271 Search Results

May 29, 2018 |
Gibson Dunn Named Winner in Three Categories for D.C. Litigation Department of the Year

Click for PDF National Law Journal’s 2018 D.C. Litigation Department of the Year contest recognized Gibson Dunn as co-winner in the General Litigation [PDF] and Labor & Employment [PDF] categories and the winner in the Products Liability/Mass Torts [PDF] category.  Gibson Dunn was the only firm to win in three categories.  Profiles ran in the magazine’s June issue and noted the firm’s “winning streak in 2017 was marked by cases that may prove instructive for future litigation.”

May 21, 2018 |
Supreme Court Upholds Agreements To Individually Arbitrate Employment-Related Disputes

Click for PDF Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP v. Morris, No. 16-300; National Labor Relations Board v. Murphy Oil USA, No. 16-307 Decided May 21, 2018 Today, the Supreme Court held 5-4 that an employee’s agreement to arbitrate employment-related disputes with his employer through individual arbitration is enforceable under the Federal Arbitration Act. The Court rejected the argument that enforcing the arbitration agreement’s class action waiver would violate employees’ right to engage in collective action under the National Labor Relations Act. Background: The Federal Arbitration Act (FAA) provides that agreements to arbitrate transactions involving interstate commerce “shall be valid, irrevocable, and enforceable,” except “upon such grounds as exist at law or in equity for the revocation of any contract.”  9 U.S.C. § 2.  In these consolidated cases, the employees agreed to arbitrate work-related disputes through individual arbitration, but later sued their employers in federal courts, arguing that the arbitration agreements were invalid because they violated employees’ right to engage in “concerted activities” under the National Labor Relations Act (NLRA).  29 U.S.C. § 157. Issue: Whether an agreement that requires an employer and an employee to resolve work-related disputes through individual arbitration, and waive class proceedings, is enforceable under the FAA, notwithstanding the employee’s NLRA right to engage in concerted activities.Court’s Holding: Yes.  Arbitration agreements requiring individual arbitration of employment disputes are enforceable notwithstanding the NLRA collective-action right. What It Means: The Supreme Court ruling confirms that courts will continue to enforce agreements between employers and employees to arbitrate their disputes on an individual basis, rather than in class action litigation. This case continues the Supreme Court’s trend of enforcing the FAA’s strong policy favoring arbitration. The Court held that under the FAA’s saving clause, litigants only can challenge an arbitration agreement on grounds that would apply to “any” contract—not on grounds specific to arbitration. The Court’s reasoning suggests that state laws restricting arbitration are not likely to withstand challenge under the FAA. Clients should consult a Gibson Dunn attorney regarding the nuances created by different jurisdictions. The Court determined that the NLRA’s “concerted activities” provision was intended to protect organizing and collective bargaining in the workplace, not the treatment of class actions or class arbitration. Interestingly, the Solicitor General said the arbitration agreements are enforceable, but the National Labor Relations Board (NLRB) said they are not enforceable – and both argued their positions before the Supreme Court. For this reason (and others), the Court declined to afford Chevron deference to the NLRB’s view. “It is this Court’s duty to interpret Congress’s statutes as a harmonious whole rather than at war with one another. And abiding that duty here leads to an unmistakable conclusion.” Justice Gorsuch, writing for the Court Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following practice leaders: Appellate and Constitutional Law Practice Caitlin J. Halligan +1 212.351.3909 challigan@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Nicole A. Saharsky +1 202.887.3669 nsaharsky@gibsondunn.com   Gibson Dunn’s Labor and Employment lawyers are available to assist in addressing any questions you may have regarding arbitration programs. Please feel free to contact the following practice leaders or the attorneys with whom you work: Labor and Employment Practice Catherine A. Conway +1 213.229.7822 cconway@gibsondunn.com) Eugene Scalia +1 202.955.8206 escalia@gibsondunn.com Jason C. Schwartz +1 202.955.8242 jschwartz@gibsondunn.com   Related Practice: Class Actions Theodore J. Boutrous, Jr. +1 213.229.7804 tboutrous@gibsondunn.comm Christopher Chorba +1 213.229.7396 cchorba@gibsondunn.com Theane Evangelis +1 213.229.7726 tevangelis@gibsondunn.com   © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

May 2, 2018 |
The Latest Legislative Responses to #Metoo: New Requirements for Sexual Harassment Training, Arbitration and Settlement Agreements in New York and Evolving Legislation in Other States

Click for PDF Against a backdrop of increased national focus on sexual harassment in the workplace, New York recently enacted a law requiring employers to provide employees with annual sexual harassment training, prohibiting mandatory arbitration of sexual harassment claims, and restricting the use of confidentiality provisions in settlement agreements.  Similar proposals have been enacted or are pending in numerous other states. TRAINING REQUIREMENTS New York’s new training requirement, which is included in the state budget for FY18–19,[1] mandates that employers provide annual interactive sexual harassment training to all employees by October 9, 2018.  Governor Cuomo signed the budget bill on April 12, 2018.  The law directs the New York State Department of Labor and New York State Division of Human Rights to “produce a model sexual harassment prevention training program to prevent sexual harassment in the workplace.”  All employers must either “utilize the model sexual harassment prevention training program” or “establish a training program . . . that equals or exceeds the minimum standards provided by such model training.”  Employers must provide such training “to all employees on an annual basis.” The law also tasks the Department of Labor and Division of Human Rights with publishing a “model sexual harassment prevention guidance document and sexual harassment prevention policy.”  Employers must either adopt the model policy or establish an equivalent policy, and must provide the policy “to all employees in writing.”  Further, the legislation requires all contractors submitting a bid to the State or a state agency under competitive bidding laws to certify, “under penalty of perjury, that the bidder has and has implemented a written policy addressing sexual harassment prevention in the workplace and provides annual sexual harassment prevention training to all of its employees.” Similar legislative proposals are pending in several other states.  Delaware is considering a bill that would require employers with fifty or more employees to provide at least two hours of sexual harassment training to all supervisory employees every two years.[2]  A Pennsylvania bill would require employers to provide interactive sexual harassment training to “all current employees” every two years, and would require employers to provide “additional interactive training” to all supervisors.[3]  And California and Connecticut—states that already impose mandatory sexual harassment training obligations on employers—are considering strengthening their previously enacted laws.  Under current California and Connecticut law, employers with fifty or more employees must provide sexual harassment training to supervisors every two years.  Connecticut proposals would reduce the number of employees to fifteen[4] or to three,[5] and would extend training to supervisory and nonsupervisory employees.  A California proposal would reduce the number to five or more employees and extend training to all employees.[6]  A separate California bill would require employers with fifty or more employees to “maintain records of employee complaints of sexual harassment for [ten] years.”[7] ARBITRATION AND CONFIDENTIALITY AGREEMENTS New York’s recently enacted law also limits the use of arbitration and nondisclosure agreements with respect to sexual harassment claims.  The law prohibits employers from including in any written contract “any clause or provision . . . which requires as a condition of the enforcement of the contract or obtaining remedies under the contract that the parties submit to mandatory arbitration to resolve any allegation or claim of an unlawful discriminatory practice of sexual harassment.”[8]  The prohibition does not apply “where inconsistent with federal law,” and it does not apply to contracts entered into before the bill’s enactment.  The law also prohibits employers from including in any settlement agreement, “the factual foundation for which involves sexual harassment, any term or condition that would prevent the disclosure of the underlying facts and circumstances to the claim or action.”  A confidentiality clause may be included where “the condition of confidentiality is the complainant’s preference.”  Like the federal requirements for a valid release of age discrimination claims, the complainant must have twenty-one days to consider the non-disclosure clause, and may revoke the agreement within seven days after signing. In March 2018, the State of Washington enacted similar restrictions.  One Washington law voids any provision in an employment contract that “requires an employee to waive the employee’s right to publicly pursue a cause of action arising under [the Washington State Law Against Discrimination] or federal antidiscrimination laws or to publicly file a complaint with the appropriate state or federal agencies, or [that] requires an employee to resolve claims of discrimination in a dispute resolution process that is confidential.”[9]  Washington also enacted a law that prohibits an employer from requiring an employee, “as a condition of employment, to sign a nondisclosure agreement . . . that prevents the employee from disclosing sexual harassment or sexual assault occurring in the workplace.”[10]  The law “does not prohibit a settlement agreement between an employee or former employee alleging sexual harassment and an employer from containing confidentiality provisions.” Several other states are actively considering similar laws.[11]  Some of these proposals would void provisions that waive an employee’s substantive or procedural rights in connection with sexual harassment claims.  For instance, the Maryland legislature passed a bill in early April that would void, except as prohibited by federal law, any provision in an employment contract that waives any substantive or procedural right or remedy relating to a claim of sexual harassment.[12]  Although the law has not yet been signed by the Governor, the bill unanimously passed the Senate, and passed the House by a vote of 136-1.  Similarly, in California, the legislature is considering a bill that would prevent employers from requiring employees to arbitrate harassment claims or to waive any right, forum, or procedure available under California’s Fair Employment and Housing Act or Labor Code.[13]  Other states have considered bills that would prohibit employers from making settlements contingent on an employee signing a nondisclosure agreement.  Some states are considering narrower laws that would void nondisclosure agreements that purport to restrict an employee’s ability to discuss criminal conduct.  For instance, Arizona recently enacted a law that expressly permits sexual harassment victims to disregard nondisclosure agreements if asked to do so by law enforcement or during a court proceeding.[14]  The original bill was broader, and would have voided all nondisclosure agreements covering sexual harassment.  (“Whistleblower” carve-outs are often expressly included in confidentiality provisions already pursuant to, among other things, EEOC and SEC provisions and the Defend Trade Secrets Act.) One key issue to monitor is the extent to which state laws purporting to prohibit arbitration of sexual harassment claims are challenged in court as preempted by the Federal Arbitration Act (FAA).  The FAA’s “liberal federal policy favoring arbitration,” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011), requires the enforcement of arbitration agreements “save upon grounds as exist at law or in equity for the revocation of any contract.”  9 U.S.C. § 2.  A number of these new state laws seem to expressly contemplate the potential that they are preempted by federal law—the New York provision, for example, does not apply “where inconsistent with federal law.”  These anticipated preemption challenges may come on the heels of the publication of the U.S. Supreme Court’s pending decision on the enforceability of class action waivers in employment agreements.[15] * * * Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have about these developments.  We have been engaged by numerous clients recently to conduct investigations of #MeToo complaints; to proactively review sexual harassment policies, practices and procedures for the protection of employees and the promotion of a respectful and professional workplace; to conduct training for executives, managers and employees; and to handle related counseling and litigation.  To learn more about these issues, please contact the Gibson Dunn lawyer with whom you usually work or the following Labor and Employment practice group leaders: Catherine A. Conway – Los Angeles (+1 213-229-7822, cconway@gibsondunn.com) Jason C. Schwartz – Washington, D.C. (+1 202-955-8242, jschwartz@gibsondunn.com)    [1]   S.B. 7507C, 2018 State Leg., Reg. Sess. (N.Y. 2018).    [2]   H.B. 360, 149th Gen. Assemb., Reg. Sess. (Del. 2018).    [3]   H.B. 2282, 2018 Gen. Assemb., Reg. Sess. (Pa. 2018).    [4]   H.B. 5043, 2018 Gen. Assemb., Feb. Sess. (Conn. 2018).    [5]   S.B. 132, 2018 Gen. Assemb., Feb Sess. (Conn. 2018).    [6]   S.B. 1343, 2018 Leg., Reg. Sess. (Cal. 2018).    [7]   A.B. 1867, 2018 Leg., Reg. Sess. (Cal. 2018).    [8]   S.B. 7507C, 2018 State Leg., Reg. Sess. (N.Y. 2018).    [9]   S.B. 6313, 65th Leg., 2018 Reg. Sess. (Wash. 2018). [10]   S.B. 5996, 65th Leg., 2018 Reg. Sess. (Wash 2018). [11]   As of the publication of this alert, the following states have considered or are considering similar bills:  Arizona, Indiana, Kansas, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, New Jersey, New York, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, and Washington.  There is also a similar proposal that has been introduced in Congress. [12]   S.B. 1010, 2018 Gen. Assemb., Reg. Sess. (Md. 2018). [13]   A.B. 3080, 2018 Leg., Reg. Sess. (Cal. 2018). [14]   H.B. 2020, 53rd Leg., 2nd Reg. Sess. (Ariz. 2018). [15]   Epic Systems Corp. v. Lewis, No. 16-285 (argued Oct. 2, 2017); Ernst & Young LLP v. Morris, No. 16-300 (argued Oct. 2, 2017); N.L.R.B. v. Murphy Oil USA, Inc., No. 16-307 (argued Oct. 2, 2017), all consolidated. © 2018 Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, CA 90071 Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

May 1, 2018 |
Federal District Court Enjoins Philadelphia Ordinance Prohibiting Employers from Asking Applicants About Their Wage History

Click for PDF On April 30, 2018, a federal judge in the Eastern District of Pennsylvania preliminarily enjoined enforcement of a Philadelphia Ordinance prohibiting employers from asking applicants about their wage history.[1]  Although over a dozen states and localities have recently enacted similar wage-history laws, this is the first court decision to rule on whether such laws violate employers’ First Amendment rights. Aimed at reducing the wage gap between men and women, the Ordinance imposes two prohibitions on Philadelphia employers:  It prohibits employers from inquiring about an applicant’s wage history and from relying on wage history to make a salary determination unless that history was knowingly and willingly disclosed by the applicant.[2] In a 59-page opinion, the District Court concluded that the plaintiff—the Chamber of Commerce for Greater Philadelphia, represented by Gibson Dunn—was entitled to a preliminary injunction prohibiting enforcement of the Ordinance’s inquiry provision.  The Court determined that the Chamber was likely to prevail on the merits of its First Amendment challenge for two reasons.  First, the Court held that wage-history inquiries do not concern unlawful activity under the first prong of the Central Hudson test for restrictions of commercial speech.[3]  “[W]hile using wage history to formulate salaries is made illegal” by the Ordinance, the Court reasoned, “other uses of wage history are not illegal.”[4]  The Court concluded that the City’s contrary position “would stand Central Hudson on its head.”[5] Second, the District Court held that the City had failed to show that the Ordinance “directly advances” a substantial government interest, as required under the third Central Hudson prong.[6]  Although the City had asserted a substantial interest in reducing discriminatory wage disparities, the Court ruled that the City’s evidence was “riddled with conclusory statements, amounting to ‘various tidbits’ and ‘educated guesses.'”[7]  “[M]ore is needed,” the Court emphasized.[8]  Without substantial evidence “that inquiry into salary history results in lower salaries for women and minorities,” it is “impossible to know whether the Inquiry Provision will directly advance the [City’s] substantial interests.”[9] The District Court also concluded that the other requirements for a preliminary injunction had been met.  The Court explained that the Chamber had demonstrated irreparable harm by “alleg[ing] a real and actual deprivation of its and its members’ First Amendment rights through declarations,” and that “the City cannot claim a legitimate interest in enforcing an unconstitutional law.”[10] The District Court did uphold the Ordinance’s provision prohibiting employers from relying on an applicant’s salary history in making a salary determination unless that history is knowingly and willingly disclosed.[11]  The Court reasoned that reliance on wage history is not speech for First Amendment purposes.[12]  Nonetheless, the Court’s decision preliminarily enjoining the Ordinance’s inquiry provision will enable employers to use wage-history information to ascertain prevailing market wages and to identify potentially unaffordable applicants at the outset of the hiring process.  The decision may also prompt employers to mount a First Amendment challenge to similar wage-history laws in other jurisdictions.    [1]   Chamber of Commerce for Greater Phila. v. City of Philadelphia, No. 17-1548, slip op. at 54 (E.D. Pa. Apr. 30, 2018).    [2]   Phila. Code §§ 9-1131(2)(a)(i)–(ii).    [3]   Chamber of Commerce for Greater Phila., No. 17-1548, slip op. at 12 (discussing Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of N.Y., 447 U.S. 557, 566 (1980)).    [4]   Id. at 14.    [5]   Id. at 15.    [6]   Cent. Hudson, 447 U.S. at 566.    [7]   Chamber of Commerce for Greater Phila., No. 17-1548, slip op. at 30.    [8]   Id.    [9]   Id. at 30, 33–34. [10]   Id. at 46. [11]   See Phila. Code § 9-1131(2)(a)(ii). [12]   Chamber of Commerce for Greater Phila., No. 17-1548, slip op. at 40.   Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work, or the authors: Miguel A. Estrada – Washington, D.C. (+1 202-955-8500, mestrada@gibsondunn.com) Amir C. Tayrani – Washington, D.C. (+1 202-887-3692, atayrani@gibsondunn.com) Kellam M. Conover – Washington, D.C. (+1 202-887-3755, kconover@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

March 18, 2018 |
Fifth Circuit Vacates Labor Department’s “Fiduciary Rule” “In Toto” in Chamber of Commerce of U.S.A., et al. v. U.S. Dep’t of Labor

