Employer’s Guide to the new FFCRA Paid Sick Leave Requirements

With the flurry of new legislation in response to the COVID-19 pandemic, many companies are concerned about what benefits they have to provide their employees regarding paid sick leave, especially related to COVID-19, and what, if any, programs are available to help them bear the costs of these new employee benefits.

In short, while employers are obligated to grant employees paid sick time in accordance with these new laws, the employer will receive immediate reimbursement in the form of a credit against any Federal withholding tax amounts due to the IRS and an additional cash refund if the credit is insufficient to offset the paid leave granted to employees.

Employee Rights and Benefits

The Families First Coronavirus Response Act (“FFCRA”) granted broad, new paid sick leave rights to employees of qualified employers – namely any private business with fewer than 500 employees. These new provisions, at least currently, are limited in time and only apply from April 1, 2020 through December 31, 2020.

Importantly, the FFCRA established six qualifying reasons for an employee to take leave. These reasons are:

  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  2. The employee has been advised by a health care provide to self-quarantine related to COVID-19;
  3. The employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  4. The employee is caring for an individual subject to an order described in section 1 or self-quarantine as described in section 2;
  5. The employee is caring for his or her child whose school or place of care is closed or unavailable due to COVID -19-related reasons; and
  6. The employee is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services.

Further, the FFCRA provides that an employer must provide up to two weeks of paid sick leave to qualified employees, paid at:

  • 100% of their regular rate of pay (up to $511 per day and $5,110 total) if the leave is for any of reasons 1 through 3 above; or
  • 2/3 of their regular rate of pay (up to $200 daily and $2,000 total) if the leave is for reasons 2 or 6 above.

Additionally, if the employee is taking leave due to reason 5, they are entitled to up to 12 weeks of paid leave at 2/3 their hourly rate (up to $200 daily and $12,000 total). If the employee has been employed for at least 30 days, the employee may be entitled to an additional 10 weeks of 2/3 pay if it is being taken for reason 5.

For part-time employees, the regular rate of pay is calculated based on the normal hours that the employee would have been expected to work during that weekly time period.

As with the FMLA, the employee must provide notice and that notice must only be given within a reasonable time given the circumstances. However, given the reasons for leave, reasonable notice could very well be shortly before or even shortly after the leave begins. Further, the employer may require that the employee provide documentation to support the leave. In fact, as discussed below, the IRS may request this documentation when the employer applies for reimbursement.

Finally, the employer must post in a conspicuous place notice of these FFCRA requirements. The Department of Labor poster containing these rights is available here.

Employer Benefits, and Potential Exemptions

While the FFCRA imposes significant financial obligations on small businesses as described above, it also ensures that those financial obligations are 100% refundable. Following the passage of the FFCRA, the IRS issued guidance to businesses as to how to obtain refunds. This guidance was adopted into law with the passage of the CARES Act.

Importantly, the FFCRA provides that employers who provide the leave and pay described above are entitled to 100% reimbursement. This reimbursement includes the employer’s share of the Medicare tax imposed on those wages and its cost of maintaining health insurance coverage for the employee during the leave period. To ensure that businesses already struggling due to the COVID-19 pandemic receive this reimbursement quickly, the IRS has set up a two-pronged process for reimbursement.

The first prong allows employers to deduct from their Federal payroll taxes the amounts they spent complying with the employee sick leave portion of the FFCRA. Thus, employers will immediately receive reimbursement up to the amount of their payroll taxes.

To the extent the reimbursement exceeds the payroll taxes, the IRS has created a second prong that allows the employer to submit forms for reimbursement of costs above the amounts covered by the payroll tax withholding, and even allows for advanced reimbursement for anticipated overages. The IRS is working on drafts of these forms and they are expected to be final in the very near future. Further, the IRS is promising a fast turn-around time on these refunds (two weeks), to help ensure that employers are getting these refunds quickly.

As mentioned above, the IRS is requiring that employers who claim this credit maintain sufficient documentation to show that the employee’s leave was for one of the qualifying reasons.

Finally, if the company has less than 50 employees, it may be eligible for an exemption to the requirement that the employer cover leave for reason number 5. To qualify, the employer must believe that providing said leave would “jeopardize the viability of the business as an ongoing concern.” While the Department of Labor is in the process of drafting regulations related to this exemption, it recommends that any business seeking to utilize this exemption keep detailed records supporting the reasons for the exemption.

