The post Disjointed: Texas Federal Court Vacates the NLRB’s Sweeping and Controversial New Joint-Employer Rule appeared first on Berenzweig Leonard, LLP.
]]>Under the vacated 2024 Rule, two or more entities would have been considered joint employers if the entities shared or codetermined control over at least one of the following seven “essential terms and conditions of employment,” which represent an exhaustive list:
An entity would be deemed to “share or codetermine” control—and thus would be considered a joint employer—if it (i) exercised direct or immediate control over one of these seven essential terms and conditions of another entity’s employees, or (ii) had indirect or reserved authority to exercise control (including control exercised through an intermediary) over of one of these seven essential terms and conditions of another entity’s employees, regardless of whether that control is actually exercised. This was the most impactful change in the 2024 Rule.
In the government contracting industry—where prime-subcontractor agreements, mentor-protégé agreements, joint ventures, teaming agreements, and other forms of multi-entity collaboration are routine—the 2024 Rule would significantly impact government contractors. Considering that agreements between government contractors often contain provisions permitting one entity to exercise some degree of control over the essential terms and conditions of another entity’s employees, the 2024 Rule would have increased the likelihood of contractors facing claims from another entity’s employees. We discussed the impact of the joint rule on government contractors at length in a recent podcast by Berenzweig Leonard Managing Partners Declan Leonard and Seth Berenzweig released in late February.
In November 2023, the U.S. Chamber of Commerce and other business groups challenged the legality of the 2024 Rule. On March 8, 2024, upon motions for summary judgment from both parties, Judge J. Campbell Barker of the U.S. District Court for the Eastern District of Texas vacated the rule. He held that the NLRB overstepped its bounds with such a broad imposition on businesses.
The NLRB is likely to appeal this decision to the U.S. Court of Appeals for the Fifth Circuit. They could then request a stay of the order pending appeal to allow the new rule to go into effect. While it is unclear whether a stay will be granted, this litigation will continue for the foreseeable future.
The prior joint-employer rule, which went into effect on April 27, 2020 (the “2020 Rule”), currently remains in effect. The 2020 Rule sets a higher threshold for joint-employer determinations, providing that an entity will not be considered a joint employer unless it possesses and actually exercises such substantial direct and immediate control over the essential terms and conditions of another entity’s employees. Thus, the mere ability of one entity to exercise control over another’s employees will not trigger joint-employer status.
For now, contractors can take some comfort knowing the existing 2020 Rule and higher threshold remain in effect. However, given the ongoing litigation and the possibility of a stay of the court’s order, contractors should consider the following proactive measures in the event the 2024 Rule is ultimately permitted to go into effect:
The case name is Chamber of Commerce of the United States of America et al. v. National Labor Relations Board et al., No. 6:23-cv-00553. Berenzweig Leonard will continue to monitor updates and developments related to this ongoing litigation. Please contact us if you have questions or concerns about your company’s potential status as a joint employer.
Charles Bonani is an Associate Attorney at Berenzweig Leonard. He works on a range of matters, including business litigation, government contracts, and employment law. He can be reached at cbonani@berenzweiglaw.com or (571) 615-0430.
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]]>The post Venture Capital vs Private Equity: Understanding the Differences appeared first on Berenzweig Leonard, LLP.
]]>When discussing venture capital with business owners and entrepreneurs, some think all VC firms are the same, deploying a one-size-fits-all investment strategy. However, most venture capital firms are highly skilled and may focus on a specific industry or stage of growth. VC firms often specialize by industry (tech, AI, healthcare, etc.), investment stage (seed, early-stage, late-stage), geographical region, or market focus (consumer, enterprise, B2B, etc.).
Based on these preferences, VC investors will inject capital into startups or emerging ventures in exchange for small or partial ownership interests. VC firms typically hold interest for short periods or until a new funding round is raised. In addition to financial support, venture capitalists can also offer mentorship, strategic guidance, and industry expertise to help a company’s management team better navigate the challenges of early-stage operations and achieve their growth objectives.
Private equity is another funding option for businesses. It equity revolves around investments in safer, more established, privately owned companies with a longer operating history. PE firms invest in businesses that have already demonstrated growth and profitability over several years or businesses that may be profitable if not for a few operational missteps. Unlike venture capital, private equity firms and investors often acquire a majority stake or significant ownership interest in the target company, sometimes taking complete control.
