Navigating Employer Obligations During California’s Wildfire Disasters
As Los Angeles (the “City”) grapples with the impacts of the devastating wildfires, employers are facing critical decisions about protecting their workforce while maintaining operations. While Cal/OSHA recently urged employers to protect workers from unhealthy air in Los Angeles County, this article will provide further insight on a variety of the complex legal obligations California employers must navigate during wildfire and other natural disaster emergencies.
Wildfire Exception in Los Angeles Fair Work Week Ordinance
The Los Angeles Fair Work Week Ordinance typically imposes strict scheduling requirements on covered employers. However, the City has clarified that wildfire-related closures fall under the ordinance’s force majeure exceptions. Specifically:
The standard 14-day advance notice requirement for work schedules may be suspended when operations are compromised by wildfires.
Employees’ right to decline schedule changes made after the notice deadline may be limited during wildfire emergencies.
The force majeure exception explicitly covers natural disasters, including fires, floods, earthquakes, and other civil disturbances.
Employers must still document and justify any schedule changes made under this exception.
Workplace Safety Requirements Under Cal/OSHA
Under California Labor Code section 6400, employers must provide and maintain a safe and healthful workplace for employees. Cal/OSHA’s Protection from Wildfire Smoke standard mandates specific employer obligations when wildfire smoke affects air quality. These requirements include:
Monitoring the Air Quality Index (AQI) for PM2.5[1] before and throughout each work shift;
Providing N-95 respirators for voluntary use when AQI for PM2.5 exceeds 150;
Requiring mandatory respirator use when AQI for PM2.5 exceeds 500;
Implementing specific worker training programs about wildfire smoke hazards; and
Tracking air quality through EPA’s AirNow website or local air quality management district resources.[2]
Worker Rights in Evacuation Zones
California law explicitly prohibits employer retaliation against workers who refuse to work in unsafe conditions, including within evacuation zones. California Labor Code section 6311 protects workers who refuse to perform work in violation of occupational safety or health standards where such violation creates a real and apparent hazard. Additionally, section 1102.5 prohibits employer retaliation against workers exercising such rights. Employers should ensure that they abide by evacuation orders when issued by appropriate authorities. For more information, the Department of Industrial Relations (“DIR”) has an infographic regarding Worker Safety Wildfire Smoke and Evacuation Zones.
Wage and Hour Obligations During Emergency Closures
Employers must also navigate complex wage and hour requirements during natural disasters. California Labor Code Section 204 and the Fair Labor Standards Act (FLSA) require employers to maintain regular payment schedules even during emergencies. If a workplace is forced to close due to wildfire danger or evacuation orders, exempt employees must generally receive their full salary for any workweek in which they perform any work. Non-exempt employees, however, generally only need to be paid for hours actually worked, though reporting time pay requirements under Industrial Welfare Commission Wage Orders may apply if employees report to work but are sent home due to wildfire-related closures.
Employee Accommodations and Leave Rights
The California Fair Employment and Housing Act (FEHA) provides protections to employees who need accommodations due to wildfire-related conditions in specific circumstances. For instance, employees with respiratory conditions may require additional accommodations when working in smoke-affected areas.
The California Family Rights Act (CFRA) and/or Family and Medical Leave Act (FMLA) entitles leave to employees with a serious health condition caused or exacerbated by a natural disaster, including smoke from wildfires. California Labor Code Section 233 (also known as the “Kin Care” law) and various local ordinances may also provide employees with the right to use accrued paid sick leave to care for family members affected by wildfire evacuations or related health issues.
WARN Act Considerations and Business Planning
Natural disasters like wildfires may trigger obligations under Labor Code Sections 1400-1408. This law, known as the WARN Act, typically requiring a 60 days’ notice before a mass layoff or closure. While Courts and the California Labor Commissioner have generally interpreted the Act’s “physical calamity” exception to include natural disasters like wildfires, employers should note that this exception is narrowly interpreted and excludes foreseeable business circumstances and economic downturns even if caused by disaster. At the start of the COVID-19 pandemic, the DIR issued Guidance providing insight on the “physical calamity” exception.
Given these issues, employers should review their employment and insurance policies, as well as their disaster preparedness plans, to ensure compliance with all applicable regulations and to minimize potential liability during these challenging circumstances.
[1] PM2.5, or particulate matter 2.5, is a term for tiny particles in the air that are 2.5 micrometers or less in diameter.
[2] Air quality can be tracked through websites like the U.S. EPA’s AirNow or local air quality management district websites. Employers can also use their own instruments to measure PM2.5 at worksites per Cal/OSHA’s requirements.
