The Patient Protection and Affordable Care Act of 2010 slipped a break time requirement for nursing mothers into the Fair Labor Standards Act (FLSA) that affects virtually all employers in the United States. The language added to the FLSA is limited; essentially, it requires employers to “provide reasonable break time and a place for nursing mothers to express breast milk for one year after their child’s birth.” In late 2010, the Department of Labor (DOL) published its request for information (RFI) from the public regarding this amendment to the FLSA. Such an RFI generally leads to rulemaking by the DOL, which may issue rules elaborating on the requirement some time late this year.

While the FLSA language on these nursing breaks is brief, it does give employers some guidance. First, all employers are required to comply with the law, although employers who have fewer than 50 employees may be eligible for a hardship defense if they cannot provide the requested space. Nursing mothers must be provided a location that is “free from intrusion” and “shielded from view,” in which to express milk. This location may not be a restroom. Employees do not have to be paid for these breaks.

Rules promulgated by the DOL may shed light on the unknowns in this law. For example, must nursing mothers be paid for break times of fewer than 20 minutes, consistent with the usual rule for breaks that are too short to primarily benefit the employee? And what length of break is “reasonable”? In the meantime, employers should plan appropriate locations for such breaks and educate supervisors on how to respond to requests from employees. Generally, employers should find a location outside of general view that can be locked (even if used for other purposes at other times) and that has an electrical outlet and a chair. The emphasis on “reasonable” requests and break times in the FLSA’s nursing break language suggests that the DOL envisions communication between employer and employee, leading to a mutually-agreeable schedule and location for these breaks. Stay tuned for further guidance from the DOL. -David J. Sullivan

The physician recruitment exception to the Stark Law allows a hospital to provide certain financial incentives to a physician group practice to induce a physician to relocate his practice to a location within the hospital’s service area. In order to comply with the physician recruitment exception, the financial arrangement must comply with a number of criteria. Among these criteria, the exception requires that the physician group practice to which the physician is recruited may not impose practice restrictions that “unreasonably” restrict the physician’s ability to practice medicine in the geographic area served by the hospital. Until recently, the Centers for Medicare & Medicaid Services (“CMS”) has declined to provide any guidance regarding what types of practice restrictions CMS would consider to be unreasonable.

In January of 2011, CMS finally addressed this reasonableness standard and issued an advisory opinion, CMS-AO-2011-01, finding permissible a physician recruitment arrangement between a hospital and a pediatric orthopedic surgeon that included a non-competition clause. In its advisory opinion, CMS examined the recruitment arrangement which contained a provision that prevented the physician from practicing medicine at any health care facility within twenty-five (25) miles of the hospital for one (1) year following the physician’s termination of employment. CMS stated that both the time and geographic restrictions were reasonable based on the large geographic area the hospital serves. CMS also found persuasive that, during the one year restriction period, the physician would be able to practice at a hospital outside the twenty-five (25) mile radius, but still within the general geographic area of the hospital. Additionally, during the restricted year the surgeon could work at three hospitals that were technically outside of the hospital’s geographic area, but were still located within sixty (60) miles of the hospital. CMS stated in its opinion that after evaluating the totality of the circumstances relating to the factors set forth in the physician recruitment exception, the non-competition provision did not constitute an unreasonable restriction on the physician’s ability to practice medicine in the geographic area of the hospital. Although CMS did not provide a separate analysis of state law, CMS did rely on the hospital’s representation that such an arrangement complied with state laws regarding restrictions on competition.

Although this advisory opinion cannot be relied upon by another individual or entity, it is the first time CMS has provided guidance as to how CMS interprets the physician recruitment exception’s requirement that a group practice not unreasonably restrict a recruited physician’s ability to practice medicine in the hospital’s geographic service area. This advisory opinion should provide group practices that are considering a recruitment arrangement with a new physician with valuable guidance concerning what CMS is likely to consider reasonable in terms of restrictions on competition. To read the full Advisory Opinion issued by CMS, click here. -Aaron J. Ambrose

Beginning in December 2009, the United States Patent and Trademark Office (“USPTO”) has offered an accelerated program for patent applications for certain green inventions. Examples include inventions which materially enhance environmental quality and inventions through which greenhouse gas emission is reduced. In November 2010, the USPTO extended the deadline for filing petitions under this Green Technology Pilot Program, and to date, a total of 1,918 petitions have been granted for green technology patent applications, with 328 patents having issued. Under the Green Technology Pilot Program, the average time between granting a green technology petition and the first office action on the merits is 49 days. To read more about the Green Technology Pilot Program offered by the USPTO, visit http://www.uspto.gov/patents/init_events/green_tech.jsp. -Kristan B. Burch

Last month, Connecticut passed a law requiring private employers to provide paid sick days to service employees.  While other states are considering similar legislation and cities such as San Francisco and Washington, D.C., require paid sick leave, Connecticut is the first state to pass such a law.

