Extended Producer Responsibility for Packaging: Taking Stock for 2025
The Extended Producer Responsibility (“EPR”) movement for packaging is growing in the U.S., marking a shift in how some states are approaching waste management and recycling. Rather than leaving municipalities to bear the full cost of waste management and recycling programs, states with EPR programs are poised to shift costs associated with building out recycling infrastructure to producers of products covered by EPR requirements. In 2024, there were significant legislative, regulatory, and programmatic developments in several states. We expect these trends to accelerate in 2025, as several programs reach the initial implementation phase of their EPR programs.
Legislative Developments
Since 2021, five states (Maine, Oregon, Colorado, California, and Minnesota) have passed EPR programs for packaging, and more are considering similar legislation. These programs target “producers,” typically defined as the manufacturer or brand owner for packaged products sold in the relevant state. Producers are generally required to join a Producer Responsibility Organization (“PRO”), which is responsible for collecting data regarding the volume of single-use packaging being sold into the state, charging producer fees based on their contribution, and using the funds to improve recycling infrastructure across the state.
In May of 2024, Minnesota passed legislation for a statewide EPR program addressing most types of packaging and paper products. A number of other states considered some form of EPR legislation in 2024. Although these measures were not adopted, we expect to see advances in 2025. States to watch include Massachusetts, which in December passed legislation calling for a legislative commission on EPR for several product categories, including plastics and packaging, paint, mattresses, and lithium-ion batteries; New York, which has been working on passing EPR legislation for several years; and Washington, which already imposes post-consumer recycled content and other requirements for plastic product packaging and recently considered but failed to pass a bill that would have added packaging to the state’s existing product classes subject to product stewardship programs.
Regulatory Developments
States with existing EPR programs spent the year developing regulatory programs. Colorado, Oregon, and Maine all adopted regulations in 2024. These regulations define key program terms, such as criteria for setting producer fees and conditions of reimbursing municipalities for program implementation costs. California initiated the rulemaking process in 2024, but missed the statutory deadline. CalRecycle will likely adopt final rules soon.
Key issues to watch as regulatory programs develop include covered product exemptions and ecomodulation provisions, which allow the PRO to offer fee adjustments to producers that make changes to the way in which they produce, use, and market covered products, potentially leading to lower fees for covered products with a lower environmental impact.
Programmatic Developments
Different states have different timelines for selecting a PRO, adopting a PRO plan, and requiring producers to join a PRO and begin reporting. Circular Action Alliance (CAA) has emerged as the leading Producer Responsibility Organization (PRO) for states with EPR programs. So far, Colorado and California have both selected CAA as the official PRO.
Producers in Colorado were required to register with the PRO by October 1, 2024. CAA reporting guidance is now available to registered producers, and producers will begin reporting in August 2025. CAA’s program plan for Colorado is due early this year and will detail how CAA plans to establish costs, reimburse recyclers for services, and other program details for review by the state’s EPR advisory board.
In California, producers registration with CAA is open. Producers are waiting for CAA to publish a program plan to initiate program implementation ahead of the January 1, 2027 implementation date.
In Oregon, CAA was the only organization to submit a program plan for consideration by Oregon’s Department of Environmental Quality, and will likely be selected as the official PRO early this year. Implementation is moving forward most quickly in Oregon, where producers are required to pre-register with the PRO and submit data on covered products sold into the state by March 31, 2025. CAA plans to launch a producer reporting portal during the first quarter of 2025.
In Minnesota, the producer-appointed PRO is expected to register with a with the Minnesota Pollution Control Agency by July 1 of this year. On December 30, 2024, CAA submitted an application for registration to the agency .
In late summer, Maine is expected to release a request for proposal for a potential PRO, called a stewardship organization under Maine’s terminology, and CAA is expected to respond to Maine’s request.
Early this year, Maryland is expected to publish the results of its Needs Assessment, which evaluates and provides recommendations on the state’s recycling system, including infrastructure, labor, and environmental impacts. The Producer Responsibility Advisory Council has been meeting regularly since May of 2024 to draft recommendations for the Needs Assessment.
Key Tasks for Producers in 2025
Producers should focus on the following tasks in 2025:
Evaluate applicability under the five EPR programs that are already in place, including by assessing “small producer” exemptions and exemptions for certain categories of covered materials. Importantly, some covered material exemptions apply automatically, while some will require submitting documentation to the relevant states.
If not already done, register with CAA in Colorado, California, Oregon, and Minnesota.
Develop a data collection plan.
Assess opportunities for fee reduction, including by leveraging ecomodulation provisions and lifecycle assessments.
Continue to monitor new legislation, regulatory processes, and updates from CAA.
Composition of the Federal Energy Regulatory Commission Under the New Administration
With President-elect Trump poised to take office, some in the energy sector are considering what this means for the composition of the Federal Energy Regulation Commission (FERC).
FERC has five Members. Although frequently FERC does not have its full complement of Members, there are currently five seated FERC Members: three Democrats and two Republicans. The Democrats are Chairman Willie Phillips (term ending June 30, 2026), Commissioner David Rosner (term ending June 30, 2027), and Commissioner Judy Chang (term ending June 30, 2029). The two Republicans are Commissioner Mark Christie (term ending June 30, 2025), and Commissioner Lindsay See (term ending June 30, 2028). Upon expiration of a Member’s term, an individual commissioner may choose to continue at FERC until Congress goes out of session. This occurs frequently.
Neither the FERC Chairman nor any Commissioner is required to resign because a President of the opposite political party is elected. Moreover, the relevant statutory provision, 42 U.S.C. § 7171(b), allows the President to remove a sitting FERC Commissioner only in very limited circumstances. Specifically, the President may remove a sitting FERC Commissioner only for “inefficiency, neglect of duty, or malfeasance in office.” However, if Chairman Phillips voluntarily steps down from his role as FERC Chairman because President-elect Trump takes office, it would not be a novel action among Democrat appointed agency Chairs. Commodity Futures Trading Commission (CFTC) Chairman, Rostin Behnam, very recently announced his intention to step down from his role as CFTC Chairman on January 19th (the day before President-elect Trump’s inauguration), and then resign from the CFTC altogether shortly thereafter on February 7th,prior to the expiration of his term.
The sitting President does have statutory authority to designate one of the seated FERC Commissioners as Chairman. See 42 U.S.C. § 7171(b). The expectation is that President Trump will designate Commissioner Christie or Commissioner See as Acting Chair. In that case, Chairman Phillips could remain at FERC as a Commissioner. If Chairman Phillips or one of the Commissioners voluntarily resigns, President Trump would have the opportunity to nominate a candidate of his choosing (presumably a Republican) to become the fifth FERC Commissioner following Senate confirmation and the related processes.
