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A Briefing on Emerging Issues Impacting Transactional Practice - Winter 2017

April 27, 2022 (18 min read)


THE FIFTH CIRCUIT COURT OF APPEALS ISSUED A BRIEF order December 8 granting expedited review of a November 22 ruling by a federal judge in the Eastern District of Texas preliminarily enjoining implementation of new white-collar exemption rules issued by the U.S. Department of Labor (DOL). The rules, which were scheduled to take effect on December 1, would have extended overtime pay to an estimated 4.2 million Americans. (Nevada v. U.S. Department of Labor, 5th Cir., No. 16-41606)

The appeals court said that it will schedule oral argument at the first available date after briefing is completed. The DOL’s opening brief was filed on December 15, with the respondent’s brief following on January 17. The DOL’s final brief was due on January 31.

The consolidated case, Nevada v. U.S. Department of Labor, 2016 U.S. Dist. LEXIS 162048 (E.D. Tex. Nov. 22, 2016), filed by 21 states and various business groups, challenges the DOL’s new overtime regulations, which more than double the salary threshold needed to qualify for the Fair Labor Standards Act’s (FLSA) whitecollar exemptions. The exemptions except certain executive, administrative, and professional employees from the FLSA’s minimum wage and overtime requirements.

The Texas court’s order enjoined the DOL from “implementing and enforcing” the new regulations. U.S. Judge Amos Mazzant III focused on two aspects of the new rules: an increase in the salary threshold for exempt white-collar employees (from $455 per week or $23,660 annually to $921 per week or $47,892 annually) and a provision that automatically updates that threshold every three years, beginning January 1, 2020.

Judge Mazzant cited the language of the FLSA, which exempts from the minimum wage and overtime requirements “any employee employed in a bona fide executive, administrative, or professional capacity.” 29 U.S.C. § 213(a)(1). While acknowledging that the terms “bona fide executive, administrative, or professional capacity” are not statutorily defined and that Congress delegated that task to the DOL, the judge declined to give deference to the DOL’s interpretation, finding that the statutory language is clear and unambiguous and evidences an intent to define exempt employees in terms of duties only. By raising the salary threshold to $913 per week, the judge said, the new regulations created a “de facto salary-only test.” Congress “did not intend salary to categorically exclude an employee with [exempt] duties from the exemptions,” he explained. Further, the judge said that the DOL does not have the authority to implement the automatic updating mechanism without further rulemaking.

While the injunction is preliminary in nature, the language and tenor of the Texas court’s opinion suggest that a reversal of its decision is unlikely. At the same time, the DOL’s appeal will result in further delays and continued uncertainty. But perhaps the real uncertainty lies with the policies of the new Trump administration, which could direct the DOL to altogether abandon the new rules and any related litigation.

Laurie E. Leader, author of Matthew Bender’s Wages and Hours: Law and Practice

To find this article in Lexis Practice Advisor, follow this research path:

RESEARCH PATH: Labor & Employment > Wage and Hour Compliance > FLSA Coverage and Requirements > Articles > Overtime Requirements


AMID SIGNS THE TRUMP ADMINISTRATION WILL MOVE quickly to scale back the Dodd-Frank Act (The Dodd–Frank Wall Street Reform and Consumer Protection Act), two prominent regulatory officials are pushing back. Shortly after being nominated to head the Treasury Department, former Goldman-Sachs banker Steven Mnuchin made the rounds on cable news shows and proclaimed that his number-one priority on the regulatory front is to do away with parts of Dodd-Frank, which he says is stifling community bank lending. Meanwhile, Comptroller of the Currency Thomas Curry and Federal Reserve Governor Daniel Tarullo urged prudence, but both acknowledged there needs to be a different set of standards for smaller banks.