Private equity investors strive to enhance the value of their portfolio companies by implementing operational improvements, driving efficiency, and facilitating expansion through strategic initiatives such as mergers and acquisitions. Private equity firms tend to focus on investments with a longer horizon and those typically associated with stable, cash-flow-generating businesses that can be exited for a profit in 5 to 10 years.
The primary distinctions between venture capital and private equity are their risk profiles and ownership approaches. While venture capital often caters to higher-risk startups by providing financial support and strategic guidance in exchange for smaller-cap/shorter-duration ownership interests, private equity often targets established businesses, aiming to enhance their value through full-scale ownership restructurings, operational improvements, and expansion initiatives.
Understanding these key differences between VC and PE is crucial for entrepreneurs and investors, enabling them to make informed decisions about the most suitable financing path for their specific industry and business endeavors. If you or your company has been considering how best to fund the next phase of your business, or if you are looking to stand up a VC or PE firm, contact us today.
Joseph Tulloch is an Associate Attorney at Berenzweig Leonard, LLP. He can be reached at jtulloch@berenzweiglaw.com.
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]]>The post The New York Times vs. OpenAI: AI’s Impact on Copyright and Traditional Media appeared first on Berenzweig Leonard, LLP.
]]>The New York Times is suing OpenAI and Microsoft for copyright infringement, arguing that their artificial intelligence software, ChatGPT, is creating new content that includes copies of original works published online by The New York Times. Procedurally, it will be interesting to see how this case can move past the initial pleading stage. To maintain a copyright infringement case, a plaintiff must normally first obtain a registration for its copyrighted material. NYT has not yet published evidence that they met that threshold, meaning OpenAI could pursue this avenue as grounds for dismissal. However, there are some exceptions to this rule and some policy problems for authors who create large volumes of content. It will be interesting to see how NYT addresses this procedural hurdle.
Assuming the case proceeds past the procedural stage, it will be interesting to see how OpenAI is treated as a defendant. Can OpenAI argue that its system creates new, original content from available news resources like a human would? It is perfectly fine for a human to read publicly available content. It is also fine for a human to use that content to create original works. So far, so good. What a human cannot do is copy the original content in the process of creating a new work. This is especially true if they are selling the new work. Humans typically understand this as plagiarism. Taking this simplistic view of the issues, a reasonable outcome of the case could be a ruling that finds OpenAI liable for infringement whenever ChatGPT has actually copied NYT content, but not where the content has been sufficiently reworded, and not where the content has been quoted and properly cited. Such a ruling would likely encourage OpenAI and other similar AI system developers to ensure their software is aware of copyright laws and does not copy content created by others.
Separately, there is an interesting question of whether someone can be sued for copyright infringement when they (in this case, the software developers) did not perform the copying. Rather, their software did the copying. Under existing laws, this is considered indirect infringement – similar to being indirectly liable when your dog bites someone. In the human world, we want people to train their dogs not to bite, and we have laws to hold them accountable when they do. We are not yet at the stage where AI systems fully understand the social and/or legal implications of their actions, but perhaps The New York Times vs. OpenAI is an opportunity for a court to rule that developers of AI systems should be held accountable when their software violates someone else’s rights (especially when the developers train their AI systems using content developed by others). In other words, if we allow AI systems to function in the human world, we should probably train the AI systems to obey the law.
If NYT does not succeed in proving actual copying, they could try a different approach. They could argue that it is not so much about copying the exact wording of the content, it is more about unfairly profiting from misusing the raw subject matter. Why should NYT employ thousands of reporters to research and produce valuable content, only to have an AI system reword that content enough to avoid copyright laws? Questions like these highlight the need for updates to intellectual property laws so they can keep up with technological developments. Otherwise, creators like NYT will either conclude that original content is not worth it or place it behind a paywall. One potential outcome of this case could be a finding of indirect infringement paired with an injunction or a forced license arrangement where OpenAI is required to pay to use NYT subject matter used in creating new content.