Click for PDF On March 15, 2018, in a 2-1 opinion, the U.S. Court of Appeals for the Fifth Circuit struck down the U.S. Department of Labor’s controversial “Fiduciary Rule.”[1]  The Rule would have expanded who is a “fiduciary” under ERISA and the Internal Revenue Code, imposing significant new obligations and liabilities on broker-dealers and insurance agents who sell annuities to IRAs.  As the Fifth Circuit’s opinion explained, the Department had “made no secret of its intent to transform the trillion-dollar market for IRA investments, annuities and insurance products, and to regulate in a new way the thousands of people and organizations working in that market.”[2] The Fifth Circuit ruled for plaintiffs—the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association (“SIFMA”), the Financial Services Institute (“FSI”), the Financial Services Roundtable (“FSR”), the Insured Retirement Institute (“IRI”), and other leading trade associations—on each of their principal arguments.  Specifically, the Court reasoned that the Labor Department’s new definition of “fiduciary” was inconsistent with the plain text of ERISA and the Internal Revenue Code, as well as with the common-law meaning of “fiduciary,” which depends upon a special relationship of trust and confidence; that the Department impermissibly abused its authority to grant exemptions from regulatory burdens as a tool to impose expansive new duties that were beyond its power to impose; and that the rule impermissibly created private rights of action against brokers and insurance agents when Congress had not authorized those claims.  The Court therefore held that the Fiduciary Rule and the exemptions adopted alongside it were arbitrary, capricious, and unlawful under the Administrative Procedure Act (“APA”), and vacated them “in toto.”[3] Under the APA, “vacatur” is a remedy by which courts “set aside agency action” that is arbitrary and capricious or otherwise outside of the agency’s statutory authority.[4]  Its effect is to “nullify or cancel; make void; invalidate.”[5]  Because the effect of vacatur is, in essence, to remove a regulation from the books, its effect is nationwide.  As the U.S. Court of Appeals for the D.C. Circuit has explained, “When a reviewing court determines that agency regulations are unlawful, the ordinary result is that the rules are vacated—not that their application to the individual petitioners is proscribed.”[6]  The Fifth Circuit’s judgment, which is scheduled to take effect on May 7, thus will effectively erase the “fiduciary” rule from the books without geographical limitation. The Fifth Circuit’s decision was the second ruling last week to address the Fiduciary Rule.  On March 13, the Tenth Circuit addressed a more limited challenge to one aspect of the Rule, specifically, the procedures and reasoning followed by the Department in regulating products known as “fixed indexed annuities.”[7]  Although the Tenth Circuit rejected that challenge, it made clear it was not addressing two threshold issues that had not been presented:  whether the Labor Department had authority to promulgate the Rule and whether the Rule permissibly defined the term “fiduciary.”  The March 15 decision of the Fifth Circuit now conclusively resolves those questions in the negative.  And because the Fifth Circuit vacated the Rule on grounds the Tenth Circuit did not address, no “circuit conflict” is presented by the two decisions.[8] Gibson Dunn represented the U.S. Chamber of Commerce, SIFMA, the FSI, FSR, and IRI, among other associations, in their successful challenge to the Fiduciary Rule.  The American Council of Life Insurers and the Indexed Annuity Leadership Council filed parallel actions through separate counsel at WilmerHale and Sidley Austin, and Gibson Dunn presented oral argument before the Fifth Circuit for all three cases.    [1]   Chamber of Commerce of the U.S.A., et al. v. U.S. Dep’t of Labor, et al., No. 17-10238, slip op. 46 (5th Cir. Mar. 15, 2018).    [2]   Id. at 45.    [3]   Id. at 46.    [4]   5 U.S.C. § 706(2).    [5]   Black’s Law Dictionary (online 10th ed. 2014).  See, e.g., Kelso v. U.S. Dep’t of State, 13 F. Supp. 2d 12, 17 (D.D.C. 1998) (quoting United States v. Munsingwear, Inc., 340 U.S. 36, 41 (1950)) (explaining that “basic understandings of vacatur dramatize that, by definition, that which is vacated loses the ability to ‘spawn[ ] any legal consequences'”).    [6]   Nat’l Mining Ass’n v. U.S. Army Corps of Engineers, 145 F.3d 1399, 1409 (D.C. Cir. 1998) (quoting Harmon v. Thornburgh, 878 F.2d 484, 495 n.21 (D.C. Cir. 1989)).    [7]   See Mkt. Synergy Grp. v. U.S. Dep’t of Labor, et al., No. 17-3038 (10th Cir. Mar. 13, 2018)    [8]   A third challenge to the Fiduciary Rule is currently being held in abeyance.  See Nat’l Ass’n for Fixed Annuities v. U.S. Dep’t of Labor, et al., No. 16-5345 (D.C. Cir. Feb. 22, 2018) (holding case in abeyance pending joint status report within 10 days of the decision of the Fifth Circuit). The following Gibson Dunn lawyers assisted in preparing this client update: Eugene Scalia, Jason Mendro, Andrew Kilberg and Brian Lipshutz. Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these issues.  For further information, please contact the Gibson Dunn lawyer with whom you usually work, or the following authors: Eugene Scalia – Washington, D.C. (+1 202-955-8206, escalia@gibsondunn.com) Jason J. Mendro – Washington, D.C. (+1 202-887-3726, jmendro@gibsondunn.com) Please also feel free to contact the following practice group leaders: Administrative Law and Regulatory Practice: Eugene Scalia – Washington, D.C. (+1 202-955-8206, escalia@gibsondunn.com) Helgi C. Walker – Washington, D.C. (+1 202-887-3599, hwalker@gibsondunn.com) Labor and Employment Practice: Catherine A. Conway – Los Angeles (+1 213-229-7822, cconway@gibsondunn.com) Jason C. Schwartz – Washington, D.C. (+1 202-955-8242, jschwartz@gibsondunn.com) Executive Compensation and Employee Benefits Practice: Michael J. Collins – Washington, D.C. (+1 202-887-3551, mcollins@gibsondunn.com) Stephen W. Fackler – Palo Alto/New York (+1 650-849-5385/212-351-2392, sfackler@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

February 15, 2018 |
Michele Maryott and Theane Evangelis Named Litigators of the Week

The Am Law Litigation Daily named partners Michele Maryott and Theane Evangelis as its Litigators of the Week [PDF] for their trial victory on behalf of Grubhub “in a bellwether case that could have a lasting impact on how gig-economy workers are classified.”  The profile was published on February 15, 2018.  

January 24, 2018 |
Das Urteil des BAG schafft erfreuliche Rechtsklarheit für Arbeitgeber

Munich partner Mark Zimmer is the author of “Das Urteil des BAG schafft erfreuliche Rechtsklarheit für Arbeitgeber” [PDF] published in issue 1-2/2018 dated 24 January 2018 of the German publication Compliance-Berater. The article comments on a decision of the Bundesarbeitsgericht (Federal Labor Court) dated 29 June 2017, which facilitates undercover investigations against fraudulent employees.

January 19, 2018 |
2017 Trade Secrets Litigation Round-Up

2017 saw a number of interesting developments in trade secrets law, including the emergence of several trends under the Defend Trade Secrets Act, as courts grappled with the federal civil trade secrets statute enacted just over a year and a half ago.  On the criminal side, we saw the Trump administration aggressively prosecute individuals for trade secret theft and cyberespionage, including an engineer who allegedly sold military trade secrets to an undercover FBI agent whom he believed to be a Russian spy.  We also saw the U.S. Supreme Court deny certiorari in two closely watched trade secrets cases under the Computer Fraud and Abuse Act. Jason Schwartz, Greta Williams, Mia Donnelly and Brittany Raia discuss these and other significant 2017 developments in trade secrets law in their article “2017 Trade Secrets Litigation Round-Up” published in BNA’s Patent, Trademark & Copyright Journal in January 2018. Reprinted with permission from BNA’s Patent, Trademark & Copyright Journal, January 19, 2018.  © 2018, The Bureau of National Affairs, Inc.  Gibson, Dunn & Crutcher’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update.  Please contact the Gibson Dunn lawyer with whom you usually work or the authors in the firm’s Washington, D.C. office: Jason C. Schwartz (+1 202-955-8242, jschwartz@gibsondunn.com) Greta B. Williams (+1 202-887-3745, gbwilliams@gibsondunn.com) Mia C. Donnelly (+1 202-887-3617, mdonnelly@gibsondunn.com) Brittany A. Raia (+1 202-887-3773, braia@gibsondunn.com) Please also feel free to contact any of the following practice group leaders and members: Labor and Employment Group: Catherine A. Conway – Los Angeles (+1 213-229-7822, cconway@gibsondunn.com) Jason C. Schwartz – Washington, D.C. (+1 202-955-8242, jschwartz@gibsondunn.com) Intellectual Property Group: Josh Krevitt – New York (+1 212-351-2490, jkrevitt@gibsondunn.com) Wayne Barsky – Los Angeles (+1 310-557-8183, wbarsky@gibsondunn.com) Mark Reiter – Dallas (+1 214-698-3360, mreiter@gibsondunn.com) Michael Sitzman – San Francisco (+1 415-393-8200, msitzman@gibsondunn.com) Privacy, Cybersecurity and Consumer Protection Group: Alexander H. Southwell – New York (+1 212-351-3981, asouthwell@gibsondunn.com) Benjamin B. Wagner – Palo Alto (+1 650-849-5395, bwagner@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 17, 2018 |
UK Employment Update – January 2018

Click for PDF In this update we: focus on two areas of UK employment law which are currently having a major impact on employers: the Gender Pay Gap Reporting Regulations which come into force in 2018 and one of the most talked about issues last year: worker status and the gig economy consider recent decisions of the European Court of Human Rights and the English High Court on data protection issues which will impact employers as they prepare for the General Data Protection Regulation. A brief overview is provided below.  More detailed information is available by clicking on the appropriate links to the Appendix.  (click on link) Gender Pay Gap Regulations   (click on link) By 5 April 2018, all employers who employed more than 250 employees as at 5 April 2017 must have filed a gender pay gap report.   Our previous client alert considered the Regulations in detail and can be found here. Worker Status and the Gig Economy  (click on link) “Worker” status was one of the most talked about employment law issues in 2017 and this trend looks likely to continue with a number of appeal decisions due in early 2018.  We consider below the categories of worker and the protections they enjoy as well as key themes emerging from the recent cases. Data Protection Update   (click on link) The GDPR will come into force on 25 May 2018, imposing significant stricter and, in some cases, new obligations on those entities which process the personal data of EU residents or which are otherwise subject to GDPR .  We summarised the key provisions of the GDPR in previous alerts that can be found here.  We are working with a number of clients to ensure that they have policies and procedures in place to comply with the GDPR.  Those who have not yet done so, have only four months left to prepare. Data protection has also been the subject of several recent decisions which we consider below and which emphasise the need for employers to ensure that they have updated data protection policies and procedures in place. APPENDIX Gender Pay Gap Regulations Approximately 500 companies have taken the decision to file their gender pay gap reports at the time of writing and those reports have attracted considerable media interest. The accuracy of those reports has also come under the spotlight, with the media accusing some employers of underreporting their gender pay gap. With a little more than two months left before the deadline, we continue to advise clients on the most appropriate strategy in terms of presentation, explanation and publication of their reports.  Gender pay gap issues are also under scrutiny in the United States and we are working in connection with our US offices to ensure our clients consider comprehensive strategies both in the UK and in the US. Will the Regulations be enforced? The Regulations do not set out a means for enforcement and it was initially thought that there would be no legal consequences for non-compliance.  However, the UK Equality and Human Rights Commission (“EHRC”), which is empowered under UK law to enforce the Equality Act 2010, has recently acknowledged for the first time that it will take steps to enforce compliance with the Regulations and has published its proposed enforcement strategy which is subject to consultation until 2 February 2018. The EHRC intends to select random “targets” from different industries, prioritising those employers who do not publish Gender Pay Gap Reports or who appear to have published  inaccurate data.  Those who refuse or fail to engage with EHRC to rectify their non-compliance would face prosecution and potential criminal liability. Any attempt by the EHRC to exercise its proposed powers may well be met with a legal challenge given that the Regulations do not contain an enforcement regime and it has been argued (and, indeed, was the initial view of the EHRC) that the EHRC does not have the power to enforce them.  However, it may be that the EHRC use non-compliance with the Regulations as a pretext for a wider investigation into employers that it suspects of engaging in discriminatory hiring, promotion or other practices (an area for which they have clear statutory authority). Worker Status and the Gig Economy Who is a worker? Employment law in the United Kingdom is unusual in that it extends a number of employment protections to those who, while not employees, work under a contract to provide services personally to a customer or client.  These persons, along with traditional employees, are classified “workers” and are to be distinguished from the genuinely self-employed, who run their own business.  In the UK an individual providing a service or services to an employer or client may therefore be considered a traditional employee, a worker who is not a traditional employee, or a truly self-employed independent contractor.  Working out which of the three categories an individual falls into is far from straightforward and with the rise of the gig economy and agile working arrangements there has been a flurry of case law on the status of these workers. Status matters – rights afforded to employees, workers and the genuinely self-employed Determining whether an individual is an employee, worker or self-employed independent contractor is important when considering what legal rights they enjoy.  We set out below a table highlighting key differences between the rights afforded to each category: Right or entitlement Employee Worker Self-employed contractor National minimum wage ✔ ✔ ✘ Paid holiday/vacation ✔ ✔ ✘ Statutory sick pay ✔ ✘ ✘ TUPE protection upon the transfer of a business, undertaking service provision change ✔ ✘ ✘ Whistleblowing protection ✔ ✔ ✘ Protection from discrimination/harassment and related rights ✔ ✔ ✔ Special protection in the event of non-payment of wages ✔ ✔ ✘ Pension contribution from “employer” under auto-enrolment scheme ✔ ✔ ✘ Entitlement to paid rest breaks ✔ ✔ ✘ 48 hour limit on a maximum week’s work ✔ ✔ ✘ Statutory maternity/paternity/adoption/parental/shared parental leave and related rights ✔ ✘ ✘ Entitlement to request flexible working ✔ ✘ ✘ Right as fixed-term/part-time employee not to be treated less favourably than a comparable permanent/full time employee ✔ ✘ ✘ Minimum notice of dismissal ✔ ✘ ✘ Written statement of reasons for dismissal ✔ ✘ ✘ Protection from unfair dismissal ✔ ✘ ✘ Statutory redundancy payment and related rights ✔ ✘ ✘ Workers and the gig economy – themes emerging from recent cases Many businesses operating in the gig-economy treat their workforce as self-employed contractors, thus avoiding the legal and administrative burden associated with employing or engaging employees and workers. This provides them with greater flexibility as their business grows and allows them to price their products and services more competitively than traditional businesses. However, this business model has been threatened by a number of recent cases before the UK courts, all but one of which has resulted in the reclassification of individuals thought to be self-employed contractors as “workers”, with all the associated legal protections. The determination of worker status remains highly fact-sensitive and involves weighing up a series of factors.  What the parties call themselves and how they document their arrangements is of limited importance. We have drawn together a list of key factors upon which the UK courts have focused in recent cases when determining whether an individual is a worker or independent contractor (none of which are determinative): Factor Points towards worker status and away from self-employed independent contractor status Points towards self-employed independent contractor status and away from worker status Who actually performs the services? A worker invariably performs the services personally. An independent contractor tends to be free to engage and use their own personnel to perform the contract. Is the individual dependent upon one client or customer? A worker tends to works for and is dependent upon one client or customer and is required to accept work when offered.  A worker has little or no bargaining power to amend or alter their terms of engagement. An independent contractor tends to have multiple clients or customers  and is not obliged to accept work when offered.  An independent contractor has greater ability to negotiate their terms of engagement. How integrated is the individual into the business of the client or customer? Does the individual appear to be operating in business on his/her own account? A worker tends to work as an integrated part of the client or customer’s business.  For example, a client or customer may provide a worker with an email account and equipment for use when providing the services. An independent contractor tends to provide skills and expertise which are not integral to the business of their client or customer.  They tend to use their own equipment and to appear to operate as an independent business (e.g. with their own uniform, website, letterhead, business cards, marketing materials). Does the individual have discretion as to how they carry out the work? A worker tends to be tightly controlled by the client or customer as to when and how they carry out their work. An independent contractor has a task to perform but tends to have both the expertise and authority to determine when and how they will carry out the work within set deadlines. A recent decision of the Court of Justice of the European Union (CJEU) in King v The Sash Window Workshop Limited (C-214/16 CJEU EU:C:2017:914) illustrates how significant the consequences and costs of reclassification can be.  This case started life in a UK Employment Tribunal with a decision that Mr King, a window salesman, was a worker and not a self-employed independent contractor as previously thought.  The Employment Tribunal awarded Mr King holiday pay in respect of leave accrued and untaken in the previous years of his engagement (i.e. when he had been treated as a self-employed contractor).  That decision was upheld by the EAT.  On appeal, the Court of Appeal referred the issue to the CJEU. The Court held that Mr King was entitled to exercise his rights to take all the paid vacation that had accrued while he had been a worker, even before reclassification and without limit in time. We are expecting decisions on a number of worker-status cases early this year, including from the Supreme Court.  It is also possible that the Government may intervene and implement some of the recommendations from the Taylor Review which was published last year and which we commented upon in our previous alert which can be found here.  Whilst worker status is primarily a UK issue, questions as to employment status arising from the gig-economy are also being considered by the courts in the US.  We can assist clients across jurisdictions to ensure a strategic approach to these issues. Data Protection Update Employer vicariously liable for criminal data breaches In a recent High Court case brought by a group of over 5,000 employees against the UK retailer Morrisons, the employer was found vicariously liable for the acts of a rogue employee who uploaded employees’ personal data to a file sharing website. In 2014, a file containing the personal details (including bank accounts, salary details and personal phone numbers) of 99,968 Morrisons’ employees was uploaded to a file sharing website.  Morrisons was alerted to the breach by the local newspaper that had anonymously received a CD that contained the uploaded data.  Morrisons took immediate steps to get the website taken down, and alerted the police.  An employee was found guilty of fraud and breaches of the Data Protection Act 1998 for uploading the data.  He was sentenced to eight years imprisonment.  The employee obtained the data through his role as an IT auditor but retained a copy for his own improper purposes. 5,528 employees whose data was disclosed claimed compensation for breaches of the Data Protection Act and the common law duty of confidentiality.  The employees claimed that Morrisons was directly responsible for what had happened, or in the alternative, vicariously liable for the actions of its rogue employee. The court  found that the employee set out to deliberately damage Morrisons in retaliation for disciplinary action taken against him for an unrelated matter.  The court held that Morrisons was not directly responsible for breaches of the Data Protection Act because it was not the data controller at the time of the breach (i.e. it was not controlling the processing in question).  It also found that Morrisons had taken technical and organisational steps to prevent data breaches save for a failure to implement a system for the deletion of data (but even if such system had been implemented it would not have prevented the breach). However, notwithstanding this, the court held that Morrisons was vicariously liable for the acts of the employee since when the employee received the data he was acting in the course of his employment and there was a sufficiently close connection between the employee’s position as an IT auditor and his wrongful conduct in order to establish vicarious liability. The quantum of damages is still to be considered.  In the meantime, we understand that Morrisons has been granted leave to appeal.  In light of this case, and the GDPR coming into force this year, employers should be taking steps to ensure they have appropriate data security systems and procedures in place. Monitoring employees in the workplace The recent decision of the European Court of Human Rights in López Ribalda and others v Spain has ruled that, given the existing data protection rules on fairness and proportionality of data processing, and on information of data subjects, the indiscriminate use of secret CCTV cameras in the workplace that target all employees at all times cannot be used as evidence before courts to argue the dismissal of certain employees involved in thefts. The employer had installed several visible surveillance cameras aimed at detecting theft by customers, and several concealed cameras aimed at recording theft by employees.  Five employees were caught on video stealing items, and helping co-workers and customers steal items. The employees admitted involvement in the thefts and were dismissed.  The employees contended that the use of the covert video evidence in the unfair dismissal proceedings had infringed both their privacy rights under Article 8 and their right to a fair hearing under Article 6(1) of the ECHR. The court upheld the employees’ Article 8 claim finding that the Spanish courts had failed to strike a fair balance between the employees’ right to respect for their private life and the employer’s interest in protecting its property. The majority found that the employer’s rights could have been safeguarded by other means, notably by informing the employees in advance of the installation of the surveillance system and providing them with the information required by Spanish data protection law. The court unanimously rejected the employees’ Article 6 claim, finding that the video evidence was not the only evidence the domestic courts had relied on when upholding the dismissals. This case serves as a reminder to employers that reliance on CCTV and other monitoring in the workplace is limited to proportionate means and subject to informing employees of its use.  Employers should ensure that employees have been notified of the purpose of CCTV and other means of monitoring if they wish to rely on it for investigations, disciplinary proceedings and dismissals.  Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these and other developments.  Please feel free to contact the Gibson Dunn lawyer with whom you usually work or the following members of the Labor and Employment team in the firm’s London office: James A. Cox (+44 (0)20 7071 4250, jacox@gibsondunn.com) Amy Sinclair (+44 (0)20 7071 4269, asinclair@gibsondunn.com) Vonda Hodgson (+44 (0)20 7071 4254, vhodgson@gibsondunn.com) Thomas Weatherill (+44 (0)20 7071 4164, tweatherill@gibsondunn.com) Heather Gibbons (+44 (0)20 7071 4127, hgibbons@gibsondunn.com) Sarika Rabheru (+44 (0)20 7071 4267, srabheru@gibsondunn.com) Georgia Derbyshire (+44 (0)20 7071 4013, gderbyshire@gibsondunn.com)     © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 7, 2018 |
2017 Year-End German Law Update