Curry: Not the Time to Change Course

In a speech to attendees at the annual meeting of The Clearing House, a trade association representing the nation’s largest banks, Curry said, “[N]ow is not the time to change course or weaken the protections and safeguards we have put in place since the last crisis. We cannot return to the same practices and weaker safeguards that resulted in the crisis we experienced in 2008.” Curry noted that large financial institutions and community banks are different, and that the regulators have acted accordingly: “There is no denying that these institutions with $500 billion, a trillion, or even $2 trillion in assets can have a tremendous impact on our banking system and the nation’s economy if something goes wrong. They deserve added attention, higher standards, and more robust levels of capital and liquidity than smaller institutions. That’s why in implementing these rules since the crisis, we have been careful to moderate the impact of these standards on smaller banks that serve local communities across the country.”

Cautioning against “light-touch supervision,” Curry said his agency is contemplating action to “raise the standards of governance at our banks.” One thought under consideration: requiring national banks to separate the roles of board chairman and chief executive officer. To eliminate potential conflicts of interest, some national banks have split the roles of the two.

As for community banks, Curry said they, too, “should be careful not to undo the progress they’ve made since the crisis. To remain strong and healthy, community banks, and their examiners, need to focus on strategic risk, rising credit risk from stretching for yield while relaxing underwriting standards, expansion of new technologies, and compliance issues.”

Tarullo: Do Not Forget Recent History

Speaking at the Federal Reserve Bank of Cleveland and Office of Financial Research 2016 Financial Stability Conference, Tarullo warned, “It is critical that we not forget our still quite recent history.” Tarullo pointed to the years leading up to the 2008 recession, saying, “Many factors contributed to the unsustainability and fragility of the pre-crisis financial system and the inadequacy of regulation and supervision was clearly among them.”

Fast-forwarding to the present where “the United States has the strongest and most diverse financial system of any major economy in the world,” Tarullo credited a forceful monetary and fiscal policy response and regulatory reform for the recovery.

In Tarullo’s view, Dodd-Frank was a necessary antidote to the recession’s ills, and he praised its application of capital, liquidity, and risk management requirements to large banks, with progressively more stringent measures applied to the most systemically important institutions.

Tarullo said, however, that the threshold for enhanced prudential standards was set too low in places, and he would entirely exempt community banks (those with less than $10 billion in assets) from some regulations, such as the Volcker Rule and the incentive compensation rule.

Pratt’s Bank Law & Regulatory Report, Volume 51, No. 1

To find this article in Lexis Practice Advisor, follow this research path:

RESEARCH PATH: Finance > Fundamentals of Financing Transactions > Regulations Affecting Credit > Articles > Other Regulatory Issues


Labor and Employment Issues Under The Trump Presidency

THE ELECTION OF PRESIDENT DONALD TRUMP WILL likely have substantial implications in the labor and employment arena, particularly on the Affordable Care Act, persuader activities, and immigration policy.

Affordable Care Act

One of the key promises of President Trump’s election campaign was the repeal of the Affordable Care Act, a touted triumph of President Barack Obama’s administration. According to the New York Times, since the election President Trump has wavered on that promise, even indicating that he would like to keep two provisions of the law: one that requires employers to cover pre-existing health conditions and a second that permits children to be covered under their parents’ plans until they reach their mid-20s.

However, even if President Trump has personally backed off the anti- Obamacare stance that he espoused during the campaign, there is a serious question as to whether he could resist the tide of Republican demands that the law be substantially revised, if not repealed outright. Republicans now control both houses of Congress with a Republican as President for the first time since 2005. The pressures will be immense for change.

DOL’s New Rule on Persuader Activities

Section 203(a) of the Labor-Management Reporting and Disclosure Act (LMRDA)1 requires an employer to report any payment to, or agreement or arrangement with, a labor relations consultant pursuant to which the consultant undertakes activities (or agrees to do so) if an object of those activities is “to persuade employees to exercise or not to exercise, or persuade employees as to the manner of exercising, the right to organize and bargain collectively through representatives of their own choosing . . . .” Section 203(b)2 of the LMRDA imposes similar requirements on labor relations consultants. It also requires consultants subject to this reporting requirement to report receipts and disbursements of any kind “on account of labor relations advice and services.”

