OSHA Broadens “Walkaround Rule,”  Potentially Widening Who May Represent Employees during OSHA Worksite Inspections

by Brad Smith

September 10, 2024

New changes to the Occupational Safety and Health Administration’s rules regarding who can represent an injured employee during workplace OSHA inspections raise questions with employers about who may now gain access to its worksites and what steps should be taken to protect its interests.

Earlier this year OSHA modified regulation, 29 C.F.R. § 1903.8(c), also known as the “Walkaround Rule,” to potentially allow non-employee third parties to represent employees during OHSA workplace inspections. Prior to the modification, which took effect on May 31, 2024, employees were typically limited to choosing other employees as their representative during OSHA inspections. Under the new rule, employees may be permitted to select a third-party, non-employee, representative, if the third-party may be “reasonably necessary to the conduct of an effective and thorough inspection based upon skills, knowledge, or experience such as knowledge or experience with hazards or conditions in the workplace or similar workplaces, or language or communication skills.” 

OSHA does not specifically identify the third parties who can now be employee representatives under the modified rule, but the new language is general enough to raise concern about how broadly it will be interpreted and applied. Opponents of the modified rule fear it could mean that parties such as competitors, attorneys, activists, union representatives or other potentially unwelcome visitors could qualify under the broadened language and gain access to worksites, inspections and insight that was  previously more restricted. OSHA, on the other hand, believes the modification brings the rule more in line with its overall intent—to conduct more thorough inspections.

The amendment by OSHA does not change that employers can still limit access to some areas of the workplace to protect trade secrets, the inspections cannot disrupt normal business activities, and does not prevent the Compliance Safety and Health Officer from denying access parties who may be disruptive or are not found to be “reasonably necessary” to conduct an effective and thorough investigation.

Several outside agencies, including the AGC and U.S. Chamber of Commerce have challenged the modification, including filing multiple lawsuits requesting courts to vacate or limit application of the new rule. Whether the amendment will stand up against legal scrutiny or will need to be remodified has not yet been decided.

All employers should be aware of the change and take necessary steps to protect workplace safety, trade secrets, confidential information, and to decrease the risk of liability created by non-employees having access to workplaces during OSHA inspections. Some potential issues that should be addressed are liability waivers, strict rules or protocols for inspections, identifying confidential information that needs to be protected or locations that should have restricted access, and identifying employer representatives that may be necessary to rebut or counter employee representatives. Employers should also be prepared to push back when it appears that application of the new rule will permit unreasonable access beyond the scope and intent of the inspections or cause prejudice to their company. In some severe instances, the employer should consider invoking its right to refuse the OSHA inspection and force OSHA to seek a subpoena. Doing so may permit the employer to limit who is allowed to participate in the inspection.

Workplace In-Civility: The NLRB Changes Course

by Hunter Taylor

February 1, 2024

Employers have a vested interest in establishing and maintaining a professional environment for their customers and employees. It seems odd to even consider an alternative approach. After all, some amount of mental gymnastics is required to imagine a scenario in which the alternative would benefit the employer. But the concept is not free of its issues in execution. Some efforts to maintain “civility” in the workplace through employee and similar handbooks can create unintended consequences. The National Labor Relations Board (NLRB) has not hesitated to respond to these unintended consequences, as evidenced by its recent shifts in interpretation and enforcement of restrictions set forth in the National Labor Relations Act.

As an example, Section 7 of the Act guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” It gives employers the right “to refrain from any or all such activities.” Section 8(a)(1) of the Act also makes it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7” of the Act.

What constitutes an interference, restraint, or coercion made by an employer is less clear. This issue has been the focus of varying (and at times conflicting) NLRB rulings in which the NLRB has attempted to determine where the Act lands on the pendulum between the: (a) employer’s interests in enforcing so-called “civility” policies, and (b) an employee’s freedom to engage in activities protected by the Act.

Confusingly, the NLRB has held that even when an employer’s facially neutral employment policy does not expressly restrict Section 7 activity, was not adopted in response to a protected activity, and has not applied to restrict a protected activity, the policy may still violate Section 8(a)(1) of the Act. Such a violation would occur if the employee “would reasonably construe the language to prohibit Section 7 activity.” Without sufficient regulatory guidance and clarity, an employer cannot adequately protect itself from an employee who may cleverly or unfairly “reasonably construe” language that violates the Act.