Click for PDF “May you live in interesting times” goes the old Chinese proverb, which is not meant for a friend but for an enemy. Whoever expressed such wish, interesting times have certainly come to pass for the German economy. Germany is an economic giant focused on the export of its sophisticated manufactured goods to the world’s leading markets, but it is also, in some ways, a military dwarf in a third-tier role in the re-sketching of the new world order. Germany’s globally admired engineering know-how and reputation has been severely damaged by the Volkswagen scandal and is structurally challenged by disruptive technologies and regulatory changes that may be calling for the end of the era of internal combustion engines. The top item on Germany’s foreign policy agenda, the further integration of the EU-member states into a powerful economic and political union, has for some years now given rise to daily crisis management, first caused by the financial crisis and, since last year, by the uncertainties of BREXIT. As if this was not enough, internal politics is still handling the social integration of more than a million refugees that entered the country in 2015, who rightly expect fair and just treatment, education, medical care and a future. It has been best practice to address such manifold issues with a strong and hands-on government, but – unfortunately – this is also currently missing. While the acting government is doing its best to handle the day-to-day tasks, one should not expect any bold move or strategic initiative before a stable, yet to be negotiated parliamentary coalition majority has installed new leadership, likely again under Angela Merkel. All that will drag well into 2018 and will not make life any easier. In stark contrast to the difficult situation the EU is facing in light of BREXIT, the single most impacting piece of regulation that will come into effect in May 2018 will be a European Regulation, the General Data Protection Regulation, which will harmonize data protection law across the EU and start a new era of data protection. Because of its broad scope and its extensive extraterritorial reach, combined with onerous penalties for non-compliance, it will open a new chapter in the way companies world-wide have to treat and process personal data. In all other areas of the law, we observe the continuation of a drive towards ever more transparency, whether through the introduction of new transparency registers disclosing relevant ultimate beneficial owner information or misconduct, through obligatory disclosure regimes (in the field of tax law), or through the automatic exchange under the OECD’s Common Reporting Standard of Information that hitherto fell under the protection of bank secrecy laws. While all these initiatives are well intentioned, they present formidable challenges for companies to comply with the increased complexity and adequately respond to the increased availability and flow of sensitive information. Even more powerful than the regulatory push is the combination of cyber-attacks, investigative journalism, and social media: within a heartbeat, companies or individuals may find themselves exposed on a global scale to severe allegations or fundamental challenges to the way they did or do business. While this trend is not of a legal nature, but a consequence of how we now communicate and whom we trust (or distrust), for those affected it may have immediate legal implications that are often highly complex and difficult to control and deal with. Interesting times usually are good times for lawyers that are determined to solve problems and tackle issues. This is what we love doing and what Gibson Dunn has done best time and again in the last 125 years. We therefore remain optimistic, even in view of the rough waters ahead which we and our clients will have to navigate. We want to thank you for your trust in our services in Germany and your business that we enjoy here and world-wide. We do hope that you will gain valuable insights from our Year-End Alert of legal developments in Germany that will help you to successfully focus and resource your projects and investments in Germany in 2018 and beyond; and we promise to be at your side if you need a partner to help you with sound and hands-on legal advice for your business in and with Germany or to help manage challenging or forward looking issues in the upcoming exciting times. ________________________________ Table of Contents 1.  Corporate, M&A 2.  Tax 3.  Financing and Restructuring 4.  Labor and Employment 5.  Real Estate 6.  Data Protection 7.  Compliance 8.  Antitrust and Merger Control ________________________________ 1. Corporate, M&A 1.1       Corporate, M&A – Transparency Register – New Transparency Obligations on Beneficial Ownership As part of the implementation of the 4th European Money Laundering Directive into German law, Germany has created a new central electronic register for information about the beneficial owners of legal persons organized under German private law as well as registered partnerships incorporated within Germany. Under the restated German Money Laundering Act (Geldwäschegesetz – GWG) which took effect on June 26, 2017, legal persons of German private law (e.g. capital corporations like stock corporations (AG) or limited liability companies (GmbH), registered associations (eingetragener Verein – e.V.), incorporated foundations (rechtsfähige Stiftungen)) and all registered partnerships (e.g. offene Handelsgesellschaft (OHG), Kommanditgesellschaft (KG) and GmbH & Co. KG) are now obliged to “obtain, keep on record and keep up to date” certain information about their “beneficial owners” (namely: first and last name, date of birth, place of residence and details of the beneficial interest) and to file the respective information with the transparency register without undue delay (section 20 (1) GWG). A “beneficial owner“ in this sense is a natural person who directly or indirectly holds or controls more than 25% of the capital or voting rights, or exercises control in a similar way (section 3 (2) GWG). Special rules apply for registered associations, trusts, non-charitable unregulated associations and similar legal arrangements. “Obtaining” the information does not require the entities to carry out extensive investigations, potentially through multi-national and multi-level chains of companies. It suffices to diligently review the information on record and to have in place appropriate internal structures to enable it to make a required filing without undue delay. The duty to keep the information up to date generally requires that the company checks at least on an annual basis whether there have been any changes in their beneficial owners and files an update, if necessary. A filing to the transparency register, however, is not required if the relevant information on the beneficial owner(s) is already contained in certain electronic registers (e.g. the commercial register or the so-called “Unternehmensregister“). This exemption only applies if all relevant data about the beneficial owners is included in the respective documents and the respective registers are still up to date. This essentially requires the obliged entities to diligently review the information available in the respective electronic registers. Furthermore, as a matter of principle, companies listed on a regulated market in the European Union (“EU“) or the European Economic Area (“EEA“) (excluding listings on unregulated markets such as e.g. the Entry Standard of the Frankfurt Stock Exchange) or on a stock exchange with equivalent transparency obligations with respect to voting rights are never required to make any filings to the transparency register. In order to enable the relevant entity to comply with its obligations, shareholders who qualify as beneficial owners or who are directly controlled by a beneficial owner, irrespective of their place of residence, must provide the relevant entity with the relevant information. If a direct shareholder is only indirectly controlled by a beneficial owner, the beneficial owner himself (and not the direct shareholder) must inform the company and provide it with the necessary information (section 20 (3) sentence 4 GWG). Non-compliance with these filing and information obligations may result in administrative fines of up to EUR 100,000. Serious, repeated or systematic breaches may even trigger sanctions up to the higher fine threshold of EUR 1 million or twice the economic benefit of the breach. The information submitted to the transparency register is not generally freely accessible. There are staggered access rights with only certain public authorities, including the Financial Intelligence Unit, law enforcement and tax authorities, having full access rights. Persons subject to know-your-customer (“KYC“) obligations under the Money Laundering Act such as e.g. financial institutions are only given access to the extent the information is required for them to fulfil their own KYC obligations. Other persons or the general public may only gain access if they can demonstrate a legitimate interest in such information. Going forward, every entity subject to the Money Laundering Act should verify whether it is beneficially owned within the aforementioned sense, and, if so, make the respective filing to the transparency register unless the relevant information is already contained in a public electronic register. Furthermore, relevant entities should check (at least) annually whether the information on their beneficial owner(s) as filed with the transparency or other public register is still correct. Also, appropriate internal procedures need to be set up to ensure that any relevant information is received by a person in charge of making filings to the registers. Back to Top 1.2       Corporate, M&A – New CSR Disclosure Obligations for German Public Interest Companies  Effective for fiscal years commencing on or after January 1, 2017, large companies with more than 500 employees are required to include certain non-financial information regarding their management of social and environmental challenges in their annual reporting (“CSR Information“). The new corporate social responsibility reporting rules (“CSR Reporting Rules“) implement the European CSR Directive into German law and are intended to help investors, consumers, policy makers and other stakeholders to evaluate the non-financial performance of large companies and encourage companies to develop a responsible and sustainable approach to business. The CSR Reporting Rules apply to companies with a balance sheet sum in excess of EUR 20 million and an annual turnover in excess of EUR 40 million, whose securities (stock or bonds etc.) are listed on a regulated market in the EU or the EEA as well as large banks and large insurance companies. It is estimated that approximately 550 companies in Germany are covered. Exemptions apply to consolidated subsidiaries if the parent company publishes the CSR Information in the group reporting. The CSR Reporting Rules require the relevant companies to inform on the policies they implemented, the results of such policies and the business risks in relation to (i) environmental protection, (ii) treatment of employees, (iii) social responsibility, (iv) respect for human rights and (v) anti-corruption and bribery. In addition, listed stock corporations are also obliged to inform with regard to diversity on their company boards. If a company has not implemented any such policy, an explicit and justified disclosure is required (“comply or explain”). Companies must further include significant non-financial performance indicators and must also include information on the amounts reported in this respect in their financial statements. The CSR Information can either be included in the annual report or by way of a separate CSR report, to be published on the company’s website or together with its regular annual report with the German Federal Gazette (Bundesanzeiger). The CSR Reporting Rules will certainly increase the administrative burden placed on companies when preparing their annual reporting documentation. It remains to be seen if the new rules will actually meet the expectations of the European legislator and foster and create a more sustainable approach of large companies to doing business in the future . Back to Top 1.3       Corporate, M&A – Corporate Governance Code Refines Standards for Compliance, Transparency and Supervisory Board Composition Since its first publication in 2002, the German Corporate Governance Code (Deutscher Corporate Governance Kodex – DCGK) which contains standards for good and responsible governance for German listed companies, has been revised nearly annually. Even though the DCGK contains only soft law (“comply or explain”) framed in the form of recommendations and suggestions, its regular updates can serve as barometer for trends in the public discussion and sometimes are also a forerunner for more binding legislative measures in the near future. The main changes in the most recent revision of the DCGK in February 2017 deal with aspects of compliance, transparency and supervisory board composition. Compliance The general concept of “compliance” was introduced by the DCGK in 2007. In this respect, the recent revision of the DCGK brought along two noteworthy new aspects. On the one hand, the DCGK now stresses in its preamble that good governance and management does not only require compliance with the law and internal policies but also ethically sound and responsive behavior (the “reputable businessperson concept”). On the other hand, the DCGK now recommends the introduction of a compliance management system (“CMS“). In keeping with the common principle of individually tailored compliance management systems that take into account the company’s specific risk situation, the DCGK now recommends appropriate measures reflecting the company’s risk situation and disclosing the main features of the CMS publically, thus enabling investors to make an informed decision on whether the CMS meets their expectations. It is further expressly recommended to provide employees with the opportunity to blow the whistle and also suggested to open up such whistle-blowing programs to third parties. Supervisory Board In line with the ongoing international trend of focusing on supervisory board composition, the DCGK now also recommends that the supervisory board not only should determine concrete objectives for its composition, but also develop a tailored skills and expertise profile for the entire board and to disclose in the corporate governance report to which extent such benchmarks and targets have been implemented in practice. In addition, the significance of having sufficient independent members on the supervisory board is emphasized by a new recommendation pursuant to which the supervisory board should disclose the appropriate number of independent supervisory board members as well as the members which meet the “independence” criteria in the corporate governance report. In accordance with international best practice, it is now also recommended to provide CVs for candidates for the supervisory board including inter alia relevant knowledge, skills and experience and to publish this information on the company’s website. With regard to supervisory board transparency, the DCGK now also recommends that the chairman of the supervisory board should be prepared, within an appropriate framework, to discuss topics relevant to the supervisory board with investors (please see in this regard our 2016-Year-End Alert, section 1.2). These new 2017 recommendations further highlight the significance of compliance and the role of the supervisory board not only for legislators but also for investors and other stakeholders. As soon as the annual declarations of non-conformity (“comply or explain”) are published over the coming weeks and months, it will be possible to assess how well these new recommendations will be received as well as what responses there will be to the planned additional supervisory board transparency (including, in particular, by family-controlled companies with employee co-determination on the supervisory board). Back to Top 1.4       Corporate, M&A – Employee Co-Determination: No European Extension As set out in greater detail in past alerts (please see in this regard our 2016 Year-End Alert, section 1.3 with further references), the scope and geographic reach of the German co-determination rules (as set out in the German Co-Determination Act; Mitbestimmungsgesetz – MitbestG and in the One-Third-Participation Act; Drittelbeteiligungsgesetz – DrittelbG) were the subject of several ongoing court cases. This discussion has been put to rest in 2017 by a decision of the European Court of Justice (ECJ, C-566/15 – July 18, 2017) that held that German co-determination rules and their restriction to German-based employees as the numeric basis for the relevant employee thresholds and as populace entitled to vote for such co-determined supervisory boards do not infringe against EU law principles of anti-discrimination and freedom of movement. The judgment has been received positively by both German trade unions and corporate players because it preserves the existing German co-determination regime and its traditional, local values against what many commentators would have perceived to be an undue pan-Europeanization of the thresholds and the right to vote for such bodies. In particular, the judgment averts the risk that many supervisory boards would have had to be re-elected based on a pan-European rather than solely German employee base. Back to Top 1.5       Corporate, M&A – Germany Tightens Rules on Foreign Takeovers On July 18, 2017, the amended provisions on foreign direct investments under the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung – AWV), expanding and specifying the right of the Federal Ministry for Economic Affairs and Energy (“Ministry“) to review whether the takeover of domestic companies by investors outside the EU or the European Free Trade Area poses a danger to the public order or security of the Federal Republic of Germany came into force. The amendment has the following five main effects which will have a considerable impact on the M&A practice: (i) (non-exclusive) standard categories of companies and industries which are relevant to the public order or security for cross-sector review are introduced, (ii) the stricter sector-specific rules for industries of essential security interest (such as defense and IT-security) are expanded and specified, (iii) there is a reporting requirement for all takeovers within the relevant categories, (iv) the time periods for the review process are extended, and (v) there are stricter and more specific restrictions to prevent possible circumventions. Under the new rules, a special review by the German government is possible in cases of foreign takeovers of domestic companies which operate particularly in the following sectors: (i) critical infrastructure amenities, such as the energy, IT and telecommunications, transport, health, water, food and finance/insurance sectors (to the extent they are very important for the functioning of the community), (ii) sector-specific software for the operation of these critical infrastructure amenities, (iii) telecom carriers and surveillance technology and equipment, (iv) cloud computing services and (v) telematics services and components. The stricter sector-specific rules for foreign takeovers within the defense and IT-security industry are also expanded and now also apply to the manufacturers of defense equipment for reconnaissance and support. Furthermore, the reporting requirement no longer applies only to transactions within the defense and IT-security sectors, but also to all foreign takeovers that fall within the newly introduced cross-sector standard categories described above. The time periods allowed for the Ministry to intervene have been extended throughout. In particular, if an application for a clearance certificate is filed, the clearance certificate will be deemed granted in the absence of a formal review two months following receipt of the application rather than one month as in the past, and the review periods are suspended if the Ministry conducts negotiations with the parties involved. Further, a review may be commenced until five years after the signing of the purchase agreement, which in practice will likely result in an increase of applications for a clearance certificate in order to obtain more transaction certainty. Finally, the new rules provide for stricter and more specific restrictions of possible circumventions by, for example, the use of so-called “front companies” domiciled in the EU or the European Free Trade Area and will trigger the Ministry’s right to review if there are indications that an improper structuring or evasive transaction was at least partly chosen to circumvent the review by the Ministry. Although the scope of the German government’s ability to intervene in M&A processes has been expanded where critical industries are concerned, it is not clear yet to what extent stronger interference or more prohibitions or restrictions will actually occur in practice. And even though the new law provides further guidance, there are still areas of legal uncertainty which can have an impact on valuations and third party financing unless a clearance certificate is obtained. Due to the suspension of the review period in the case of negotiations with the Ministry, the review procedure has, at least in theory, no firm time limit. As a result, the M&A advisory practice has to be prepared for a more time-consuming and onerous process for transactions in the critical industries and may thus be forced to allow for more time between signing and closing. In addition, appropriate termination clauses (and possibly break fees) must be considered for purposes of the share purchase agreement in case a prohibition or restriction of the transaction on the basis of the amended AWV cannot be excluded. Back to Top 2. Tax 2.1       Tax – Unconstitutionality of German Change-of-Control Rules Tax loss carry forwards are an important asset in every M&A transaction. Over the past ten years the German change-of-control rules, which limit the use of losses and loss carry forwards (“Losses“) of a German target company, have undergone fundamental legislative changes. The current change-of-control rules may now face another significant revision as – according to the German Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) and the Lower Tax Court of Hamburg – the current tax regime of the change-of-control rules violates the constitution. Under the current change-of-control rules, Losses of a German corporation will be forfeited on a pro rata basis if within a period of five years more than 25% but not more than 50% of the shares in the German loss-making corporation are transferred (directly or indirectly) to a new shareholder or group of shareholders with aligned interests. If more than 50% are transferred, Losses will be forfeited in total. There are exceptions to this rule for certain intragroup restructurings, built-in gains and – since 2016 – for business continuations, especially in the venture capital industry. On March 29, 2017, the German Federal Constitutional Court ruled that the pro rata forfeiture of Losses (share transfer of more than 25% but not more than 50%) is not in line with the constitution. The BVerfG held that the provision leads to unequal treatment of companies. The aim of avoiding legal but undesired tax optimizations does not justify the broad and general scope of the provision. The BVerfG has asked the German legislator to amend the change-of-control rules retroactively for the period from January 1, 2008 until December 31, 2015 and bring them in line with the constitution. The legislative changes need to be finalized by December 31, 2018. Furthermore, in another case on August 29, 2017, the Lower Tax Court of Hamburg held that the change-of-control rules, which result in a full forfeiture of Losses after a transfer of more than 50% of the shares in a German corporation, are also incompatible with the constitution. The ruling is based on the 2008 wording of the change-of-control rules but the wording of these rules is similar to that of the current forfeiture rules. In view of the March 2017 ruling of the Federal Constitutional Court on the pro-rata forfeiture, the Lower Tax Court referred this case also to the Federal Constitutional Court to rule on this issue as well. If the Federal Constitutional Court decides in favor of the taxpayer the German tax legislator may