Section 203(c)3 creates an exception for services that constitute “advice,” and Section 204 exempts from the reporting requirement “any information which was lawfully communicated to [an] attorney by any of his clients in the course of a legitimate attorney-client relationship.”4

Regulations promulgated by the Department of Labor (DOL) had long defined “advice” in such a manner as to exempt labor relations attorneys from the reporting requirement. However, in March of 2016, the DOL reversed itself and issued a final rule that would subject attorneys representing clients in labor matters to the reporting requirements. The rule was immediately challenged in court and an injunction against its enforcement, pending resolution on the merits, was issued in July of 2016.5

It can be expected that those opposing the new rule will not be satisfied with awaiting a decision on the merits but will push the DOL, as reconstituted by President Trump, to reverse the rule at the administrative level.

Immigration Policy

President Trump’s campaign platform included tough immigration planks, including building “an impenetrable physical wall on the southern border,” and reversing two programs protecting illegal immigrants implemented by President Obama as executive actions: (1) Deferred Action for Childhood Arrivals (DACA), which allows certain undocumented immigrants who entered the United States before June 2007, at a time that they were under 16, to obtain a two-year work permit and be exempt from deportation; and (2) Deferred Action for Parental Accountability (DAPA), which grants deferred action status to certain illegal immigrants who have lived in the United States since 2010 and have children who are either American citizens or lawful permanent residents.

Although President Trump promised during his campaign that Mexico would pay for the “impenetrable physical wall on the southern border,” Mexico has shown no inclination to do so, and building the wall would require approval and funding by Congress. It may prove more difficult to implement than the Trump campaign promised its supporters. It is not unreasonable, however, to anticipate substantially tougher policies that will significantly limit immigration, and DACA and DAPA may be eliminated by executive fiat.

Bender’s Labor & Employment Bulletin, Volume 16 • Issue No. 12

To find this article in Lexis Practice Advisor, follow this research path:

RESEARCH PATH: Labor & Employment > Business Immigration > Employment Eligibility Verification > Articles > DAPA and DACA


THE FEDERAL COMMUNICATIONS COMMISSION (FCC) issued an order denying a Mortgage Bankers Association (MBA) petition that sought an exemption from the prior-express-consent requirement of the Telephone Consumer Protection Act (TCPA).

Congress enacted the TCPA in 1991 to address certain calling practices thought to be an invasion of consumer privacy and a risk to public safety. The TCPA and the Commission’s rules prohibit robocalls to wireless telephone numbers and other specified recipients except when made (1) for an emergency purpose, (2) solely to collect a “debt owed to or guaranteed by the United States,” (3) with the prior express consent of the called party, or (4) pursuant to a Commission-granted exemption.

In response to the MBA petition, the FCC found that the MBA had not shown, as a threshold matter, that exempted calls would be free of charge to called parties. The FCC also found that the MBA had not shown that it should be able to make or send non-time-sensitive robocalls, including robotexts, to consumers without first obtaining consumer consent.

Pratt’s Bank Law & Regulatory Report, Volume 51, No. 1

To find this article in Lexis Practice Advisor, follow this research path:

RESEARCH PATH: Finance > Fundamentals of Financing Transactions > Regulations Affecting Credit > Articles > Other Regulatory Issues


BANK REGULATORS ISSUED interagency final rules December 12, increasing the number of small banks and savings associations eligible for an 18-month examination cycle rather than a 12-month cycle.

Under the final rules, qualifying wellcapitalized and well-managed banks and savings associations with less than $1 billion in total assets are eligible for an 18-month examination cycle. Previously, only firms with less than $500 million in total assets were eligible for the extended examination cycle. Qualifying wellcapitalized and well-managed U.S. branches and agencies of foreign banks with less than $1 billion in total assets are also eligible.