Until 2017, this “reasonableness” qualifier was enforced without substantial deference to objective circumstances, such as an employer’s legitimate interests in maintaining civility policies. This changed in the NLRB’s Boeing decision, in which the NLRB acknowledged the existence of special circumstances relative to the employer’s industry, work settings, and events specific to or resulting in the policy in question. Under Boeing, employers found some degree of stability in understanding the types or categories of policies that do not violate the Act.

However, following its invitation for public input (which was notably absent in Boeing), the NLRB changed course in its Stericycle decision. In Stericycle, the NLRB reemphasized a perception-based qualifier as to an employee’s “reasonable” interpretation of a workplace policy and paid particular attention to whether or not an “economically dependent” employee could interpret a policy to restrict Section 7 rights. The decision was a drastic shift in the NLRB’s position on the pendulum because it replaced the NLRB’s use of “categories” of acceptable rules in favor of a case-by-case approach that is contingent on disparate interpretations.

Poised to abandon the precedent it set in Boeing, the NLRB quickly applied the new elements and standards it laid out in Stericycle to Starbucks’ “How we communicate” policy.

Although Starbucks’ policy was facially neutral and included common requirements that its employees practice “professional and respectful” behavior, contained a uniform dress code, and required attendance at HR meetings related to employee benefits, the NLRB determined that Starbucks’ application of these policies created opposing interpretations as to the policy’s true meaning. According to the ruling, Starbucks’ selective implementation of its policies and certain language within its policy suggested there could be negative consequences for union activity. This resulted in the NLRB finding that Starbucks’ policy was “overly broad, vague, and can [be] reasonably construed to intrude on Section 7.” Of note, the NLRB imposed a significant burden of proof on Starbucks, requiring it to demonstrate that it would be “unable” to advance its legitimate interests with a “more narrowly tailored rule.” The impact of a burden of this sort cannot be understated as applied to workplace policies because each employer policy may now be rendered unenforceable if a less “restrictive” alternative is available.

In sum, recent NLRB cases reflect a substantial shift in the legality of workplace “civility” policies that “could” be interpreted to limit union activity and involvement. Further, the NLRB cases serve as a great reminder that employers need to periodically review their handbooks and update the handbooks accordingly. Any such updates should narrowly tailor policies to promote enforceability and hedge against potential contests that a policy violates the Act. 

To discuss how these policy changes could impact your business, contact Hunter Taylor at Griffith Davison’s Dallas office at (972) 392-8900, or email Hunter directly at htaylor@griffithdavison.com

This article first appeared in the January 2024 Issue of Dallas Bar Association Headnotes.

Corporate Transparency Act Update

by Hunter Taylor

December 13, 2023

We are writing to remind you about some regulatory changes which are going into effect in the coming weeks which may impact your business. As you may have heard or seen in prior updates, The Corporate Transparency Act (CTA) has been enacted and it is crucial for all business owners to be aware of its applicability and considerations.

Overview of the Corporate Transparency Act

The Corporate Transparency Act, passed as part of the National Defense Authorization Act for Fiscal Year 2021, aims to enhance corporate transparency and combat illicit activities such as money laundering and “terrorism financing.” In short, the CTA requires certain businesses to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) in an effort to hedge against those illicit activities.

Applicability

The CTA applies to “reporting companies”, which include corporations, limited liability companies (LLCs), and similar entities that do not qualify for one of the available exemptions. If your business falls within the scope of a reporting company, you will need to comply with the disclosure requirements outlined in the Act.

Key Considerations

Reporting companies are required to submit information about their beneficial owners to FinCEN. Beneficial owners are individuals who exercise “substantial control” over a reporting company, or directly or indirectly own or control 25% or more of the ownership interests in the company. 

Compliance Deadlines

It is important to be aware of the compliance deadlines. Entities formed after January 1, 2024 must comply at the time of formation, while existing entities have a grace period to comply which is currently set at one (1) year. This is a key consideration in corporate governance planning for the next year, and may favor filings being made before January 1, 2024 for certain structures.

Information to be Disclosed

The information to be disclosed includes the names, dates of birth, addresses, and unique identification numbers of the beneficial owners; each of which must be submitted using FinCEN’s online portal (which, as of today, has not yet been released for access). There are significant penalties for lack of disclosure, so it is essential to take proactive steps to meet these new regulatory requirements.