completely revise the current tax loss limitation regime and limit its scope to, for example, abusive cases. A decision by the Federal Constitutional Court is expected in the course of 2018. Affected market participants are therefore well advised to closely monitor further developments and consider the impact of potential changes on past and future M&A deals with German entities. Appeals against tax assessments should be filed and stays of proceedings applied for by reference to the case before the Federal Constitutional Court in order to benefit from a potential retroactive amendment of the change-of-control rules. Back to Top 2.2       Tax – New German Tax Disclosure Rules for Tax Planning Schemes In light of the Panama and Paradise leaks, the respective Finance Ministers of the German federal states (Bundesländer) created a working group in November 2017 to establish how the new EU Disclosure Rules for advisers and taxpayers as published by the European Commission (“Commission“) on July 25, 2017 can be implemented into German law. Within the member states of the EU, mandatory tax disclosure rules for tax planning schemes already exist in the UK, Ireland and Portugal. Under the new EU disclosure rules certain tax planners and advisers (intermediaries) or certain tax payers themselves must disclose potentially aggressive cross-border tax planning arrangements to the tax authorities in their jurisdiction. This new requirement is a result of the disclosure rules as proposed by the OECD in its Base Erosion and Profit Shifting (BEPS) Action 12 report, among others. The proposal requires tax authorities in the EU to automatically exchange reported information with other tax authorities in the EU. Pursuant to the Commission’s proposal, an “intermediary” is the party responsible for designing, marketing, organizing or managing the implementation of a tax payer´s reportable cross border arrangement, while also providing that taxpayer with tax related services. If there is no intermediary, the proposal requires the taxpayer to report the arrangement directly. This is, for example, the case if the taxpayer designs and implements an arrangement in-house, if the intermediary in question does not have a presence within the EU or in case the intermediary cannot disclose the information because of legal professional privilege. The proposal does not define what “arrangement” or “aggressive” tax planning means but lists characteristics (so-called “hallmarks“) of cross-border tax planning schemes that would strongly indicate whether tax avoidance or abuse occurred. These hallmarks can either be generic or specific. Generic hallmarks include arrangements where the tax payer has complied with a confidentiality provision not to disclose how the arrangement could secure a tax advantage or where the intermediary is entitled to receive a fee with reference to the amount of the tax advantage derived from the arrangement. Specific hallmarks include arrangements that create hybrid mismatches or involve deductible cross border payments between related parties with a preferential tax regime in the recipient’s tax resident jurisdiction. The information to be exchanged includes the identities of the tax payer and the intermediary, details about the hallmarks, the date of the arrangement, the value of the transactions and the EU member states involved. The implementation of such mandatory disclosure rules on tax planning schemes are heavily discussed in Germany especially among the respective bar associations. Elements of the Commission’s proposal are regarded as a disproportionate burden for intermediaries and taxpayers in relation to the objective. Further clarity is needed to align the proposal with the general principle of legal certainty. Certain elements of the proposal may contravene EU law or even the German constitution. And the interaction with the duty of professional secrecy for lawyers and tax advisors is also still unclear. Major efforts are therefore needed for the German legislator to make such a disclosure regime workable both for taxpayers/intermediaries and the tax administrations. It remains to be seen how the Commission proposal will be implemented into German law in 2018 and how tax structuring will be affected. Back to Top 2.3       Tax – Voluntary Self-Disclosure to German Tax Authorities Becomes More Challenging German tax law allows voluntary self-disclosure to correct or supplement an incorrect or incomplete tax return. Valid self-disclosure precludes criminal liability for tax evasion. Such exemption from criminal prosecution, however, does not apply if the tax evasion has already been “detected” at the time of the self-disclosure and this is at least foreseeable for the tax payer. On May 5, 2017 the German Federal Supreme Court (Bundesgerichtshof – BGH) further specified the criteria for voluntary self-disclosure to secure an exemption from criminal prosecution (BGH, 1 StR 265/16 – May 9, 2017). The BGH ruled that exemption from criminal liability might not apply if a foreign authority had already discovered the non- or underreported tax amounts prior to such self-disclosure. Underlying the decision of the BGH was the case of a German employee of a German defense company, who had received payments from a Greek business partner, but declared neither the received payments nor the resulting income in his tax declaration. The payment was a reward for his contribution in selling weapons to the Greek government. The Greek authorities learned of the payment to the German employee early in 2004 in the course of an anti-bribery investigation and obtained account statements proving the payment through intermediary companies and foreign banks. On January 6, 2014, the German employee filed a voluntary self-disclosure to the German tax authorities declaring the previously omitted payments. The respective German tax authority found that this self-disclosure was not submitted in time to exempt the employee from criminal liability. The issue in this case was by whom and at what moment in time the tax evasion needed to be detected in order to render self-disclosure invalid. The BGH ruled that the voluntary self-disclosure by the German employee was futile due to the fact that the payment at issue had already been detected by the Greek authorities at the time of the self-disclosure. In this context, the BGH emphasized that it was not necessary for the competent tax authorities to have detected the tax evasion, but it was sufficient if any other authority was aware of the tax evasion. The BGH made clear that this included foreign authorities. Thus, a prior detection is relevant if on the basis of a preliminary assessment of the facts a conviction is ultimately likely to occur. This requirement is for example met if it can be expected that the foreign authority that detected the incorrect, incomplete or omitted fact will forward this information to the German tax authorities as in the case before the BGH. In particular, there was an international assistance procedure in place between German and Greek tax authorities and the way the payments were made by using intermediaries and foreign banks made it obvious to the Greek authorities that the relevant amounts had not been declared in Germany. Due to the media coverage of the case, this was also at least foreseeable for the German employee. This case is yet another cautionary tale for tax payers not to underestimate the effects of increased international cooperation of tax authorities. Back to Top 3. Financing and Restructuring 3.1       Financing and Restructuring – Upfront Banking Fees Held Void by German Federal Supreme Court On July 4, 2017, the German Federal Supreme Court (Bundesgerichtshof – BGH) handed down two important rulings on the permissibility of upfront banking fees in German law governed loan agreements. According to the BGH, boilerplate clauses imposing handling, processing or arrangement fees on borrowers are void if included in standard terms and conditions (Allgemeine Geschäftsbedingungen). With this case, the court extended its prior rulings on consumer loans to commercial loans. The BGH argued that clauses imposing a bank’s upfront fee on a borrower fundamentally contradict the German statutory law concept that the consideration for granting a loan is the payment of interest. If ancillary pricing arrangements (Preisnebenabreden) pass further costs and expenses on to the borrower, the borrower is unreasonably disadvantaged by the user (Verwender) of standard business terms, unless the additional consideration is agreed for specific services that go beyond the mere granting of the loan and the handling, processing or arrangement thereof. In the cases at hand, the borrowers were thus awarded repayment of the relevant fee. The implications of these rulings for the German loan market are far-reaching. The rulings affect all types of upfront fees for a lender’s services which are routinely passed on to borrowers even though they would otherwise be owed by the lender pursuant to statutory law, a regulatory regime or under a contract or which are conducted in the lender’s own interest. Consequently, this covers fees imposed on the borrower for the risk assessment (Bonitätsprüfung), the valuation of collateral, expenses for the collection of information on the assessment of a borrower’s financing requirements and the like. At this stage, it is not yet certain if, for example, agency fees or syndication fees could also be covered by the decision. There are, however, good arguments to reason that services rendered in connection with a syndication are not otherwise legally or contractually owed by a lender. Upfront fees paid in the past, i.e. in 2015 or later, can be reclaimed by borrowers. The BGH applied the general statutory three year limitation period and argued that the limitation period commenced at the end of 2011 after Higher District Courts (Oberlandesgerichte) had held upfront banking fees void in deviation from previous rulings. As of such time, borrowers should have been aware that a repayment claim of such fees was possible and could have filed a court action even though the enforcement of the repayment was not risk-free. Going forward, it can be expected that lenders will need to modify their approach as a result of the rulings: Choosing a foreign (i.e. non-German) law for a separate fee agreement could be an option for lenders, at least, if either the lender or the borrower is domiciled in the relevant jurisdiction or if there is a certain other connection to the jurisdiction of the chosen law. If the loan is granted by a German lender to a German borrower, the choice of foreign law would also be generally recognized, but under EU conflict of law provisions mandatory domestic law (such as the German law on standard terms) would likely still continue to apply. In response to the ruling, lenders are also currently considering alternative fee structures: Firstly, the relevant costs and expenses underlying such fees are being factored into the calculation of the interest and the borrower is then given the option to choose an upfront fee or a (higher) margin. This may, however, not always turn out to be practical, in particular given that a loan may be refinanced prior to generating the equivalent interest income. Secondly, a fee could be agreed in a separate fee letter which specifically sets out services which go beyond the typical services a bank renders in its own interest. It may, however be difficult to determine services which actually justify a fee. Finally, a lender might charge typical upfront fees following genuine individual negotiations. This requires that the lender not only shows that it was willing to negotiate the amount of the relevant fee, but also that it was generally willing to forego the typical upfront fee entirely. However, if the borrower rejects the upfront fee, the lender still needs to rely on alternative fee arrangements. Further elaboration by the courts and market practice should be closely monitored by lenders and borrowers alike. Back to Top 3.2       Financing and Restructuring – Lingering Uncertainty about Tax Relief for Restructuring Profits Ever since the German Federal Ministry of Finance issued an administrative order in 2003 (“Restructuring Order“) the restructuring of distressed companies has benefited from tax relief for income tax on “restructuring profits”. In Germany, restructuring profits arise as a consequence of debt to equity swaps or debt waivers with regard to the portion of such debt that is unsustainable. Debtors and creditors typically ensured the application of the Restructuring Order by way of a binding advance tax ruling by the tax authorities thus providing for legal certainty in distressed debt scenarios for the parties involved. However, in November 2016, the German Federal Tax Court (Bundesfinanzhof – BFH) put an end to such preferential treatment of restructuring profits. The BFH held the Restructuring Order to be void arguing that the Federal Ministry of Finance had lacked the authority to issue the Restructuring Order. It held that such a measure would need to be adopted by the German legislator instead. The Ministry of Finance and the German restructuring market reacted with concern. As an immediate response to the ruling the Ministry of Finance issued a further order on April 27, 2017 (“Continuation Order”) to the effect that the Restructuring Order continued to apply in all cases in which creditors finally and with binding effect waived claims on or before February 8, 2017 (the date on which the ruling of the Federal Tax Court was published). But the battle continued. In August 2017, the Federal Tax Court also set aside this order for lack of authority by the Federal Ministry of Finance. In the meantime, the German Bundestag and the Bundesrat have passed legislation on tax relief for restructuring profits, but the German tax relief legislation will only enter into force once the European Commission issues a certificate of non-objection confirming the new German statutory tax relief’s compliance with EU restrictions on state aid. This leaves uncertainty as to whether the new law will enter into force in its current wording and when. Also, the new legislation will only cover debt waivers/restructuring profits arising after February 8, 2017 but at this stage does not provide for the treatment of cases before such time. In the absence of the 2003 Restructuring Order and the 2017 Continuation Order, tax relief would only be possible on the basis of equitable relief in exceptional circumstances. It appears obvious that no reliable restructuring concept can be based on potential equitable relief. Thus, it is advisable to look out for alternative structuring options in the interim: Subordination of debt: while this may eliminate an insolvency filing requirement for illiquidity or over indebtedness, the debt continues to exist. This may make it difficult for the debtor to obtain financing in the future. In certain circumstances, a carve-out of the assets together with a sustainable portion of the debt into a new vehicle while leaving behind and subordinating the remainder of the unsustainable portion of the debt, could be a feasible option. As the debt subsists, a silent liquidation of the debtor may not be possible considering the lingering tax burden on restructuring profits. Also, any such carve-out measures by which the debtor is stripped of assets may be challenged in case of a later insolvency of the debtor. A debt hive up without recourse may be a possible option, but a shareholder or its affiliates are not always willing to assume the debt. Also, as tax authorities have not issued any guidelines on the tax treatment of debt hive ups, a binding advance tax ruling from the tax authorities should be obtained before the debt hive up is executed. Still, a debt hive up could be an option if the replacement debtor is domiciled in a jurisdiction which does not impose detrimental tax consequences on the waiver of unsustainable debt. Converting the debt into a hybrid instrument which constitutes debt for German tax purposes and equity from a German GAAP perspective is no longer feasible. Pursuant to a tax decree from May 2016, the tax authorities argue that the creation of a hybrid instrument amounts to a taxable waiver of debt on the basis that tax accounting follows commercial accounting. It follows that irrespective of potential alternative structures which may suit a specific set of facts and circumstances, restructuring transactions in Germany continue to be challenging pending the entry into force of the new tax relief legislation. Back to Top 4. Labor and Employment 4.1       Labor and Employment – Defined Contribution Schemes Now Allowed In an effort to promote company pension schemes and to allow more flexible investments, the German Company Pension Act (Betriebsrentengesetz – BetrAVG) was amended considerably with effect as of January 1, 2018. The most salient novelty is the introduction of a purely defined contribution pension scheme, which had not been permitted in the past. Until now, the employer would always be ultimately liable for any kind of company pension scheme irrespective of the vehicle it was administered through. This is no longer the case with the newly introduced defined contribution scheme. The defined contribution scheme also entails considerable other easements for employers, e.g. pension adjustment obligations or the requirement of insolvency insurance no longer apply. As a consequence, a company offering a defined contribution pension scheme does not have to deal with the intricacies of providing a suitable investment to fulfil its pension promise, but will have met its duty in relation to the pension simply by paying the promised contribution (“pay and forget”). However, the introduction of such defined contribution schemes requires a legal basis either in a collective bargaining agreement (with a trade union) or in a works council agreement, if the union agreement so allows. If these requirements are met though, the new legal situation brings relief not only for employers offering company pension schemes but also for potential investors into German businesses for whom the German-specific defined benefit schemes have always been a great burden. Back to Top 4.2     Labor and Employment – Federal Labor Court Facilitates Compliance Investigations In a decision much acclaimed by the business community, the German Federal Labor Court (Bundesarbeitsgericht – BAG) held that intrusive investigative measures by companies against their employees do not necessarily require a suspicion of a criminal act by an employee; rather, less severe forms of misconduct can also trigger compliance investigations against employees (BAG, 2 AZR 597/16 – June 29, 2017). In the case at hand, an employee had taken sick leave, but during his sick leave proceeded to work for the company owned by his sons who happened to be competing against his current employer. After customers had dropped corresponding hints, the company assigned a detective to ascertain the employee’s violation of his contractual duties and subsequently fired the employee based on the detective’s findings. In the dismissal protection trial, the employee argued that German law only allowed such intrusive investigation measures if criminal acts were suspected. This restriction was, however, rejected by the BAG. This judgment ends a heated debate about the permissibility of internal investigation measures in the case of compliance violations. However, employers should always adhere to a last-resort principle when investigating possible violations. For instance, employees must not be seamlessly monitored at their workplace by way of a so-called “key logger” as the Federal Labor Court held in a different decision (BAG, 2 AZR 681/16 – July 27, 2017). Also, employers should keep in mind a recent ruling of the European Court of Human Rights of September 5, 2017 (ECHR, 61496/08). Accordingly, the workforce should be informed in advance that and how their email correspondence at the workplace can be monitored. Back to Top 5. Real Estate Real Estate – Invalidity of Written Form Remediation Clauses for Long-term Lease Agreements On September 27, 2017, the German Federal Supreme Court (Bundesgerichtshof – BGH) ruled that so-called “written form remediation clauses” (Schriftformheilungsklauseln) in lease agreements are invalid because they are incompatible with the mandatory provisions of section 550 of the German Civil Code (Bürgerliches Gesetzbuch – BGB; BGH, XII ZR 114/16 – September 27, 2017). The written form for lease agreements requires that all material agreements concerning the lease, in particular the lease term, identification of the leased premises and the rent amount, must be made in writing. If a lease agreement entered into for a period of more than one year does not comply with this written form requirement, mandatory German law allows either lease party to terminate the lease agreement with the statutory notice period irrespective of whether or not a fixed lease term was agreed upon. The statutory notice period for commercial lease agreements is six months (less three business days) to the end of any calendar quarter. To avoid the risk of termination for non-compliance with the written form requirement, German commercial lease agreements regularly contain a general written form remediation clause. Pursuant to such clause, the parties of the lease agreement undertake to remediate any defect in the written form upon request of one of the parties. While such general written form remediation clauses were upheld in several decisions by various Higher District Courts (Oberlandesgerichte) in the past, the BGH had already rejected the validity of such clauses vis-à-vis the purchasers of real property in 2014. With this new decision, the BGH has gone one step further and denied the validity of general written form remediation clauses altogether. Only in exceptional circumstances, the lease parties are not entitled to invoke the non-compliance with the written form requirement on account of a breach of the good faith principle. Such exceptional circumstances may exist, for example, if the other party faced insolvency if the lease were terminated early as a result of the non-compliance or if the lease parties had agreed in the lease agreement to remediate such specific written form defect. This new decision of the BGH forces the parties to long-term commercial lease agreements to put even greater emphasis on ensuring that their lease agreements comply with the written form requirement at all times because remediation clauses as potential second lines of defense no longer apply. Likewise, the due diligence process of German real estate transactions will have to focus even more on the compliance of lease agreements with the written form requirement. Back to Top 6.  