Listen to this post
China To Revise Registration Requirements for Foreign Food Facilities
On January 3, 2025, the Chinese General Administration of Customs (GAC) published a draft amendment to the Regulations on Registration and Administration of Overseas Manufacturers of Imported Food (“Registration Regulations,” known as GAC Decree 248)[1] for public comments, due by February 19, 2025. China also notified the World Trade Organization (WTO) of the draft through G/SPS/N/CHN/1324.[2]
In 2021, China issued GAC Decree 248 in 2021, which requires that all overseas food manufacturers exporting food products to China to register with GAC.[3] After three years of implementation, GAC has identified areas for refinement and optimization of the framework, aiming to address practical challenges and enhance the efficiency of the registration process for overseas manufacturers.
Notably, the draft newly introduces a regulatory pathway for overseas facility registration, namely, system recognition, which allows the competent authorities of the manufacturing facility’s home country (region) to obtain recognition from GAC.[4]
Under this new pathway, the competent authorities of recognized countries (regions) may submit a list of recommended manufacturers to GAC. Upon receiving these recommendations, GAC will register the listed enterprises and assign them official registration numbers. It appears that manufacturers may not be required to submit individual applications directly to GAC; however, enterprises from recognized countries may need to coordinate with their competent authorities to ensure their information (e.g., enterprise name, facility address, and contact details) is included in the list submitted to GAC.
This proposed approach represents a significant shift from the current framework under GAC Decree 248, which regulates imported food products based on their risk level and establishes two registration pathways, one for “specified foods” (e.g., milk, meat, aquatic products (typically known as high-risk foods)) and another for “others” (e.g., confectionary and solid beverage). More details concerning GAC Decree 248 can be found in our newsletter: Breaking News: China Imposes New Registration Requirements for All Foreign Food Companies. The draft, however, proposes a classification system at the national level, focusing on whether the competent authorities of the manufacturing facility’s home country (region) can obtain recognition from GAC. Therefore, it is likely that the competent authorities at home countries may have to undertake a higher level of responsibility to supervise the companies exporting foods to China.
On the other hand, the draft also specifies dossier requirements for enterprises whose competent authorities are not recognized by GAC. These enterprises must apply for registration with GAC by themselves or through an agent. We note that the dossier requirements differ based on the category of food involved. Specifically, manufacturers of the specified foods under Catalogue of Foods that Require Official Recommendation Registration Letters (“Catalogue”) will need to provide official inspection reports and recommendation letters issued by their competent authority.
The draft further proposes to update the Catalogue, listing 11 categories of high-risk foods subject to government-recommended registration, along with their corresponding risk assessments. Compared with GAC Decree 248, 8 types of food may no longer be subject to the current recommended registration requirements, covering health foods (including dietary supplements), special dietary foods, unroasted coffee beans and cocoa beans, edible fats and oils, etc. For example, previously, health food manufacturers were required to undergo a government-recommended registration process, [5] which often involved lengthy procedures. Under the proposed revisions, health food manufacturers will be able to process facility registrations by themselves, which will greatly simplify the process, leading to faster market entry and reduced compliance costs. Per GAC’s announcement, the Catalogue will be subject to dynamic adjustments. This flexible approach empowers the authority to adapt quickly to evolving dynamics within the food industry and shifts in the regulatory landscape.
In addition, the draft removes the requirements for overseas manufacturers to reapply for registration in certain scenarios, such as changes to the legal representative or changes to the registration number granted by the country (region). Instead, it specifies that reapplying for registration is necessary when such changes have a significant impact on the enterprise’s sanitation management and control for food safety – for example, in the event of a production site relocation.
Importantly, GAC removes the provision that mandates overseas producers to file their renewal applications three to six months before the registration expires. It also clarifies specific food categories that are exempt from facility registration, including food sent by mail or express delivery, cross-border e-commerce retail items, food carried by travelers, as well as samples, etc. It is worth noting that food additive manufacturers exporting products to China are excluded from the facility registration requirement under Decree No. 248; this remains the same in the draft.
Overall, the proposed changes underscore China’s ongoing efforts to strengthen food safety oversight while simplifying administrative procedures for the registration of overseas manufacturers of imported foods. However, there are certain remaining issues that may require further clarification. For instance, it is unclear how the new system recognition mechanism will integrate with the existing framework under GAC Decree 248. One key question is whether companies that have already registered with GAC still need to coordinate with their competent authorities to be included in the list provided to GAC. Such ambiguity could create challenges for businesses navigating the transition between the current and proposed systems.
[1] http://www.customs.gov.cn/customs/302452/302329/zjz/6297231/index.html; Non-official English translation prepared by United States Department of Agriculture (USDA) is available at: https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Amended%20Overseas%20Food%20Producer%20Registration%20Regulation%20Notified_Beijing_China%20-%20People%27s%20Republic%20of_CH2025-0005.pdf
[2] https://eping.wto.org/en/Search/Index?countryIds=C156%2CC764%2CC704%2CC458%2CC360%2CC608%2CC410%2CC392%2CC702%2CC158&viewData=G%2FSPS%2FN%2FCHN%2F1324; All comments should be submitted before March 11, 2025.