The New York Times vs. OpenAI lawsuit throws into sharp focus how technology is outpacing legal precedent. Every question that arises out of cases like this one is an opportunity to redefine the legal landscape of intellectual property in the digital age. If these questions remain unanswered, companies will continue developing their technologies in an unregulated space, and traditional media companies like The New York Times will be left wondering where their legal protections went.
Clyde Findley is Special Counsel and a registered patent attorney in the Intellectual Property practice at Berenzweig Leonard. He can be reached at cfindley@berenzweiglaw.com.
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]]>The post Expanded Worker Protections Under The Pregnant Workers Fairness Act appeared first on Berenzweig Leonard, LLP.
]]>By Nick Johnson and Shelby Julien
The Pregnant Workers Fairness Act (PWFA), which went into effect on June 27, 2023, is focused on providing temporary accommodations to pregnant workers with disabilities or limitations related to pregnancy. Although the Americans with Disabilities Act protects workers with disabilities from discrimination in the workplace, the Act does not expressly consider pregnancy to be a disability, so the Act does not always protect workers with disabilities or conditions related to pregnancy. To ensure pregnant workers receive the accommodations they need to continue working, the Equal Employment Opportunity Commission (EEOC) has drafted proposed regulations to guide employers through the more expansive protections of the PWFA.
The PWFA requires covered employers to provide “reasonable accommodations” for qualified employees’ “known limitations” related to pregnancy, childbirth, or related medical conditions unless providing the accommodations would cause undue hardship on the employer’s business operations. For qualified employees to be protected under this Act, they must simply show they are suffering from a “limitation” arising about pregnancy, childbirth, or related medical conditions and that a reasonable accommodation will allow them to continue working without causing an undue hardship on the business operations of their employer.
Besides requiring employers to provide reasonable accommodations, the PWFA also prohibits employers from requiring qualified employees to accept certain accommodations, denying job opportunities to qualified applicants or employees, and retaliating against employees who report the employer’s violations of the Act. The PWFA also does not permit employers to force employees to take leave if a reasonable accom will allow them to continue working.
Like the Americans with Disabilities Act (ADA), the PWFA only applies to certain employers. The Act’s language, “covered employers,” refers to employers in the private and public sectors with at least 15 employees and includes federal agencies, labor organizations, and employment agencies. Despite its name, the Act does not only apply to pregnant workers. “Qualified employees” are workers who are trying to become pregnant, are pregnant, have terminated or lost the pregnancy, have given birth, are recovering from birth, and are dealing with related medical conditions. Although “related medical condition” sounds broad, the EEOC provided examples that fall within that category, including miscarriages, stillbirths, abortions, lactation, use of birth control, menstrual cycles, and gestational diabetes. In its proposed rule, the EEOC also mentions explicitly that postpartum depression and fertility-related treatments are two instances in which employers must provide reasonable accommodations if those accommodations would not cause undue hardship.
After establishing that an employee qualifies for protection under the PWFA, the employer must determine whether the requested accommodation is reasonable or if it would cause undue hardship to the employer’s business operations. The EEOC does not explicitly define “reasonable” in its proposed rules, but it does provide examples of what it deems to be reasonable accommodations. For example, the EEOC states that these accommodations will be considered reasonable in almost every occupation.
The EEOC believes that none of these accommodations should cause undue hardship on the employer’s business operations. However, if the employer believes otherwise, the employer has the burden of proving so.
The drafters of the PWFA modeled the Act after the ADA, using almost identical language in some circumstances. As a result, “undue hardship” has the same meaning in the PWFA as in the ADA. According to the PWFA, an accommodation imposes an undue hardship if it causes a “significant expense” to the employer’s business or if it causes “significant difficulty” to the operation of the employer’s business.
Under the PWFA, an employer may be required to accommodate a qualified employee’s inability to carry out an essential function of their job by suspending the employee’s responsibility to complete that duty. Employers are more likely to experience undue hardship when an accommodation leaves an essential function of the business operations incomplete. To help employers with their determination of the undue hardship status of a requested accommodation, the EEOC has provided a list of factors that
should be assessed.