Data Protection Data Protection – Employee Data Protection Under New EU Regulation After a two-year transition period, the EU General Data Protection Regulation (“GDPR“) will enter into force on May 25, 2018. The GDPR has several implications for data protection law covering German employees, which is already very strictly regulated. For example, under the GDPR any handling of personnel data by the employer requires a legal basis. In addition to statutory laws or collective agreements, another possible legal basis is the employee’s explicit written consent. The transfer of personnel data to a country outside of the European Union (“EU“) will have to comply with the requirements prescribed by the GDPR. If the target country has not been regarded as having an adequate data protection level by the EU Commission, additional safeguards will be required to protect the personnel data upon transfer outside of the EU. Otherwise, a data transfer is generally not permitted. The most threatening consequence of the GDPR is the introduction of a new sanctions regime. It now allows fines against companies of up to 4% of the entire group’s revenue worldwide. Consequently, these new features, especially the drastic new sanction regime, call for assessments of, and adequate changes to, existing compliance management systems with regard to data protection issues. Back to Top 7. Compliance 7.1       Compliance – Misalignment of International Sanction Regimes Requires Enhanced Attention to the EU Blocking Regulation and the German Anti-Boycott Provisions The Trump administration has been very active in broadening the scope and reach of the U.S. sanctions regime, most recently with the implementation of “Countering America’s Adversaries Through Sanctions Act (H.R. 3364) (‘CAATSA‘)” on August 2, 2017 and the guidance documents that followed. CAATSA includes significant new law codifying and expanding U.S. sanctions on Russia, North Korea, and Iran. The European Union (“EU“) has not followed suit. More so, the EU and European leaders openly stated their frustration about both a perceived lack of consultation during the process and the substance of the new U.S. sanctions. Specifically, the EU and European leaders are concerned about the fact that CAATSA authorizes secondary sanctions on any person supporting a range of activities. Among these are the development of Russian energy export pipeline projects, certain transactions with the Russian intelligence or defense sectors or investing in or otherwise facilitating privatizations of Russia’s state-owned assets that unjustly benefits Russian officials or their close associates or family members. The U.S. sanctions regime differentiates between primary sanctions that apply to U.S. persons (U.S. citizens, permanent U.S. residents and companies under U.S. jurisdiction) and U.S. origin goods, and secondary sanctions that expand the reach of U.S. sanctions by penalizing non-U.S. persons for their involvement in certain targeted activities. Secondary sanctions can take many forms but generally operate by restricting or threatening to restrict non-U.S. person access to the U.S. market, including its global financial institutions. European, especially export-heavy and internationally operating German companies are thus facing a dilemma. While they have to fear possible U.S. secondary sanctions for not complying with U.S. regulations, potential penalties also loom from European member state authorities when doing so. These problems are grounded in European and German legislation aimed at protecting from and counteracting financial and economic sanctions issued by countries outside of the EU and Germany, unless such sanctions are themselves authorized under relevant UN, European, and German sanctions legislation. On the European level, Council Regulation (EC) No 2271/96 of November, 22 1996 as amended (“EU Blocking Regulation“) is aimed at protecting European persons against the effects of the extra-territorial application of laws, such as certain U.S. sanctions directed at Cuba, Iran and Libya. Furthermore, it also aims to counteract the effects of the extra-territorial application of such sanctions by prohibiting European persons from complying with any requirement or prohibition, including requests of foreign courts, based on or resulting, directly or indirectly, from such U.S. sanctions. For companies subject to German jurisdiction, section 7 of the German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung – AWV), states that “[t]he issuing of a declaration in foreign trade and payments transactions whereby a resident participates in a boycott against another country (boycott declaration) shall be prohibited” to the extent such a declaration would be contradictory to UN, EU and German policy. With the sanctions regime on the one hand and the blocking legislation at EU and German level on the other hand, committing to full compliance with U.S. sanctions whilst falling within German jurisdiction, could be deemed a violation of the AWV.  Violating the AWV can lead to fines by the German authorities and, under German civil law, might render a relevant contractual provision invalid. For companies conducting business transactions on a global scale, the developing non-alignment of U.S. and European / German sanctions requires special attention. Specifically, covenants with respect to compliance with U.S. or other non-EU sanctions should be reviewed and carefully drafted in light of the diverging developments of U.S. and other non-EU sanctions on the one hand and European / German sanctions on the other hand. Back to Top 7.2       Compliance – Restated (Anti-) Money Laundering Act – Significant New Requirements for the Non-Financial Sector and Good Traders On June 26, 2017, the restated German Money Laundering Act (Geldwäschegesetz – GWG), which transposes the 4th European Anti-Money Laundering Directive (Directive (EU 2015/849 of the European Parliament and of the Council) into German law, became effective. While the scope of businesses that are required to conduct anti-money laundering procedures remains generally unchanged, the GWG introduced a number of new requirements, in particular for non-financial businesses, and significantly increases the sanctions for non-compliance with these obligations. The GWG now extends anti money laundering (“AML“) risk management concepts previously known from the financial sector also to non-financial businesses including good traders. As a matter of principle, all obliged businesses are now required to undertake a written risk analysis for their business and have in place internal risk management procedures proportionate to the type and scope of the business and the risks involved in order to effectively mitigate and manage the risks of money laundering and terrorist financing. In case the obliged business is the parent company of a group, a group-wide risk analysis and group-wide risk management procedures are required covering subsidiaries worldwide who also engage in relevant businesses. The risk analysis must be reviewed regularly, updated if required and submitted to the supervisory authority upon request. Internal risk management procedures include, in particular, client due diligence (“know-your customer”), which requires the identification and verification of customers, persons acting on behalf of customers as well as of beneficial owners of the customer (see also section 1.1 above on the Transparency Register). In addition, staff must be monitored for their reliability and trained regularly on methods and types of money laundering and terrorist financing and the applicable legal obligations under the GWG as well as data protection law, and whistle-blowing systems must be implemented. Furthermore, businesses of the financial and insurance sector as well as providers of gambling services must appoint a money laundering officer (“MLO“) at senior management level as well as a deputy, who are responsible for ensuring compliance with AML rules. Other businesses may also be ordered by their supervisory authority to appoint a MLO and a deputy. Good traders including conventional industrial companies are subject to the AML requirements under the GWG, irrespective of the type of goods they are trading in. However, some of the requirements either do not apply or are significantly eased. Good traders must only conduct a risk analysis and have in place internal AML risk management procedures if they accept or make (!) cash payments of EUR 10,000 or more. Furthermore, client due diligence is only required with respect to transactions in which they make or accept cash payments of EUR 10,000 or more, or in case there is a suspicion of money laundering or terrorist financing. Suspicious transactions must be reported to the Financial Intelligence Unit (“FIU“) without undue delay. As a result, also low cash or cash free good traders are well advised to train their staff to enable them to detect suspicious transactions and to have in place appropriate documentation and reporting lines to make sure that suspicious transactions are filed with the FIU. Non-compliance with the GWG obligations can be punished with administrative fines of up to EUR 100,000. Serious, repeated or systematic breaches may even trigger sanctions up to the higher fine threshold of EUR 1 million or twice the economic benefit of the breach. For the financial sector, even higher fines of up to the higher of EUR 5 million or 10% of the total annual turnover are possible. Furthermore, offenders will be published with their names by relevant supervisory authorities (“naming and shaming”). Relevant non-financial businesses are thus well advised to review their existing AML compliance system in order to ensure that the new requirements are covered. For good traders prohibiting cash transactions of EUR 10,000 or more and implementing appropriate safeguards to ensure that the threshold is not circumvented by splitting a transaction into various smaller sums, is a first and vital step. Furthermore, holding companies businesses who mainly acquire and hold participations (e.g. certain private equity companies), must keep in mind that enterprises qualifying as “finance enterprise” within the meaning of section 1 (3) of the German Banking Act (Kreditwesengesetz – KWG) are subject to the GWG with no exemptions. Back to Top  7.3       Compliance – Protection of the Attorney Client Privilege in Germany Remains Unusual The constitutional complaint (Verfassungsbeschwerde) brought by Volkswagen AG’s external legal counsel requesting the return of work product prepared during the internal investigation for Volkswagen AG remains pending before the German Federal Constitutional Court (Bundesverfassungsgericht – BVerfG). The Munich public prosecutors had seized these documents in a dawn raid of the law firm’s offices. While the BVerfG has granted injunctive relief (BVerfG, 2 BvR 1287/17, 2 BvR 1583/17 – July 25, 2017) and ordered the authorities, pending a decision on the merits of the case, to refrain from reviewing the seized material, this case is a timely reminder that the concept of the attorney client privilege in Germany is very different to that in common law jurisdictions. In a nutshell: In-house lawyers do not enjoy legal privilege. Material that would otherwise be privileged can be seized on the client’s premises – with the exception of correspondence with and work product from / for criminal defense counsel. The German courts are divided on the question of whether corporate clients can already appoint criminal defense counsel as soon as they are concerned that they may be the target of a future criminal investigation, or only when they have been formally made the subject of such an investigation. Searches and seizures at a law firm, however, are a different matter. A couple of years ago, the German legislator changed the German Code of Criminal Procedure (Strafprozessordnung – StPO) to give attorneys in general, not only criminal defense counsel, more protection against investigative measures (section 160a StPO). Despite this legislation, the first and second instance judges involved in the matter decided in favor of the prosecutors. As noted above, the German Federal Constitutional Court has put an end to this, at least for now. According to the court, the complaints of the external legal counsel and its clients were not “obviously without any merits” and, therefore, needed to be considered in the proceedings on the merits of the case. In order not to moot these proceedings, the court ordered the prosecutors to desist from a review of the seized material, and put it under seal until a full decision on the merits is available. In the interim period, the interest of the external legal counsel and its clients to protect the privilege outweighed the public interest in a speedy criminal investigation. At this stage, it is unclear when and how the court will decide on the merits. Back to Top 7.4       Compliance – The European Public Prosecutor’s Office Will Be Established – Eventually After approximately four years of discussions, 20 out of the 28 EU member states agreed in June 2017 on the creation of a European Public Prosecutor’s Office (“EPPO“). In October, the relevant member states adopted the corresponding regulation (Regulation (EU) 2017/1939 – “Regulation“). The EPPO will be in charge of investigating, prosecuting and bringing to justice the perpetrators of offences against the EU’s financial interests. The EPPO is intended to be a decentralized authority, which operates via and on the basis of European Delegated Prosecutors located in each member state. The central office in Luxembourg will have a European Chief Prosecutor supported by 20 European Prosecutors, as well as technical and investigatory staff. While EU officials praise this Regulation as an “important step in European justice cooperation“, it remains to be seen whether this really is a measure which ensures that “criminals [who] act across borders […] are brought to justice and […] taxpayers’ money is recovered” (U. Reinsalu, Estonian Minister of Justice). It will take at least until 2020 until the EPPO is established, and criminals will certainly not restrict their activities to the territories of those 20 countries which will cooperate under the new authority (being: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Germany, Greece, Finland, France, Italy, Latvia, Lithuania, Luxembourg, Portugal, Romania, Slovenia, Slovakia and Spain). In addition, as the national sovereignty of the EU member states in judicial matters remains completely intact, the EPPO will not truly investigate “on the ground”, but mainly assume a coordinating role. Last but not least, its jurisdiction will be limited to “offences against the EU’s financial interests”, in particular criminal VAT evasion, subsidy fraud and corruption involving EU officials. A strong enforcement, at least prima facie, looks different. To end on a positive note, however: the new body is certainly an improvement on the status quo in which the local prosecutors from 28 member states often lack coordination and team spirit. Back to Top 7.5       Compliance – Court Allows for Reduced Fines in Compliance Defense Case The German Federal Supreme Court (Bundesgerichtshof – BGH) handed down a decision recognizing for the first time that a company’s implementation of a compliance management system (“CMS“) constitutes a mitigating factor for the assessment of fines imposed on such company where violations committed by its employees are imputed to the company (BGH 1 StR 265/16 – May 9, 2017). According to the BGH, not only the implementation of a compliance management system at the time of the detection of the offense should be considered, but the court may also take into account subsequent efforts of a company to enhance its respective internal processes that were found deficient. The BGH held that such remediation measures can be considered as a mitigating factor when assessing the amount of fines if they are deemed suitable to “substantially prevent an equivalent violation in the future.” The BGH’s ruling has finally clarified the highest German court’s views on a long-lasting discussion about whether establishing and maintaining a CMS may limit a company’s liability for legal infringements. The recognition of a company’s efforts to establish, maintain and improve an effective CMS should encourage companies to continue working on their compliance culture, processes and systems. Similarly, management’s efforts to establish, maintain and enhance a CMS, and conduct timely remediation measures, upon becoming aware of deficiencies in the CMS, may become relevant factors when assessing potential civil liability exposure of corporate executives pursuant to section. 43 German Limited Liability Companies Act (Gesetz betreffend Gesellschaften mit beschränkter Haftung – GmbHG) and section 93 (German Stock Companies Act (Aktiengesetz – AktG). Consequently, the implications of this landmark decision are important both for corporations and their senior executives. Back to Top 8.  Antitrust and Merger Control In 2017, the German Federal Cartel Office (Bundeskartellamt – BKartA) examined about 1,300 merger filings, imposed fines in the amount of approximately EUR 60 million on companies for cartel agreements and conducted several infringement proceedings. On June 9, 2017, the ninth amendment to the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB) came into force. The most important changes concern the implementation of the European Damages Directive (Directive 2014/104/EU of the European Parliament and of the Council of November, 26 2014), but a new merger control threshold was also introduced into law. Implementation of the European Damages Directive The amendment introduced various procedural facilitations for claimants in civil cartel damage proceedings. There is now a refutable presumption in favor of cartel victims that a cartel caused damage. However, the claimant still has the burden of proof regarding the often difficult to argue fact, if it was actually affected by the cartel and the amount of damages attributable to the infringement. The implemented passing-on defense allows indirect customer claimants to prove that they suffered damages from the cartel – even if not direct customers of the cartel members – because the intermediary was presumably able to pass on the cartel overcharge to his own customers (the claimants). The underlying refutable presumption that overcharges were passed on is not available in the relationship between the cartel member and its direct customer because the passing-on defense must not benefit the cartel members. In deviation from general principles of German civil procedural law, according to which each party has to produce the relevant evidence for the facts it relies on, the GWB amendment has significantly broadened the scope for requesting disclosure of documents. The right to request disclosure from the opposing party now to a certain degree resembles discovery proceedings in Anglo-American jurisdictions and has therefore also been referred to as “discovery light”. However, the documents still need to be identified as precisely as possible and the request must be reasonable, i.e., not place an undue burden on the opposing party. Documents can also be requested from third parties. Leniency applications and settlement documents are not captured by the disclosure provisions. Furthermore, certain exceptions to the principle of joint and several liability of cartelists for damage claims in relation to (i) internal regress against small and medium-sized enterprises, (ii) leniency applicants, and (iii) settlements between cartelists and claimants were implemented. In the latter case, non-settling cartelists may not recover contribution for the remaining claim from settling cartelists. Finally, the regular limitation period for antitrust damages claims has been extended from three to five years. Cartel Enforcement and Corporate Liability Parent companies can now also be held liable for their subsidiary’s anti-competitive conduct under the GWB even if they were not party to the infringement themselves. The crucial factor – comparable to existing European practice – is the exercise of decisive control. Furthermore, legal universal successors and economic successors of the infringer can also be held liable for cartel fines. This prevents companies from escaping cartel fines by restructuring their business. Publicity The Bundeskartellamt has further been assigned the duty to inform the public about decisions on cartel fines by publishing details about such decisions on its webpage. Taking into account recent efforts to establish a competition register for public procurement procedures, companies will face increased public attention for competition law infringements, which may result in infringers being barred from public or private contracting. Whistleblower Hotline Following the example of the Bundeskartellamt and other antitrust authorities, the European Commission (“Commission“) has implemented a whistleblowing mailbox. The IT-based system operated by an external service provider allows anonymous hints to or bilateral exchanges with the Commission – in particular to strengthen its cartel enforcement activities. The hope is that the whistleblower hotline will add to the Commission’s enforcement strengths and will balance out potentially decreasing leniency applications due to companies applying for leniency increasingly facing the risk of private cartel damage litigation once the cartel has been disclosed. Merger Control Thresholds To provide for control over transactions that do not meet the current thresholds but may nevertheless have significant impact on the domestic market (in particular in the digital economy), a “size of transaction test” was implemented; mergers with a purchase price or other consideration in excess of EUR 400 million now require approval by the Bundeskartellamt if at least two parties to the transaction achieve at least EUR 25 million and EUR 5 million in domestic turnover, respectively. Likewise, in Austria a similar threshold was established (EUR 200 million consideration plus a domestic turnover of at least EUR 15 million). The concept of ministerial approval (Ministererlaubnis), i.e., an extra-judicial instrument for the Minister of Economic Affairs to exceptionally approve mergers prohibited by the Bundeskartellamt, has been reformed by accelerating and substantiating the process. In May 2017, the Bundeskartellamt published guidance on remedies in merger control making the assessment of commitments more transparent. Remedies such as the acceptance of conditions (Bedingungen) and obligations (Auflagen) can facilitate clearance of a merger even if the merger actually fulfils the requirements for a prohibition. The English version of the guidance is available at: http://www.bundeskartellamt.de/SharedDocs/Publikation/EN/Leitlinien/Guidance%20on%20Remedies%20in%20Merger%20Control.html; jsessionid=5EA81D6D85D9FD8891765A5EA9C26E68.1_cid378?nn=3600108. Case Law Finally on January 26, 2017, there has been a noteworthy decision by the Higher District Court of Düsseldorf (OLG Düsseldorf, Az. V-4 Kart 4/15 OWI – January 26, 2017; not yet final): The court confirmed a decision of the Bundeskartellamt that had imposed fines on several sweets manufacturers for exchanging competitively sensitive information and even increased the fines. This case demonstrates the different approach taken by courts in calculating cartel fines based on the group turnover instead of revenues achieved in the German market. Back to Top     The following Gibson Dunn lawyers assisted in preparing this client update:  Birgit Friedl, Marcus Geiss, Jutta Otto, Silke Beiter, Peter Decker, Ferdinand Fromholzer, Daniel Gebauer, Kai Gesing, Franziska Gruber, Johanna Hauser, Maximilian Hoffmann, Markus Nauheim, Richard Roeder, Katharina Saulich, Martin Schmid, Sebastian Schoon, Benno Schwarz, Michael Walther, Finn Zeidler, Mark Zimmer and Caroline Ziser Smith. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. The two German offices of Gibson Dunn in Munich and Frankfurt bring together lawyers with extensive knowledge of corporate / M&A, financing, restructuring and bankruptcy, tax, labor, real estate, antitrust, intellectual property law and extensive compliance / white collar crime experience. The German offices are comprised of seasoned lawyers with a breadth of experience who have assisted clients in various industries and in jurisdictions around the world. Our German lawyers work closely with the firm’s practice groups in other jurisdictions to provide cutting-edge legal advice and guidance in the most complex transactions and legal matters. For further information, please contact the Gibson Dunn lawyer with whom you work or any of the following members of the German offices: General Corporate, Corporate Transactions and Capital Markets Lutz Englisch (+49 89 189 33 150), lenglisch@gibsondunn.com) Markus Nauheim (+49 89 189 33 122, mnauheim@gibsondunn.com) Ferdinand Fromholzer (+49 89 189 33 170, ffromholzer@gibsondunn.com) Dirk Oberbracht (+49 69 247 411 510, doberbracht@gibsondunn.com) Wilhelm Reinhardt (+49 69 247 411 520, wreinhardt@gibsondunn.com) Birgit Friedl (+49 89 189 33 180, bfriedl@gibsondunn.com) Silke Beiter (+49 89 189 33 170, sbeiter@gibsondunn.com) Marcus Geiss (+49 89 189 33 122, mgeiss@gibsondunn.com) Annekatrin Pelster (+49 69 247 411 521, apelster@gibsondunn.com) Finance, Restructuring and Insolvency Sebastian Schoon (+49 89 189 33 160, sschoon@gibsondunn.com) Birgit Friedl (+49 89 189 33 180, bfriedl@gibsondunn.com) Marcus Geiss (+49 89 189 33 122, mgeiss@gibsondunn.com) Tax Hans Martin Schmid (+49 89 189 33 110, mschmid@gibsondunn.com) Labor Law Mark Zimmer (+49 89 189 33 130, mzimmer@gibsondunn.com) Real Estate Peter Decker (+49 89 189 33 115, pdecker@gibsondunn.com) Daniel Gebauer (+ 49 89 189 33 115, dgebauer@gibsondunn.com) Technology Transactions / Intellectual Property / Data Privacy Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) Corporate Compliance / White Collar Matters Benno Schwarz (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Mark Zimmer (+49 89 189 33 130, mzimmer@gibsondunn.com) Finn Zeidler (+49 69 247 411 530, fzeidler@gibsondunn.com) Antitrust and Merger Control Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, CA 90071 Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