There is currently no law in Virginia that requires private employers to provide paid sick days.  However, employers in Virginia may obligate themselves to provide certain benefits as described in their personnel manuals.  For this reason, it is a good idea to regularly review your personnel manual to ensure that you are not promising any benefits other than those you intend to provide.  Similarly, your personnel manual should expressly state that it is not a contract of employment and that the policies described in the manual are subject to change. –David J. Sullivan

The United States Department of Health and Human Services (“HHS”) announced new steps last week to significantly lower premiums for the Pre-Existing Condition Insurance Plan (PCIP) in most states.  Under the proposed steps, eligibility standards for patients with pre-existing conditions will ease in 23 states and the District of Columbia.  PCIP premiums will drop by as much as 40 percent in 18 states.  In Virginia, PCIP rates will decrease by 40.3 percent.  The rate decreases will bring PCIP premiums closer in line with states’ individual insurance markets.

HHS believes that the proposed steps will make it easier to enroll in the PCIP.  As of July 1, 2011, those applying for PCIP coverage will no longer have to wait for a letter of denial from an insurance company.  Applicants can simply present a letter from a doctor, physician assistant, or nurse practitioner from the last 12 months stating that they had or have an illness or medical condition.

Between November 2010 and March 2011, PCIP enrollment spiked 129 percent to approximately 18,000 people.  To further bolster enrollment, HHS plans to pay insurance brokers and agents for connecting eligible individuals with the PCIP.  Several states have experimented with such a program with good results. 

Congress enacted the PCIP under the Affordable Care Act as a federally-administered temporary program to help uninsured Americans with pre-existing conditions obtain affordable health coverage.  Beginning in 2014, health insurance companies may not deny coverage to anyone with a pre-existing condition.  According to the HHS, PCIP provides primary and specialty care, hospital care, prescription drugs, home health and hospice care, skilled nursing care and preventative health and maternity care.  For further information, click here and for fact sheets, click here. –Aaron J. Ambrose & Christopher L. McLean

Different types of intellectual property law protect different things.  Copyright law prohibits unauthorized copying of creative expression, but not facts (not even if those facts are embodied in creative expression).  Trade secret law can protect facts, but only when they are competitively valuable and kept secret.  Neither body of law protects factual information, perhaps developed through great effort and expense, that is in high demand for a brief time, and that is provided to those willing to pay for it.  It is called “hot news.”  Harnessing the power of computers and instant communications technologies, many businesses have built profitable businesses based on compiling, assembling, and selling such valuable, time-sensitive information.  Given the gap between copyright and trade secret law, however, these businesses face a major challenge in trying to prevent competitors from taking their hot news, once public, and using it for their own benefit.  Doing so is very hard, as is illustrated by a recent Second Circuit decision that has attracted much interest in the financial sector.

An old Supreme Court decision, International News Service (1918), recognized a federal common law cause of action for “misappropriation” of hot news, and relied upon it to bar INS from cribbing elements of Associated Press news stories and selling them to its own subscribers.  Hot news misappropriation is no longer a federal law cause of action, but it is still recognized in some states, most notably New York.  Some businesses trading in hot news contractually bind their licensees to be bound by New York law in order to maximize their ability to take advantage of the tort.

In a widely-cited 1997 decision, NBA v. Motorola, the Second Circuit considered whether Motorola misappropriated hot news about NBA games by hiring people to watch games on television and enter information about the progress of games on a computer, and then compile that information and send it via pager, in real time, to paying customers.   The NBA claimed the factual information as part of its copyrighted broadcasts, that the facts about games were hot news, and that the Motorola service undercut its efforts to develop a similar service.  At that time, the Second Circuit concluded that the NBA’s hot news claims were in large part pre-empted by the Copyright Act, and that the NBA could not make a claim under what little of the hot news misappropriation claims survived pre-emption.  Specifically, the NBA did not prove two essential elements of a misappropriation claim:  Motorola’s service was not directly competitive with what the NBA provided and there was no evidence of a competitive effect; in addition, Motorola was not “free riding” on the NBA’s product because it bore its own effort and costs in assembling and delivering its information.