Although the changes brought about by the PWFA may seem overwhelming, employers can take several steps to ensure compliance with the EEOC’s rules. However, before discussing the steps, it is important to note that the Act only requires employers to provide reasonable accommodations to qualified employees or applicants with “known limitations.” This means employers are only responsible for providing accommodations to employees who have made their qualifying condition known to the employer and asked them for an accommodation. Employers are not responsible for providing accommodations for conditions about which they do not know, leading to the first step.
Last, if an employer believes that an accommodation request is unreasonable or would cause undue hardship to the operations of its business, the employer should contact an attorney before taking any action.
Nick Johnson, Partner
Mr. Johnson is a partner at Berenzweig Leonard and is an experienced litigator representing clients in the full spectrum of employment litigation matters in addition to advising management and executive clients on human resources (HR) compliance, restrictive covenants, employment contracts and HR policies, investigating employee complaints, and conducting antidiscrimination training seminars. He has been recognized in the honorary list of “Legal Elite” in the Washington, D.C., region, and has been regularly selected as one of the Washington Area’s “Rising Stars” by both Virginia and Washington, D.C.’s SuperLawyers.
Shelby Julien, Summer 2023 Law Clerk
Ms. Julien attends The College of William and Mary where she is currently in her third year of law school.
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]]>The post Independent Contractor or Employee? The Department of Labor Issues a New Final Independent Contractor Rule appeared first on Berenzweig Leonard, LLP.
]]>The 2024 Final Rule rescinds a previous final rule from 2021 defining the same term. In contrast to the 2021 rule on independent contractors, the 2024 Final Rule implements a new six-factor test focusing on the “economic reality” of the relationship between an employer and worker. The test assesses whether, as a matter of economic reality, a worker depends on the employer for continued employment or if the worker is operating an independent business. The 2024 Final Rule becomes effective on March 11, 2024, and employers will need to assess their relationships with workers to determine if any may be misclassified under this new rule
The 2024 Final Rule was issued to rescind the final rule issued in 2021 (the “2021 Rule”) where the term “independent contractor” was defined by the DOL for the first time. The definition of an “independent contractor” is important because independent contractors are not subject to the overtime and minimum wage requirements under the FLSA – only employees are. In addition, independent contractors are not eligible for employee benefits like group health insurance plans or paid leave.
Prior to the 2021 Rule, the DOL relied on (informal) guidance through Fact Sheet 13 to determine whether an employee is an independent contractor or an employee. The 2021 Rule issued a five-factor test in 2020 in an attempt to provide more clarity in worker classification. Even though there were five factors to consider, there were two “core” factors that drove the analysis: (1) the employer’s right to control; and (2) the worker’s opportunity for profit or loss. If those factors weighed heavily to one conclusion (employee or independent contractor) the analysis would end. But, if there was no clear result from analyzing those factors, the 2021 Rule went on to say three additional factors should be considered: (3) the permanence or length of the working relationship; (4) the worker’s special skills, if any; and (5) the worker’s integration into the employer’s operations.
The 2024 Final Rule rescinds the 2021 Rule and adopts a six-factor test to determine whether a worker is an independent contractor or an employee. Those six factors include:
These factors are not to be viewed in a vacuum and should be assessed by reviewing the totality of the circumstances. This list is also not considered exhaustive, and other non-listed factors may also be considered. No one factor guides or controls the analysis.
Berenzweig Leonard will continue to monitor updates and developments related to the 2024 Final Rule. Please contact us if you have questions or concerns about whether your independent contractors need to be reclassified to employees and what that entails for your business.
Samy Abdallah is an Associate Attorney at Berenzweig Leonard. He can be reached at sabdallah@berenzweiglaw.com.
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]]>The post The Corporate Transparency Act: What Business Owners Need to Know appeared first on Berenzweig Leonard, LLP.
]]>Update: On March 1, 2024, a federal judge in Alabama declared the Corporate Transparency Act (CTA) unconstitutional in the case of National Small Business United v. Yellen. However, this ruling only applies to the named plaintiffs in that specific case, which includes all entities that were members of the National Small Business Association (NSBA) at the time of the ruling. If a company was not a named plaintiff and qualifies under the CTA, it must still comply with reporting requirements. Please contact us if you have any questions about whether or not your company is subject to the CTA’s reporting requirements. |
The U.S. government is implementing new reporting requirements for many small businesses in an effort to address concerns around financial crimes, money laundering, and terrorism financing through the use of corporate structures. The Corporate Transparency Act (CTA), scheduled to go into effect on January 1, 2024, is a federal law enacted to combat illicit financial activities by enhancing transparency in corporate ownership. It requires specific entities to disclose their “beneficial ownership” information to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of the Treasury responsible for enforcing anti-money laundering regulations.