[3] https://www.gov.cn/gongbao/content/2021/content_5616161.htm
[4] Such recognition is granted under specific conditions, including (1) accepting and passing the inspection of the food safety management system of the country (region) by GAC; (2) signing a food safety cooperation agreement with GAC; (3) signing a mutual recognition agreement of Authorized Economic Operator (AEO) with GAC; and (4) signing other cooperation agreements or joint statements with Chinese government departments that include food safety cooperation content.
[5] Please note that the term “registration” mentioned in this context pertains solely to overseas facility registration under GAC Decree 248 and does not refer to the “blue hat” registration required for health foods in China.
2024 False Claims Act Statistics Show More Cases Filed Than Ever Before
The Justice Department released its annual False Claims Act statistics on Wednesday, January 15, detailing the number of cases filed, recoveries made, and relators’ shares awarded in fiscal year 2024. The government recovered $2.9 billion dollars in 2024, with 57% of that total coming from healthcare cases, 3% from defense spending cases, and the remainder from other actions. Seventy-five percent of recoveries came from qui tam actions in which the government intervened and 17% came from cases initiated by the Justice Department, while qui tam actions where the government declined to intervene resulted in only 7% of the year’s recoveries.
2024 also saw more new FCA cases initiated than ever before. There were 1,402 new matters: 423 initiated by the government and a record-shattering 979 initiated by relators.
While the overall total recoveries increased by $133 million from the year prior, the types of cases driving the number have shifted slightly. Healthcare recoveries are down $184 million from last year and are the lowest they have been since 2009. Defense spending recoveries are down $464 million and are the lowest they have been in the last several years, though DOJ noted in its press release that a $428 million defense settlement—the second largest in history—came in just after the close of the fiscal year. While those traditional stalwarts of FCA recoveries lagged in 2024, DOJ more than made up for them in recoveries in non-healthcare or defense cases. Recoveries in other cases increased $781 million over the prior year and were the highest they have been in almost a decade.
It is not immediately clear what drove the uptick in non-healthcare and defense cases, though pandemic-related fraud claims accounted for at least $250 million of the recoveries. A menagerie of claims related to other government agencies, programs, and grants also appear to have contributed, including claims related to General Services Administration contracts, Housing and Urban Development grant funds, underpayment of royalties owed for oil and natural gas on federal lands, and Federal Emergency Management Agency (FEMA) projects.
Though the government increased its recoveries, it shared less of that money with whistleblowers. Relators received $50 million less than they did in fiscal year 2023. For qui tam actions in which DOJ intervened, it provided an average of 15.7% of the recoveries to the relator, which is the second-lowest relator share percentage since 2012.
In its press release touting the year-end statistics, the Justice Department highlighted healthcare recoveries in areas it has focused on in recent years, including opioid-related cases, matters alleging unnecessary services and substandard care, Medicare Advantage cases, kickbacks, and Stark Law violations. Though it did not appear to drive significant numbers in 2024, the government also highlighted its emerging cybersecurity initiative to promote cybersecurity requirements for government contractors.
Listen to this article
DOJ Reports Nearly $3 Billion in FCA Settlements, Judgments for FY 2024
Headlines that Matter for Companies and Executives in Regulated Industries
DOJ Reports Nearly $3 Billion in FCA Settlements, Judgments for FY 2024
On January 15, the US Department of Justice (DOJ) reported that settlements and judgments under the False Claims Act (FCA) totaled more than $2.9 billion in fiscal year 2024. The government and whistleblowers were involved in 558 FCA settlements and judgments, marking the second-highest total after fiscal year 2023’s record of 566 recoveries. Whistleblowers also filed the highest number ever of qui tam lawsuits, totaling 979 this past fiscal year.
Health care fraud accounted for the majority of FCA settlements and judgments. Over $1.67 billion of the FCA settlements and judgments reported in fiscal year 2024 related to health care matters, including managed care providers, hospitals, pharmacies and pharmaceutical companies, and physicians. The cases related to the health care industry involved, among other things, the opioid epidemic, unnecessary services and substandard care, Medicare Advantage matters, and unlawful kickbacks.
The DOJ statistics sheet can be found here and the press release can be found here.
Pharmacy to Pay $625,000 to Resolve FCA Allegations
On January 13, a settlement was finalized between a pharmacy located in New Jersey, Medsinbox Pharmacy LTC LLC, and the federal and New Jersey state governments. Pursuant to the settlement agreement, Medsinbox agreed to pay $625,000 to settle allegations that it violated the FCA by billing Medicare and Medicaid for prescriptions that it never actually distributed.
The government alleged that between 2019 and 2022, Medsinbox knowingly submitted claims for reimbursement to the federal Medicare and Medicaid programs for medications that it never actually gave to beneficiaries. According to the government, Medsinbox inventory records indicate that the pharmacy never purchased the amount of prescriptions that it claims to have filled and billed to Medicare and Medicaid programs.