The final rules increase the number of institutions that may qualify for an 18-month examination cycle by more than 600 to approximately 4,800 banks and savings associations. In addition, the final rules increase the number of U.S. branches and agencies of foreign banks that may qualify for an 18-month examination cycle by 30 branches and agencies, to a total of 89.

The interagency rules are intended to reduce regulatory compliance costs for smaller institutions while maintaining safety and soundness protections. These rules have been in effect since February 29, 2016, pursuant to the interim final rules previously adopted by the agencies.

The agencies—the Federal Deposit Insurance Corporation, the Federal Reserve, and the Office of the Comptroller of the Currency—acted following passage of the Fixing America’s Surface Transportation Act (FAST) by Congress in late 2015. Section 83001 of FAST permits the agencies to conduct a full-scope, on-site examination of qualifying insured depository institutions with less than $1 billion in total assets no less than once during each 18-month period.

Pratt’s Bank Law & Regulatory Report, Volume 51, No. 1

To find this article in Lexis Practice Advisor, follow this research path:

RESEARCH PATH: Finance > Fundamentals of Financing Transactions > Regulations Affecting Credit > Articles > Other Regulatory Issues


A NEW REPORT BY THE FINANCIAL ACTION TASK FORCE (FATF) concludes that the anti-money laundering and combating the financing of terrorism framework in the United States is “well developed and robust.” According to the report, at the federal level the United States achieves more than 1,200 money laundering convictions a year.

The report says that the FATF has witnessed significant improvements in the 10 years since its last report, and it credits much of the improvement to financial institutions and (1) an evolution in their understanding of money laundering and terrorist financing risks and obligations, and (2) their implementation of preventative systems and processes, including for on-boarding customers, transaction monitoring, and reporting suspicious transactions.

However, the FATF warned that the U.S. regulatory framework has gaps in other areas, including minimal coverage of certain institutions and businesses, such as investment advisors, lawyers, accountants, real estate agents, and trust company service providers (not trust companies). The FATF also faulted the lack of timely access to accurate beneficial ownership information and the absence of uniformity in money laundering efforts at the state level.

The report is available at:

Pratt’s Bank Law & Regulatory Report, Volume 51, No. 1

To find this article in Lexis Practice Advisor, follow this research path:

RESEARCH PATH: Finance > Fundamentals of Financing Transactions > Regulations Affecting Credit > Articles > Other Regulatory Issues


THE FEDERAL HOUSING FINANCE AGENCY (FHFA) ISSUED a final rule creating complementary processes for Fannie Mae and Freddie Mac (the Enterprises) to establish and submit plans for their “Duty to Serve” activities. Under the rules, the FHFA will annually evaluate, rate, and report to Congress each Enterprise’s compliance with its Duty to Serve obligations as required by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008.

The statute requires Fannie Mae and Freddie Mac to serve three specified underserved markets—manufactured housing, affordable housing preservation, and rural housing—by improving the distribution and availability of mortgage financing in a safe and sound manner for residential properties that serve very low-, low-, and moderate-income families in these markets.

The final rule sets forth specific activities that the Enterprises may consider undertaking, at their discretion, to receive Duty to Serve credit and provides that the Enterprises may propose additional activities. The final rule does not mandate any particular activities but requires the Enterprises to consider ways to better serve families in the three underserved markets.

Under the final rule, Fannie Mae and Freddie Mac will each submit to FHFA a three-year Underserved Markets Plan that describes the activities and objectives they will undertake to meet their Duty to Serve requirements. The plans will become effective January 2018.

“We look forward to working with Fannie Mae and Freddie Mac to help meet the critical housing needs for very low-, low-, and moderate-income American families around the country in the manufactured housing, affordable housing preservation, and rural housing markets,” FHFA Director Melvin L. Watt said. “As we do so,” he added, “we of course will evaluate each Enterprise proposal to ensure that it will not compromise safety and soundness.”