In the context of the National Labor Relations Board (NLRB), some have speculated that once in office, President Trump may use the Unitary Executive Theory to broadly interpret his constitutionally endowed removal powers and replace NLRB Board Members before their terms expire. Although Supreme Court precedent holds that certain removal restrictions on the President do not violate the President’s executive power or the President’s constitutional duty “to take Care that the Laws be faithfully executed,” the Unitary Executive Theory posits that statutory removal restrictions on the President interfere with the President’s constitutional authority. Thus, with the backing of a conservative Court that may be deferential to expansive executive powers, there has been talk that President Trump may seek to replace NLRB Board Members before their terms expire. Although the NLRB is an independent agency similarly situated to FERC in many ways, the statutory removal restriction for FERC has material differences from the statutory removal restriction for the NLRB and FERC’s removal restriction is far less likely to be found unconstitutional (i.e., President Trump is less likely to try to rely on the Unitary Executive Theory to remove FERC Members than to remove NLRB Members).
Nine PFAS Compounds Added to EPA TRI List
EPA has added nine additional per- and polyfluoroalkyl substances (PFAS) compounds to Toxic Release Inventory (TRI) reporting requirements for facilities that release the compounds into the environment. The TRI program requires companies that release quantities of toxic chemicals above the regulatory threshold amounts to report how much they release each year.
This program is part of the Environmental Protection Community Right-to-Know Act, which maintains a publicly accessible database of the companies that release the chemicals, how much of each chemical is released and the location of the facilities. The program was created in 1986 in response to the release of toxic methyl isocyanate gas in Bhopal, India in 1984, which killed thousands of people in what was one of the worst industrial disasters in history.
The newly added PFAS compounds were added for Reporting Year 2025 under the framework for the automatic addition of PFAS to TRI created by the Fiscal Year 2020 National Defense Authorization Act. These nine PFAS compounds are:
Ammonium perfluorodecanoate (PFDA NH4)
Sodium perfluorodecanoate (PFDA-Na)
Perfluoro-3-methoxypropanoic acid
6:2 Fluorotelomer sulfonate acid
6:2 Fluorotelomer sulfonate anion
6:2 Fluorotelomer sulfonate potassium salt
6:2 Fluorotelomer sulfonate ammonium salt
6:2 Fluorotelomer sulfonate sodium salt
Acetic acid
The new compounds join the 197 PFAS compounds previously listed by the EPA. According to the EPA, “As of Jan. 1, facilities that are subject to reporting requirements for these chemicals should begin tracking their activities involving these PFAS as required by Section 313 of [EPCRA]. Reporting forms will be due by July 1, 2026.”
NNCO Releases NNI Supplement to President Biden’s 2025 Budget
On December 19, 2024, the National Nanotechnology Coordination Office (NNCO) released The National Nanotechnology Initiative Supplement to the President’s 2025 Budget, which also serves as the annual report for the National Nanotechnology Initiative (NNI). According to the report, President Biden’s fiscal year (FY) 2025 budget requests over $2.2 billion for NNI, with cumulative funding totaling over $45 billion since the inception of NNI in 2001 when Congress approved increased funding for nanotechnology in FY 2021 appropriations. The funding includes over $900 million in annual investments by the National Institutes of Health alone (along with other important contributions from the U.S. Food and Drug Administration, Centers for Disease Control and Prevention, Biomedical Advanced Research and Development Authority, and basic research agencies, e.g., the U.S. National Science Foundation and U.S. Department of Energy), as nanotechnology-enabled diagnostic and therapeutic technologies for a wide variety of human health threats successfully compete for funding. The report includes examples of how NNI participating agencies are harnessing nanotechnology research and development and education programs to reduce barriers and inequities, from workforce development to economic progress in historically underserved communities. The report states that NNI participating agencies support applied research, experimental development, pre-commercialization, and standards-related efforts that build economic competitiveness, facilitating the adoption of a wide range of nanotechnologies, and helping create good-paying jobs across the country, including in both traditional and emerging industries. The report notes that the coordination provided through NNI has facilitated the proactive responsible development of new technologies, thereby streamlining their adoption.
New US Sanctions Target Russia’s Energy Sector
On 10 January 2025, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a package of new sanctions targeting Russia’s energy sector. In an effort to curtail Russia’s oil revenue and ability to evade US sanctions, OFAC issued: (1) a Determination authorizing sanctions on parties operating in Russia’s energy sector; (2) a Determination banning US petroleum services to Russia; and (3) blocking sanctions against oil and gas majors, vessels in the so-called “shadow fleet,” certain traders of Russian oil, Russian maritime insurers, and Russian oilfield service providers.
Operating in Russia’s Oil Sector
The new “Energy Sector” Determination broadens OFAC’s authority to block parties that operate in Russia’s “energy sector,” which OFAC will define in forthcoming regulations to broadly cover activities in Russia’s oil, nuclear, electrical, thermal, and renewable sectors.
Ban on US Petroleum Services
The “US Petroleum Services” Determination prohibits most petroleum services (directly or indirectly) to Russia from the US or by US persons, effective 27 February 2025. OFAC plans to define “petroleum services” to include services related to oil exploration, production, refining, storage, transportation, distribution, marketing, among others. OFAC confirmed this Determination does not ban all US services for maritime transportation of Russian oil, provided services comply with applicable price caps and do not involve blocked parties. FAQ 1217.
Blocking Sanctions
OFAC designated hundreds of entities, vessels, and individuals to the Specially Designated Nationals and Blocked Persons List (SDN List). Notably, these blocking sanctions targeted:
Gazprom Neft and Surgutneftegas (two of Russia’s biggest oil producers and exporters) and numerous subsidiaries.
183 vessels in the “shadow fleet” that aids Russia’s sanctions evasion, including Sovcomflot vessels previously covered by General License 93, which OFAC revoked.
A network of traders of Russian oil that are linked to the Russian government or otherwise have suspicious ownership.
Over 30 Russian oilfield service providers.
Russian maritime insurance providers, Ingosstrakh Insurance and Alfastrakhovanie.
US persons are prohibited from all dealings with parties listed on the SDN List and entities owned more than 50% by parties on the SDN List. The property interests of these parties must be blocked/frozen and reported to OFAC if they are within US jurisdiction or US person possession/control.
General Licenses
OFAC issued several General Licenses (GLs) to authorize: petroleum services for certain projects (GL 121), wind down transactions related to energy (GL 8L), certain transactions for nuclear projects (GL 115A), certain transactions involving Russian oil majors (GL 117, 118, and 119), and safety-related transactions for blocked vessels (GL 120).
Conclusion
These new sanctions increase risk and pose considerable challenges for companies with connections to Russia’s energy sector. While US companies are prohibited from providing most petroleum services to Russia, non-US companies face the risk of blocking sanctions if their operations support the broader Russian energy sector. Although OFAC intends to issue regulations and guidance that clarify these measures, businesses must assess risk now, with the assistance of counsel, to identify effected transactions and implement appropriate compliance measures.
Litigation Minute: A Look Back and Ahead
What You Need to Know in a Minute or Less
Throughout 2024, we published three series highlighting emerging and evolving trends in litigation. From generative AI to ESG litigation, our lawyers continue to provide concise, timely updates on the issues most critical to our clients and their businesses.
In a minute or less, find our Litigation Minute highlights from the past year—as well as a look ahead to 2025.
Beauty and Wellness
Our first series of the year covered trends in the beauty and wellness industry, beginning with products categorized as “beauty from within,” including oral supplements focused on wellness. We outlined the risks of FDA enforcement and class action litigation arising from certain marketing claims associated these products.
