On May 2, 2016, the National Association of Manufacturers joined with the American Foundry Society to challenge the Occupational Safety and Health Administration’s (OSHA) new crystalline silica rule, which cuts the current permissible exposure limit in half and requires employers to implement costly engineering controls. The rule attempts to limit exposure to silica-containing materials, such as concrete and stone, in industries like brick manufacturing, foundries and hydraulic fracturing. We are fighting this rule on all fronts by both petitioning for review of the final rule and intervening to address the union filings directly. Last week, on November 11, we filed our joint industry opening brief to oppose this rule, which will severely stunt the economy and burden manufacturers. Read More
President Barack Obama has relied on, and expanded, the power of the administrative state by making substantial use of both executive orders and presidential memoranda to achieve policy objectives. Executive orders are appealing to any president because they can be quietly and quickly implemented without hearings, votes or substantive public feedback. President Obama has been direct in favoring this approach, stating, “We’re not just going to be waiting for legislation in order to make sure that we’re providing Americans the kind of help they need. I’ve got a pen, and I’ve got a phone.”
The National Association of Manufacturers (NAM) ramped up its litigation in response to the tsunami of regulations coming out of the White House. In this final year of the president’s term, the regulatory spigot has only been turned up. The NAM is currently suing the federal government in 16 cases for overregulation.
The Manufacturers’ Center for Legal Action has argued in the courts that the president overstepped his constitutional power in issuing many memoranda and executive orders affecting labor and environmental law. However, a presidential legacy implemented by the pen can be destroyed by the pen. First, an executive order can be revoked by another executive order, and it is common for presidents to revoke some of their predecessors’ executive orders. Second, Congress can revoke an executive order through legislation. Third, an executive order can be revoked by a federal appeals court or the Supreme Court.
This year’s election will have a profound impact on future NAM litigation efforts to limit executive overregulation through the courts. President-elect Donald Trump will fill the Supreme Court vacancy created by Justice Antonin Scalia’s death and potentially two or more additional seats as justices retire. If multiple vacancies occur, the Supreme Court will shift from its previous makeup of five conservative and four liberal justices that shaped some of the nation’s most significant issues on social norms, individual rights, the balance of government powers and business and workplace matters. Several, if not all, of the cases in which the NAM is suing the government for executive overreach may end up in a newly configured Supreme Court, and the outcome of President Obama’s regulatory legacy will largely rest on the Supreme Court nominees of President-elect Trump.
The Supreme Court has not had a liberal majority since the retirement of Chief Justice Earl Warren in 1969, and during the past 48-year period, the Supreme Court has made a modest shift to curtail executive overreach. Without a majority conservative Supreme Court, many pro-business decisions on labor and environmental issues would likely not have been rendered. It is generally thought that President-elect Trump will support Supreme Court nominees who believe the Founders’ words in the Constitution mean what they say, not that the Constitution should be seen as a living document. Justices in this mold will likely not support broad deference to executive authority and agency actions. The issues at stake range from the ability of citizens to challenge regulations by administrative fiat to the ability of workers to unionize.
The morning after the election brought with it discussion of whether Democrats will filibuster the Trump administration’s Supreme Court nominees. The Senate confirmation process will offer a critical view into the Supreme Court’s future and the legacy of President Obama’s executive orders.
Last year, the Manufacturers’ Center for Legal Action filed our lawsuit against the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers over their expansive interpretation of their jurisdiction to require permits for the use of a wide variety of land across the country. More than 150 other business organizations, states and other groups have also challenged the “Waters of the United States” (WOTUS) rule in various courts, and many of these challenges, including ours, have been consolidated in one federal appellate court—the Sixth Circuit. Some of this background, and the justification for our litigation, is summarized in this post from February.
Two key events have happened recently. First, the National Association of Manufacturers (NAM) asked the Supreme Court in September to review a splintered decision from the Sixth Circuit that allows that court to continue to hear arguments in the case, despite a widely held view among lawyers that the Clean Water Act requires the case to be heard by a trial court, not an appeals court, in the first instance. The administration will be filing its response next Monday. If the court agrees to review this issue, considerable time and effort could be saved in trying to resolve the underlying merits of the challenges to the WOTUS rule.
Second, today, business and municipal groups filed a detailed 93-page brief describing point by point the numerous concerns of all the petitioners about the rule. The brief contains textbook examples of arguments that are all too frequently made about government regulations: the rule was promulgated in violation of basic principles of notice-and-comment rulemaking, the agencies failed to comply with the Regulatory Flexibility Act, the rule is inconsistent with the statutory language of the statute (the Clean Water Act), the rule is unconstitutionally vague, and it violates the Commerce Clause and federalism principles. There are also more unusual arguments arising from EPA’s “covert propaganda” efforts in support of the rule.