Pratt’s Bank Law & Regulatory Report, Volume 51, No. 1

To find this article in Lexis Practice Advisor, follow this research path:

RESEARCH PATH: Finance > Fundamentals of Financing Transactions > Regulations Affecting Credit > Articles > Other Regulatory Issues


IN FISCAL YEAR 2016, THE U.S. EQUAL EMPLOYMENT Opportunity Commission (EEOC) resolved nearly 5,000 charges of discrimination based upon mental health conditions and obtained approximately $20 million for individuals with mental health conditions who alleged that they were unlawfully denied employment and reasonable accommodations.

EEOC Chair Jenny R. Yang stated in a recent release on workplace protections under the Americans With Disabilities Act (ADA), “Many people with common mental health conditions have important protections under the ADA. Employers, job applicants, and employees should know that mental health conditions are no different than physical health conditions under the law." To assist employees in understanding the rights of individuals with mental health conditions under the provisions of the ADA, the EEOC has issued two resource documents on the subject.

Legal Rights of Employees

The first document, “Depression, PTSD, and Other Mental Health Conditions in the Workplace: Your Legal Rights,” is directed to job applicants and employees with mental health conditions and explains how they are protected from employment discrimination and harassment based on their conditions. The resource document makes clear that it is illegal for an employer to discriminate against a job applicant or employee simply because that individual has a mental health condition and that unlawful discrimination includes firing, rejecting the individual for a job or a promotion, forcing the individual to take leave, or failing to prevent workplace harassment.

The EEOC notes, however, that the ADA does not require an employer to hire or keep disabled persons in jobs they cannot perform or in jobs where they would pose a “direct threat” to safety. However, for an employer to take a job action based upon an individual’s mental health condition, the employer must have objective evidence that the person cannot perform the job duties in a safe manner even without a reasonable accommodation. Reasonable accommodations that can be of assistance to persons with mental health conditions include altering work schedules to accommodate therapy appointments, having the individual work in a quiet office space, changing supervisory methods such as providing written instead of oral instructions, and working from home.

The resource also emphasizes that in most situations, an individual with a mental health condition can keep that condition private. Under the ADA, an employer is allowed to ask medical questions only in certain limited circumstances: the person is asking for a reasonable accommodation, the individual is undergoing a conditional offer medical exam, the employer is engaging in affirmative action for individuals with disabilities, or there is objective evidence that the individual is unable to do his or her job safely because of the medical condition.

Mental Health Providers and Reasonable Accommodation

In addition to issuing its publication “Your Legal Rights,” the EEOC also issued a fact sheet entitled “The Mental Health Provider’s Role in a Client’s Request for a Reasonable Accommodation at Work.” The fact sheet deals with situations in which an employee with a mental health condition needs to obtain documentation from his or her mental health provider as part of the process of obtaining a reasonable accommodation at work. The fact sheet is directed to mental health providers and explains an employer’s obligation to provide disabled employees with reasonable accommodations and the type of accommodations that may prove effective.

The EEOC’s publications are available at

Bender’s Labor & Employment Bulletin, Volume 17 • Issue No. 1

To find this article in Lexis Practice Advisor, follow this research path:

RESEARCH PATH: Labor & Employment > Attendance, Leaves, and Disability Management > The ADA and Disability Management > Articles > ADA

*Copyright © 2017. Matthew Bender & Company, Inc., a member of the LexisNexis Group. All rights reserved. Materials reproduced from Pratt’s Bank Law & Regulatory Report and Bender’s Labor & Employment Bulletin with permission of Matthew Bender & Company, Inc. No part of this document may be copied, photocopied, reproduced, translated or reduced to any electronic medium or machine readable form, in whole in in part, without prior written consent of Matthew Bender & Company, Inc

1. 29 U.S.C. § 433(a). 2. 29 U.S.C. § 433(b). 3. 29 U.S.C. § 433(c). 4. 29 U.S.C. § 434. 5. Nat’l Fedn. of Indep. Bus. v. Perez, 2016 U.S. Dist. LEXIS 89694 (N.D. Tex. June 27, 2016).