The settlement is available here and the DOJ press release can be found here.
Firm Founder Pleads Guilty for Role in $9 Million Cryptocurrency Investment Fraud
On January 9, Travis Ford, the founder of a cryptocurrency investment firm, pleaded guilty for his role in a $9 million fraud conspiracy. Ford pleaded guilty to one count of conspiracy to commit wire fraud, for which he faces up to five years in prison.
According to the government, Ford was the co-founder of cryptocurrency investment firm Wolf Capital Crypto Trading LLC. As alleged, Ford made false promises to solicit investments through social media and other internet platforms, including by purporting to be a sophisticated trader able to deliver returns of 1-2% daily despite admitting that those returns were not realistic. The government alleged that Wolf Capital raised $9.4 million through Ford’s conduct and Ford then misappropriated the investor funds for his own use.
The DOJ press release can be found here.
Department of Labor Proposes Rule on Valuing Stock for ESOP Stock Purchase and Sale Transactions
On January 16, 2025, the Employee Benefits Security Administration (EBSA) at the Department of Labor (DOL) released drafts of long-awaited proposed regulations seeking to clarify the definition of “adequate consideration” as set forth in Section 3(18)(B) of ERISA and a proposed class exemption from certain prohibited transaction restrictions in connection with an employee stock ownership plan’s (ESOP) initial acquisition of privately held employer stock from a selling shareholder.
The ESOP community has sought clear guidance on what the term “adequate consideration” means ever since ERISA’s inception 50 years ago. Although EBSA first proposed “adequate consideration” regulations in 1988, the DOL never finalized these rules. Without such guidance, the ESOP community has expressed concerns that plan sponsors, selling shareholders and ERISA fiduciaries could be left exposed to allegations that the ESOP overpaid for shares at the time of the initial transaction through investigations and civil lawsuits brought later with the benefit of hindsight.
The proposed regulations are in response to the latest Congressional mandate in Section 346(c)(4) of the SECURE 2.0 Act of 2022 for the Secretary of Labor, in consultation with the Department of Treasury, to “issue formal guidance, for . . . acceptable standards and procedures to establish good faith fair market value for shares of a business to be acquired by an employee stock ownership plan.” The proposed regulations are scheduled to be published on January 22, 2025, and if so published would trigger a comment period ending April 7, 2025. However, with a new administration starting January 20th, it is possible that the publication of the proposed regulations may be delayed.
Jenny Cascone Mosh, David Pardys, Sean Power, David A. Surbeck, Rafael Ramos Aguirre, and Nichole M. Smith also contributed to this article.
Hold Your Horses – Cannabis Rescheduling Hearings Stayed, Pending Appeal
In the latest development in a road to rescheduling cannabis from Schedule I to Schedule III under the Controlled Substances Act (“CSA”), on January 13, 2025, in the Matter of Schedules of Controlled Substances: Proposed Rescheduling of Marijuana, DEA Docket No. 1362 Hearing Docket No. 24-44, Chief Administrative Law Judge (“ALJ”) John Mulrooney cancelled the January 21, 2025 hearing on the merits of the Drug Enforcement Agency’s (“DEA”) proposal to reschedule cannabis from Schedule I to Schedule III.
After a request by two private movants (the “Movants”) to remove the DEA from its role as proponent of the proposed reclassification rule was denied, the Movants filed a motion for the ALJ to reconsider its denial of this request. On January 13, 2025, ALJ Mulrooney (i) denied the motion for reconsideration but (ii) granted leave for the Movants to file an interlocutory appeal on the merits of ALJ Mulrooney’s refusal to remove the DEA as proponent of the reclassification. While this Order opens the door on appeal to potentially enable to a private actor to replace the DEA as proponent of the reclassification, the January 13 Order will surely cause further delay in the process of potential rescheduling, evidenced by ALJ Mulrooney’s ordering the Movants and the Government to provide a joint status update 90 days from the issuance of the Order, and every 90 days thereafter.
For those hoping that cannabis would be reclassified before the Trump administration enters office, this is a major disappointment. For those who have been paying attention, this is no surprise, and more of the same.
In a constantly evolving and [still – very] nascent industry like the cannabis industry, one truth has remained: it is a fools errand to try to predict if, when, and how regulatory changes and developments will occur at the federal level. For years, there have been similar questions floated and discussed amongst advisors, operators, and investors in the cannabis industry: “when will cannabis be legalized?”,“when will the SAFE act pass”, “surely Congress will do something, right?”.
Federal action is largely an issue of legislative and regulatory priorities (or, as we have seen, a lack-thereof). Folks can talk and pontificate all they want, but the reality has remained the same: States (at this point, 39 in total, having already passed laws allowing medical marijuana use) are left to fend for themselves, as are the businesses trying to operate with one (if not two) arms tied behind their back.