Courts give agencies considerable deference when interpreting their statutory authority, but the Supreme Court has weighed in several times to try to provide some constitutional limits on the EPA’s jurisdiction, and a significant part of our brief is dedicated to it. The brief argues that the agencies relied too heavily on Justice Kennedy’s concurring opinion in the Rapanos case, which cannot be reconciled with the other justices’ views in the way attempted by the EPA. The EPA’s approach brings into its jurisdiction countless features that lack the volume of flow and proximity needed to ensure that effects on navigable waters are more than insubstantial or speculative.
The scope of the agencies’ jurisdiction is one of the most fundamental issues affecting the regulation of land use in the United States. Today’s brief brings us one step closer to resolving the allocation of regulatory power among federal, state and local governments.
Yesterday, Judge Marcia A. Crone of the Eastern District of Texas granted a nationwide injunction for the majority of the Fair Pay and Safe Workplaces regulation, otherwise known as “blacklisting.” The order states that business groups “properly demonstrated immediate and ongoing injury to their members if the rule is allowed to take effect,” adding that based on the National Association of Manufacturers’ conflict minerals disclosure lawsuit against the Securities and Exchange Commission, the Blacklisting Order was also likely a “compelled public reporting requirement violating the First Amendment.”
The regulation, finalized in August, places extensive and burdensome new reporting requirements on federal contractors in an attempt to achieve broad and sweeping labor law reforms, and it would have gone into effect today if the judge had not ruled. The only area where the preliminary injunction was not granted is the January 1, 2017, Paycheck Transparency provision, which, upon implementation, would require contractors and subcontractors to provide employees with documentation of regular and overtime hours worked, pay and additions to or deductions from pay that are not currently included in employee paychecks. The decision strongly affirms the arguments related to the First Amendment, due process, constitutional, arbitrary and capricious concerns and others raised in the complaint.
This regulation arises out of the executive branch’s attempt to parlay the federal government’s limited proprietary authority over the procurement of government contracts into a regulatory tool designed to achieve broad and sweeping labor-law reforms. Implementation for prime contractors was set to begin on October 25, 2016, for contracts of $50 million or more and requires reporting of one prior year of labor law violations. The threshold for contract size drops to $500,000 on April 25, 2017. The reporting period extends to the three prior years of labor law violations starting on October 25, 2018. Covered disclosures of labor law violations include civil judgments, administrative merits determinations and arbitral awards, including those that are not final or still subject to court review. The number and severity of the alleged and proven violations will be a factor in the awarding of contracts, affecting thousands of manufacturers.
The judge ruled that the First Amendment claim will likely be successful on the merits based on the court’s logic in NAM v. SEC (D.C. Cir. 2014). Specifically, the court stated, “The Executive Order, FAR Rule and DOL Guidance share the same constitutional defect as the conflict minerals rule in NAM, only more so. The Order, Rule and Guidance compel government contractors to ‘publicly condemn’ themselves by stating that they have violated one or more labor or employment laws. The reports must be filed with regard to merely alleged violations, which the contractor may be vigorously contesting or has instead chosen to settle without an admission of guilt, and, therefore, without a hearing or final adjudication.” The appeals court in NAM “further took issue with the government’s attempt to force companies to ‘stigmatize’ themselves by filing the required reports, stating, ‘Requiring a company to publicly condemn itself is undoubtedly a more ‘effective’ way for the government to stigmatize and shape behavior than for the government to have to convey its views itself, but that makes the requirement more constitutionally offensive, not less so.’”
Manufacturers are pleased that Judge Crone enjoined the implementation of this regulation that would have far-reaching negative impacts on companies with federal contracts. The NAM will continue fighting for manufacturers in the courts to turn back the growing wave of federal regulations that hamper growth.
The Supreme Court’s new term began this month with only eight Justices, with prospects slim for adding a ninth in time to participate in any of the cases being argued over the next seven months. It is thus harder to get a majority of five to agree on a result and therefore more likely that rulings already made by the lower courts will stand.
Nevertheless, oral arguments will proceed, and manufacturers are concerned about 10 upcoming decisions that will affect their competitiveness and ability to create jobs.
