attorneys have focused specifically on three areas – those providing services to end-users during the pandemic, businesses in any part of the supply chain for 15 categories of “scarce resources,” and healthcare providers treating COVID-19 symptoms.
Separately, Virginia Attorney General Mark Herring has emphasized the commitment of his office to pursuing and investigating complaints of price-gouging under the Virginia Post-Disaster Anti-Price Gouging Act.
These actions are based, at least in part, on the warnings and actions of elected leaders – giving prosecutors broad cover for their aggressive position.
Governor Ralph Northam’s State of Emergency, issued on March 12, 2020, automatically triggered Virginia’s anti-price gouging laws. On March 23, 2020, the President issued an Executive Order targeting suspected price-gouging and hoarding of scarce supplies and medical resources, and charged the United States Department of Justice to prioritize investigations in these matters.
Virginia’s statute addressing price-gouging is broad, and proscribes “unconscionable prices” that “grossly exceeded” the price 10 days prior to the emergency declaration in the state. The Virginia Attorney General’s office is charged with investigations into consumer complaints, and the statute specifically provides that “actual sales” at the advertised price are not necessary to prove a violation of the statute. Such expansive language allows for a significant amount of leeway, and businesses and individuals falling under investigation will often face scrutiny under a standard of unconscionability that will be unique with the severity of this pandemic.
On March 25, 2020, the Virginia Health Commissioner issued a “warning” letter to healthcare providers regarding “off-label” prescribing of certain medications to treat COVID-19, describing those treatments as “life-saving” for several different medical conditions and cautioning against the “hoarding” of such medications.
Following Governor Northam’s declaration of emergency, the Attorney General swiftly encouraged consumers to report suspected price-gouging, and, on April 1, 2020, followed up with letters to 42 businesses seeking additional information related to investigations of price-gouging complaints.
As evidence of the commitment of the Virginia Coronavirus Fraud Task Force to prosecuting these cases, on April 10, 2020, the US Attorneys for EDVA and WDVA sent a letter to the CEO of every hospital system operating in Virginia, advising them of their commitment to investigations and prosecutions, alerting them to the “potentially fraudulent and illegal activity associated with the COVID-19 pandemic,” and outlining the “criminal consequences” of hoarding medical supplies identified as scarce in the March Executive Order from the President and the US Department of Health and Human Services.
In this letter, the US Attorney’s called upon the hospital administrators to act a “partners” in combatting these crimes, and encouraged them to “identify individuals or entities” the administrators believed had been hoarding supplies or inflating prices. The letter likened these practices to “extortion” – and businesses who come under the harsh light of criminal investigation in this climate can expect to be treated accordingly: not as businesses operating under ordinary commercial practices, but as common thugs holding “critical” supplies hostage and demanding “extortionate” payments of medical providers to access those supplies.
The Days Ahead
The current climate will favor aggressive prosecutions of fraud and price-gouging arising from the pandemic; prosecutors have been charged with prioritizing these cases and have already initiated investigations, while the end of the COVID-19 outbreak is still nowhere in sight.
While the focus here has been primarily on medical supplies and healthcare providers, businesses can expect a whole host of potential criminal scrutiny to arise from:
- applications for federal and state relief funds for businesses, with an eye towards fraudulent statements made in applying for funds or fraudulent use of funds received;
- community solicitations for donations for business relief, examining whether the business used the donations as advertised;
- advertising to consumers about products or services to combat COVID-19, particularly where statements without the proper supporting information about efficacy, or the proper caveats; and
- increased prices on goods that are not deemed scarce under the federal executive order, but that otherwise could come under the ambit of state law for price-gouging on “essential” supplies, where the ultimate question will be whether someone sought to profit off of the misfortune of others.
Businesses should ensure they keep abreast of the various state and federal regulations that have been triggered by these declarations of emergency and executive orders. Each state has its own set of anti-price gouging, supply hoarding, and disaster fraud laws, and businesses who operate in multiple states need to be apprised of the differences as they cross those borders. Businesses need to implement policies to guard against price-gouging, bribery, fraud, and supply hoarding, and to protect themselves from such practices within their supply chains.
The best defense is a good offense: the key to defending against any complaint of illegal activity or regulatory violation later is to act now to develop proactive policies and to document the decision-making of the business.
Friday, April 17th, 2020
The Equal Employment Opportunity Commission (“EEOC”), like other federal agencies, is releasing new guidance on a periodic basis to address issues arising during this pandemic. On April 9, the EEOC updated previously issued technical guidance adding twelve (12) new questions and the answers. The full technical guidance, including this recent update, which is in the form of Questions and Answers addresses issues that arise under the Americans with Disability Act (“ADA”) and the Rehabilitation Act of can be found here.
Several points maybe of significance:
A.2 Symptom Questions Permitted. Despite ADA limitation on medical inquires, employers are permitted to ask employees about symptoms associated with COVID-19 as identified overtime by the CDC and other public health authorities if done to guide them in determining if an employee poses a direct threat to health in the workplace. This inquiry is not limited to just asking about fevers, chills, cough, shortness of breath or sore throat, but can include other symptoms that become identified, like loss of smell and taste.
B.1 & 2 Confidential Information. COVID-19-related information is confidential and can be kept in the company’s regular medical records. There is no need for a separate stand-alone file. If an employer takes daily temperature checks and maintains a log of the results those logs and the information collected is confidential and must be kept as a medical record.
B.3 Limited Disclosure Permitted. An employer may disclose employee’s name to the public health agency if it learns the employee has COVID-19.
B.4 Sharing Information Permitted. Temporary staffing agency and third-party contractors may notify the joint or statutory employer if it learns one of its employees has COVID-19, because the joint or statutory employer needs to determine if this individual had contact with anyone in the workplace.
C.1 Hiring. An employer may not postpone the start date or withdraw a job offer because an individual is 65 years old or pregnant and are at a higher risk for COVID-19 infection, but an employer is permitted to discuss a potential postponement of the start date or offer teleworking.
D.1 Accommodations. Several accommodations were suggested for those who must perform job duties in the workplace but who are at a high risk of infection per CDC Guidance: (i) designated one-way isles, using plexiglass, tables or other barriers to ensure a minimum distance whenever feasible; (ii) temporary job restructuring of less important duties; (iii) temporary transfer to a different position; and (iv) modifying the work schedule or shift assignment in order to allow an individual with a disability to perform while reducing exposure to others in the workplace or while commuting.
D.2 Mental Disabilities. Employers are cautioned and reminded that employees with pre-existing mental illnesses or disabilities (e.g. anxiety disorder, compulsive disorder, PTSD) may have more difficulty handling the disruption in daily life which will be exasperated during the pandemic. In these situations, an appropriate response it to ask questions to determine whether the condition is a disability, solicit input from the employee on how a requested accommodation would assist or enable her to keep working, explore alternative accommodations that may effectively meet the need and then request medical documentation if needed.
D.3 Additional Assistance. If an employee was receiving a reasonable accommodation prior to the pandemic, this does not mean that additional or altered accommodations may not be required. The test as always proof of an undue hardship. For example, an employee who is teleworking may need a different type of an accommodation then what is used in the workplace.
The EEOC also reminded employers that it has a duty to prevent harassment and discrimination that might arise in the workplace when employees act out of fear or bias, and the rules applicable to waivers and releases in separation agreements still apply during the pandemic.