Courts have generally followed the narrow reading of hot news misappropriation since NBA v. Motorola.  A 2010 decision by a district court in New York, however, attracted much attention when it ruled in favor of several financial firms who alleged that a web service called Theflyonthewall.com misappropriated their trading recommendations or stock calls they issued in reports, before the market opened, to their larger investors.  The firms then contacted those investors so that any trades could be placed (with them, of course) when the market opened, before the stock calls were generally published.  Despite the firms’ efforts to control access to the reports, Theflyonthewall.com managed to get early, legal access to them, aggregate the stock calls from the reports, and then quickly provide compilations of the recommendations to its subscribers, mostly smaller investors to whom the financial firms did not provide their pre-opening reports. 

Dampening the hopes of purveyors of financial hot news, the Second Circuit issued an opinion in June 2011, in Barclay’s Capital, Inc. v. Theflyonthewall, Inc., reversing the district court holding.  It followed NBA v. Motorola strictly and reaffirmed the narrow reading of the misappropriation tort.  On the facts, it concluded that the financial firms’ misappropriation claim was pre-empted by the Copyright Act because the defendant’s actions amount to no more than copying of information in their reports.  The copying was not copyright infringement, however, because Theflyonthewall.com was not disseminating the full reports, just compilations of facts, for example, the fact that brokerage X downgraded stock Y.   Moreover, the court held, Theflyonthewall.com’s acts were not hot news misappropriation because it, like Motorola, was not free riding.  Instead, it was expending effort and resources to gather and publish the news, the news being the facts of the firms’ stock calls.  That, it found, is breaking news in its own right.   

Barclays clarifies the NBA definition of hot news, but last month’s appellate decision mostly reaffirms rather than extends NBA.  In terms of new law, then, the decision is not “hot news” (yes, the title above is a tease).  Yet, its lengthy analysis will give guidance to others, both those making and those taking hot news.  Aggregators of information must consider whether their acts are of a nature that they will be subject to copyright or misappropriation claims, and if the former whether they are taking expression or facts.  To the extent they may face a misappropriation claim, they must consider whether they are acting in direct competition with their sources, and whether are expending enough additional effort in order to not be free riding.  For their part, financial firms and other generators of time-sensitive information must devise additional, practical ways to prevent aggregators from obtaining lawful access to the time-sensitive information.  The plaintiffs in Barclays tried a number of “self-help” measures, though in the end they were not enough.

Chris Mugel practices intellectual property law in Kaufman & Canoles’ Richmond, Virginia office. –Christopher J. Mugel

On May 16, 2011, the U.S. Supreme Court issued an important decision with implications for sponsors of employee benefit plans: CIGNA Corp. v. Amara. The opinion in this case clarifies the consequences that occur when a plan’s Summary Plan Description (“SPD”) conflicts with the terms of the underlying plan document by promising more generous benefits than are available under the plan.

This case arose out of the 1998 conversion of CIGNA’s pension plan to a “cash balance” formula.  Various features of the new plan meant that some employees received fewer benefits than they would have received under the pre-1998 defined-benefit system.   CIGNA did not adequately describe these features in its revised SPD, which instead indicated that the revised formula provided “an overall improvement in retirement benefits” and guaranteed that retiring employees would receive at least as much as benefits to which they were entitled prior to the date of amendment.  

When CIGNA employees discovered that the plan benefits were in some cases less than the amount indicated by the SPD, they filed suit under ERISA § 502(a)(1)(B), which allows participants to recover benefits owed under the terms of a plan. The district court granted their claim and, as a remedy, order CIGNA to reform its plan to provide the benefits promised in the SPD. The district court did not require the plan beneficiaries to show that they had each suffered individual injuries as a result of the changes in the plan; rather the evidence created a presumption of “likely harm” to the plan beneficiaries, which CIGNA had failed to rebut.  The Court of Appeals for the Second Circuit summarily affirmed the district court’s decision.

On appeal, the Supreme Court vacated the decisions below and remanded the case to the district court on the ground that the ERISA § 502(a)(1)(B) did not authorize the court to reform the plan.  The Court explained that § 502(a)(1)(B) only authorizes relief to enforce the terms of an existing plan; it does not permit a court to rewrite a plan to conform to the representations made in an SPD.  The Court rejected the argument that the terms of the SPD are themselves part of the plan which the SPD is intended to summarize.  Therefore, the Court concluded that statements in a SPD are merely communications “about the plan” and do not “constitute the terms of the plan for purposes of § 502(a)(1)(B).”

The Court continued on to explain that relief would be authorized by § 502(a)(3), which allows a plan beneficiary “to obtain other appropriate equitable relief” for violations of ERISA.  The Court also rejected CIGNA’s argument that plan beneficiaries must always show detrimental reliance to obtain relief based on statements contained in an SPD, but it also emphasized that the plan beneficiaries were required to make some showing of actual harm.