December 12, 2017 |
Arbeitnehmer und interne Untersuchungen – ein Balanceakt

Frankfurt partner Finn Zeidler and associate Dorothee Herrmann are the authors of “Arbeitnehmer und interne Untersuchungen – ein Balanceakt” [PDF] published in the issue 23/2017 of the German publication NZA (Neue Zeitschrift für Arbeitsrecht). The article focuses on the position of employees between the obligation to cooperation and the privilege against self-incrimination during internal investigations. The authors identify the principles for every stage of the investigation and provide best practice recommendations.

October 5, 2017 |
Wider die Macht unbewusster Denkmuster

​Munich partner Mark Zimmer has been interviewed [PDF] by the German legal magazine NJW aktuell. The interview focuses on unconscious bias training and related aspects under German labor law, and was published in October in issue 41/2017.

September 12, 2017 |
2017 UK Employment Update

So far, 2017 has seen a number of interesting legal developments in UK employment law and the pace is set to continue with important regulations coming into force early next year.  A brief overview of key developments which we believe will be of interest to our clients is provided below.  More detailed information on each topic is available by clicking on the italicised links to the appendix below. Gender Pay Gap Reporting and the EU General Data Protection Regulation All employers who employed more than 250 employees as at 5 April 2017, need to file a gender pay gap report by 5 April 2018 in accordance with the provisions of the Equality Act 2010 (Gender Pay Gap Information Regulations) 2017.  We considered the Gender Pay Gap Regulations in our last alert which can be seen here.  In addition, the EU General Data Protection Regulation ("GDPR") comes into force on 25 May 2018 and it elevates data protection to a board level issue.  We are currently helping clients in a number of business sectors to ensure compliance with their obligations under both the Gender Pay Gap Regulations and the GDPR.   Protecting Your Business from Competing Employees We consider the impact of three cases concerning post-employment restrictions comprising decisions of the High Court which held that: an employee was under no obligation to disclose their intention to compete even when asked a direct question; a 6 month restrictive covenant was enforceable despite the fact that it had been entered into when the employee was very junior; and, finally, an employee who stole confidential information from his previous employer and subsequently destroyed relevant evidence in breach of a court order should be imprisoned for contempt of court.  UK Collective Consultation Rights to Extend to Cover Overseas Employees In a decision which will be of particular interest to those UK businesses with significant overseas workforces, the Employment Appeal Tribunal has recently ruled that employers may have to collectively consult with overseas employees under UK rules when proposing to make collective redundancies. Whistleblowing Update We consider two recent decisions of the UK Court of Appeal which provide useful guidance on the protection afforded to whistleblowers under UK law.  In the first decision,  the court considers the requirement for any such disclosure to be in the "public interest" and in the second case, the court considers whether a whistleblower qualifies for protection under UK law where he is employed by one legal entity but makes a protected disclosure to a connected entity. Discrimination Update Dress code in the workplace has been a hot topic in the UK and the EU this year and we consider the impact of a number of interesting decisions of the higher courts in the EU. Monitoring Employees’ Personal Messages We consider a decision of the European Court of Human Rights ("ECHR") which found that a Romanian employer had breached an employee’s right to privacy by reading his personal messages which he had sent from his employer’s systems. While not directly binding on employers in the UK, the UK courts are, for the present, required to interpret UK law consistent with decisions of the ECHR. Updates on the ‘Gig-Economy’ The gig-economy has sparked a lot of media interest in the past few months. In a gig economy, where the prevalence of "free-lance workers" and the desire for flexible working has increased, it is difficult to determine who is truly self-employed, a worker or in fact an employee.  The gig economy is currently being investigated by several different bodies and the Taylor Review has recently made several recommendations aimed at clarifying the law governing employment status. APPENDIX The EU General Data Protection Regulation The new requirements of the GDPR are onerous and non-compliance carries serious financial and reputational risk. Employers will therefore need to take a number of steps before the implementation date in order to ensure compliance, including conducting data protection audits and putting in place relevant internal and external procedures and policies.  The key changes of the GDPR include:  Extra-territorial scope:  The GDPR will apply not only to controllers and processors established in the EU but also to those outside the EU who offer goods and services to, or monitor EU data subjects. Changes to requirements for valid consent: The GDPR will require consent to be given by clear affirmative action, rather than being implied. Increased burden on data controllers: The GDPR will introduce a raft of new obligations for data controllers and places onerous accountability obligations on data controllers to demonstrate compliance. Direct obligations on data processors: For the first time, data processors will have direct compliance obligations, and they may be liable to the same sanctions as data controllers. Additional data subject rights: Under the GDPR, existing data subject rights will be enhanced, and new data subject rights will be introduced. Increased sanctions: In the event of a breach of the GDPR, data controllers and processors may be subject to fines of up to the greater of 4% of annual worldwide turnover for the preceding financial year, or 20 million Euros. Protecting Your Business from Competing Employees MPT Group Limited v Peel & ors [2017] EWHC 1222 The courts have grappled in a number of cases with the question of whether  a senior employee is required to tell their present employer that they intend to leave and compete with them.  The High Court considered this question again in a recent case involving a producer of mattress machinery and equipment.  Two employees resigned on the same day and denied they intended on going into partnership together.  Instead, both stated separate, personal reasons for leaving MPT.  Prior to leaving MPT, both employees copied considerable confidential information including customer and supplier lists, drawings, manuals and price lists.  Shortly after the expiry of their 6 month non-competition period, they incorporated a competing business and started selling competing products.  MPT argued that the former employees were obliged to tell the truth when asked about their intentions to compete, and, to do otherwise, breached their duties of good faith and fidelity.  The Judge disagreed.  It is notable that in this case the two employees, whilst senior, were not directors of the company and as such did not owe fiduciary duties to the company.  Further, MPT could have imposed express obligations in their contracts of employment requiring them to reveal details of their own competing activities, but had not done so.  Employers who expect senior employees to divulge their own competing activities should ensure that this is stated expressly in their contracts of employment. Egon Zehnder v Tillman The High Court in Egon Zehnder v Tillman considered whether a 6 month non-compete should be enforced against a departing employee, Mrs Tillman.  At the time of her departure Mrs Tillman held a senior role at Egon Zehnder.  However, the non-compete was contained in a contract which she signed in 2004, when she was recruited as a junior consultant.  It has long been an established principle that the reasonableness of a restrictive covenant should be assessed at the point the contract is entered into, not the time of departure.    Mrs Tillman argued that the 6 month non-compete was an unreasonable restriction at the time she joined Egon Zehnder due to the junior nature of her role and that, as a result, it should not be enforced.  The court disagreed.   Whilst the Court accepted that reasonableness should be assessed at the point the contract is entered into, the parties were entitled to consider their expectations for the future.  If, as it was found to be in this case, the employee is employed with the expectation of growing into a senior role, and was highly skilled for her level of seniority, that was a factor to be taken into account by the courts and in this case, made a 6 month non-compete reasonable.  However, this wasn’t quite the last word on the matter.  Whilst not disagreeing with the High Court’s findings on the reasonableness of a 6 month non-compete for Mrs Tillman, the Court of Appeal nevertheless determined that her non-compete was unenforceable because it did not permit her to hold a minority shareholding in a competing business (a common carve out in such restrictions). Thus the courts have given with one hand, but taken with the other.  The High Court decision is helpful in the case of employers who fail to update restrictive covenants when employees are promoted.  However, the Court of Appeal’s decision is a reminder of the importance of careful drafting when it comes to enforcing restrictive covenants.  OCS Group v Dadi In the case of OCS Group v Dadi the High Court imposed a six week prison sentence on a former employee of OCS Group who had breached a court order prohibiting him from disclosing confidential information and requiring him to preserve evidence. Whilst the punishment may seem unusually harsh, particularly in circumstances where Mr Dadi admitted the deletions and tried to assist his former employer in recovering its confidential information, the case shows how seriously the courts will treat flagrant breaches of court orders.  Mr Dadi’s breaches were particularly serious given that following a court order requiring him to preserve hard copy and electronic documents, and in the full knowledge of that order, Mr Dadi deleted over 8,000 emails. UK Collective Consultation Rights to Extend to Cover Overseas Employees Application of collective consultation rights to overseas employees In the case of Seahorse Maritime Limited v Nautilus International (a trade union) UKEAT/0281/16, the Employment Appeal Tribunal ruled that an employer’s collective consultation obligations under UK rules may extend to cover overseas employees of its UK business. Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 ("TULRCA") requires employers to collectively consult where they propose to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less.  If a complaint for a failure to comply with section 188 is well-founded the employment tribunal can make a declaration to that effect and make an award to the claimant of a week’s pay (subject to the statutory limits) for each week up to 90 days.  Historically, employees working outside Great Britain were excluded from the right to be collectively consulted, but this exclusion was removed by legislation in 1999.  Here, the Employment Appeal Tribunal considered it should apply the same principles to the extra-territorial effect of employees rights under TULRCA as it does under the Employment Rights Act 1996. This means that employees who work outside Great Britain can have the right to a protective award for a failure to collectively consult if they have a sufficiently strong connection to Great Britain and British employment law. When considering the strength of an employee’s connection to Great Britain and UK employment law, the domicile of the employee and the governing law of their employment contract will be important factors. What does this mean for employers in practice? When considering whether a redundancy proposal meets the threshold for collective consultation under UK rules, an employer should consider the impact of the proposal not only on UK based employees working in the establishment in question but also others who may be based overseas but nevertheless have a sufficiently strong connection to Great Britain and UK employment law (such as UK nationals working abroad, particularly those on a temporary secondment overseas). Whistleblowing Update Since 2013 it has been a requirement under UK law that a worker who wishes to be afforded whistleblower protection must reasonably believe that he is making his disclosures in "the public interest".  In the case of Chestertons v Nurmohamed the Court of Appeal has now determined what the expression "in the public interest" actually means. Mr Nurmohamed was a director in Chestertons’ Mayfair office and following his dismissal, claimed he was subjected to detriments on the grounds that he had made a number of protected disclosures about internal misreporting of Chestertons’ accounts which adversely affected his earnings in commission payments.  Whilst his disclosures related mainly to the impact of the alleged misreporting on his own earnings Mr Nurmohamed suggested that his employer look at the accounts of other offices which he suspected followed the same practices. The Employment Tribunal, the Employment Appeal Tribunal and the Court of Appeal upheld Mr Nurmohamed’s claim and found that his disclosures were in the public interest because there was sufficient evidence that the other directors were in his mind at the time he made the disclosures. The Court of Appeal clarified that the public interest test has a subjective and an objective element, and that the courts should not substitute their own views for that of the worker.  A worker must believe they are making the disclosure in the public interest, but that interest does not need to be the predominate motive for making the disclosure.  Whilst Mr Nurmohamed’s disclosures related to a breach of his own contract of employment the Court of Appeal held that the facts of the case supported a finding that the disclosures were also in a wider public interest.  The court confirmed that factors such as the number of employees affected, the nature of the interests affected and the nature of the wrongdoing may all be relevant to the determination.  Ultimately, it is for the employment tribunal, as arbiter of fact, to consider all the circumstances. In Day v Health Education England (HEE) and others, Dr Day brought a whistleblowing claim against HEE which was not his employer.  Dr Day was instead employed by Lewisham NHS Trust.  The Court of Appeal found that Dr Day’s contract with the NHS did not preclude him in principle from also being classed as a "worker" (under the extended definition in whistleblower protection legislation), in relation to another employer, HEE.  It determined that a tribunal should make an assessment of whether HEE determined Mr Day’s terms of engagement, indicating that his claim could proceed against HEE should that be the case. Discrimination Update In Achbita and another v G4S Secure Solutions NV, the CJEU held that a headscarf ban resulting from a religious neutrality principle in the work place did not amount to direct discrimination because there was no evidence that the employee in question had been treated differently to any other employee.  The CJEU held that such a measure could constitute indirect discrimination but that it could potentially be justified in pursuance of the employer’s policy of upholding political, philosophical or religious neutrality in customer-facing roles. However, the CJEU reached the opposite decision in the case of Bougnaoui and another v Micropole SA.  In this case a customer of Micropole requested that one of its employees, Ms Bougnaoui, not wear a headscarf in the future.  Micropole raised the complaint with Ms Bougnaoui who was subsequently dismissed because she refused to comply with the customers’ request.  The employer argued that its neutrality principle was a "genuine and determining occupational requirement."  However, the CJEU held that an occupational requirement cannot include an instruction from a customer and accordingly found that Ms Bougnaoui was treated less favourably on the ground of her religion. These decisions illustrate the need for employers to give careful consideration before adopting a dress code policy which could adversely impact employees in a protected group, whether that be on grounds of age, gender, religion, race, disability or otherwise. Monitoring Employees’ Personal Messages In Barbulescu v Romania, the employee was dismissed for breaching his employer’s internal policies when he used a professional Yahoo messenger account to send personal messages.  When the employee maintained that he had only sent work related messages from his professional account, his employer presented him with a transcript of personal messages which it had retrieved from the account, and terminated his employment.  Mr Barbelescu filed a complaint in the Romanian Courts alleging that his employer had breached his right to privacy as set out in Article 8 of the European Convention on Human Rights.  At first instance, the court held that the employer was legitimately entitled to look at the messages because it had done so on the initial assumption that the messages would be work related, and it had a policy that strictly prohibited employees from using company computers or systems for personal purposes.  This decision was overturned by the Grand Chamber of the ECHR. The ECHR considered whether the employee had a reasonable expectation that his messages would be private in circumstances where his employer had a policy against personal use, and had advised employees that it monitored electronic communications.  Whilst acknowledging that an employer has a legitimate interest in the efficient running of its company, the ECHR commented that an employer cannot expect its policies to reduce an employee’s private life in the workplace to zero.  The court determined that the employer had failed to strike a fair balance between the interests at stake, on the one hand its own business interests and, on the other hand, Mr Barbelescu’s right to privacy and considered that the employee’s privacy had been breached.  In reaching its decision the ECHR took into account a number of factors, but focused particularly on the fact that the employee had not been made aware of his employer’s monitoring policy before the monitoring was initiated, and that the policy did not make it clear that the content of personal communications would be monitored.  This case is a timely reminder for employers to review their IT policies and procedures and ensure that adequate detail is provided as to the extent of any monitoring practices. Updates on the ‘Gig-Economy’ Matthew Taylor was appointed by the Government to conduct an independent review of modern working practices and the impact of new forms of work on worker rights and responsibilities.  The recommendations from the Taylor review include: changing the definition of ‘worker’ so that the obligation to provide personal service is no longer crucial; codifying the key criteria that define ’employee’ status into primary legislation; introducing the term ‘dependent contractor’ to refer to those who are workers but not employees; giving dependent contractors additional rights, such as the right to a section 1 statement of terms that employees currently enjoy, and adapting the ‘output work’ definition in the National minimum Wage Regulations 2015 to apply to those who provide services through a digital platform. It will be interesting to see whether the recommendations such as the new term dependent contractor get taken up by the courts or the legislature in coming months. Employment status is being simultaneously reviewed in the courts. In the case of Pimlico Plumbers Ltd v Smith, the Court of Appeal upheld the judgments of the ET and EAT that a plumber who was engaged as an independent contractor was to be considered a worker. We understand that an application to appeal this case to the Supreme Court has been accepted.   Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these and other developments.  Please feel free to contact the Gibson Dunn lawyer with whom you usually work or the following members of the Labor and Employment team in the firm’s London office: James A. Cox (+44 (0)20 7071 4250, jacox@gibsondunn.com)Amy Sinclair (+44 (0)20 7071 4269, asinclair@gibsondunn.com)Vonda Hodgson (+44 (0)20 7071 4254, vhodgson@gibsondunn.com) Thomas Weatherill (+44 (0)20 7071 4164, tweatherill@gibsondunn.com)Heather Gibbons (+44 (0)20 7071 4127, hgibbons@gibsondunn.com)Sarika Rabheru (+44 (0)20 7071 4267, srabheru@gibsondunn.com) Georgia Derbyshire (+44 (0)20 7071 4013, gderbyshire@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

September 12, 2017 |
The Overhaul of France’s Labor Laws Has Been Launched – What Is Going to Change?