We next reviewed the use of “clean” and “natural” marketing terminology. We assessed these labeling claims across a range of potentially impacted products and brands, as well as regulatory and litigation risks associated with such claims.
Alongside these marketing-focused issues, companies also face increased regulatory scrutiny, including new extended producer responsibility laws and the FTC Green Guides. We concluded our series by assessing product packaging and end-of-life considerations for beauty and wellness brands.
Generative AI
One of the most-discussed developments of 2024, generative AI was the focus of our second series of the year, which examined key legal, regulatory, and operational considerations associated with generative AI. We outlined education, training, and risk management frameworks in light of litigation trends targeting these systems.
2024 also saw several new state statutes regulating generative AI. From mandatory disclosures in Utah to Tennessee’s ELVIS Act, we examined how new state approaches would remain at the forefront of attention for companies currently utilizing or considering generative AI.
With the need for compliance and training in mind, we next discussed the potential for generative AI in discovery. With the ability to rapidly sort through data and provide timely requested outputs, we provided an overview of how generative AI has created valuable tools for lawyers as well as their clients.
ESG Litigation
2024 highlighted the impacts of extreme weather, as well as the importance of preparation for such natural disasters. With extreme weather events expected to increase in both frequency and intensity around the world, we provided insurance coverage considerations for policyholders seeking to restore business operations following these events and weather the consequential financial storms.
Further ESG headlines this year focused on the questions surrounding microplastics—including general definition, scientific risk factors, potential for litigation, and the hurdles complicating this litigation.
Greenwashing claims, on the other hand, have experienced fewer setbacks, with expanded litigation targeting manufacturers, distributors, and retailers of consumer products. Alleging false representation of companies or their products as “environmentally friendly,” we reviewed how the risk of such claims can be mitigated through proper substantiation and documentation of company claims and certifications.
Protecting Against Residential Price Gouging During the Los Angeles Wildfires
As devastating wildfires displace thousands in Los Angeles County, Governor Newsom has declared a state of emergency. In the wake of this crisis, California’s price-gouging laws impose strict limits on rental price increases to prevent exploitation of displaced individuals.
Key Protections for Renters
Under California Penal Code section 396:
Rent Increase Cap. Residential landlords may not raise rents by more than 10% unless the increase reflects verified additional costs or pre-existing contracts.
New Rentals. Properties not rented or advertised before the emergency cannot exceed 160% of the U.S. Department of Housing and Urban Development’s (HUD) fair market rental determination (FMR).[1] In some localities (e.g., Beverly Hills), rental rates included in the schedule may be less than fair market value prior to the emergency declaration, as the rates are based on regional market valuations.
Evictions & Relisting. It is illegal to evict tenants and relist properties at a higher rate than the previous rental price.
These Section 396 protections last 30 days following the emergency declaration and may be extended.
What Landlords Should Know
Compliance Is Critical. Violating price-gouging laws can result in significant penalties, such as:
Criminal Penalties: Up to one year in jail and $10,000 in fines.
Civil Penalties: Additional fines under California’s Business and Professions Code and the Los Angeles County Code.
Scrutiny Is High. State and local authorities are actively investigating violations, and penalties can apply to each separate act of non-compliance.
What To Keep in Mind
Audit Your Pricing. Ensure any rental increases during the emergency align with the law.
Document Costs. Keep detailed records of any price increases justified by added expenses or repairs.
Stay Informed. Follow updates from the California Attorney General’s Office and other state agencies.
Why It Matters
Price gouging not only violates the law but undermines community trust during a critical time. Landlords play a pivotal role in helping Los Angeles recover by providing fair and compliant housing solutions to those in need.
We will continue to provide updates as they become available from the California Attorney General’s Office and other regulatory agencies.
FOOTNOTES
[1] A schedule of HUDs fair market rental rates is available at this link.
Kennedy Kline also contributed to this article.
EPA Issues Final Risk Management Rules for Trichloroethylene, Perchloroethylene, and Carbon Tetrachloride
The U.S. Environmental Protection Agency (EPA) released final risk management rules under the Toxic Substances Control Act (TSCA) for trichloroethylene (TCE) and perchloroethylene (PCE) on December 9, 2024, and for carbon tetrachloride (CTC) on December 11, 2024. EPA states that all uses of TCE will be banned over time, with “the vast majority of identified risks eliminated within one year,” and safer alternatives readily available for the majority of uses. The PCE rule will ban manufacture, processing, and distribution in commerce of PCE for all consumer uses and many commercial uses, while allowing some workplace uses to continue only where robust workplace controls can be implemented. The CTC rule will require “robust worker safety programs” while banning some uses.
TCE
EPA’s December 9, 2024, press release states that TCE is used as a solvent in consumer and commercial products such as cleaning and furniture care products, degreasers, brake cleaners, sealants, lubricants, adhesives, paints and coatings, and arts and crafts spray coatings, and is also used in the manufacture of some refrigerants. According to EPA, “[s]afer alternatives are readily available for the majority of these uses.”
The final rule (89 Fed. Reg. 102568) states that to address unreasonable risk, EPA is:
Prohibiting the manufacture (including import), processing, and distribution in commerce of TCE for all uses (including all consumer uses), with longer compliance timeframes for manufacture, processing, and distribution in commerce related to certain industrial and commercial uses;
Prohibiting the industrial and commercial use of TCE, with longer compliance timeframes for certain uses;
Prohibiting the manufacture (including import) and processing of TCE as an intermediate for the manufacturing of hydrofluorocarbon 134a (HFC-134a), following an eight-and-a-half-year phase-out;
Prohibiting the industrial and commercial use of TCE as a solvent for closed-loop batch vapor degreasing for rayon fabric scouring for end use in rocket booster nozzle production by federal agencies and their contractors, following a ten-year phase-out;
Prohibiting the manufacture (including import), processing, distribution in commerce, and use of TCE as a laboratory chemical for asphalt testing and recovery, following a ten-year phase-out;
Prohibiting the manufacture (including import), processing, distribution in commerce, and industrial and commercial use of TCE as a solvent in batch vapor degreasing for essential aerospace parts and components and narrow tubing used in medical devices, following a seven-year TSCA Section 6(g) exemption;
Prohibiting the manufacture (including import), processing, distribution in commerce, and industrial and commercial use of TCE as a solvent in closed-loop vapor degreasing necessary for rocket engine cleaning by federal agencies and their contractors, following a seven-year TSCA Section 6(g) exemption;
For vessels of the Armed Forces and their systems, and in the maintenance, fabrication, and sustainment for and of such vessels and systems, prohibiting the industrial and commercial use of TCE as: potting compounds for naval electronic systems and equipment; sealing compounds for high and ultra-high vacuum systems; bonding compounds for materials testing and maintenance of underwater systems and bonding of nonmetallic materials; and cleaning agents to satisfy cleaning requirements for: materials and components required for military ordnance testing; temporary resin repairs in vessel spaces where welding is not authorized; ensuring polyurethane adhesion for electronic systems and equipment repair and installation of elastomeric materials; various naval combat systems, radars, sensors, and equipment; fabrication and prototyping processes to remove coolant and other residue from machine parts; machined part fabrications for naval systems; installation of topside rubber tile material aboard vessels; and vapor degreasing required for substrate surface preparation prior to electroplating processes, following a ten-year TSCA Section 6(g) exemption;
Prohibiting the emergency industrial and commercial use of TCE in furtherance of the National Aeronautics and Space Administration (NASA) mission for specific conditions that are critical or essential and for which no technically and economically feasible safer alternative is available, following a ten-year TSCA Section 6(g) exemption;
Prohibiting the manufacture (including import), processing, distribution in commerce, disposal, and use of TCE as a processing aid for manufacturing battery separators for lead acid batteries, following a 20-year TSCA Section 6(g) exemption;
Prohibiting the manufacture (including import), processing, distribution in commerce, disposal, and use of TCE as a processing aid for manufacturing specialty polymeric microporous sheet materials following a 15-year TSCA Section 6(g) exemption;
Prohibiting the manufacture (including import), processing, distribution in commerce, and use of TCE as a laboratory chemical for essential laboratory activities and some research and development activities, following a 50-year TSCA Section 6(g) exemption;
Requiring strict workplace controls to limit exposure to TCE, including compliance with a TCE workplace chemical protection program (WCPP), that includes requirements for an interim existing chemical exposure limit (ECEL) revised from the proposed rule, as well as dermal protection, for conditions of use (COU) with long term phase-outs or time-limited exemptions under TSCA Section 6(g) or prescriptive workplace controls;
Prohibiting the disposal of TCE to industrial pre-treatment, industrial treatment, or publicly owned treatment works (POTW), through a phase-out allowing for longer timeframes for disposal necessary for certain industrial and commercial uses, along with a 50-year TSCA Section 6(g) exemption for disposal for cleanup projects before prohibition and interim requirements for wastewater worker protection; and
Establishing recordkeeping and downstream notification requirements.