The CTA predominantly focuses on what they define in the Act as “reporting companies.” These reporting companies encompass a wide range of entities, including corporations, limited liability companies (LLCs), and other legal entities existing and operating under U.S. law. Notably, large publicly traded companies, registered investment firms, non-profit organizations, and certain other highly regulated entities are excluded from the reporting requirements under the CTA. This exclusion also includes companies with (i) over 20 employees; (ii) reporting over $5,000,000.00 in revenue; and (iii) a physical presence in the U.S. As a result, many small businesses will fall under the purview of this act.
The CTA necessitates that all small businesses meeting the criteria of a “reporting company” must submit beneficial ownership information to FinCEN. “Beneficial Owners” are individuals who exert substantial direct or indirect control over the entity or possess 25% or more of the ownership interests. To comply, companies will need to provide comprehensive data to FinCEN, such as each beneficial owner’s full legal name, date of birth, residential address, and driver’s license or other federally issued identification number.
Entities in existence prior to January 1, 2024 | Filing required within 1 year (before January 1, 2025) |
Entities formed after January 1, 2024, and before January 1, 2025 | Filing required within 90 days of entity formation (per amended rule) |
Entities formed after January 1, 2025 | Filing required within 30 days of entity formation |
Following a change to the beneficial ownership, (e.g., through the sale of the business, merger, acquisition, or death) | Updated filing required within 30 days of change to beneficial ownership information |
The penalties for not filing under the CTA or for willful non-compliance are serious and include a $500 per day civil penalty; criminal violations up to $10,000; and/or up to two years in prison.
Small business owners may encounter various challenges when striving to comply with CTA requirements including the need to perform due diligence on existing records, update internal procedures, establish mechanisms for maintaining updated information, and meet the timing requirements. To navigate the upcoming implementation of the Corporate Transparency Act, business owners should consider taking the following actions to prepare:
The Corporate Transparency Act represents a significant shift in the federal government’s treatment of small-mid sized businesses and underscores the importance of accountability and integrity within a party’s business operations. FinCEN has provided a list of Frequently Asked Questions to help impacted companies prepare for these new requirements. By proactively preparing for compliance with the CTA, businesses can effectively navigate this regulatory landscape as it evolves. Please contact us if you have any questions about what you can do to prepare for the Corporate Transparency Act, or how it could impact your business.
Joseph Tulloch is an Associate Attorney at Berenzweig Leonard, LLP. He can be reached at jtulloch@berenzweiglaw.com.
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]]>The post NLRB Ban on Nondisparagement and Confidentiality Clauses in Severance Agreements and What It Means for Employers appeared first on Berenzweig Leonard, LLP.
]]>By Rachael Haley and Declan Leonard
The McLaren Macomb Decision
On February 21, 2023, the NLRB issued its decision in McLaren Macomb,1 holding that severance agreements with overly broad nondisparagement and confidentiality provisions unlawfully infringe upon employees’ rights under Section 7 of the NLRA in violation of Section 8 of the NLRA.2 Section 7 of the NLRA confers broad rights to nonsupervisory employees to engage in “protected, concerted activity” for their “mutual aid and protection,” which generally includes discussing the terms and conditions of their employment with other employees and the public in general.3 In McLaren Macomb, the Board explained that, where a severance agreement unlawfully conditions receipt of severance benefits on the forfeiture of statutory rights, the mere offer of the agreement itself violates Section 8(a)(1) of the Act because it has a reasonable tendency to interfere with or restrain the prospective exercise of those rights by separating the employee and those who remain employed. The Board did not limit this decision to unionized workplaces; thus, severance agreements for both unionized and nonunionized employees are affected by McLaren Macomb.