High on our priority list is Microsoft v. Baker, a class action involving the Xbox 360 console. The Supreme Court will decide whether an appeals court was correct in allowing an immediate appeal of a decision that refused to allow a group of plaintiffs to file a class action when they had already voluntarily dismissed their claims. It’s a tortured procedural issue but will determine whether class-action plaintiffs can appeal decisions that deny class certification—that is, decisions that require each plaintiff to sue individually for the damages they allege. The Manufacturers’ Center for Legal Action filed briefs in this case.
Another important case challenges whether the general counsel of the National Labor Relations Board properly authorized thousands of complaints against companies for labor law violations. The outcome could affect decisions made by senior government officials at six other government agencies as well. See our previous blog post here for details.
Other significant cases on the docket include the following:
- Samsung Electronics Co. v. Apple Inc.: Apple claimed that Samsung infringed upon the patented design of Apple’s iPhone. The legal issue involves calculating damages for infringement—whether “total profit” from the infringement is calculated from sales of all the phones, or rather whether it should be some fraction of that based on the extent to which the design was used on the infringing phones.
- Star Athletica, LLC v. Varsity Brands, Inc.: The Supreme Court will explain the appropriate test to determine when the design of a useful article is protected by copyright law. Designs may be copyrighted, but “useful articles” may not.
- SCA Hygiene Prod. v. First Quality Baby Prod.: Patent owners may lose their rights if they don’t sue fast enough for infringement. The Supreme Court will clarify the doctrine of “laches” under the patent laws.
- Venezuela v. Helmerich & Payne Int’l.: A company sued Venezuela for expropriating 11 oil drilling rigs and related property, and the question is whether that government can be sued under provisions of the Foreign Sovereign Immunities Act.
- Life Technologies Corp. v. Promega Corp.: At issue is whether supplying a single component of a patented multicomponent invention violates a law prohibiting companies from supplying “all or a substantial portion of the components of a patented invention” and from inducing the combination of components overseas in a way that would infringe a patent. The Supreme Court will decide how broadly this statute should be interpreted to punish manufacturers of parts that are incorporated into others that infringe patents.
- Visa, Inc. v. Osborn: Industry trade associations must be careful to avoid agreements in restraint of trade under the antitrust laws, and this case involves whether members of an association are deemed to have entered into an agreement merely because they agree to adhere to an association’s governance rules. The issue arose from an agreement among credit card companies and banks over fees when using automated teller machines. It could result in even stricter limits on association activities.
- Expressions Hair Design v. Schneiderman: The government regularly compels manufacturers to say things about their products or services that are controversial, without sufficient legal justification. This case involves a law that allows different pricing for cash and credit-card transactions but prohibits retailers from calling a credit-card differential a “surcharge.” The Supreme Court will decide whether this law violates the First Amendment because it restricts what merchants can tell their customers.
- Goodyear Tire & Rubber Co. v. Haeger: If a manufacturer hires trial counsel to defend a product liability case, and that counsel fails to turn over relevant documents during discovery, what sanction may a court impose on the company? In this case, the Supreme Court will decide whether the damages must be limited to the harm directly caused by the misconduct, or can be much higher, without affording the parties the protections of criminal due process.
In addition to some of these cases, the Manufacturers’ Center for Legal Action has been active in others awaiting a decision whether the Supreme Court will hear the appeals. We will provide an update on those cases in another blog post shortly.
An unusual statutory restraint on the appointment process for the general counsel of the National Labor Relations Board (NLRB) is at the heart of a significant case about to be heard by the Supreme Court of the United States. The provision is part of the Federal Vacancies Reform Act of 1998. The court will decide whether Lafe Solomon, a long-serving NLRB official and former acting general counsel of the board for several years, could actually serve as acting general counsel in the face of statutory language prohibiting such service if he was nominated to be general counsel but had not served long enough as first assistant general counsel.
It’s a technical provision with a “notwithstanding” clause that has caused all the confusion. That clause only refers to one subsection of the law, but the rest of the statutory language refers to the entire section. A federal appeals court ruled that Solomon was prohibited from serving as acting general counsel after his nomination and that the unfair labor practice complaint that was issued on his authority was invalid.
The NLRB issues more than 1,200 complaints each year, so thousands of decisions were made by the general counsel or those to whom he delegated decision-making authority from January 5, 2011, to November 4, 2013. This challenge could allow many of those cases to be revisited.