When President Biden requested in October 2022 for the U.S. Department of Health and Human Services (“HHS”) to “initiate the administrative process to review expeditiously how marijuana is scheduled under federal law”, there was tepid excitement. Hey – the White House is asking HHS to look into this… progress! Then, in August 2023, HHS issued a recommendation to the DEA that cannabis be reclassified from Schedule I to Schedule III under the CSA. At this point, industry participants started to cautiously buy in – maybe – just maybe – this will be the time something actually happens. After all, for business operators, a reclassification to Schedule III under the CSA, would have potentially huge implications – potentially rendering §280E of the tax code inapplicable to cannabis businesses, opening the door for cannabis businesses to deduct various business expenses like any other businesses complying with their state and local laws. And yet, here we are, almost two and a half years later, and the industry is still hoping for change at the federal level.
For operators and investors alike, the reality is simple. Now is not the time to focus on what could happen – or what we hope will happen – at the federal level. Industry participants must continue to focus on what they control: increasing operational efficiency to achieve and maintain profitability.
California Wildfires—Insurance Tips for Policyholders
The recent wildfires in California have clearly had a catastrophic impact, destroying a vast number of homes and business premises across the region. Homeowners and businesses may have limited means to protect against nature’s forces, but, in this alert, we provide tips on steps that can be taken to protect against denials of coverage by insurers. Careful and proactive attention to insurance coverage considerations could be the key to restoring homes and business operations and weathering the financial storms that follow from such disastrous events.
Potentially Relevant Insurance Policies
It is vital for affected homeowners and businesses to review all relevant or potentially relevant insurance policies promptly, including excess-layer policies, and to comply with loss notification procedures. The most common source of coverage for most individuals and businesses is likely to be first-party property coverage insuring the damaged premises and other assets, including against the risk of fire, smoke, and related damage. In many cases, this insurance will be supplemented by specialty coverages that apply to specific situations.
For businesses, the coverage will typically include the following:
Property damage where losses are caused to the business premises and assets, including computers and machinery.
Business interruption (BI) where the business experiences loss of earnings or revenue due to property damage or loss of use caused by an insured peril, for a specified period of time after the insured event or until normal business operations have been resumed.
Contingent BI which generally covers loss of revenue arising from damage to the property of a supplier, customer, or other business partner.
Denial of access, where use or access to the insured property is prevented or restricted for a specific period of time, for example, if roads or bridges leading to the property have been blocked or destroyed.
Civil authority coverage, which covers losses arising from an order made by a civil or government authority that interferes with normal business operations.
Service interruption coverage, which typically covers the insured for losses related to electricity or interruption of other utilities or supplies.
Extra expense incurred to enable business operations to be resumed or to mitigate other losses.
When presenting an insurance claim, it is important that policy provisions are considered against the backdrop of potentially applicable insurance coverage law to ensure that the policyholder is taking the steps necessary to maximize coverage. Many property policies are written on an “all risks” basis, but there will typically be exclusions, sublimits, or restrictions applicable to certain perils or circumstances. Some coverages may be subject to different policy limits and policy deductibles that impact the amount of coverage available. A proper analysis of the policy wording is vital to enable the insured to take full advantage of the coverage provided.
Practical Tips to Maximize Coverage
There are several steps policyholders should consider when making an insurance claim arising from natural disasters like the California fires:
Be Proactive in Notifying Insurers
Most policies identify specific procedures to be followed in presenting a claim, and there are likely to be timing deadlines associated with them. Failure to comply may result in insurers seeking to restrict or deny coverage for a claim otherwise covered by the policy. Policyholders should carefully consider any notice requirements, including any clause allowing for notice of a loss or an event that may or is likely to give rise to a claim. Prompt notification may assist policyholders in securing early access to loss mitigation resources and related coverages.
Early Assessment of Coverage
There are significant benefits in evaluating coverage at an early stage to understand any issues that may impact the way in which the claim is presented. Consultation with experienced coverage lawyers will assist in identifying and analyzing responsive policies as well as anticipating coverage issues or exclusions insurers might seek to rely upon.
Collate and Preserve Relevant Documents
Insurers typically require proof of loss and damage along with extensive supporting documentation. It is critical to take steps early on to ensure that potentially relevant documents and electronic records are located and preserved. In particular, insurers may argue that some part of the revenue loss is attributable to other causes, such as poor business decisions or economic downturn, such that historical records often must be examined and relied upon.
Preparation of Proof of Loss
The preparation of a detailed inventory and proof of loss is a time-consuming and challenging process but can prove invaluable in seeking to challenge any settlement offers made by the insurers or any loss adjustors appointed on their behalf. Many commercial policies include claim preparation coverage, which covers costs associated with compiling a detailed claim submission. The appointment of independent loss assessors or forensic accountants can prove particularly beneficial for collating BI losses, which are often challenged by insurers. For example, insurers may adopt a narrow view of what constitutes “interruption” to the business, particularly where certain business activities are ongoing.