EPA notes that all TSCA COUs of TCE are subject to the final rule. The final rule will be effective January 16, 2025.
PCE
EPA’s December 9, 2024, press release states that PCE is a solvent that is widely used for consumer uses such as brake cleaners and adhesives, in commercial applications such as dry cleaning, and in many industrial settings. According to EPA, “[s]afer alternatives are readily available for the majority of these uses.”
The final rule (89 Fed. Reg. 103560) states that to address unreasonable risk, EPA is:
Prohibiting most industrial and commercial uses and the manufacture (including import), processing, and distribution in commerce of PCE for those uses;
Prohibiting the manufacture (including import), processing, and distribution in commerce of PCE for all consumer use;
Prohibiting the manufacture (including import), processing, distribution in commerce, and commercial use of PCE in dry cleaning and spot cleaning through a ten-year phase-out;
Requiring a WCPP, including an inhalation exposure concentration limit, direct dermal contact controls, and related workplace exposure controls, for many occupational COUs of PCE not prohibited;
Requiring prescriptive workplace controls for use of PCE in laboratories and energized electrical cleaners;
Establishing recordkeeping and downstream notification requirements;
Providing a ten-year time limited exemption under TSCA Section 6(g) for certain emergency uses of PCE in furtherance of NASA’s mission, for specific COUs that are critical or essential and for which no technically and economically feasible safer alternative is available; and
Identifying a regulatory threshold for products containing PCE for the prohibitions and restrictions on PCE.
EPA notes that all TSCA COUs of PCE are subject to the final rule. The final rule will be effective January 17, 2025.
CTC
EPA’s December 11, 2024, press release states that CTC is a solvent used in commercial settings as a raw material for producing other chemicals like those used in refrigerants, aerosol propellants, and foam-blowing agents. EPA notes that the U.S. Consumer Product Safety Commission banned the use of CTC in consumer products in 1970. According to EPA, requirements under the Montreal Protocol on Substances that Deplete the Ozone Layer and the Clean Air Act phased out CTC production in the United States in 1996 for most domestic uses that did not involve manufacturing other chemicals. The continued, safe use of CTC in the manufacture of low global warming potential chemicals used in refrigerants, aerosol propellants, and foam-blowing agents “is particularly important in the agency’s efforts to support the American Innovation and Manufacturing Act of 2020 (AIM Act) and the Kigali Amendment to the Montreal Protocol.”
The final rule (89 Fed. Reg. 103512) states that to address unreasonable risk, EPA is:
Requiring a WCPP, including an inhalation exposure concentration limit, direct dermal contact controls, and related workplace exposure controls, for the following occupational COUs of CTC not prohibited:
Domestic manufacture;
Import;
Processing as a reactant in the production of hydrochlorofluorocarbons (HCFC), hydrofluorocarbons (HFC), HFOs, and PCE;
Incorporation into formulation, mixture, or reaction products in agricultural products manufacturing, vinyl chloride manufacturing, and other basic organic and inorganic chemical manufacturing;
Repackaging for use as a laboratory chemical;
Recycling;
Industrial and commercial use as an industrial processing aid in the manufacture of agricultural products and vinyl chloride;
Industrial and commercial use in the elimination of nitrogen trichloride in the production of chlorine and caustic soda and the recovery of chlorine in tail gas from the production of chlorine; and
Disposal;
Requiring use of laboratory ventilation devices, such as fume hoods or glove boxes, and dermal personal protective equipment (PPE) for the industrial and commercial use as a laboratory chemical;
Prohibiting these additional COUs, for which EPA understands use of CTC has already ceased:
Incorporation into formulation, mixture, or reaction products in petrochemical-derived manufacturing, except in the manufacture of vinyl chloride (for which EPA is requiring a WCPP);
Industrial and commercial use as an industrial processing aid in the manufacture of petrochemicals-derived products, except in the manufacture of vinyl chloride (for which EPA is requiring a WCPP);
Industrial and commercial use in the manufacture of other basic chemicals (including manufacturing of chlorinated compounds used in solvents, adhesives, asphalt, and paints and coatings), except for use in the elimination of nitrogen trichloride in the production of chlorine and caustic soda and the recovery of chlorine in tail gas from the production of chlorine (for which EPA is requiring a WCPP);
Industrial and commercial use in metal recovery;
Industrial and commercial use as an additive; and
Industrial and commercial use in specialty uses by the U.S. Department of Defense (DOD);
Requiring recordkeeping; and
Requiring manufacturers (including importers), processors, and distributors to provide downstream notification of the requirements.
EPA notes that all TSCA COUs of CTC are subject to the final rule. The final rule will be effective January 17, 2025.
Commentary
Bergeson & Campbell, P.C. (B&C®) is pleased that EPA completed its risk management activities but disappointed with the approach EPA has taken. It is vitally important that EPA take action to protect health and the environment, especially workers who may be exposed to these three substances, but EPA fails to follow the statutory standard and meet its own regulations, and neglects to use the best available science. As with the other risk management rules, EPA remains vulnerable to legal challenges for not meeting the scientific standards under TSCA Section 26. In addition, EPA failed to comply with its own regulations for following the procedures for conducting risk evaluations. We discuss each of these points in more detail below. B&C expects entities impacted by these final rules to seek petitions for review, further delaying the implementation of the measures necessary to protect against unreasonable risk.