Conclusion

If you need any assistance in implementing the new FFCRA sick leave provisions, obtaining the refund, or determining if you qualify for the exemption, you should contact an attorney at Smith & Associates to discuss your rights and options.

New Law Allows Pharmacists to Diagnose and Treat Certain Medical Conditions

On March 11, 2020, Governor Ron DeSantis signed HB 389 into law. This law allows qualified pharmacists the ability to treat chronic illnesses and to test, diagnose, and treat certain minor, non-chronic illnesses.

Treatment of Chronic Illnesses

This new law creates Florida Statute § 465.1865 entitled “Collaborative Pharmacy Practice for Chronic Health Conditions.” This section sets forth the requirements for a pharmacist to treat certain chronic health conditions. Importantly, these chronic health conditions are limited to:

  • Arthritis;
  • Asthma;
  • Chronic obstructive pulmonary diseases;
  • Type 2 Diabetes;
  • Human immunodeficiency virus or acquired immune deficiency syndrome;
  • Obesity; and
  • Other chronic conditions that the Board of Pharmacy may allow by future rule making.

Fla. Stat. § 465.1865(1).

To be able to treat these chronic conditions, a pharmacist must enter into a “Collaborative Pharmacy Practice Agreement” with the patient’s licensed physician. This agreement must include:

  • The name of the patient(s) for whom a pharmacist may provide services;
  • The chronic health condition(s) to be managed;
  • The specific drugs to be managed;
  • The circumstances under which the pharmacist may order and evaluate laboratory or clinical tests;
  • The conditions upon which the pharmacist must notify the physician;
  • The beginning and end dates of the treatment; and
  • A statement that the agreement can be terminated at any time by either the pharmacist or the physician.

Fla. Stat. § 465.1865(3)(a).

Additionally, before a pharmacist can treat these chronic conditions, the pharmacists must be certified by the Board of Pharmacy. To obtain this certification, the pharmacists must:

  • Have an active pharmacy license;
  • Have a Doctor of Pharmacy or have completed five years as a licensed pharmacist;
  • Complete a 20-hour course on Collaborative Treatment of Chronic Health Conditions that is approved by the Board of Pharmacy;
  • Maintain at least $250,000 of professional liability insurance; and
  • Have an established system for keeping patient records.

Fla. Stat. § 465.1865(2).

As this law was recently passed, rulemaking has not yet begun. However, as the Board of Pharmacy promulgates rules on collaborative treatment of chronic illnesses, we will provide update with any new developments.

Treatment of Non-Chronic Health Conditions

Additionally, the new law created Florida Statute § 465.1895, which allows for the testing and treatment of minor, non-chronic health conditions by a pharmacist. Minor, non-chronic health conditions include:

  • Influenza;
  • Streptococcus;
  • Lice;
  • Certain skin conditions; and
  • Minor, uncomplicated infections.

Fla. Stat. § 465.1895(1)(a).

Much like the treatment of chronic conditions, a pharmacist who wishes to treat non-chronic, minor illnesses must do so under the supervision of a physician and pursuant to written protocol between the pharmacist and the physician. This protocol must contain:

  • The categories of patients the pharmacist s authorized to treat;
  • The physician’s instruction for obtaining relevant patient medical history;
  • The physician’s instructions for the treatment of the condition based on the patients age, symptoms, and test results; and
  • A process and schedule for the physician to review the pharmacist’s actions and for the pharmacist to notify the physician of his or her actions.

Fla. Stat. § 465.1895(5).

As rule making progresses, new requirements may be added to this list.

Finally, any pharmacist who wishes to treat minor, non-chronic health conditions must be certified by the Board of Pharmacy to do so. To obtain this certification, the pharmacist must, among other things:

  • Hold an active license to practice pharmacy in Florida;
  • Take a 20-hour board approved education course on assessing and treating minor, non-chronic health conditions;
  • Maintain at least $250,000 of liability coverage;
  • Upon request, furnish patient health care records to a health care practitioner designated by the patient; and
  • Maintain patient records for five years.

Fla. Stat. § 465.1895(2).