Advance Payments
Any delays by insurers in making appropriate and periodic payments will delay the rebuilding of premises and the resumption of business operations. Insureds should consider requests for interim or advance payments, prior to completion of the loss adjustment process, particularly if the policy expressly provides for this.
Evaluating and Challenging Insurer Positions
The validity of any coverage defenses or limitations raised by insurers will be impacted by the precise wording of the insurance contract and by the applicable governing law. Experienced coverage counsel will be able to assist an insured in assessing the merit and viability of any coverage issues raised by insurers, or by their appointed loss adjusters, and in maximizing the insured’s potential recovery.
New U.S. Sanctions Targeting Russia’s Energy Sector
On Jan. 10, 2025, the U.S. Department of Treasury announced several new types of sanctions that will affect U.S. and global service providers to the Russian energy sector.
The first of these sanctions will prohibit U.S. persons, including U.S. persons located abroad, from providing petroleum services to any person located in Russia. The Treasury Department’s Office of Foreign Assets Control (OFAC) plans to issue regulations defining “petroleum services,” but they are likely to include services related to exploration, drilling, well completion, production, refining, processing, storage, maintenance, transportation, purchase, acquisition, testing, inspection, transfer, sale, trade, distribution, or marketing of crude oil and petroleum products.
These sanctions will enter into effect on Feb. 27, 2025, so U.S. persons have a limited time to wind down affected transactions.
In addition, the U.S. Secretary of the Treasury issued a determination under Executive Order 14024 that authorizes imposing economic sanctions on any person – whether U.S. or non-U.S. – that is subsequently determined to be operating in the Russian energy sector. OFAC plans to define the “energy sector of the Russian Federation economy” to encompass not just petroleum products, but also natural gas, biofuels, coal, nuclear and other renewable energy.
This determination has broad extraterritorial implications, because it exposes non-U.S. entities to potential sanctions. As a preview, OFAC simultaneously used the determination to impose sanctions on Russia’s major oil companies, Gazprom Neft and Surgutneftegas. However, the determination could be used to impose sanctions on entities from any country that operate in the Russian energy sector.
“The United States is taking sweeping action against Russia’s key source of revenue for funding its brutal and illegal war against Ukraine . . . With today’s actions, we are ratcheting up the sanctions risk associated with Russia’s oil trade, including shipping and financial facilitation in support of Russia’s oil exports.”
home.treasury.gov/…
US Department of Justice Announces US$2.9 Billion in Fiscal Year 2024 False Claims Act Recoveries
On 15 January 2025, the US Department of Justice (DOJ) published its report (Report) announcing civil recoveries under the False Claims Act (FCA) for Fiscal Year (FY) 2024. The recoveries for FY 2024 exceeded US$2.9 billion, approximately US$1.7 billion of which involved the health care industry. The US government has now collected over US$78 billion in recoveries under the FCA since the statute was amended in 1986 to allow for treble damages and increased incentives for whistleblowers. Notably, the 979 qui tam lawsuits filed in FY 2024 marked the highest number in a single year; and the 558 settlements and judgments trailed only just behind the record number set in FY 2023.
As with FY 2023, qui tam cases comprised the largest portion of recoveries, with over 83% (US$2.4 billion) stemming from whistleblower actions. The government paid over US$400 million to whistleblowers in relation to these FY 2024 recoveries. Of the record-setting 979 qui tam suits that were filed in FY 2024, 370 were health care focused.
DOJ also highlighted its “key enforcement priorities” for FY 2024 and provided representative examples. The enforcement priorities included health care fraud, military procurement fraud, pandemic fraud, and cybersecurity fraud. As with prior years, health care fraud was the principal source of FCA recoveries, which included recoveries relating to Medicare Advantage fraud, billing for unnecessary services and substandard care, opioid epidemic-related fraud, kickback schemes, and Stark Law violations.
Health Care Fraud
With Medicare Advantage, also known as Medicare Part C, having become the largest component of the Medicare program, the government continued its focus on Medicare Advantage fraud. In FY 2024, the government secured a substantial recovery from a provider that allegedly paid kickbacks to third-party insurance agents in exchange for recruiting senior citizens to the provider’s primary care clinics. DOJ also highlighted that it is continuing to litigate a number of cases against Medicare Advantage Organizations.
DOJ obtained substantial recoveries from providers who allegedly improperly billed for medically unnecessary services and substandard care. Additionally, the government has continued to focus on opioid crisis-related fraud, with several substantial recoveries against pharmaceutical companies and individual physicians.