The primary implication of this decision for plan sponsors is that conflicts between the terms of the plan and the SPD can form a valid basis for recovery by plan participants, forcing the employer to honor promises made in the SPD even if those benefits are not authorized under the terms of the plan. Further, the court’s determination that the participants were not required to show that they detrimentally relied on the SPD in order to recover under ERISA § 502(a)(3) make it that much easier for plaintiffs to recover, removing a defense that employers had previously relied upon.

The lesson? Always double check the SPD to make sure it matches the terms of the plan. –Shad C. Fagerland

This post is the third iteration in a series regarding the Antiboycott Provisions of the Export Administration Regulations (EAR).  An overview of the prohibitions included within the antiboycott provisions can be found here, and a detailed discussion of the reporting requirements of the antiboycott provisions can be found here.  This post addresses the specific exceptions to the antiboycott provisions of the EAR.  Once you have determined that the antiboycott provisions of the EAR apply to your company, then you should become familiar with the exceptions listed in 15 C.F.R. § 760.3 of the EAR, which can be found here.

One exception provides that U.S. persons may comply with certain shipping requirements of the boycotting country.  Pursuant to this exception, when shipping goods to a boycotting country, a U.S. person may comply with the requirements of the boycotting country regarding the specific route of the shipment or the specific carrier.  The agreement may be stated in positive or negative terms.  However, this exception does not permit an agreement to ship the goods only on vessels eligible to enter Arab waters or to refrain from using blacklisted vessels. 

In addition, U.S. persons may comply with certain shipping document requirements.  This exception allows a U.S. person to furnish the following information on shipping documents: a positive certificate stating the origin of the goods, a positive statement of the name of the supplier of the goods or the provider of the services, and a positive statement as to the route of the shipment or the name of the carrier of the goods. 

Another exception permits a U.S. person to furnish positive certificates of origin of goods and certification regarding his/her own blacklist status.  For example, you may state that you or your company is not on the “blacklist”.  You may also certify that the goods are of a particular country’s origin.  If you would like more information on the Antiboycott Provisions of the EAR, please feel free to contact me.  –R. Ellen Coley

Historically, Virginia’s federal courts have required employees claiming discrimination to demonstrate that the actual decision-maker, as opposed to other supervisors with whom the employee worked, showed a discriminatory motive in his or her treatment of the employee.  While inappropriate and unlawful motives by other non-decision-makers might be deplorable, violate workplace policies, and result in disciplinary action, they could not be the linchpin of the plaintiff’s discrimination case.

The Supreme Court recently decided a case that should inspire employers to reiterate anti-discrimination training for all employees, particularly supervisors.  In Staub v. Procter Hospital, the Supreme Court was persuaded that the unlawful motives of two supervisors influenced a third supervisor to terminate an Army Reservist employee.  The employee, who was protected by the Uniform Services Employment and Reemployment Rights Act after serving intermittently as a Reservist, demonstrated that two of his supervisors were tired of his frequent absences from work and took affirmative steps to penalize him.  The employee was ultimately terminated by the third supervisor, based partly on an independent investigation and partly on the reports of the unlawfully-motivated supervisors.  Both sides agreed that the third supervisor lacked any discriminatory motive.

The Supreme Court ruled that an employer may be liable for an adverse employment action (in this case, a termination) even where the actual decision-maker is free of unlawful bias, where that supervisor has been used as the “cat’s paw” by other, unlawfully-motivated supervisors.  A few lessons for employers:  (1) employers should be vigilant in maintaining a discrimination-free workplace, from top to bottom; (2) all employees should receive anti-discrimination training and be well aware of resulting discipline for policy violations; (3) prior to taking any adverse employment actions, employers should conduct a thorough investigation, keeping in mind the potential for any bias or improper motivation of the employee’s entire supervisory team; and (4) decision-makers must avoid blind reliance on supervisory reports. –Anna Richardson Smith & Mark E. Warmbier

Before you buy a franchise, it’s important that you perform your due diligence.  The franchisor will gather a lot of information about you and determine if you are the right fit for their business.  You should do the same about the franchisor and its business.  A critical piece of your due diligence should be contacting franchisees.  The franchisor is required to provide you with a list of franchisees, and if they don’t a red flag should go up.  You should pick a mix of franchisees – franchisees currently in the franchise system and those who no longer own franchises, newer and more experienced franchisees and franchisees in varying sized outlets and locations.  You should ask questions such as their relationship with the franchisor, whether they think the training and support was adequate, what problems they have encountered with the franchisor and how did the franchisor handle them, why they chose to buy this particular franchise, and whether they would invest in that franchise system again, knowing what they now know.  Your interviews with franchisees should help you determine if a particular franchise is right for you and give you an idea of the relationship you can expect with the franchisor. –Nicole J. Harrell