Under TSCA Section 6(b)(4)(C), EPA is required to “conduct and publish risk evaluations” in accordance with a rulemaking that establishes procedures for such evaluations. The relevant rulemaking cited in the final risk evaluations for TCE, PCE, and CTC was the 2017 Procedures for Chemical Risk Evaluation Under the Amended Toxic Substances Control Act (the Risk Evaluation Rule). The Risk Evaluation Rule codified regulatory definitions (e.g., weight of scientific evidence) and required application of a systematic review method that “uses a preestablished protocol…and integrate[s] evidence…”.
EPA was informed publicly about issues with its systematic review method as early as July 2019 by a public commenter at a meeting of the TSCA Science Advisory Committee on Chemicals (SACC). The public commenter made the following statements about EPA’s use of the 2018 Application of Systematic Review in TSCA Risk Evaluations (the 2018 TSCA SR document), including:
The first critical piece of missing information is creating a protocol which is used to review all the evidence and outline the process for conducting the review. This helps minimize bias and ensure transparency in the decision-making process. It’s also required by law to have a preestablished protocol, and there’s not one for 1,4-Dioxane or the other TSCA chemicals. [see pp. 125-126 of the meeting transcript.]
EPA was informed in February 2021 by the U.S. National Academies of Sciences, Engineering, and Medicine (NASEM) that its 2018 TSCA SR document did not meet the criteria of “comprehensive, workable, objective, and transparent” and that “The OPPT approach to systematic review does not adequately meet the state-of-practice.”
EPA acknowledged in its December 2021 Draft Systematic Review Protocol Supporting TSCA Risk Evaluations for Chemical Substances Version 1.0 that it “did not have a complete clear and documented TSCA systematic review (SR) Protocol [in the first ten risk evaluations].” EPA further acknowledged that an “Evidence Integration process…was not previously included in the 2018 TSCA SR document [used for TCE, PCE, and CTC].”
Despite public comments, NASEM’s review, and EPA’s acknowledgements, EPA did not remedy these issues in the first ten risk evaluations, including the risk evaluations for TCE, PCE, and CTC. Rather, EPA re-issued final unreasonable risk determinations with the following unsupported blanket statement in each: “EPA views the peer reviewed hazard and exposure assessments and associated risk characterization [for TCE, PCE, and CTC] as robust and upholding the standards of best available science and weight of the scientific evidence per TSCA sections 26(h) and (i).”
In addition to these weaknesses that apply to all the completed risk management rules, each of these three rules suffers from additional weaknesses.
TCE
EPA stated in the preamble of the final rule that it “recognizes that the interim ECEL of 0.2 ppm as an 8-hr TWA does not fully address the unreasonable risk from TCE, hence, the term ‘interim.’’’ EPA further stated that “Potentially exposed persons may continue to be at risk for the developmental [i.e., fetal cardiac defects] and immunotoxicity effects that provide the basis for EPA’s ultimate prohibition.” In comparison, EPA concluded in the 2020 Final Risk Evaluation for Trichloroethylene “that acute immunosuppression and chronic autoimmunity were the best overall non-cancer endpoints for use in Risk Evaluation under TSCA, based on the best available science and weight of the scientific evidence, and were used as the basis of risk conclusions…”.
EPA subsequently departed from its statements about the best available science and weight of scientific evidence for TCE in the proposed and final risk management rules. As noted above, EPA stated on January 9, 2023, in the final revision to the risk determination for TCE that the 2020 Final Risk Evaluation for Trichloroethylene upheld the scientific standards under TSCA Section 26. Also on January 9, 2023, EPA issued a press release stating that it will develop “existing chemical exposure limits [ECELs] based on both the immune endpoint [i.e., a generally agreed upon effect by the TSCA SACC; see p. 70 of the TSCA SACC final report and consistent with the final risk evaluation] and the CHD endpoint [i.e., fetal cardiac defects, which EPA had rated previously as a lower quality study] in support of risk management.” EPA clarified this decision by stating that the fetal cardiac defects endpoint “was not relied on to determine whether there is unreasonable risk from TCE [in the 2020 Final Risk Evaluation for Trichloroethylene] because of direction not to do so that was provided by the previous political leadership.” For discussion of this claim, see our memorandum dated January 19, 2023. Because Section 6(a) mandates that EPA regulate to the extent necessary to mitigate the risk identified in the risk evaluation, it is not clear that EPA can promulgate a rule to protect against hazards not identified as representing the best available science and weight of scientific evidence in the final risk evaluation.
PCE
EPA stated the following in the final risk management rule for PCE:
EPA is finalizing as proposed an ECEL under TSCA section 6(a) of 0.14 ppm (0.98 mg/m3) as an 8-hour TWA based on the chronic non-cancer human equivalent concentration for neurotoxicity.
EPA’s ECEL was derived using studies (i.e., Cavalleri et al., 1994 and Echeverria et al., 1995) judged by NASEM as “appropriate to use as a point of departure [POD] for derivation of the [Integrated Risk Information System’s (IRIS) reference concentration] RfC…[see p. 5 of the NASEM report].” The TSCA SACC concluded that EPA’s use of these studies and deriving a midpoint value as the POD was “appropriate [see pp. 62-63 of the TSCA SACC final report].” We, therefore, do not anticipate successful challenges of EPA’s ECEL, based on the scientific standards under TSCA Section 26. Given the scientific robustness of the ECEL, it is not clear why EPA elected to ban COUs that might be undertaken in compliance with a WCPP that includes that ECEL. As with other of EPA’s final risk management rules, EPA seems to be issuing regulations with prohibitions that go beyond the extent necessary to protect against the unreasonable risks identified in the final risk evaluation.
CTC
EPA stated the following in the final risk management rule for CTC:
EPA is finalizing as proposed an ECEL under TSCA section 6(a) of 0.03 ppm (0.2 mg/m3) for inhalation exposures to CTC as an 8-hour TWA based on the threshold POD for liver cancer (assuming a margin of exposure of 300) and the [inhalation unit risk] IUR for adrenal cancer.
EPA derived the ECEL using a POD of 6 mg/m3 based on liver tumor data from female mice chronically exposed to CTC via inhalation. As EPA stated, it applied a benchmark margin of exposure (MOE) of 300 to this POD, which consisted of 10× for intraspecies (human to human) uncertainty (i.e., UFH), 3× for interspecies (animal to human) uncertainty (i.e., UFA), and 10× for uncertainty with extrapolating from a lowest-observed-adverse-effect-concentration (LOAEC) to a no-observed-adverse-effect-concentration (NOAEC) (i.e., UFLOAEC to NOAEC or UFL).
We agree with EPA’s use of a threshold approach for carcinogenicity of CTC as recommended by the TSCA SACC. See p. 51 of the TSCA SACC’s final report to “Consider adoption of a threshold-type [mode of action] MOA in estimating the carcinogenic risks of carbon tetrachloride.” Unfortunately, EPA did not follow its own guidance for developing the POD and benchmark MOE.