On August 31st, 2017, after weeks of dialogue and discussions with unions over the summer, the French government unveiled the content of the proposed reform of the French Labor Code through the publication of five draft ordinances (the "Draft Ordinances"). The general objective pursued by the French Government through this reform is to liberalize and to free up the labor market to support economic growth and to bring down the country’s unemployment rate to 7% by 2022[1]. The content of the Draft Ordinances may evolve until publication, notably after receipt of the non-binding opinions to be rendered by relevant consultative bodies (instances consultatives) and by the French Council of State (Conseil d’Etat). We are pleased to lay out below some of the key measures of the expected reform, which brings about new opportunities for our international clients and is likely to impact decision-making of human resources managers in the months to come: 1. Collective dismissals and departures: the main facilitative measures The scope of assessment of the economic grounds for dismissal in international groups: Under President Macron’s proposed reform, the scope of assessment of the economic difficulties justifying redundancies should be limited to companies located in France only.  Until now, the economic grounds for redundancies have to be assessed at the level of all group companies operating in the same business sector.  This change of scope will offer greater legal certainty to companies belonging to international groups and should encourage inbound investments.  However, in case of fraud (e.g., through accounting manipulations), employers will not be in a position to justify the reasons for dismissal by limiting their appraisal to French companies only.   New opportunities to implement voluntary departure plans: The proposed reform aims at easing and securing voluntary departure plans that were previously regulated by case law.  These collective departure plans will not be subject to the stringent constraints imposed by job preservation plans (plans de sauvegarde de l’emploi).  The collective contractual termination mechanism (i) shall be defined by a collective agreement, (ii) will only concern voluntary departures and (iii) will be placed under the labor administration’s control. Redeployment procedures are made more transparent and simplified: In case of economic dismissals, the employer will no longer be under the obligation to individually communicate redeployment offers to the concerned employees.  Instead, employees could be given access to internal offers via the company’s Intranet, for example.  For international groups also, the proposed reform alleviates employers’ redeployment obligations: failure to respect the obligation to seek redeployment opportunities abroad would no longer call into question an economic dismissal. 2. Employee representative bodies: a merger of existing bodies aiming at streamlining social dialogue The announced reform proposes to merge the three main employee representative bodies into a single employee representation body named "comité social et économique" (the "CSE").  In companies with at least 11 employees but less than 50 employees, the CSE will exercise the powers of employee delegates; in companies with 50 employees or more, the CSE will cumulate the powers of the works council, the employee delegates and the health and safety committee.  In substance, the mission of the CSE will remain unchanged compared to those of the previous, now combined representative bodies. Please note that companies employing more than 300 employees and certain high risk companies (such as nuclear companies or "Seveso"-classified companies) would be under the obligation to implement a specific commission within the CSE dealing with health, security, and work conditions issues. Finally, by collective agreement, the CSE could be merged with union representatives to become a single representative body named "Conseil d’Entreprise" with negotiating powers. 3. Collective negotiations: a greater flexibility for companies A new interplay between company and industry-level agreements: Returning to a topic that crystallized major opposition during the last labour law reform in 2016, the Draft Ordinances propose to reallocate competencies between industry-level and company-level agreements in order to offer an increased flexibility to companies.  Thus, the Draft Ordinances differentiate between three areas: areas in which the industry-level agreement shall prevail over the company-level agreement: these include, notably, minimum wages (bonuses excluded), classifications and gender equality in the workplace, night work, contract for a fixed term period, temporary work; areas in which industry-level agreement may expressly object to any breach by a company-level agreement: these include notably, the prevention of occupational risks and difficult working conditions, disabilities, the conditions governing and means of exercising a trade union mandate; in all other areas (which cover the definition of bonuses or premiums paid to employees), the company-level agreement shall take precedence over the industry-level agreement, it being specified that in the absence of company-level agreement, the industry-level agreements shall apply. New opportunities to negotiate in small/medium sized companies without union representatives: The reform aims at simplifying the negotiation within small/medium companies where there is no union representatives. In companies (i) employing less than 50 employees and (ii) without union representatives, the employers may negotiate directly with an employee delegate on all matters open to collective negotiation. In companies (i) employing less than 20 employees (ii) without employee delegates, and (iii) without union representatives, the employer may negotiate directly with employees on all matter open to collective negotiation.  In order to be valid, the agreement will have to be ratified by at least two third of the employees. 4. Redundancy procedures: few measures aiming at reducing disputes and securing dismissals The introduction of a cap on damages granted by the judge in case of unfair dismissal: The indicative cap amounts established by the "El Khomri" Act enacted on August 8, 2016, shall become a mandatory reference.  More visibility on the outcome of disputes shall result from the capping of such indemnities.  These caps vary from 1 to 20 months of salary depending on the employee’s seniority (according to the Draft Ordinances, damages will roughly equal 1 month of salary per year of service up to a 10-year seniority, and then, increase year on year by a half month). The introduction of a standard dismissal letter: In order to avoid procedural errors in dismissal procedures, the proposed reform proposes to introduce standard dismissal letters in the form of a "CERFA form" mentioning the rights and obligations of each party. The form should no longer prevail over the substance: A procedural error committed by the employer when implementing a dismissal procedure should no longer deprive the redundancy of actual and serious cause so long as the substance of the dismissal is valid. The reduction of time limits for objections: The proposed reform harmonizes the statute of limitations for actions contesting the lawfulness or validity of a dismissal on personal or economic grounds from 24 to 12 months. *        *        * Through this reform, the French Government has taken a first step in reforming the country’s labor market. President Macron’s next initiative in that respect will be a recasting of France’s unemployment insurance and professional training systems (planned for 2018). Please note that the content of the Draft Ordinances may evolve until publication, expected at the end of September 2017.  Once published, the ordinances will be immediately applicable.  However, until they are ratified by the French Parliament, the ordinances will retain regulatory status and  can, during this transitional period, be challenged before the French Council of State (Conseil d’Etat).  If any substantial modifications were to be adopted, we will circulate an updated version of this client alert. [1]      in Q2 2017, the average ILO unemployment rate in metropolitan France and the overseas departments (excluding Mayotte) stood at 9.5% of active population (source: INSEE). The following Gibson Dunn lawyers assisted in the preparation of this client update: Claire Aristide, Nicolas Autet, Ariel Harroch, Judith Raoul-Bardy and Jean-Philippe Robé. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. For further information, please contact the Gibson Dunn lawyer with whom you usually work or any of the following members of the Paris office by phone (+33 1 56 43 13 00) or by email (see below):  Nicolas Autet – nautet@gibsondunn.comBernard Grinspan – bgrinspan@gibsondunn.comAriel Harroch – aharroch@gibsondunn.comJudith Raoul-Bardy – jraoul@gibsondunn.comJean-Philippe Robé – jrobe@gibsondunn.com © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

September 5, 2017 |
Trump Administration Rescinds Deferred Action for Childhood Arrivals (DACA) Program

On September 5, 2017, the Trump Administration announced the termination of the Deferred Action for Childhood Arrivals program ("DACA").  Attorney General Jeff Sessions announced the Administration’s decision in remarks delivered on Tuesday morning.[1]  Acting Secretary of Homeland Security Elaine Duke subsequently issued a memorandum formally rescinding the program,[2] after which the White House issued a separate statement explaining President Trump’s decision.[3] Under DACA, certain individuals brought to the United States as children who met specific criteria could apply for a two-year, renewable period of deferred action from immigration enforcement.  Those granted deferred action were considered by the Department of Homeland Security ("DHS") to be "lawfully present" in the United States, and eligible for work authorization.  Since 2012, nearly 800,000 young people have been granted DACA status, with the majority of these individuals located in California, Texas, Illinois, New York, and Florida.[4] This alert addresses the implications of the implementation of the rescission memorandum by DHS.  Most notably for our clients, DHS will continue to accept renewal applications from individuals who have DACA status that will expire between now and March 5, 2018, so long as the renewal applications are filed and accepted by October 5, 2017. I.  Background On June 15, 2012, then-Secretary of Homeland Security Janet Napolitano issued a memorandum establishing the DACA program.[5]  Individuals qualified for DACA if they: (1) came to the United States under the age of sixteen; (2) had five years of continuous residence in the United States; (3) met certain education or military service requirements; (4) had not been convicted of a felony or certain other crimes, and weren’t otherwise a threat to national security; and (5) were not above the age of 30.[6] On November 20, 2014, DHS issued a new memorandum expanding the eligibility for DACA and also creating a new program called Deferred Action for Parents of Americans and Lawful Permanent Residents ("DAPA").[7]  However, shortly thereafter, a group of 26 states successfully challenged DAPA in federal court, obtaining a nationwide injunction against its implementation that was affirmed by the Fifth Circuit on the basis that the DAPA program was not authorized by the Immigration and Nationality Act and was therefore unlawful executive action.[8]  The Fifth Circuit’s decision was subsequently affirmed by an equally divided Supreme Court. On June 29, 2017, officials from ten of the states that had challenged the DAPA program sent a letter to Attorney General Sessions, asserting that the DACA program was unconstitutional for the same reasons that the court found the DAPA program to be unconstitutional.  The states wrote that they would amend their DAPA lawsuit to include a challenge to DACA unless the federal government rescinded the DACA program by September 5, 2017.[9] On July 21, 2017, attorneys general from twenty other states sent a letter to the President urging him to maintain DACA and defend the program in court.[10]  On August 31, 2017, hundreds of America’s leading business executives sent a letter to President Trump urging him to preserve the DACA program.[11] On September 4, 2017, Attorney General Sessions wrote to Acting Secretary of Homeland Security Duke, describing his assessment that "DACA was effectuated by the previous administration through executive action, without proper statutory authority;" that DACA "was an unconstitutional exercise of authority by the Executive Branch;" and that "it is likely that potentially imminent litigation would yield similar results [as the DAPA litigation] with respect to DACA."[12] On September 5, 2017, Attorney General Sessions announced the Administration’s decision to end DACA, and Acting Secretary of Homeland Security Duke issued the memorandum formally rescinding the DACA program. II.  Effect of Today’s Rescission Memorandum The DHS memorandum does not immediately terminate the lawful presence or work authorizations of current DACA recipients, nor does it immediately terminate the DACA program itself.  Rather, DHS has chosen to wind down the program over the coming years.  The details of this phase-out are as follows: DHS will continue to process and approve initial DACA applications that it received as of September 5, 2017, although it will not accept any new applications. DHS will continue to process and approve DACA renewal applications from current beneficiaries, including: (a) applications that DHS received as of September 5, 2017; and (b) applications that DHS receives between now and October 5, 2017, for individuals whose benefits will expire between now and March 5, 2018. DHS will not terminate any individual’s DACA status or work authorization solely on the basis of the rescission memorandum.  Rather, these benefits will be allowed to continue until their previously-established expiration dates, subject to the limited renewal period discussed above. DHS will "generally honor" the validity period for previously-granted foreign-travel requests submitted by DACA beneficiaries, called applications for "advance parole."  However, DHS will not approve any currently-pending requests for advance parole relying on DACA; these requests will be administratively closed, and DHS will refund the associated fees. DHS will reject all initial and renewal DACA applications and requests for advance parole, with the exceptions of those already outlined above that fall within the prescribed time periods. DHS will not "proactively" provide the information submitted in DACA requests to other law enforcement entities for the purpose of immigration enforcement proceedings, except in limited circumstances, such as those involving risks to national security or public safety.[13] DHS will continue to terminate or deny deferred action under DACA on an individual basis when immigration officials consider it appropriate to do so.[14] Although the extended nature of the rescission will delay the effect of terminating DACA somewhat, the end of the program is nonetheless expected to be disruptive to American businesses.  Researchers have estimated that terminating DACA would cause 30,000 people per month to lose their jobs, and will impose costs of approximately $3.4 billion on employers nationwide.[15] III.  Related Developments In a statement issued on September 5, 2017, President Trump called on Congress to pass comprehensive immigration reform, including a program similar to DACA.  President Trump wrote, "Congress now has the opportunity to advance responsible immigration reform that puts American jobs and American security first. . . . I look forward to working with Republicans and Democrats in Congress to finally address all of these issues in a manner that puts the hardworking citizens of our country first. . . . It is now time for Congress to act!"[16] At least one court challenge has already been initiated in reaction to today’s rescission memorandum.  The National Immigration Law Center, joined by the Jerome N. Frank Legal Services Organization at Yale Law School and Make The Road – New York, are requesting leave to amend a complaint in the Eastern District of New York, to allege that the rescission of DACA violates the Administrative Procedure Act and the constitutional rights of DACA beneficiaries.[17]  And at least three Democratic state attorneys general have threatened to challenge the Administration’s decision in court.[18] Additionally, following the Administration’s announcement, the states that successfully challenged the DAPA program voluntarily dismissed their lawsuit.[19] IV.  Guidance For Clients Employers may consider actions to address the developments described above, and minimize the effect on employees.  In particular, employers may want to consider: Identifying employees who are DACA recipients, in order to aid those employees with renewing their status if appropriate; Broadly distributing an informational email to employees regarding these developments and the limited opportunity for renewal (keeping in mind that some employees may not want to self-identify as DACA recipients); and Reviewing the potential impact on travel and work authorization of employees, being careful to comply with I-9 and non-discrimination requirements. Finally, employers may consider the impact that these developments are likely to cause for DACA beneficiaries and their families.  Employers may consider providing counseling or other support for employees affected by this change in policy. * * * Gibson Dunn will continue to closely monitor these rapidly developing issues.    [1]   See Attorney General Sessions Delivers Remarks on DACA (Sept. 5, 2017), https://www.justice.gov/opa/speech/attorney-general-sessions-delivers-remarks-daca.    [2]   See Memorandum from Acting Secretary Elaine C. Duke, Rescission of the June 15, 2012 Memorandum Entitled "Exercising Prosecutorial Discretion with Respect to Individuals Who Came to the United States as Children" (Sept. 5, 2017), https://www.dhs.gov/news/2017/09/05/memorandum-rescission-daca (hereinafter "Rescission Memorandum").    [3]   See Statement from President Donald J. Trump (Sept. 5, 2017), https://www.whitehouse.gov/the-press-office/2017/09/05/statement-president-donald-j-trump.    [4]   See United States Citizenship and Immigration Services, Number of Form 1-821D, Consideration of Deferred Action for Childhood Arrivals, by Fiscal Year, Quarter, Intake, Biometrics and Case Status Fiscal Year 2012-2017 (June 8, 2017).    [5]   Memorandum from Secretary Janet Napolitano, Exercising Prosecutorial Discretion with Respect to Individuals Who Came to the United States as Children (June 15, 2012), https://www.dhs.gov/xlibrary/assets/s1-exercising-prosecutorial-discretion-individuals-who-came-to-us-as-children.pdf.    [6]   Id.    [7]   Memorandum from Secretary Jeh Charles Johnson, Exercising Prosecutorial Discretion with Respect to Individuals Who Came to the United States as Children and with Respect to Certain Individuals Who Are the Parents of U.S. Citizens or Permanent Residents (Nov. 20, 2014), https://www.dhs.gov/sites/default/files/publications/14_1120_memo_deferred_action.pdf.    [8]   Texas v. United States, 86 F. Supp. 3d 591 (S.D. Tex. 2015); see also Texas v. United States, 809 F.3d 134 (5th Cir. 2015), aff’d by an equally divided Court, 136 S. Ct. 2271 (2016). [9]   Letter from Texas Attorney General Ken Paxton, et al., to U.S. Attorney General Jeff Sessions (June 29, 2017),  https://www.texasattorneygeneral.gov/files/epress/DACA_letter_6_29_2017.pdf. [10]   Letter from California Attorney General Xavier Becerra, et al., to President Donald J. Trump (July 21, 2017), https://oag.ca.gov/system/files/attachments/press_releases/7-21-17%20%20Letter%20from%20State%20AGs%20to%20President%20Trump%20re%20DACA.final_.pdf. [11]   Letter to Donald J. Trump, Paul Ryan, Nancy Pelosi, Mitch McConnell, and Charles Schumer (Aug. 31, 2017), https://dreamers.fwd.us/business-leaders. [12]   See Mahita Gajanan, Read Jeff Sessions’ Letter Calling for the End of DACA, TIME (Sept. 5, 2017), http://time.com/4927250/jeff-sessions-daca-rescind-letter; see also Rescission Memorandum, supra note 2. [13]   Department of Homeland Security, Frequently Asked Questions: Rescission Of Deferred Action For Childhood Arrivals (DACA) (Sept. 5, 2017), https://www.dhs.gov/news/2017/09/05/frequently-asked-questions-rescission-deferred-action-childhood-arrivals-daca. [14]   See Rescission Memorandum, supra note 2. [15]   See Immigration Legal Resource Center, Money on the Table: The Economic Cost of Ending DACA, at 4 (Dec. 2016), https://www.ilrc.org/sites/default/files/resources/2016-12-13_ilrc_report_-_money_on_the_table_economic_costs_of_ending_daca.pdf. [16]   Statement from President Donald J. Trump, supra note 3. [17]   See Batalla Vidal, et al. v. Baran, et al., No. 1:16-cv-04756-NGG-JO, Dkt. #46 (E.D.N.Y. Sept. 5, 2017). [18]   Reid Wilson, Dems Threaten to Sue Trump Over DACA, The Hill (Sept. 5, 2017), http://thehill.com/homenews/state-watch/349302-dems-threaten-to-sue-trump-over-daca. [19]   Texas v. United States, No. 1:14-cv-00254, Dkt. #469 (S.D. Tex. Sept. 5, 2017). Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work or the following: Theodore J. Boutrous, Jr. – Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com)Ethan Dettmer – San Francisco (+1 415-393-8292, edettmer@gibsondunn.com) Stuart F. Delery – Washington, D.C. (+1 202-887-3650, sdelery@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

August 25, 2017 |
Unbewusste Denkmuster

​Munich partner Mark Zimmer is the co-author of “Unbewusste Denkmuster” [PDF] published in the issue 16/2017 of the German publication NZA (Neue Zeitschrift für Arbeitsrecht), together with Sara Stajcic. The article focuses on Unconcious Bias Training and related aspects under German labor law.

July 24, 2017 |
Webcast: Navigating Employment Issues: Sexual Harassment, Sex Discrimination and Other Potential Pitfalls in The Workplace

Recent press has made clear that no industry is immune from allegations of sexual harassment or other wrongdoing. From the perspective of an investor or startup company, it can result in serious adverse business consequences: for example, missed investment opportunities, a permanent online reputation, stigma, and a reduction in others’ willingness to work with or for you. Join our panel of employment lawyers as they discuss how to identify, prevent, and respond to workplace harassment and otherwise identify frequent employment-related pitfalls. Among other things, our panel will: Introduce you to the basics of federal and state employment laws—and the legal risks of ignoring them, no matter your organization’s size. Provide practical guidance for responding to behavioral complaints, conducting an investigation, and taking appropriate action. Teach you how to foster a culture of respect in the workplace—with an understanding that today’s workplace extends well outside the office. Address specific questions submitted to the panel in advance. View Slides PANELISTS: Michele Maryott is a partner in Gibson, Dunn & Crutcher’s Orange County office. She is a member of the firm’s Litigation Department and its Labor and Employment and Class Actions Practice Groups. Ms. Maryott’s practice focuses on business litigation, with particular emphasis on employment litigation, class actions and complex commercial disputes. She has litigated a wide range of labor and employment matters, including defending employers against wage and hour and discrimination class actions, and retaliation, sexual harassment, wrongful termination and whistleblower claims in federal and state courts, as well as in administrative proceedings and arbitrations. Rachel Brass is a partner in the San Francisco office of Gibson, Dunn & Crutcher. She is a member of the firm’s Litigation Department where her practice focuses on complex class actions in the labor, employment and antitrust areas, and appellate litigation. Ms. Brass has extensive experience representing clients in high-stakes employment matters in the Supreme Court, as well as federal and state appellate courts throughout the United States. She has successfully represented companies in single plaintiff and class action Title VII, ADA, FEHA and Unruh Act discrimination claims. She has also obtained successful results for several companies in wage and hour class actions. She regularly advises companies on employment-related compliance issues. Laura Sucheski is an associate in the San Francisco office of Gibson, Dunn & Crutcher. She is a member of the firm’s Litigation Department and its Labor and Employment, Class Action, and White Collar Defense and Investigations Practice Groups. She has represented clients in a variety of employment matters, including serving as an active member of the trial team defending a major retailer in a wage-and-hour class action in San Francisco, negotiating a favorable settlement of a classification dispute on behalf of a major shipping carrier, and advising on employment-related compliance matters.   MCLE CREDIT INFORMATION: This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 1.0 credit hour, of which 1.0 credit hour may be applied toward the Ethics and Professionalism requirement.  This course is approved for transitional/non-transitional credit. Attorneys seeking New York credit must obtain an Affirmation Form prior to watching the archived version of this webcast.  Please contact Jeanine McKeown (National Training Administrator), at 213-229-7140 or jmckeown@gibsondunn.com to request the MCLE form.  Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE Elimination of Bias credit by the State Bar of California in the amount of 1.0 hour. California attorneys may claim “self-study” credit for viewing the archived version of this webcast.  No certificate of attendance is required for California “self-study” credit.