Our corporate law team is available to assist you in understanding and complying with the Corporate Transparency Act. Again, if you are considering forming a new entity in the near future, you may want to do so before the turn of the new year. If you have any questions regarding the CTA and its new regulatory requirements, please do not hesitate to reach out to our office. 

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This update should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Further, this update shall not create a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult an attorney regarding the contents hereof.

NLRB Adopts New Standard for Evaluating Workplace Rules

by Caleb Johnston

November 1, 2023

The National Labor Relations Board (“NLRB”) has prescribed a new legal standard for evaluating whether an employer’s workplace rules tend to interfere with the rights of employees which are protected by Section 7 of the National Labor Relations Act (“NLRA”). Specifically, the NLRB’s decision in Stericycle, Inc., 372 NLRB No. 113 (N.L.R.B. Aug. 2, 2023) sets forth the new standard and overturns the old test established in Boeing Co., 365 NLRB No. 154 (N.L.R.B. Dec. 14, 2017)which had governed employer’s workplace rules for the past six years. Employers should be aware of the changes the NLRB has implemented as it may require an employer to revise its workplace rules to comply with the new Stericycle standard. 

Legal Background. 

Under Section 7 of the NLRA, employees have the right to form, join, or assist labor unions and the right to join together as employees to advance their interests as employees. If an employer implements a workplace rule which interferes with, restrains, or coerces an employee in exercising their Section 7 rights, then the employer will have committed “unfair labor practice” in violation of the NLRA. 

A workplace rule which threatens to terminate an employee for joining a labor union is clearly a violation of an employee’s Section 7 rights. However, the analysis is not as clear when an employer implements facially neutral workplace rule. For example, a workplace rule which prohibits employees from discussing or disclosing “confidential information” is facially neutral. If the term “confidential information” can be interpreted to include information such as individual salaries or work schedules, then the rule may violate Section 7 because employees have the right under Section 7 to discuss and disclose their salaries and work schedules. In these more challenging cases, the standard prescribed by the NLRB will be used to determine whether or not the facially neutral workplace rule in question violates an employee’s Section 7 rights. 

The NLRB recently changed its standard for evaluating facially neutral workplace rules. The old standard, established in Boeing, sought to provide greater clarity and certainty for employers by placing workplace rules into one of three categories: (i) rules that were considered lawful; (ii) rules that were deemed unlawful; and (iii) rules that warranted “individualized scrutiny” to determine whether they violated an employee’s Section 7 rights. The three-category system established in Boeing is no longer in effect, however, as the NLRB recently decided to move to a more rigorous standard for analyzing workplace rules in Stericycle.

The New Stericycle Standard. 

The new standard in Stericycle replaces Boeing’s categorical approach with a case-by-case analysis of workplace rules. The Stericycle standard also implements a burden shifting framework. First, the NLRB must prove that the challenged workplace rule “has a reasonable tendency to chill employees from exercising their Section 7 rights.” At this stage, the workplace rule is interpreted from the perspective of a “reasonable employee.”  In other words, if an employee could reasonably interpret the workplace rule to interfere with, restrain, or coerce the employee in exercising their Section 7 rights, then the workplace rule is presumptively unlawful. 

The burden then shifts to the employer to rebut the presumption. This will require the employer to prove “that the rule advances a legitimate and substantial business interest, and that the employer is unable to advance that interest with a more narrowly tailored rule.” If the employer can satisfy its burden, then the challenged workplace rule is upheld as lawful.

Practical Considerations. 

The new Stericycle standard went into effect on August 2, 2023, and applies retroactively, meaning that all workplace rules which are challenged as violating Section 7 of the NLRA will be reviewed by the NLRB under the Stericycle standard moving forward. As a result, workplace rules that were previously lawful for an employer to maintain under the Boeing standard may now be held unlawful under Stericycle. For example, a “no recording” rule which prohibits an employee from recording workplace conversations was categorically approved as lawful under Boeing. Today, however, the same rule may be held unlawful under Stericycle if the rule is not narrowly tailored to serve the employer’s legitimate and substantial business interest.