In a carry-over from FY 2023, some of the largest health care recoveries in FY 2024 resulted from alleged unlawful kickback schemes and Stark Law violations. The kickback schemes ranged from payments to purportedly induce referrals of dialysis patients, to medical directorships that were intended to induce patient referrals. As to the Stark Law, DOJ highlighted a US$345 million settlement to resolve allegations that a health care network paid compensation to certain physician groups far above fair market value and awarded bonuses tied to referral volume.
Other Enforcement Priorities
In addition to health care-specific recoveries, the government recovered significant funds stemming from military procurement fraud, pandemic fraud, and cyber fraud. The military procurement fraud recoveries included a US$70 million settlement against a contractor to resolve allegations that they overcharged the US Navy for spare parts and materials needed to repair and maintain aircraft used to train naval aviators. Of note, military procurement fraud recoveries could have been much higher in FY 2024, however, a US$428 million settlement with a defense contractor occurred on 16 October 2024, putting that recovery in FY 2025.
The government also resolved an estimated 250 cases, totaling over US$250 million, in connection with pandemic-related fraud. As with FY 2023, the pandemic fraud largely stemmed from the submission of inaccurate information in PPP loan applications, though the DOJ also highlighted a US$12 million recovery that resolved allegations of false claims for COVID-19 testing that were billed to the Health Resources and Services Administration’s Uninsured Program.
In October 2021, DOJ announced its Civil Cyber-Fraud Initiative with the goal of pursuing companies who receive federal funds while failing to follow required cybersecurity standards. In FY 2024, the government entered into several recoveries under the Civil Cyber-Fraud Initiative. DOJ also highlighted a complaint-in-intervention that was filed against a research institution alleging that the defendants had failed to meet cybersecurity requirements in connection with Department of Defense contracts.
Whistleblower Suits
Given the record-setting number of qui tam cases filed in FY 2024, it will be important to continue to monitor developments regarding the constitutionality of the qui tam provisions. On 30 September 2024, a judge in the US District Court for the Middle District of Florida held that the qui tam provisions of the FCA violate the Appointments Clause of Article II of the US Constitution. This first-of-its-kind decision has sparked a wave of filings by the defense bar. With the Middle District of Florida’s decision on appeal, there are sure to be many developments on this issue in the coming months.
The FY 2024 settlements and judgments provide an insight into the government’s enforcement priorities and potential future enforcement areas. The firm’s forthcoming article The False Claims Act and Health Care: 2024 Recoveries and 2025 Outlook will provide an in-depth analysis of the 2024 recoveries, as well as some key enforcement areas to look out for in 2025.
PBGC Technical Update on Accelerated Premium Filing Due Dates for 2025
As described in further detail below, absent Congressional action, plan sponsors should take note that PBGC premium filings will generally be due one month earlier than usual for plan years beginning in 2025. This modification only applies for 2025.
Under ERISA Section 4007, the PBGC determines when premium filings—the submission of required data and payment of any required premiums for PBGC-insured plans—are due. Accordingly, PBGC Regulation Section 4007.11 provides that, in most cases, the premium filings for a plan year are due the “fifteenth day of the tenth calendar month that begins on or after the first day of the premium payment year.”
However, Section 502 of the Bipartisan Budget Act of 2015 (“BBA of 2015”) provides that, notwithstanding ERISA Section 4007 and the corresponding PBGC regulation, for plan years beginning in 2025 only, premium due dates are accelerated by one month to the “fifteenth day of the ninth calendar month that begins on or after the first day of the premium payment year.”
Technical Update Number 25-1 released by the PBGC on January 6th provides further information on the timing of premium payments under the BBA of 2015 for plan years beginning in 2025, including clarification that this accelerated nine-month timeline applies to all premium due date rules in 2025 (including the special due date rules under the PBGC regulation for new plans and short plan years). The Technical Update also indicates that information regarding these special filing due dates for 2025 will be incorporated into the PBGC’s forthcoming 2025 Comprehensive Premium Filing Instructions.
It is important to note, however, that this special acceleration period for 2025 does not supersede PBGC’s disaster relief policy—which, for plans affected by a disaster, generally extends premium filing due dates to correspond with any disaster-related extensions of Form 5500 due dates by the IRS—nor does it supersede any of the PBGC’s general filing rules for due dates that fall on weekends or Federal Holidays.
For illustrative purposes, a calendar year plan beginning January 1, 2024, had a premium filing due date of October 15, 2024, under ERISA Section 4007 and the corresponding PBGC regulation. However, pursuant to the special acceleration provision under the BBA of 2015, for 2025, the same plan will instead have an accelerated premium filing due date of September 15, 2025. The Technical Update includes a full chart for plan years beginning in 2025, which is reproduced below.