During the public comment period on the proposed risk management rule for CTC, members of the public commented on EPA’s threshold approach, specifically noting that application of the LOAEC-to-NOAEC (UFL) approach rather than using benchmark dose (BMD) modeling was inconsistent with EPA’s own guidance documents (see slides 15 and 16 of the public comments). Note, when BMD modeling is used, a UFL is not applied because BMD modeling reduces the uncertainty represented by the UFL. The public commenters performed BMD modeling on the liver tumor data from female mice and concluded that their results “were statistically valid and identical to EPA’s 2010 BMD results” (see slide 11 of the public comments). Using the BMD approach, rather than the UFL approach, the public commenters derived an ECEL of 1.5 ppm (i.e., 9.5 mg/m3) (see slide 12 of the public comments). EPA did not explain why it did not use the BMD modeling approach.
EPA’s statement about the “IUR for adrenal cancer” is questionable, given that these tumors were evaluated recently by carcinogenicity experts who concluded that “The pheochromocytomas in rodents are not relevant to human cancer risk.” EPA has yet to refute that conclusion.
Conclusions
B&C anticipates that the common procedural issues with the final risk evaluations for TCE, PCE, and CTC may serve as an underlying basis for challenging the final risk management rules on these substances. We acknowledge that courts will generally give deference to EPA’s interpretation of science, but we question whether this will occur, particularly with the issues discussed above with TCE and CTC, when EPA departs from its own standards. We anticipate that EPA may be challenged for prohibiting occupational COUs when EPA concludes that compliance with the WCPP and ECELs protects against the unreasonable risks identified. EPA’s own conclusion about the protective effect of a WCPP undermines any argument that a ban is required to protect to the “extent necessary” under TSCA Section 6(a).
Supporting Employees Impacted by Wildfires
The ongoing Los Angeles, California, wildfires have caused widespread devastation, forcing residents to evacuate, and have destroyed homes and communities. President Joe Biden approved a Major Disaster Declaration in response to the wildfires in Los Angeles County on January 8.
There are several ways employers can support employees impacted by the wildfires, including by making qualified disaster relief payments to employees and creating paid leave sharing programs. Employers can also set up employee assistance funds through existing public charities that administer disaster relief programs, create an employer-sponsored charitable organization that provides disaster relief payments to employees, or set up a donor-advised fund with a sponsoring public charity. In addition, employers can allow employees greater access to distributions and loans from accounts under employer-sponsored retirement plans.
This alert provides a high-level overview of qualified disaster relief payments, leave sharing programs, disaster relief options using charitable organizations, and expanded opportunities to receive distributions and loans from employer-sponsored retirement plans. The following is intended to provide a brief introduction to the options available to employers and does not address the specific requirements for each option. Qualified disaster relief payments, leave bank programs, charitable organizations, and expansion of distributions and loans from employer-sponsored retirement plans must be carefully structured to ensure compliance under the federal tax laws. It is recommended to consult with legal or tax professionals to ensure full compliance and avoid potential liabilities.
Qualified Disaster Relief Payments
Section 139 of the Internal Revenue Code permits employers to make “qualified disaster relief payments” to employees in areas with an emergency disaster or major disaster declaration. Qualified disaster relief payments are not included in the employee’s gross income or subject to employment tax. Employers can also deduct qualified disaster relief payments to the same extent as payments treated as income to the employee.
A payment qualifies as a “qualified disaster relief payment” if the following requirements are satisfied:
There has been a “qualified disaster” (e.g., a federally declared disaster issued by the President of the United States).
The payment is intended to cover reasonable and necessary personal, family, living, or funeral expenses, or reasonable and necessary expenses incurred for repairing or replacing a personal residence or its contents, provided the expenses were incurred as a result of the qualified disaster and not covered by insurance or other resources.
The payment is not income replacement (e.g., severance, furlough pay, or lost wages from missed work).
Since President Biden approved the Major Disaster Declaration, employers can therefore provide financial assistance to employees impacted by the wildfires, provided that the payments meet the additional requirements described above. Employers who provide qualified disaster assistance payments should maintain adequate records for the program and request that recipients retain receipts and other documentation.
Leave Sharing Programs
Under Internal Revenue Service (IRS) Notice 2006-59, the IRS allows employers, responding to a “major disaster” (as declared by the president), to establish “leave banks” that enable employees to contribute accrued leave (up to the maximum amount the employee normally accrues during the year) to a collective pool for use by employees who have been adversely affected by a “major disaster” necessitating absence from work. Because President Biden approved a Major Disaster Declaration in response to the wildfires in Los Angeles County, employers can use employer-sponsored leave banks to support employees adversely impacted by the wildfires with additional paid leave. The leave is treated as wages with respect to the leave recipient and subject to federal income tax withholding and employment tax (e.g., FICA and FUTA). Leave donors are not entitled to a charitable contribution deduction on their individual income tax returns for the donated leave, but the portion of leave donated is not treated as income or wages to the leave donor. For employer-sponsored leave banks to qualify for the US federal tax treatment addressed herein, leave bank programs must meet certain additional requirements set forth in IRS Notice 2006-59.
Charitable Organizations
Employers can also support employees and other individuals impacted by the wildfires through disaster relief options using charitable organizations. Employers can set up employee assistance funds through existing public charities that administer disaster relief programs, create an employer-sponsored charitable organization that provides disaster relief payments to employees, or set up a donor-advised fund with a sponsoring public charity.
Employee Assistance Fund Administered by Existing Public Charity
Employers can create and fund an employee assistance fund administered by an existing public charity. This allows an employer to provide critical financial assistance to employees affected by the disaster while leveraging the charity’s established infrastructure and expertise.
Employer-Sponsored Public Charity
Employers can establish an employee-sponsored public charity to provide disaster relief payments to employees and other individuals impacted by current and future disasters. Employee-sponsored public charities are typically funded not only by the employer but also by employees or other donors. An employer-sponsored public charity can generally provide disaster relief to employees affected by current and future disasters, including qualified and non-qualified disasters or emergency hardship situations.
Employee-Sponsored Private Foundation
Employers can also establish an employee-sponsored private foundation to provide disaster relief payments to employees and other individuals impacted by current and future disasters. Employee-sponsored private foundations are generally funded by the employer and subject to additional requirements and restrictions that do not apply to public charities. An employer-sponsored private foundation can provide disaster relief to employees affected by current and future qualified disasters (but not non-qualified disasters or emergency hardship situations).
Employer-Sponsored Donor-Advised Fund
Employers can set up a donor-advised fund with a sponsoring public charity to support employees and their family members who are victims of qualified disasters. The sponsoring organization manages the fund, and a selection committee has advisory privileges over the fund. An employer-sponsored donor-advised fund can provide disaster relief to employees affected by current and future qualified disasters (but not non-qualified disasters or emergency hardship situations).
Disaster relief options involving charitable organizations are subject to complex tax requirements and must be carefully structured to ensure compliance.
Distributions and Loans From Employer-Sponsored Retirement Plans
Employers can allow their retirement plans to offer relief to “qualified individuals” impacted by a qualified disaster through expanded distribution options, increased access to plan loans, and loan repayment relief. A “qualified individual” is an individual whose principal residence during the incident period of any qualified disaster is in the qualified disaster area and the individual has sustained an economic loss by reason of that qualified disaster.
To the extent the plans do not already have provisions related to expansions of distributions and loans in the context of federally declared disasters, employers will need to amend their plans and would have until the end of this year to adopt the amendments.