But the case will have an impact on many other federal agencies, arguably going back to 1998. In April, the administration warned the Supreme Court that “Decisions of many former acting officers, including senior officers in the HHS Centers for Medicare and Medicaid Services, DOJ, DOT, Department of Defense, the Export-Import Bank and General Services Administration could be open to question under the court of appeals’ reasoning. Moreover, the decision below casts a cloud over the service of about half a dozen current acting high-level officers, including in the DOT, HHS, EPA and OPM.”
The Manufacturers’ Center for Legal Action is on the front lines challenging a variety of NLRB actions that skew policy and law against manufacturers in the United States. We look forward to oral arguments at the court on November 7 and a decision thereafter.
The entire bench of the federal appeals court in the District of Columbia is hearing nearly four hours of arguments tomorrow in 39 lawsuits challenging the Obama administration’s Clean Power Plan regulation. The challengers represent a broad swath of industries, including mining, transportation, electric utilities, manufacturers and consumers of energy, as well as 27 states.
The Manufacturers’ Center for Legal Action, joined by a manufacturing coalition of more than a dozen other national trade groups, is involved in this case because we are very concerned that the Environmental Protection Agency (EPA) has imposed a set of regulations on electric utility companies that is not authorized by, and contradicts specific provisions of, the Clean Air Act. The rule’s goal is to restructure the power sector by imposing emissions limits that are unachievable without switching fuel inputs. This could undermine the reliability of the electric grid and cause higher energy rates for consumers, including manufacturers in the United States. A ruling in favor of the rule would set the EPA up to impose greenhouse gas regulations on many other sectors of manufacturing.
This case has all the earmarks of a major case that will wind up in the Supreme Court, probably in the fall of 2017. Normally only three judges would hear this first round of arguments, but the appellate court decided to go straight to the full panel of 10 (not counting Chief Judge Garland, who is not participating). This unusual step signals that the judges consider this case extraordinary, and the court has set aside its largest courtroom and two overflow rooms for the large anticipated attendance from litigants and the public.
This regulation is of existential importance for certain sectors and will put substantial upward pressure on energy costs for many manufacturers and other consumers. But beyond raising legal issues of statutory construction, administrative procedure and constitutional compliance, the Clean Power Plan is a prototype for the kind of regulation that tests the limits of the executive branch. Whoever wins the upcoming election, the next administration will have to live within the contours of decisions like the one in this case. The power to regulate comes from the Constitution and the laws enacted in compliance with it, and the courts stand as the final judge on how far that authority goes.
The Manufacturers’ Center for Legal Action filed a complaint with a coalition of other associations on September 20 to challenge the Department of Labor’s (DOL) new overtime rule, asserting the new rule exceeds the authority of the DOL under the Fair Labor Standards Act (FLSA). Unless a court stops it, this unprecedented rule will impair employers’ ability to classify as exempt from overtime executive, administrative, professional and computer employees. The new rule will go into effect on December 1, 2016, causing economic harm to both employers and the employees who will be subject to the new overtime requirements.
The new overtime rule drastically alters the DOL’s minimum salary requirements—increasing the minimum by 100 percent, from $23,660 to $47,476 annually—so as to impose new overtime payment requirements on businesses of all sizes. This directly effects those individuals who have historically been considered exempt from overtime pay. Due to the drastic rise in the salary threshold, employees will have to be reclassified and will inevitably lose many of the benefits and flexibilities that go along with being an exempt employee, such as flexible work schedules that permit employees to sometimes work outside of the normal business hours due to personal obligations.
In addition, the DOL’s new rule permits employers for the first time to count nondiscretionary bonuses, incentives and commissions toward up to 10 percent of the minimum salary level for exemption; however, this provision is so restricted by the DOL as to be meaningless. It also establishes an unprecedented automatic “escalator” provision that will dramatically increase the minimum salary every three years without a rulemaking. Congress has provided for automatic increases in other areas, such as the cost of living for Social Security benefits, but Congress has never provided for automatic increases of the minimum wage. The escalator provision exacerbates the detrimental impact on businesses, both large and small, by automatically updating the minimum salary requirements to even higher levels every three years.
The DOL has failed to recognize the infeasibility, costs and real-world impacts of the new overtime rule. As noted in our press release, manufacturers of all sizes will bear the burden of this costly regulation that will force many employers to cut critical programming, staffing and services to the public. Many of these employers will lose the ability to effectively manage their workforces and provide flexibility to valued employees on the pathway to the middle class. This new rule will injure employers and employees across many industries, job categories and geographic areas by denying them opportunities for advancement and hindering performance of their jobs. We are hopeful that the court will understand the importance of this issue and overturn the DOL’s new overtime rule.
