Audit, Compliance and Risk Blog

Are Your Climate Risks “Material”, and If So, Do You Disclose Them?

Posted by Jon Elliott on Thu, May 17, 2018

The Securities and Exchange Commission (SEC) administers reporting requirements for companies listed on national securities exchanges (“listed companies” or “public companies”), under the federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. These requirements include detailed specifications for some reporting, such as financial reporting consistent with Generally Accepted Accounting Practices (GAAP). But SEC also administers vaguer reporting standards – including requirements to report any information that might be “material” to investors’ evaluation of a public company. Registered entities must disclose material information, including details or caveats necessary to ensure that the disclosures are not misleading. Materiality is open to wide differences in interpretation, at any given time across companies with different activities and resources, and over time based on developments in markets and the wider world. The Government Accountability Office (GAO) recently issued an evaluation of SEC’s “Commission Guidance Regarding Disclosure Related to Climate Change” (referred to below as the “2010 Guidance”), and subsequent general and company-specific guidance related to this topic. Read More

Tags: SEC, directors & officers, directors, Business & Legal, Corporate Governance

Key Employment Law Decisions from 2017

Posted by Bethan Dinning on Tue, May 15, 2018

By Audrey Belhumeur, Bethan Dinning, Andrew Nathan, Kamini Dowe, and Tommy Leung

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Tags: Employee Rights, Employer Best Practices, Business & Legal

SEC Expands Public Company Cybersecurity Disclosure Expectations

Posted by Jon Elliott on Tue, Apr 10, 2018

The Securities and Exchange Commission (SEC) has just published Interpretive Guidance to “assist” public companies with evaluation and reporting of their cybersecurity risks. This Guidance expands similar SEC guidance issued in 2011, reflecting the growing importance of the issue and highly-publicized cybersecurity breaches during the intervening years. The following discussion summarizes the new Guidance, and provides context.

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Tags: SEC, Internet, directors & officers, directors, Corporate Governance, Business & Legal

Administration Proposes Massive Cuts in EPA for Fiscal Year 2019

Posted by Jon Elliott on Tue, Mar 27, 2018

On February 12, the Trump Administration issued its budget proposal for federal Fiscal Year (FY) 2019 (October 1, 2018 through September 30, 2019), subtitled “An American Budget”. The proposal included a 34% cut in the Environmental Protection Agency (EPA) budget, from $8.2 billion in FY 2016 (stable in FY 2017 and FY 2018 under a Continuing Budget Resolutions rather than a fully-new federal budget), to $5.4 billion for FY 2019, with corresponding personnel cuts from 15,408 full-time-equivalent employees (FTE) to 12,250. (these are numbers for EPA in the government-wide budget from the Office of Management and Budget (OMB); the stand-alone budget document on EPA’s website cites $6.1 billion).

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Tags: EPA, Environmental, Environmental risks, climate change, Business & Legal

NLRB Eases Restrictions on Employer Policies

Posted by Jon Elliott on Tue, Feb 06, 2018

Most employers promulgate a wide range of employee-related policies and work rules, which some compile in employment manuals. All too frequently, these policies and work rules contain ambiguities that employees try to parse to understand what rules really apply, and why. What if employees interpret – or might reasonably interpret – an ambiguity in a way that appears to restrict employees’ rights to organize themselves? Do these provisions violate the National Labor Relations Act (NLRA)?

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Tags: Employee Rights, Employer Best Practices, directors & officers, directors, NLRB, Business & Legal

California’s New Cleaning Products Right to Know Act – A First Look

Posted by Jon Elliott on Tue, Jan 16, 2018

Does your employer’s Hazard Communication program pay attention to cleaning agents used in the workplace – bleaches, disinfectants, glass cleaners, etc? If it does more than mention their existence and note that they’re probably corrosive and maybe toxic, you’re almost certainly in the minority. In most workplaces, workers who use cleaners are exposed to undisclosed or unexplained chemical hazards. And even if your organization’s employees do receive this information, does your employer contract out janitorial and other service work without ensuring that those night janitors are fully trained and protected?

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Tags: Hazcom, Environmental, Environmental risks, Employee Rights, Employer Best Practices, Business & Legal

NLRB Re-Revises the Definition of “Joint Employer”

Posted by Jon Elliott on Tue, Jan 09, 2018

If someone receives occupational direction and/or compensation from more than one entity, then who’s the boss? Sometimes it’s obviously one or the other, sometimes it’s not clear which one is, and sometimes the answer may be “both.” The answer has important implications, not just for who writes a paycheck but for who is subject to legal requirements and prohibitions under federal, state and local laws. The National Labor Relations Board (NLRB) upended established definitions in 2015, in a decision that Browning-Ferris Industries of California (BFI) was a joint employer with the company (Leadpoint Business Services) that provided employees who worked at one of BFI’s sanitary landfills, since BFI reserved the right to intervene in a variety of labor decisions. By a party-line 3:2 vote (with Democrats in the majority) NLRB “restated” agency and judicial precedent and found that the two companies were indeed joint employers, which realigned the employees’ access to collective bargaining (NLRB’s area of jurisdiction). The other two members dissented vociferously, for a variety of reasons.