Nondisparagement Clause
The severance agreement in McLaren Macomb had a nondisparagement clause that prohibited employees from making statements that could disparage or harm the image of the employer; its parent and affiliates; and their officers, directors, employees, agents, and representatives. In response, the Board explained that prohibiting communication among employees expressly violated Section 7 and objected to the nondisparagement clause’s expansive reach (i.e., applied not just to the hospital but also its affiliated entities, officers, directors, employees, agents, etc.) and lack of temporal limitation (i.e., applied “at all times hereafter”).
Confidentiality Clause
The confidentiality clause in McLaren Macomb prohibited employees from disclosing the terms of the agreement to anyone except for a spouse or professional adviser unless compelled by law to do so. In response, the Board reasoned that the language was so broad it would preclude employees “from disclosing even the existence of an unlawful provision contained in the agreement.” Moreover, the ban on communications with coworkers and others, including the employees’ union, had an “impermissible chilling effect” on the employees’ ability to engage in their Section 7 rights.
The Office of General Counsel Guidance
On March 22, 2023, the NLRB Office of General Counsel released a nonbinding guidance memorandum in response to inquiries about the McLaren Macomb decision.4 The memo provided much-needed clarification regarding the applicability and scope of the decision.
Notably, the NLRB ruling in McLaren Macomb overruled two previous NLRB decisions decided in 2020 under the Trump administration, Baylor Univ. Med. Ctr.5 (Baylor) and /GT dlbla /nt’l Game Tech. (/GT).6 In Baylor and /GT, the NLRB held that an employer could lawfully offer a severance agreement to employees that required an employee to waive Section 7 rights via confidentiality and nondisparagement clauses, so long as there was no showing of additional unlawful conduct by the employer.
The McLaren Macomb decision expressly eliminates the requirement of additional unlawful conduct by the employer, such that now the mere offering of a severance agreement with such terms is an unfair labor practice because the act of “conditioning receipt of those benefits on acceptance of unlawfully coercive terms” was coercive in and of itself. The focus of the analysis is now the language of the provisions within the severance agreement, not the employer’s intent or additional unlawful conduct.
It is important for employers to remember that the NLRB is a political body whose decisions can swing back and forth with each new administration when deciding whether their agreements need to be updated, given the NLRB McLaren Macomb ruling.
Although the NLRB is a political body and the McLaren Macomb decision is subject to potential future litigation in which a federal court would review the decision, there has been a recent trend in employment law to prohibit or at least limit the use of nondisparagement and confidentiality clauses in severance agreements, especially in sexual harassment in the wake of the #MeToo movement. This trend is likely to continue, and employers should take heed.
State-Level Limitations on Confidentiality and Nondisparagement Clauses
Many states, including Maine, Oregon, Washington, California, Illinois, New Jersey, and New York, have enacted limitations or outright prohibitions on confidentiality and nondisparagement provisions in severance agreements.7 Much of this legislation was passed in the wake of the #MeToo movement to prevent companies from covering up sexual harassment and sex discrimination in the workplace.
Although many states are enacting such laws, their scope and exceptions vary widely, and employers need to be aware of these nuances. This is true if their workforce is geographically spread out, as can be the case with remote employees. These laws can also apply more generally than just in the context of severance agreements.8 Moreover, the penalties for noncompliance differ in each state. A comparison of the newly enacted laws in Washington and Maine illustrates these nuances.
Employers should not simply use standard, form contracts for a nationwide workforce anymore. It is important for employers to review state law and tailor their form contract to account for the applicable jurisdiction’s laws about confidentiality and nondisparagement clauses.
Federal-Level Limitations on Confidentiality and Nondisparagement Clauses
On December 7, 2022, President Biden signed the Speak Out Act,11 which renders unenforceable predispute confidentiality and nondisparagement clauses covering sexual assault and sexual harassment disputes. The Speak Out Act does not apply to agreements entered into after a sexual harassment or sexual assault dispute has surfaced and applies to nondisclosure agreements generally, not merely severance agreements. Employers should review their employment agreements, confidentiality agreements, arbitration agreements, and employee handbooks and policies to ensure compliance with the Speak Out Act and applicable state and local laws.
Rachael Haley is an Associate Attorney at Berenzweig Leonard where she works on a range of matters, including government contracts, business litigation, and employment law. She can be reached at rhaley@berenzweiglaw.com or (703) 663-8185.