A bedrock principle of tort law in this country is that the party who causes the damage is the one who should be liable for fixing the damage. Even under a standard of “strict liability” where a defendant is liable without a finding of fault, courts require a showing that the damage in question was actually caused by the defendant at the table.
A lawsuit recently filed in Rhode Island, led by the state’s Attorney General and staffed by hired-gun private plaintiff’s lawyers who stand to make a mint if the lawsuit is successful, seeks to break from this foundational principle. That should be of concern to any manufacturer that could become the target of creative plaintiffs’ lawyer lawsuits—which is to say, to every manufacturer.
The lawsuit involves the gasoline oxygenate MTBE, which was for a time blended with motor fuel in order to meet federal emissions standards. The problem with MTBE is that it is highly water soluble, and if underground storage tanks containing gasoline leak, the MTBE stored in them can contaminate groundwater. Of course, the owners of these tanks, if they can be identified, have always been, and continue to be, responsible for cleaning up such leaks. On top of that, Congress created a special trust fund to pay for cleanups when the owner or cause is unknown, or where the owner may not have the wherewithal to pay. The fund, which has been around since the mid-1980s, is paid for by a tax levied on the petroleum industry on every gallon of fuel sold.
Unfortunately, many of the states where MTBE was most heavily used are also states that have suffered poor economic growth and have faced major budget challenges in recent years. This has led many of these states, including Rhode Island, to raid their cleanup funds for other state budget priorities, thus creating the need to find alternative sources of funds to handle these cleanups. Cue the trial bar, who have shopped MTBE lawsuits to several state Attorneys General and have found fertile hunting ground in the cash-strapped northeastern states.
The Rhode Island legal filing includes a smorgasbord of legal theories intended to bypass the inconvenient need to show that the defendants in the case actually caused the damage the lawsuit seeks to remedy. The case seeks to pin liability on any company that sold reformulated fuel in the state—regardless of whose actions or whose storage tanks actually caused contamination. It is remarkably a sanction based on simply doing business in the state of Rhode Island, which the state seeks to allocate according to the market share held by industry participants during the relevant time period. Beyond the tort law implications of this case, it is remarkable that a state so badly in need of economic investment would target an industry simply for doing business there.
No matter how much money defendants have paid into the state fund to cover such cleanups and regardless of the extensive efforts they may have already gone through to prevent leaks and to remediate those that occurred under their watch, the companies are targeted in this lawsuit because they are perceived as most able to pay. This is a case about targeting deep pockets, not about remedying past wrongs, and certainly not about justice.
On September 2, the Manufacturers’ Center for Legal Action filed an amicus brief in the U.S. Court of Appeals for the Eight Circuit challenging a National Labor Relations Board (NLRB) decision forcing Cooper Tire & Rubber Company (Cooper) to reinstate an employee who used racial epithets toward a replacement worker while the employee was on the picket line. The NLRB’s decision overturned an arbitration decision finding that Cooper dismissed its employee for good cause. This decision does not align with existing federal law, forces manufacturers to execute a policy that leaves them open to civil liability and requires businesses to tolerate behavior antithetical to American values.
The NLRB’s decision to reinstate an employee who used racist speech does not follow federal law by violating Title VII of the Civil Rights Act of 1964 and 42 U.S.C. § 1981. These laws prohibit discrimination and harassment on grounds such as race and allow for an employer to fire an employee in violation. The work environment should encourage openness and understanding of all employee backgrounds. Forcing a company to condone racist behavior violates other workers’ rights to a hostile-free workplace. Ultimately, this decision by the NLRB significantly diminishes an employer’s ability to cultivate an inclusive work environment, which hurts workers, productivity and profit.
Not only does this decision negatively impact the working environment, but it also forces manufacturers to accept conduct, which leaves them open to liability. Under federal law, when a racial statement is made directly to an employee, an employer can be liable if it knows about the statement and fails to take proper action. If the NLRB’s erroneous decision is upheld, employers in many instances will be forced to allow discrimination to continue, instead of firing employees for racial harassment. This would, therefore, require employers to follow a pro-discriminatory policy, exposing them to possible litigation and allegations of cultivating a hostile workplace environment.
This NLRB decision challenges American progress on issues of race and diversity in both business and culture. Employers should not be required to condone racism in the workplace. We are hopeful that the Eighth Circuit will understand the importance of overturning this discriminatory NLRB decision, which not only negatively impacts the way we conduct business but also the way we conduct ourselves.