Qualified Disaster Recovery Distributions
Employers can permit qualified individuals to receive distributions from the employee’s plan account in an amount up to $22,000 per disaster, with no early withdrawal penalty, and the option to repay all or a portion of the distribution within three years.
Increase to Plan Loan Limit
Employers can increase the maximum loan amount available to qualified individuals for plan loans made during a specified period following a qualified disaster. The plan loan limit may be increased to the full amount of the individual’s vested account under the plan, but not more than $100,000 (minus outstanding plan loans of the individual).
Relief for Plan Loan Repayments
Employers can also provide qualified individuals additional time (up to one year) to repay plan loans outstanding on the date of the declaration of the qualified disaster.
EPA Adds Nine PFAS to Toxics Release Inventory for Reporting Year 2025
The U.S. Environmental Protection Agency (EPA) announced on January 6, 2025, that it is updating the list of chemicals subject to toxic chemical release reporting under the Emergency Planning and Community Right-to-Know Act (EPCRA) and the Pollution Prevention Act (PPA). 90 Fed. Reg. 573. Specifically, the final rule updates the regulations to identify nine per- and polyfluoroalkyl substances (PFAS) that must be reported pursuant to the National Defense Authorization Act for Fiscal Year 2020 (FY2020 NDAA) enacted on December 20, 2019. EPA notes that as this action is being taken to conform the regulations to a Congressional legislative mandate, notice and comment rulemaking is unnecessary. The PFAS added to the Toxics Release Inventory (TRI) and the triggering events are:
Ammonium perfluorodecanoate (PFDA NH4) (Chemical Abstracts Service Registry Number® (CAS RN®) 3108-42-7) (Final Toxicity Value);
Sodium perfluorodecanoate (PFDA-Na) (CAS RN 3830-45-3) (Final Toxicity Value);
Perfluoro-3-methoxypropanoic acid (CAS RN 377-73-1) (Final Toxicity Value);
6:2 Fluorotelomer sulfonate acid (CAS RN 27619-97-2) (Final Toxicity Value);
6:2 Fluorotelomer sulfonate anion (CAS RN 425670-75-3) (Final Toxicity Value);
6:2 Fluorotelomer sulfonate potassium salt (CAS RN 59587-38-1) (Final Toxicity Value);
6:2 Fluorotelomer sulfonate ammonium salt (CAS RN 59587-39-2) (Final Toxicity Value);
6:2 Fluorotelomer sulfonate sodium salt (CAS RN 27619-94-9) (Final Toxicity Value); and
Acetic acid, [(γ-ω-perfluoro-C8-10-alkyl)thio] derivs., Bu esters (CAS RN 3030471-22-5) (Confidential Business Information (CBI) Declassification).
The final rule will be effective February 5, 2025. As of January 1, 2025, facilities that are subject to reporting requirements for these PFAS should begin tracking their activities involving these chemicals as required by EPCRA Section 313. Reporting forms will be due by July 1, 2026.
Federal Circuit Clarifies Claim Construction at the Pleading Stage
Many lower courts have interpreted the Federal Circuit’s Nalco decision to hold that claim construction is inappropriate at the motion to dismiss stage. But the Federal Circuit’s recent UTTO decision clarified that claim construction is not categorically forbidden at the motion to dismiss stage.
The Court noted whether claim construction is appropriate at the motion to dismiss stage is case-specific, as sometimes “a claim’s meaning may be so clear . . . that no additional process is needed.” For patent litigants, the UTTO decision provides express support for patent litigants to make claim construction arguments at the motion to dismiss stage.
Prior Understandings From Nalco
Nalco Co. (“Nalco”) was the exclusive licensee of U.S. Patent No. U.S. 6,808,692 (the “’692 Patent), which was directed to “Enhanced mercury control in coal-fired power plants.” Independent claim 1 of the ’692 Patent recites “[a] method of treating coal combustion flue gas containing mercury, comprising . . . injecting a member selected from the group consisting of molecular halogen and a thermolabile molecular halogen precursor into said flue gas.” Chem-Mod, LLC (“Chem-Mod”) is an environmental services company that specializes in pollutant control technologies and licenses its “Chem-Mod Solution.” The Chem-Mod Solution comprises mixing a thermolabile molecular halogen precursor with coal before the coal is fed into a coal combustion process.
Nalco brought an action for patent infringement against Chem-Mod, arguing that the Chem-Mod Solution practices all steps of at least claim 1 of the ’692 Patent. At the district court, Chem-Mod argued that the Chem-Mod Solution did not infringe because mixing thermolabile molecular halogen precursors prior to combustion does not constitute “injecting” such precursors into flue gas post-combustion. The district court ultimately agreed, dismissing Nalco’s complaint and subsequent amended complaints, which Nalco ultimately appealed to the Federal Circuit.
The Federal Circuit reversed and remanded the district court’s dismissal and, in doing so, discussed the inappropriateness of claim construction at the pleading stage in this case. Focusing on the Twombly/Iqbal pleading standards, the Court held that Nalco had plausibly alleged that “injection” of the halogen precursor occurred when treated coal was fed into a furnace for combustion. In discussing this theory of infringement, the Court went on to explain:
Defendants’ objections to this theory of infringement read like classic Markman arguments. Defendants first take issue with Nalco’s allegation that “coal combustion flue gas” is “the gas that is created during the combustion of coal. But Defendants’ arguments boil down to objections to Nalco’s proposed claim construction for “flue gas,” a dispute not suitable for resolution on a motion to dismiss.
Many lower courts have read this passage and others in Nalco to hold that claim construction is categorically forbidden at the motion to dismiss stage.
UTTO’s Clarification of Nalco
UTTO Inc. (“UTTO”) owned U.S. Patent No. U.S. 9,086,441 (the “’441 Patent), which was directed to “Detection of buried assets using current location and known buffer zones.” Independent claim 1 of the ’441 Patent recites “[a] method . . . comprising . . . generating, based on the group of buried asset data points, a two dimensional area comprising the buffer zone . . ..” The core of the process involves using both (1) a GPS to pinpoint a person’s location and (2) previously stored buried assert data to locate and generate a buffer zone around a buried asset.
Metrotech Corp. (“Metrotech”), a competitor of UTTO, sold a device that had a “walk back” feature that performed substantially similar to the claimed method. However, the walk back feature “requires only a single point” to generate a buffer zone, as opposed to a group of buried asset data points.
UTTO brought an action for patent infringement and moved for a preliminary injunction against Metrotech, arguing that the walk back feature infringes on the ’441 Patent. In denying Metrotech’s motion for preliminary injunction, the district court construed the claims in favor of Metrotech.
Specifically with respect to claim 1, the Court noted that “[t]he claim does not mention ‘one or more’ data points, or ‘a’ data point. It describes a ‘group’ of ‘data points,’ plural. The ordinary and customary meaning indicates that more than one data point is necessary to create the buffer zone.” Based on the Court’s construction, Metrotech moved to dismiss UTTO’s complaint, and the dismissal of UTTO’s third amended complaint was ultimately appealed to the Federal Circuit.