Conclusion

This new law takes effect on July 1, 2020. Right now, the Board of Pharmacy is in the beginning stages of developing rules to implement this new law. As these rules progress, we will provide any important updates.

If you are a pharmacist who would like to take advantage of this new law and have questions about how to obtain licensing, you should contact an attorney at Smith & Associates to discuss your options.

Autonomous Practice and Nurse Practitioners: What the New Florida Law Holds in Store

On March 11, 2020, only hours after it was passed by the Florida Legislature, Governor Ron DeSantis signed HB 607 into law. Importantly, this new law allows “advanced practice registered nurses” to be licensed for autonomous practice. Once this law takes effect on July 1, 2020, qualified nurse practitioners will be able to get licensed for autonomous practice and be able to set up their own practices without the need for physician supervision. However, with this new opportunity, new issues arise for nurse practitioners who want to set up their own shop. This article discusses the requirements to be licensed for autonomous practice and some issues that nurse practitioners may face if they want to set out on their own.

Requirements to Be Licensed for Autonomous Practice

HB 607 creates Section 464.0123, Florida Statutes, entitled “Autonomous Practice by an Advanced Practice Registered Nurse.” This new law sets forth the requirements for an advanced practice registered nurse to be licensed to practice autonomously. Specifically, this new law requires that an applicant for autonomous practice:

  • Hold an active, unencumbered license to practice advanced nursing;
  • Not have any disciplinary action within the past five years;
  • Completed 3,000 hours of clinical practice (including clinical instruction hours) within the past five years; and
  • Completed three graduate level semester hours in differential diagnosis and three graduate level semester hours in pharmacology within the past five years.

Fla. Stat. § 464.0123 (1).

The statute also provides that the Board of Nursing may add additional requirements through the rulemaking process. While the rulemaking process has not yet begun, any nurse practitioner looking to start an autonomous practice should keep abreast of this process.
Additionally, the new law requires that autonomous nurse practitioners must demonstrate the financial responsibility to pay any malpractice claims that may arise. This can be accomplished by either of the following methods:

  • Maintaining professional liability coverage in an amount not less than $100,000 per claim, with a minimum annual aggregate of not less than $300,000; or
  • Maintaining an unexpired, irrevocable letter of credit in an amount of not less than $100,000 per claim, with a minimum annual aggregate availability of credit of not less than $300,000.

Fla. Stat. § 464.0123(2)(a).

Practice Requirements

The new law also sets forth the practice requirements for autonomous nurse practitioners. Specifically, the new law allows for autonomous practice nurse practitioners to:

  • Engage in autonomous primary care practice, including family medicine, general pediatrics, and general internal medicine;
  • For certified nurse midwives, engage in autonomous practice for the following:
    • Perform superficial minor surgical procedures;
    • Manage the patient during labor and delivery to include amniotomy, episiotomy, and repair;
    • Order, initiate, and perform appropriate anesthetic procedures.
    • Perform postpartum examinations;
    • Order appropriate medications;
    • Provide family-planning services and well-woman care; and
    • Manage the medical care of the normal obstetrical patient and the initial care of a newborn patient.
  • Perform general functions of an advanced practice registered nurse;
  • For patients that require the services of a health care facility, they can:
    • Admit and discharge patients; and
    • Manage the care of the patient in the facility.
  • Provide a signature, certification, stamp, verification, affidavit, or endorsement that is otherwise required to be provided by a physician, with the notable exception that they cannot provide medical marijuana certifications.

Fla. Stat. § 464.0123(3)(a).

Additionally, the new law requires that certified nurse midwifes must have a written transfer agreement with a hospital and a written referral agreement with a licensed physician. Fla. Stat. § 464.0123(3)(b). Finally, the law prohibits autonomous nurse practitioners from performing any surgical procedure other than a subcutaneous procedure. Fla. Stat. § 464.0123(3)(c).

Issues with Autonomous Practice

Nurse practitioners looking to establish their own practice will now face many of the same issues that physicians face. The first issue is existing employment agreements. Many nurse practitioners were forced to sign employment agreements either with their physician practice group or hospital when they began their employment. Many of these employment agreements contain restrictive covenants, governing when and where employees can work after terminating their current job (e.g., they may prevent the nurse practitioner from working at any competitive practice within 20 miles of the current practice for three years). Additionally, these employee agreements may also contain prohibitions on soliciting patients or employees. Any nurse practitioner seeking to establish an autonomous practice needs to first understand what restrictions are contained in any current employment agreement and the validity of those restrictions.