After the BFI decision, employer groups and many Republican legislators argued that the correct standard was actual control not potential control, and that the majority was abandoning the common law approaches it claimed to follow. Early in December 2017, the U.S. House of Representatives passed legislation to write a definition of “joint employer” into the National Labor Relations Act (NLRA), in order to reverse this expansive interpretation (HR 3441, the “Save Local Business Act”). However, on December 14 the NLRB – now with a 3:2 Republican majority after President Trump filled two intervening vacancies – voted on a party line vote to rescind the BFI case analysis and return to an actual control test. The new decision is in Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co., as a single employer and/or joint employers. The remainder of this note discusses the issue and this decision, which probably resolves the issue … until the next election that changes the balance of power again.

Who Can Be a “Joint Employer” Under the NLRA

The NLRA does not presently include a statutory definition of “joint employer” (or even “employer”, for that matter, other than to clarify that “any person acting as an agent of an employer” is also considered an employer (29 USC § 152(2))). In the absence of a statutory definition, NLRB and courts look to other labor laws and the “common law” when considering whether an employer-employee relationship exists. This case-specific review allows flexibility to adapt policies to changing workplace realities, but also means that guidance can be unclear and tends to vary with the opinions of a majority of the five NLRB Board members.

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Tags: NLRB, Employee Rights, Employer Best Practices, Business & Legal

Final Determination of Net Neutrality Fate Likely to be Slower Than Dial-up

Posted by Eric Robinson on Tue, Dec 19, 2017

On December 14, the FCC voted to rescind its “net neutrality” rules barring Internet service providers from either favoring or disfavoring certain online content over other content by providing faster, prioritized access to the favored content. As expected, the changes came in a three-to-two vote of the commission members.

This issue has had a convoluted history, dating back to when dial-up was the primary means to access materials online. In 2002, the commission decided that then-emerging broadband access should be classified under the law as an “enhanced information service,” which is subject to little regulation, rather than as a “basic telecommunications service,” which is more highly regulated, like a public utility.

For example, the regulation of old-fashioned telephone service as a basic service means that telephone companies cannot keep their customers from calling customers of other phone companies, or from receiving such calls.

The commission then tried to enact “net neutrality” rules in 2008 and in 2010, both of which were struck down by the courts because of the prior classification of broadband access as an enhanced service. So in 2015, the FCC reclassified Internet access as a “basic service” and imposed new net neutrality regulations on the basis of that classification. With the reclassification in place, the commission’s net neutrality rules were upheld by the courts last year.

Now the commission has voted to again classify Internet access as an enhanced service and rescind the net neutrality regulations. FCC Chair Ajit Pai has said that if Internet service providers unfairly favor some online content over others, the issue should be handled by the Federal Trade Commission as an anti-competitive business practice.

It is important to note that many of the concerns of net neutrality advocates are so far primarily theoretical. But without net neutrality regulations, Internet service providers could favor content from their corporate siblings or subsidiaries, or from content providers that have paid for such priority.

Without net neutrality rules in place, the accessibility of an individual business’s website or cellphone app could depend on the specific circumstances in their markets. Large companies may, for example, be able to afford prioritization from ISPs and dominant businesses may have enough customer support to avoid being deprioritized, so that customers would object if an ISP blocked or limited access. But smaller and independent businesses may not have the clout, in terms of either funds or user demand, to avoid having access to their online material slowed.

The FCC’s vote eliminating the net neutrality rules is not likely to be the last word on the issue. Several state attorney generals have already announced a court challenge and other groups are likely to file separate lawsuits. The changes will probably be put on hold until the court challenges are resolved. Some members of Congress have endorsed legislation on the issue.

In the Internet era, we’ve become used to instant answers and results, but it appears that the question of net neutrality, like many legal issues, will be resolved the old-fashioned way: slowly.

This column is for educational purposes only; it does not constitute legal advice.

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Tags: Internet, Business & Legal

U.S. Senate Will Require Anti-Harassment Training

Posted by Jon Elliott on Tue, Dec 12, 2017

Highly-publicized revelations about extensive workplace harassment have cost many alleged harassers their high-powered positions (including US Senator Al Franken), and are producing a variety of proposals to toughen standards. One of the first new provisions was enacted by the U.S. Senate on November 9. The Senate Anti-Harassment Training Resolution of 2017 (S.Res. 330) will require anti-harassment training in Senate offices. The Resolution applies to internal governance of the Senate, so does not apply to any other body, such as the House of Representatives (where House Resolution 630, requiring annual training by each member, officer and employee in employee rights, including anti-harassment and anti-discrimination, was passed on November 29 but is being reconsidered).

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Tags: Employee Rights, Business & Legal, Employer Best Practices, Workplace violence

EPA Moving to Prevent “Regulation By Litigation”

Posted by Jon Elliott on Tue, Dec 05, 2017

As the Attorney General of Oklahoma, Scott Pruitt made his national reputation suing the Environmental Protection Agency (EPA) to reverse or delay the agency’s attempts to expand environmental controls and the scope of its authority. Now that he’s EPA Administrator, Pruitt is moving to ensure that his agency doesn’t make use of the second major type of agency-defendant litigation, in which an agency is sued and then settles on terms favorable to the plaintiff’s goals. In a Directive and Memorandum issued October 16, Pruitt argues that this “sue and settle” litigation represents collusion between agencies and advocates, bypassing normal legislative and administrative processes and allowing agencies to redirect their efforts through “regulation by litigation.” And because litigation settlements typically involve only the active parties and the judge, these approaches tend to freeze out others – states, groups, and individuals – who lose the opportunities to participate that they’d be provided by normal legislative and regulatory proceedings.

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Tags: EPA, Business & Legal, Environmental, Environmental risks