Declan Leonard is Managing Partner of Berenzweig Leonard and he also heads up the firm’s employment law practice, where he counsels businesses and executives on all areas of employment and labor law. In addition to his many other awards, he has been recognized for the past three years as a Top 100 Lawyer in Virginia by Super Lawyers publication. He can be reached at dleonard@berenzweiglaw.com or (703) 760-0469.
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]]>The post Major Updates to SBA 8(a) Program Certification Requirements appeared first on Berenzweig Leonard, LLP.
]]>Presented by The Capital Group and Berenzweig Leonard
The SBA is no longer permitting most applicants to the 8(a) Business Development Program to establish their eligibility based on the rebuttable presumption of social disadvantage. Instead, the SBA is now requiring business owners to prove that they have faced racial, ethnic, or cultural discrimination or bias due to their social background in order to maintain or obtain the 8(a) status.
This change is the result of a recent court decision that held that all 8(a) Business Development Program applicants should prove their social disadvantage instead of some applicants having their social disadvantage automatically assumed because of their race. The change means that if you are an individual who owns a small business and wants to participate in the 8(a) Business Development Program, you now must demonstrate that you have experienced discrimination or prejudice based on your race, religion, ethnic origin, gender, sexual orientation, or identifiable disability. It is important to note that this decision does not apply to entity-owned firms, such as firms owned by Native American tribes, Alaska native corporations, native Hawaiian organizations, or community development organizations. Additionally, owners who have already been admitted to the program through submission of a social disadvantage narrative are not impacted by this change.
Here are several steps you can take to remain or become compliant with the new SBA 8(a) Business Development Program requirement:
Nothing is required at this time if you were admitted to the program because the qualifying owner(s) established his or her social disadvantage by proving beyond a reasonable doubt that he or she was socially disadvantaged. However, be prepared to provide evidence of your eligibility if asked to present it again.
If you were admitted under the presumption of social disadvantage, you should have received a notification from the SBA asking you to submit a social disadvantage narrative.
Check to ensure that you still meet the eligibility criteria for the program. Make sure that you are able to demonstrate how you have faced significant obstacles due to your social background.
When drafting your statement for the SBA, be sure to use any paperwork, documentation, or evidence that supports your claim of social disadvantage, including any discriminatory or prejudicial treatment you have experienced over time. The types of documents that may be helpful include employment records, academic transcripts, and copies of business contracts that highlight your struggles.
Review the SBA 8(a) Business Development Program policies and guidelines for the updated requirements and any other eligibility criteria you should know about. Take note of any changes and consider how they may impact your business.
If you have questions or require assistance in navigating the new guidelines, reach out to your designated business development specialist or the SBA District Office for clarification and guidance.
IMPORTANT
By taking these steps to help ensure compliance with the new requirement, you can be positioned to remain eligible for the 8(a) Business Development Program and continue receiving its benefits.
When drafting your social disadvantage narrative, include (1) your identity or identities that are the basis of your disadvantage, and (2) thorough descriptions of situations in which you have experienced discrimination based on your identity or identities.
Determine whether you can demonstrate significant obstacles due to your social background. This could include exploring educational background, work history, and personal experiences of discrimination, as well as any other factors that contribute to your social disadvantage.
Gather all relevant supporting documentation that demonstrates your social disadvantage, including education records, employment records, and any documentation related to past discrimination you may have experienced.
The SBA or other qualified professionals, including specialized business consultants, can help guide you through the application process and ensure that you provide all necessary information and documentation.
Once accepted into the program, it is important to continue to monitor compliance with the eligibility requirements, including demonstrating ongoing social or economic disadvantage, and seeking assistance when needed.
Remaining compliant with the eligibility requirements is critical for 8(a) Participants to continue to compete for 8(a) contracts. Participating in the 8(a) program comes with many benefits. However, non-compliance can lead to penalties, suspension, or termination from the program. Failure to meet program rules can have a negative impact on the company’s reputation.
It is important to understand that the SBA’s compliance requirements may change, and businesses should monitor for new regulations and guidance from the SBA.