Next, nurse practitioners should decide the type of business entity that should be formed. As licensed professionals, nurse practitioners, in addition to the normal business entity options, will have the ability to form Professional Associations or Professional Limited Liability Corporations in Florida. What business entity a nurse practitioner should choose is very fact intensive and depends on an individual’s circumstances. However, in any event, it is strongly recommended that any nurse practitioner seeking to start their own practice consult with competent legal and tax professionals to establish the business entity.

In conjunction with the above, nurse practitioners may want to form their own practice groups with multiple nurse practitioners. If this is the case, in addition to the business entity formation documents, agreements between the owners of the practice group need to be created. These agreements can be complex but are very necessary. Owners of these practice groups, much like owners of physician practice groups, need to consider numerous issues to ensure that the practice group can continue to function through changes that naturally occur over time. For example, what if an owner wants to retire? What if one wants to quit and set up a new practice group across the street? What if an owner passes away? Further, when practice groups are formed, additional licensure in the form of a health care clinic license from the Agency for Health Care Administration may be required. These and many more questions need to be addressed at the outset to minimize future uncertainty.

In addition, much like physician practice groups, nurse practitioners will need to adopt their own employee agreements, employment handbooks, and employee policies and procedures.

Finally, and probably most importantly, autonomous nurse practitioners need to be able to bill private and government insurance. This includes getting a Medicare/Medicaid provider number and reviewing insurance contracts and Medicare/Medicaid provider agreements.
Nurse practitioners seeking to start their own autonomous practice should seek out legal counsel to assist at each of these steps.

Conclusion

Courthouses are filled with lawsuits from physicians who wanted to start their own practice but failed to properly plan for issues that a competent attorney could have warned them would arise. As nurse practitioners begin to start their own practices, they will face the same issues and should take the same precautions that physician practices do to protect themselves and the future of their practice.
Smith & Associates has extensive experience representing physicians and physician practice groups. If you are a nurse practitioner seeking to take advantage of this new law and start your own autonomous practice, you should contact an attorney at Smith & Associates to discuss your rights and options.

Coronavirus Impacts on Employers and Employees: Overview of Federal, State and Local Mitigation and Assistance Programs

The Coronavirus pandemic poses unprecedented challenges for employers and employees as more stringent measures and restrictions are imposed almost daily by federal, state and local officials seeking to control the spread of the virus. The possibility of large geographic areas being ordered to “Shelter in Place” and not leave their homes is taking hold as cities and states continue to evaluate their options.

As of the date of this article, all public schools in Florida have been closed, most likely for the reminder of the school year; restaurants have been ordered to operate only at 50% of seating capacity; bars and nightclubs have been ordered to close for at least the next 30 days; Disney and Universal Studios, as well as other tourist attractions, have been closed until at least the end of the March, and likely beyond; the cruise industry has effectively shut down; and now the prospect of closing down Florida’s beaches seems to be on the horizon. Aside from the drastic government measures, the fear among the populace is palpable as many people now practicing social distancing by refusing to eat out at restaurants and limiting all but essential shopping and commercial activities. The impact on Florida’s business is already devastating on the state’s tourism and hospitality industries. As this crisis grows, business owners and employers are evaluating options and strategies to try to save their businesses. Employees are facing lay-offs with unemployment projected to reach the highest level since the Great Depression. Given the devastating consequences and economic dislocation, employers and employees alike should consider available assistance and mitigation programs available. A few possible options are:

The Florida Small Business Emergency Bridge Loan Program: The Florida Department of Economic Opportunity will administer the Program in partnership with the Florida SBDC Network and Florida First Capital Finance Corporation to provide cash flow to businesses economically impacted by COVID-19. The short-term, interest-free loans help bridge the gap between the time the economic impact occurred and when a business secures other financial resources, including payment of insurance claims or longer-term Small Business Administration (SBA) loans. Up to $50 million has been allocated for the Program. The application period for this short-term interest-free loan opened on March 17, 2020 and will continue at least through May 8, 2020. The highlights of the program are:

  • Short-term interest-free loans in an amount up to $50,000 for business owners.
  • Loans to be repaid without interest within one year.
  • Interest rates after one year go to 12%.
  • Purpose of the Program is to provide short-term liquidity to small business owners to remain open despite economic impacts of the Coronavirus pandemic.