Date Plan Year Begins
Due Date
1/1/2025
9/15/2025
1/2/2025 – 2/1/2025
10/15/2025
2/2/2025 – 3/1/2025
11/17/2025*
3/2/2025 – 4/1/2025
12/15/2025
4/2/2025 – 5/1/2025
1/15/2026
5/2/2025 – 6/1/2025
2/16/2026*
6/2/2025 – 7/1/2025
3/16/2026*
7/2/2025 – 8/1/2025
4/15/2026
8/2/2025 – 9/1/2025
5/15/2026
9/2/2025 – 10/1/2025
6/15/2026
10/2/2025 – 11/1/2025
7/15/2026
11/2/2025 – 12/1/2025
8/17/2026
12/2/2025 – 12/31/2025
9/15/2026
* The 15th day of the ninth month on or after the first day of the plan year falls on a weekend or federal holiday.
Finally, Technical Update Number 25-1 comes with a warning: because of anticipated increased costs and burdens on plan sponsors, a repeal of Section 502 of the BBA of 2015 has been on the legislative agenda for the past eight years. So, a mid-year repeal of the accelerated premium filing schedule by Congress is possible. The PBGC pledges to “revise the premium filing instructions and notify practitioners as quickly as possible” if such a repeal occurs.
Alex Scharr also contributed to this article.
Private Market Talks: Bringing Private Credit to the Wealth Channel with Nomura Capital Management’s Robert Stark [Podcast]
In our first episode of 2025, we speak with Robert Stark, CEO of Nomura Capital Management, who has been building a private credit business and expanding Nomura’s investment management capabilities in the Americas. During our discussion, we learn how he successfully launched the platform in a highly competitive market and how Nomura has been able to activate its network of registered investment advisors to bring private credit to the private wealth channel.
Department of Education Warns NCAA Schools That NIL Deals May Implicate Title IX Obligations
The U.S. Department of Education warned National Collegiate Athletic Association (NCAA) schools that payments to athletes for the use of their names, images, and likenesses (NIL) implicate the gender equal opportunity requirements of Title IX of the Education Amendments, even if from outside sources.
Quick Hits
The U.S. Department of Education released a fact sheet that provides guidance on educational institutions’ Title IX obligations with NIL compensation for college athletes.
The guidance confirms the Department of Education’s view that NIL compensation from schools constitutes “athletic financial assistance” covered by Title IX’s equal opportunity requirements.
The guidance comes amid a changing landscape in college sports with NIL compensation and the prospect of potential revenue-sharing between schools and college athletes.
On January 16, 2024, the Department of Education’s Office for Civil Rights (OCR) released a nine-page fact sheet, titled, “Ensuring Equal Opportunity Based on Sex in School Athletic Programs in the Context of Name, Image, and Likeness (NIL) Activities,” providing long-awaited guidance on schools’ obligations with respect to Title IX in the context of NIL.
The fact sheet confirms that the department views NIL compensation provided by a school as “athletic financial assistance,” which Title IX requires to be distributed in a nondiscriminatory manner under Title IX.
The guidance comes years after the NCAA lifted restrictions on college athletes’ ability to earn compensation for their NIL. This has led to the formation of so-called NIL collectives, organizations typically comprised of boosters, fans, alumni, and businesses, to facilitate NIL deals for athletes.
Further, the NCAA and major conferences have reached a proposed settlement in litigation that will pay nearly $2.8 billion in back pay to former athletes over the next ten years and establish a revenue-sharing framework in which schools will be allowed to share more than $20 million annually with their athletes.
Title IX regulations require schools to provide equal athletic opportunity, regardless of sex, including with “athletic financial assistance” that schools award to college athletes.
According to the OCR fact sheet, the Department of Education “does not view compensation provided by a third party (rather than a school) to a student-athlete for the use of their NIL as constituting athletic financial assistance awarded by the school.” However, the fact sheet warns that the OCR has “long recognized that a school has Title IX obligations when funding from private sources, including private donations and funds raised by booster clubs, creates disparities based on sex in a school’s athletic program or a program component.”
“The fact that funds are provided by a private source does not relieve a school of its responsibility to treat all of its student-athletes in a nondiscriminatory manner,” the Department of Education said in the fact sheet. “It is possible that NIL agreements between student-athletes and third parties will create similar disparities and therefore trigger a school’s Title IX obligations.”
The department noted the variety and evolving nature of NIL agreements in college athletics and specified that the application of Title IX “is a fact-specific inquiry.” Further, and in recognition of the continued evolution of college athletics, the department noted that “Title IX regulations assume that the receipt of financial assistance does not transform students, including student-athletes, into employees,” and the fact sheet, thus, operates under the same assumption. The Department of Education stated that it would “reevaluate” this position should the legal landscape around that issue change.
Next Steps
The fact sheet comes just days before the presidential administration changeover, which is anticipated to impact the federal government’s response to NIL pay and make systemic changes to college sports, including regarding the question of employee status. Still, the fact sheet indicates that schools may face risks under Title IX with the distribution of NIL compensation even if third parties are providing that money.