The Federal Circuit sided with UTTO and vacated the dismissal of UTTO’s third amended complaint, finding the district court’s claim construction to be incomplete in this case. However, the Court squarely addressed arguments made in UTTO’s briefing that misconstrued Nalco. Specifically directed to the passages of Nalco provided in the previous Section, the Court noted that:
Those passages, we conclude, should not be read as stating a categorical rule against a district court’s adoption of a claim construction in adjudicating a motion to dismiss. The passages do not in terms state such a rule. They are readily understood to be drawing a conclusion about the need for further proceedings to resolve the particular claim-construction issues in that case before a sound determination of the appropriateness of dismissal could be reached. Nalco should be read in that case-specific way.
The Court went on to say that some case-specific circumstances make it improper to resolve a claim construction dispute at the pleading stage, but “sometimes a claim’s meaning may be so clear . . . that no additional process is needed.”
While claim construction is now expressly not forbidden at the pleading stage under UTTO, Nalco is still good law and should be read in a case-specific way. Like the Federal Circuit did in both Nalco and UTTO, cases will still be remanded where “[t]here has been insufficient exploration in the record, both [at the Federal Circuit] and in the district court, of too many questions of apparent relevance to identifying a proper construction of [a] limitation.”
Employers’ Wage and Hour FAQs: California Wildfires Edition
Wildfires continue to rage across Southern California, leveling entire neighborhoods, forcing evacuations for tens of thousands of people, and posing incredible hardship on businesses and their employees. Below are a few common scenarios employers should know about paying their California employees and maintaining compliance with wage and hour laws:
“Our office was closed for a few days because of the fires. Do we have to pay our employees for those days?”
Non-exempt (i.e., overtime-eligible) employees generally have to be paid only for hours they actually work. So, if a non-exempt employee cannot work because your office is closed—or because the employee cannot make it into the office because of natural disaster-related conditions—the wage and hour laws do not require you to pay the employee for non-working time. On the other hand, a non-exempt employee who performs work remotely (say, from home, from a temporary site, or from a coffee shop) is entitled to pay for the time worked.
An exception exists for salaried non-exempt employees, who may—depending on the terms of their agreement with the employer—expect to receive their full weekly salary regardless of how many hours they actually work that week.
Exempt employees (i.e., employees not entitled to overtime pay) generally receive their full salary for any week in which the office is closed for less than a full workweek. If your office is closed for an entire workweek, you can inform all employees of the closure and you need not pay them for that week (unless they are working remotely).
Be sure to check any agreements with exempt employees—as well as offer letters, policies, or other statements regarding the nature of their pay—which may also limit your ability to prorate salary during office closures and/or give rise to pay claims.
“Because of dangerous conditions, we had to close our office after a number of employees had already reported for work. Do we have to pay them for the day?”
Exempt employees who report to work but are turned away or sent home by their employer generally must receive their salary for that week.
Non-exempt employees are often entitled to reporting time pay when they show up for their shift and are sent home before they’ve worked at least half their shift. But there is an exception for certain conditions that are beyond the employer’s control, including natural disasters like wildfires.
If the business closes at an employer’s discretion, and not due to a threat to property, recommendation by civil authority, failure of public utilities, or work interruption by an “act of God,” reporting time pay may be owed. When a nonexempt employee shows up for work as scheduled and is not put to work or is given less than half of their scheduled hours, the employee is eligible for reporting time pay equal to one-half of the scheduled shift, but no less than two hours and no more than four hours.
“Our office was open, but some of our staff could not make it in because of the fires. Do we need to pay them?
As we note above, non-exempt employees generally must be paid only for hours they actually work, but salaried non-exempt employees may have a right to receive their full salary for any week in which they perform work.
Exempt employees who are absent from work for one or more full days because of transportation difficulties are considered to be absent for personal reasons if the office is otherwise open. Absent a contractual right to be paid, they do not have to be paid for the days they are unable to report to work, and the employer does not jeopardize their exempt status if it decides not to pay them for those days. Deductions for partial-day absences under these circumstances, however, are not permitted.
“Can employees refuse to work if our worksite is an evacuation zone?”
Yes. California law prohibits employers from retaliating against workers who refuse to work in unsafe conditions, including when their worksite is an evacuation zone. Employers should check local evacuation orders before reopening worksites and communicate clearly with employees about when it is safe to return.
“Our payroll records were destroyed in the fires or are inaccessible. How do we pay our employees?”
If the only records of hours worked are lost or unusable, then there is no perfect solution. Recreate the most-accurate accounting you can under the circumstances. Use a reasonable method to determine the number of hours worked, such as:
Asking employees to submit a certified time sheet indicating the number of hours they worked;
Re-creating hours worked through electronic records (e.g., card/ID swipes or logins/logouts);
Making assumptions based on an employee’s fixed or regular schedule of hours;
Asking managers to verify hours worked; or
Some combination of the above.
“How do we record employees’ worktime without our electronic time clocks?”
Employees may record all hours worked on physical or handwritten timesheets. Employees should be instructed to enter their own time and to record the actual times when their work starts and stops each workday, including meal breaks.
“Can we require our employees to use available sick time or vacation days during a fire or natural disaster-related office closure or absence?”
Employees may use accrued sick leave under California law for absences related to the wildfire disaster if the need falls under a permissible use (such as health issues or to care for a family member). Additionally, the employee may choose to take paid leave under vacation or paid time off policy if the policy provides for such leave or the employer opts to allow, but this generally cannot be required unless reasonable notice is provided and stated in a policy or employment agreement.
“Can we give our staff additional paid or unpaid time off to assist in recovery or relief efforts?”
Yes. Employers may grant their employees additional paid and unpaid time off for any reason, including assisting with disaster-related recovery and relief efforts.
All employers must also provide leaves of absence for employees who serve as volunteers for local fire departments or other emergency response entities but are not required to compensate the employees during this time off. Employees who are assisting in relief efforts as part of the National Guard or Armed Forces Reserves may have additional rights under state and federal law.
“Because of the fires, it took our employees twice as long to commute to work as opposed to most other days. Do we need to pay them for the additional commute time?”
Generally, time spent in an employee’s normal commute from home to work at the beginning of the workday, and from work to home at the end of the workday, is not considered time worked and need not be paid. However, commute time is considered compensable work hours where the employer requires its employees to meet at a designated place, use the employer’s transportation to and from the work site, and prohibits employees from using their own transportation.
“Some of my employees are members of a union. Do these rules apply to them as well?”
Collective bargaining agreements generally cannot waive or reduce the protections available to employees under federal, state, or local wage and hour laws. However, collective bargaining agreements can—and often do—impose additional pay, time off, and other obligations on employers. Employers with unionized employees should consider all applicable agreements when analyzing their rights and responsibilities in the context of a natural disaster-related emergency or other “force majeure” event.
“We want to do more for our employees, to go above and beyond what the law requires. What are some things we can do?”
Employers that want to do more for their employees may consider the following:
Granting additional paid or unpaid time off;
Allowing affected employees to work remotely for some period of time;
Making loans or emergency advances of wages;
Setting up disaster-relief programs or payments;
Setting up food and clothing drives.
Final Thoughts
Employers making decisions about scheduling, pay, and time off during natural disaster-related emergencies and disruptions should bear in mind the potential implications on employee morale. Flexibility and support in times of need—or the absence of them—are likely to be remembered long after the fires are extinguished.