Employers should consider reviewing their employee handbooks, manuals and other documents containing work rules or policies to ensure compliance with the NLRB’s newly announced standard in Stericycle. In addition, employers should consider adopting a policy which specifically sets out an employee’s Section 7 rights under the NLRA and explains that the employer’s workplace rules should not be interpreted as restricting those rights. While there is no guarantee that such policy would save an employer’s workplace rule from violating the NLRA, the General Counsel for the NLRB has taken the position that such policy should create a presumption that an employer’s rules are lawful.

To discuss how Stericycle may impact your workplace rules, please feel free to contact one of our attorneys at (972) 392-8900. 

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This update should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Further, this update shall not create a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult an attorney regarding the contents hereof.

Federal Government Issues Procedures for “Corporate Transparency”

by Hunter Taylor

March 6, 2023

In an effort to hedge against ill-dealings and potential foreign security threats in American business entities, Congress enacted the Corporate Transparency Act (“CTA”) in 2021 with the intent of increasing the availability of information regarding corporate ownership. Recently, efforts have been made by the Financial Crimes Enforcement Network (“FinCEN”) to establish enforcement mechanisms which serve to give the CTA “teeth.” To this end, FinCEN recently issued a Final Ruling, as further supplemented, which outlines enforcement procedures and disclosure requirements associated with the CTA. This ruling, in short, requires certain non-exempt entities to timely file reports identifying and providing information about their owners and business affairs above and beyond what has ever been previously required. 

The ownership disclosure requirements set forth in the CTA and the Final Ruling will change the way that business owners plan for the future, especially with regard to non-exempt complex and multi-level corporate structures which are involved in more than one industry. For this reason, each business owner, manager, principal, and officer needs to be aware of the potential implications which are associated with these lingering disclosure requirements and plan accordingly.

Disclosure Rules Will Affect Your Business

The basic consequence to each business owner which does not qualify for an exemption (each, a “Reporting Company”) involves disclosure of its ownership to a government authority, itemized down to what the law defines as a “Beneficial Owner”. This disclosure will require (i) the entities full name, (ii) any trade or DBA name, (iii) the entity’s street address, (iv) State or country (if foreign) of formation, and (v) the entities Taxpayer Identification Number (“TIN”). Additionally, each “Beneficial Owner” of each Reporting Company will be required to disclose their (i) legal name, (ii) date of birth, (iii) current address, (iv) a unique identification number from a passport, state driver’s license, or other government-issued identification document, and (v) an image of that document. 

The Final Rule defines a Beneficial Owner as any individual who, directly or indirectly, either (i) exercises “substantial control” over a Reporting Company, or (ii) owns or controls at least 25% of the ownership interests of a Reporting Company. The Final Rule sets forth that an individual exercises “substantial control” if they serve as a senior officer, have authority over appointment or removal of officers or board members, or have “substantial influence” over important matters of the Reporting Company (among others).

Applicability

Unless an entity qualifies for an exemption, any entity that is a corporation, limited liability partnership, or other entity registered with the Texas Secretary of State will be required to file a Beneficial Ownership Information Report. To the extent that an entity is either (i) publicly traded, or (ii) is a “large operating company” with more than 20 employees and gross receipts in excess of $5 million, an exemption may be available. However, unless an entity is able to qualify for such an exemption, disclosure of its “Beneficial Owners” will be required.

Timelines

All new non-exempt entities formed on or after January 1, 2024, will be required to file a report with FinCEN detailing its ownership and other required business-related information within thirty (30) days of formation. All applicable entities formed before this date will be required to file a report with the same or similar information on or before January 1, 2025.

Access to Information

The CTA authorizes FinCEN to maintain a database of the information disclosed in Beneficial Ownership Information Reports, and to disclose this information to US Government Agencies, certain foreign agencies and authorized persons, and financial institutions using the information for KYC purposes, among others.

Noncompliance

While the penalties actually enforced by FinCEN are unclear pending the CTA’s implementation, the law provides criminal penalties including fines of up to $10,000 or up to two years in prison when a business entity willfully fails to report complete or updated information or willfully provides false or fraudulent information. Accordingly, the timely filing of accurate reports is paramount to continued compliance.

Key Takeaways

Beginning on January 1, 2024, a vast majority of business entities will be required to disclose information regarding their ownership to the government. To discuss how these compliance and disclosure laws could impact your business, please consult with one of our attorneys at (972) 392-8900.

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This update should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Further, this update shall not create a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult an attorney regarding the contents hereof.