July 20, 2017 |
French Market Update – July 2017

France is great again? Many of you have read positive articles on the new government in France and its freshly elected President, Emmanuel Macron. Is it real? First, one needs to understand the context: a quasi-unknown individual a year ago, Mr. Macron has stunned all by winning the first, then second, round of the presidential election, as an "anti-populist", pro-European, candidate. Almost as surprisingly, his party (called "Republic on the Move!"), which has been in existence for less than a year, won an absolute majority (with 350 seats over 577) in the subsequent parliamentary election, held on June 11 and 18, 2017, reducing, for example, the Socialist representatives to 28 from 280 in 2012. This, in turn, means that for the next five years, Mr. Macron has both a mandate and an ability to implement his program. France, in electing him with such latitude, rejected the extreme right (with a Frexit program) and the extreme left (with a very high taxation program). One of Mr. Macron’s key strengths has been his "extreme centrist" positioning, based on the simple concept that necessary policies are neither leftist or rightist ones; they are just common sense and should be supported by all reasonable politicians regardless of their original party. He also promoted a very large number of non-politicians to political positions, thus considerably altering the political landscape. Being an ex-Rothschild banker, Mr. Macron is guided by a resolute desire to "open the country for business" and eliminate the disincentives to investment in France, particularly at a time when Brexit causes potential issues for businesses based in the UK. He also understands the need to act fast, and intends to pass his most emblematic promises, aiming at triggering a supply-side shock and boosting confidence, before the end of 2017. What are these promises? An extensive labor reform to "move the rules of the game" aiming at lowering the unemployment rate to 7% at the end of his term in 2022. Proposed measures include caps on financial penalties for companies sued for firing employees, allowing businesses more flexibility to define internal working rules, merging the various employee representative bodies currently existing in French business organizations to improve social dialogue. To achieve this reform expeditiously, the French Government wants to use a special procedure to pass the measures this Summer without extended debate in parliament. The details of the reform are expected to be announced at the end of August. Strong workers antagonism is likely, but the climate has changed and popular support for movements has weakened.  Tax reform aimed at restoring France’s attractiveness: Among the key signals sent to the business community: a decrease of the corporate income tax (from 34.3% today to 25% in 2022), and, as from 2019, the replacement of the tax credit for competitiveness and employment (CICE) by a substantial reduction in the employers’ social contributions.     Another aspect of the proposed tax reform will be the replacement of the general wealth tax by a special wealth tax limited to real estate and the creation of a "flat tax" on capital gains and dividends at a rate of about 30%. The purpose of this proposal is to favor financial investments over real estate ones.  These long-awaited measures will kick-in as soon as 2018. A 50-billion euro investment program: Although not yet fully financed, this plan will likely rely on the existing program "Investing for the Future" launched by President Sarkozy and on a new wave of privatizations. This program embraces huge investments in training (up to €15bn), supports to the ecological transition, the digitalization of the healthcare system, investments in infrastructures (such as transports) and modernization of the State services, all of which will favor future business fluidity. A large number of these projects will be open for bidding to non-French entities. An additional 10 billion euro "innovation program" is planned to invest into Cleantech, Greentech, AI, all in order to attract and retain start-ups. A new momentum for foreign investments in France After seven years of profound economic crisis, and five years of French bashing due to the former president’s administration, his tax increases and anti-business stance, France now benefits a true shift in perception. These changes have the effect to make France a desirable investment target, especially for business and real estate. Opportunities for foreign investors are relatively cheap, especially given the quality of the administration, education, health and infrastructure and the stability of the political system. France has numerous fundamental strengths including its central location in Europe, excellent communication and transport infrastructure, significant industrial achievements in a wide range of sectors, high productivity, and a well-qualified workforce. All these strengths support opportunities for foreign investments, from the United States and elsewhere. 2017 marks Gibson Dunn’s 50th year in France.  With 45 lawyers, whose expertise covers all aspects of business law, such as corporate transactions, restructuring/insolvency, private equity, litigation, compliance, public law and regulatory, technology and innovation, and finance, as well as tax and real estate, our Paris office,  is well-positioned to assist all the Firm’s clients as their strategy shifts towards France. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. For further information, please contact the Gibson Dunn lawyers with whom you usually work, or the following authors in the firm’s Paris office: Bernard Grinspan (+33 1 56 43 13 00, bgrinspan@gibsondunn.com) Judith Raoul-Bardy (+33 1 56 43 13 00, jraoulbardy@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

July 18, 2017 |
European Court of Justice Confirms German Co-Determination Law

Today, the European Court of Justice has rendered a landmark decision about German corporate co-determination, avoiding a "Europeanization" of the current regime. Germany has a unique system of employee co-determination on the supervisory board of mid-sized and large corporations. In most companies between 500 and 2,000 employees, a third of the supervisory board members must be employee representatives. In corporations with more than 2,000 employees, even half of the seats are filled with employee and union representatives. This system has undergone criticism from investors and legal scholars alike, albeit for different reasons. Since 2013, several scholars and activists have been trying to curb this system in several German courts, which is virtually carved in stone on a political level. The German courts have responded differently to these approaches. One of them (the "TUI Case") has been referred to the European Court of Justice, which has led to the case at hand. The plaintiff argues that the German co-determination laws only consider employees in Germany, not in other EU countries and therefore violate European laws, particularly the principles of non-discrimination (Art. 18 TFEU) and/or the freedom of movement for workers (Art. 45 TFEU). The Court has heard various parties. Most interestingly, the EU Commission performed a surprising turn around in the oral hearing. In their written brief, the Commission had argued that the German co-determination laws do violate EU law. In the oral hearing of 24 January 2017, however, the Commission representative suddenly presented a different legal opinion. As evident from a press release (http://europa.eu/rapid/press-release_STATEMENT-17-141_en.htm), the Commission now held that the German co-determination laws do not violate European law. A similar development could be observed with regard to the Advocate General: In the oral hearing, he held that the German laws did violate EU law and referred to his home country Denmark to argue that co-determination laws could indeed extent to foreign operations. However, in his final written comments on 4 May 2017, the Advocate General deviated from this position and found the contested German co-determination rules compatible with EU law (https://curia.europa.eu/jcms/upload/docs/application/pdf/2017-05/cp170043en.pdf).  This decision comes as a relief to many German companies, which had feared a revolution of their co-determination system with tedious adaption steps, all of which is now history. Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. The two German offices of Gibson Dunn in Munich and Frankfurt bring together lawyers with extensive knowledge of corporate, tax, labor, real estate, antitrust, intellectual property law, litigation and arbitration as well as extensive compliance / white collar crime experience. The German offices are comprised of seasoned lawyers with a breadth of experience who have assisted clients in various industries and in jurisdictions around the world. Our German lawyers work closely with the firm’s practice groups in other jurisdictions to provide cutting-edge legal advice and guidance in the most complex transactions and legal matters. For further information, please contact the Gibson Dunn lawyer with whom you work or any of the following authors in the firm’s Munich office: Lutz Englisch (+49 89 189 33 150, lenglisch@gibsondunn.com) Mark Zimmer (+49 89 189 33 130, mzimmer@gibsondunn.com) Please also feel free to contact any of the following partners in the firm’s Frankfurt and Munich offices: General Corporate and Corporate TransactionsLutz Englisch (+49 89 189 33 150, lenglisch@gibsondunn.com)Ferdinand Fromholzer (+49 89 189 33 121, ffromholzer@gibsondunn.com)Markus Nauheim (+49 89 189 33 122, mnauheim@gibsondunn.com)Dirk Oberbracht (+49 69 247 411 510, doberbracht@gibsondunn.com)Wilhelm Reinhardt (+49 69 247 411 520, wreinhardt@gibsondunn.com) Labor and Employment Mark Zimmer (+49 89 189 33 130, mzimmer@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

June 29, 2017 |
Update on Immigration Executive Order

Gibson Dunn previously issued several client alerts regarding President Trump’s January 27, 2017 and March 6, 2017 Executive Orders restricting entry into the United States for individuals from certain nations and making other immigration-related policy changes.[1] This alert addresses implementation of the Supreme Court’s June 26, 2017 ruling allowing the travel ban to go partially into effect.  The executive branch has indicated it will begin enforcing the order as of 8 pm ET, June 29, 2017.  The most current information indicates this will primarily impact those applying for visas, not those travelling on existing visas. Experience suggests that individuals attempting to board U.S.-bound aircraft, or arriving in the United States, may nonetheless encounter some difficulties. I.    Background On January 27, 2017, President Trump issued the first Executive Order restricting entry into the country for individuals from seven specified nations, as well as related changes to visa and refugee programs.  Multiple courts enjoined implementation of most major aspects of that order, including the entry ban.  On March 6, 2017, the President issued a new Executive Order, rescinding in full the January Order, but providing for a ban on entry of individuals from six specified nations, and suspension of the refugee program, among other changes.  The revised order was narrower in certain respects, notably in removing Iraq from the list of impacted countries, and more clearly defining certain exceptions to the Order, such as the exception of dual citizens from the ban. Courts again blocked implementation of the major provisions, this time before it went into effect.  Ultimately both the Fourth Circuit (sitting en banc) and the Ninth Circuit upheld injunctions issued by the District of Maryland and the District of Hawaii, respectively.[2] The government asked the Supreme Court to reverse the lower courts’ order blocking implementation, as well as to grant certiorari to hear the merits of the case.  II.    Supreme Court Action On June 26, 2017, the Supreme Court issued an order allowing certain aspects of the the March Executive Order to be implemented.[3]  Separately, the Court granted certiorari and added the case to its calendar for the term beginning in October.[4] The Court’s order stayed implementation of the lower court injunctions in part, allowing the government to enforce the ban "with respect to foreign nationals who lack any bona fide relationship with a person or entity in the United States," but continued to block enforcement against individuals who do have such ties.  The Court provided some guidance on what it means to have a "bona fide relationship with a person or entity in the United States": For individuals, a close familial relationship is required. A foreign national who wishes to enter the United States to live with or visit a family member, like Doe’s wife or Dr. Elshikh’s mother-in-law, clearly has such a relationship. As for entities, the relationship must be formal, documented, and formed in the ordinary course, rather than for the purpose of evading [the Executive Order.] The students from the designated countries who have been admitted to the University of Hawaii have such a relationship with an American entity. So too would a worker who accepted an offer of employment from an American company or a lecturer invited to address an American audience.  Not so someone who enters into a relationship simply to avoid § 2(c): For example, a nonprofit group devoted to immigration issues may not contact foreign nationals from the designated countries, add them to client lists, and then secure their entry by claiming injury from their exclusion.[5] III.    Practical Implications It appears that the most immediate impact will be in connection with the issuance of new visas, rather than the use of a visa that was issued prior to 8 pm ET on June 29, 2017.  Certain categories of individuals are exempt from the ban based either on the terms of the March Executive Order itself or the State Department guidance implementing the Supreme Court’s decision.  Those are outlined below. Notwithstanding the clear language of the Executive Order, it is difficult to predict whether those travelling on existing visas will run into difficulties in trying to board U.S.-bound flights or upon attempting to enter upon arrival. A.    Who Is Covered By The Ban And Who Is Not? As a reminder, the March Executive Order barred entry to the United States by nationals of Iran, Libya, Somalia, Sudan, Syria, and Yemen.  (Iraq was not included in the second Executive Order.)  On its face, the March Executive Order already excluded from the ban: Nationals from those countries who are travelling on a passport from a country not included on the list; U.S. Legal Permanent Residents, regardless of nationality; Those travelling on already issued and currently valid visas; and Those travelling on certain diplomatic and related visas.[6] Now the Court has created another exception for those with a "bona fide relationship with a person or entity in the United States."  The primary question at this point is what qualifies as, and what is needed to prove, such a relationship. The State Department issued a cable on June 28, providing guidance about handling visa applications, and has also posted a similar FAQ.[7]  This cable gives some indications of how the government will interpret the March Executive Order, as narrowed by the recent Supreme Court order. The following additional categories of people are now exempt from the ban: Anyone who qualifies for a non-immigrant visa in a "classification other than B, C-1, D, I or K" because that eligibility inherently establishes the required relationship. "Derivative" applicants are also exempt (i.e., certain immediate family members of the main applicant). Individuals who have been granted asylum, refugees already admitted to the United States, and individuals already granted withholding of removal, advance parole, or protection under the Convention Against Torture. Otherwise, eligibility has to be established according to the following criteria: For family-based eligibility, the only relationships that qualify are "close family," which the State Department is defining as parents, parents-in-law, spouses, children (including adults), sons- and daughters-in law, and siblings (including half-siblings).  No other relationships qualify. UPDATE (6/30/17): As the ban was going into effect, the Departments of State and Homeland Security added fiancés to the list of qualifying categories. For entity-based eligibility, the standards are less clear, and largely parrot those in the Supreme Court’s order.  The following are specifically exempt from the Executive Order: Media ("I") visa applicants employed by an organization with a U.S. news office; Students admitted to a U.S. educational institution; Workers who have "accepted an offer of employment from a company in the United States;" and "Lecturer[s] invited to address an audience in the United States." The State Department specifically noted that "a hotel reservation, whether or not paid, would not constitute a bona fide relationship with an entity in the United States." In the event an applicant is not exempt, he or she may still be eligible for a waiver.  The State Department indicated that travelers in the following categories may be eligible for a waiver: Individuals who "previously established significant contacts with the United States but [are] outside the United States on the effective date of the" Order;  Travel for "significant business or professional obligations," which would be "impair[ed]" by the denial of entry; Small children, adoptees, and those needing medical care; and Those travelling for certain international organizations. B.    Practical Tips Without further clear guidance about how travelers (as opposed to visa applicants) will be treated under this system, those who may be affected and are travelling in the near future should collect and carry clear documentation of the purpose of the trip if that documentation might help to show a "bona fide relationship" with people or entities in the United States.  For example, for work-related travel, employment offer letters, conference agendas listening the traveler as a speaker, invitations to a business meeting, and the like may be helpful in the event of questions from immigration officials.  However, the Court made clear that the supporting documentation must show "ordinary course" relationships, and not relationships that appear to have been created for the purposes of fitting within the narrowed scope of the injunction.  As suggested in Gibson Dunn’s earlier alerts on these topics, companies will want to consider effective planning and communication with employees and partners who may be affected by implementation of the Executive Order.   *      *      * Gibson Dunn will continue to monitor these rapidly developing issues closely.    [1]    See, Court Orders Block Implementation of New Immigration Executive Order (March 16, 2017), http://gibsondunn.com/publications/Pages/Court-Orders-Block-Implementation-of-New-Immigration-Executive-Order.aspx; Analysis of March 6, 2017 Executive Order on Immigration (Mar. 7, 2017), http://www.gibsondunn.com/publications/Pages/Analysis-of-March-6-2017-Executive-Order-on-Immigration.aspx;  Ninth Circuit Court of Appeals Issues Opinion Upholding Nationwide TRO of January 27 Immigration-Related Executive Order (Feb. 10, 2017), http://www.gibsondunn.com/publications/Pages/Ninth-Circuit-Issues-Opinion-Upholding-Nationwide-TRO-of-Jan27-Immigration-Executive-Order.aspx; Recent Developments Regarding Executive Order on Immigration (Feb. 1, 2017), http://gibsondunn.com/publications/Pages/Recent-Developments-Regarding-Executive-Order-on-Immigration.aspx; President Trump Issues Executive Order on Immigration (Jan. 30, 2017), http://gibsondunn.com/publications/Pages/President-Trump-Issues-Executive-Order-on-Immigration.aspx     [2]   See Hawaii v. Trump, 2017 WL 2529640 (9th Cir. June 12, 2017) https://cdn.ca9.uscourts.gov/datastore/opinions/2017/06/12/17-15589.pdf; Int’l Refugee Assistance Project v. Trump, 857 F.3d 554 (4th Cir. 2017).    [3]   https://www.supremecourt.gov/opinions/16pdf/16-1436_l6hc.pdf.     [4]   Slip op at 12, https://www.supremecourt.gov/orders/courtorders/062717zr_6537.pdf.    [5]   https://www.supremecourt.gov/opinions/16pdf/16-1436_l6hc.pdf.     [6]   See Analysis of March 6, 2017 Executive Order on Immigration (Mar. 7, 2017), http://www.gibsondunn.com/publications/Pages/Analysis-of-March-6-2017-Executive-Order-on-Immigration.aspx.    [7]   See Dep’t of State, Implementing Executive Order 13780 Following Supreme Court Ruling – Guidance to Visa-Adjudicating Posts (June 28, 2017), http://live.reuters.com/Event/Live_US_Politics/989297085; Dep’t of State, Executive Order on Visas (June 29, 2017), https://travel.state.gov/content/travel/en/news/important-announcement.html.   Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work or any of the following: Theodore J. Boutrous, Jr. – Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com)Rachel S. Brass – San Francisco (+1 415-393-8293, rbrass@gibsondunn.com)Anne M. Champion – New York (+1 212-351-5361, achampion@gibsondunn.com)Ethan Dettmer – San Francisco (+1 415-393-8292, edettmer@gibsondunn.com) Theane Evangelis – Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Kirsten Galler – Los Angeles (+1 213-229-7681, kgaller@gibsondunn.com) Ronald Kirk – Dallas (+1 214-698-3295, rkirk@gibsondunn.com)Joshua S. Lipshutz – Washington D.C. (+1 202-955-8217, jlipshutz@gibsondunn.com) Katie Marquart, Pro Bono Counsel & Director – New York (+1 212-351-5261, kmarquart@gibsondunn.com) Samuel A. Newman – Los Angeles (+1 213-229-7644, snewman@gibsondunn.com) Jason C. Schwartz – Washington D.C. (+1 202-955-8242, jschwartz@gibsondunn.com) Kahn A. Scolnick – Los Angeles (+1 213-229-7656, kscolnick@gibsondunn.com)   © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.