For more information on 8(a) regulatory updates and requirements contact us at:
The Capital Group: 301-214-7666 | Info@CapGroupFinancial.com
Berenzweig Leonard: 703-760-0402 | SWilson@BerenzweigLaw.com
This material has been prepared for informational purposes only. BRP Group, Inc. and its affiliates, do not provide tax, legal or accounting advice. Please consult with your own tax, legal or accounting professionals before engaging in any transaction.
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]]>The post New Form I-9s and Remote I-9 Verification Procedures appeared first on Berenzweig Leonard, LLP.
]]>On August 1, 2023, the U.S. Citizenship and Immigration Services (“USCIS”) released a revised version of the Form I-9, Employment Eligibility Verification that must be used for all new hires and rehires starting November 1, 2023.
The notable changes in the new form include:
The Department of Homeland Security (“DHS”) has authorized qualified employers to perform virtual verifications of employment eligibility for remote employees. Generally, employers are required to perform a physical verification, even for remote employees. During the COVID-19 pandemic employers were permitted to temporarily perform virtual and remote verifications. Under the new rule, qualified employers are permitted to continue performing virtual verifications under certain circumstances for remote employees. Employers who do not qualify for the new alternative verification method must physically verify I-9 documentation for employees.
To qualify, employers must be (1) in good standing in the E-Verify program, (2) enrolled in E-Verify for all hiring sites in the United States for which they seek to use the alternative procedure; (3) have complied with all E-Verify requirements, including verifying the employment eligibility of newly hired employees in the United States; and (4) have completed an E-Verify tutorial/training concerning fraud awareness and anti-discrimination.
If an employer or an authorized representative chooses to utilize the alternative procedure, they must complete the following steps within three (3) business days of the individual’s first day of employment:
In the event of a Form I-9 audit or investigation, employers must also make available the clear and legible copies of the Form I-9 documents presented by the employee.
Please contact us if you have any questions about how to implement the revised Form I-9s or the new remote verification procedures within your company.
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]]>If implemented, these changes would drastically increase the amount of data, documents, and information required for HSR filings, resulting in higher costs and preparation time, even for transactions without competition issues. The proposed rules were open for public comment until September 27, 2023, however, the final scope and timing of these changes remain uncertain. However, it’s clear that the agencies intend to revamp the HSR filing process in some way. Companies considering transactions in the coming years should proactively organize the data identified in the NPRM, in an effort to lessen the burdens the revised HSR requirements will naturally create.
Information About the Transaction and Parties: Expanded requirements for identifying board members, majority and minority shareholders, parent companies, creditors and any other entities involved in the transaction, including any individuals or entities connected to the acquiring entity that could exert even minor influence over the business.
Documents Related to the Transaction and Overlaps: A new requirement to submit all draft transaction documents and/or term sheets prepared by the parties and a wider range of existing company agreements, including existing non-compete and non-solicitation agreements, and additional documents related to overlapping products or services.
Information About Competitive Overlaps and Vertical Relationships: A new requirement to provide more detailed information on acquisitions involving overlapping NAICS codes, product and service categories, employee data, and geographical information.
National Security and Document Retention: New requirements concerning document retention and disclosure of deal funding partners, particularly those from foreign entities or countries that aim to provide goods/services to U.S. defense or intelligence customers.
The proposed changes represent a substantial shift in the HSR filing process, increasing the burden and cost for all parties, irrespective of a company’s size or position in the market. The Agencies seem to aim for stronger enforcement in various areas, such as competitive interlocks and labor data. These proposals align with recent executive branch efforts to oversee large strategic M&A transactions, discourage deals promoting market monopolization, and address concerns regarding document preservation and private equity roll-ups.
Should these changes be finalized, parties involved in transactions should anticipate adjusting their transaction timelines and cost analysis, in preparation for 2024 and beyond. While it is still unclear how exactly the NPRM will shape out, competent legal counsel can provide valuable assistance in understanding, addressing, and overcoming the new HSR filing requirements, including data capture, document management and production, database creation, and FTC communications.
If you or your company are considering a merger transaction in the coming years, please reach out to Berenzweig Leonard LLP’s Corporate Transactional practice. We would be happy to assist you in all of your transactional needs, including navigating the ever-evolving regulatory landscape.
Joseph Tulloch is an Associate Attorney at Berenzweig Leonard, LLP. He can be reached at jtulloch@berenzweiglaw.com.
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