“Families First Coronavirus Response Act” (H.R. 6201): This emergency federal legislation passed the House overwhelmingly with bipartisan support and is expected to pass the Senate today. The key features place new responsibilities on employers to assist employees who are affected when the employee or a family member is affected by Coronavirus. The Bill includes the following:

  • Applies to businesses with fewer than 500 employees.
  • Paid Family and Medical Leave for 12 weeks (the first 14 days are to be paid under sick leave provisions).
  • This leave benefit covers employees who have been working for at least 30 calendar days.
  • Among other uses, employees may use the leave to respond to quarantine requirements or recommendations, to care for family members who are responding to quarantine requirements or recommendations, and to care for a child whose school has been closed as a result of the COVID-19 pandemic.
  • After the first 14 days, employers must compensate employees in an amount that is not less than two-thirds of the employee’s regular rate of pay. These pay requirements apply to only the COVID-19-related leave reasons listed above.
  • The provisions will go into effect 15 days after the date of enactment and expire on December 31, 2020.
  • Paid Sick Leave provisions of the Bill also require employers with fewer than 500 employees to provide full-time employees two weeks (80 hours) of paid sick leave for specific circumstances related to COVID-19 (e.g., self-isolating, doctors’ visits, etc.).
    Part-time employees are also covered and entitled to paid sick leave for the number of hours equal to the number of hours they work, on average, over a two-week period.
  • Employers must compensate employees for any paid sick time they take at their regular rates of pay.
  • Employers will be required to post a notice informing employees of their rights to leave.
  • As currently drafted, the Bill expressly provides that it does not preempt existing state or local paid sick leave entitlements.
  • Employers will be provided with tax credits to offset their costs in meeting the new paid leave mandates.
  • The provisions will go into effect 15 days after the date of enactment and expire on December 31, 2020.
  • The Bill provides $1 billion in emergency unemployment insurance (UI) relief to the states: $500 million for costs associated with increased administration of each state’s UI program and $500 million held in reserve to assist states with a 10 percent increase in unemployment. Besides demonstrating an increase in unemployment, in order to receive a portion of this grant money, states must temporarily relax certain UI eligibility requirements, such as waiting periods and work search requirements.

Additional Federal Legislation Under Consideration: Additional legislation will be adopted to provide relief to employees who are dislocated by the impacts of the pandemic. As of this writing, the proposal is likely to include a cash payment directly to every American worker in an amount of $1,000.00. The overall price tag of this Bill is projected to be in excess of $1 Trillion. Details of the program will be posted in subsequent updates to this article.

Conclusion:

There is absolutely no question that Coronavirus will pose new challenges for both Employers and Employees. In assessing their business strategy for meeting new obligations, and navigating the process to seek assistance, both employers and employees should consider consulting with qualified legal counsel. If you have questions about any of the issues contained herein, you should contact an attorney at Smith & Associates to discuss your rights.

Medical Marijuana and Hemp in Florida: A Hazy Landscape

In 1996 California passed the first “Compassionate Use” law in the nation legalizing marijuana use for medicinal purposes. Multiple states followed suit into the 2000s. In 2016, Florida voters overwhelmingly adopted the Florida Medical Marijuana Legalization Initiative, also known as Amendment 2, into the Florida Constitution. Since that time, Florida’s implementation of this constitutional amendment has led to numerous lawsuits, especially over the constitutionality of the caps on the number of providers and the requirement that providers be “vertically integrated.” Despite the legislative and regulatory obstacles to implementation, Florida is among the fastest growing Medical Marijuana markets in the country. This article details the history of the medical marijuana statutes and rules as they relate to licensing, the lawsuits that arose from them, and where licensing of medical marijuana providers stands now. It also explores Florida’s new statutes and rules related to legalization of the hemp industry and the growing market for CBD products. Finally, this article tries to gaze into the crystal ball to see where this is all heading.

Early History: 2014 Amendment 2 and Compassionate Use

The 2016 passage of Amendment 2 was not the first attempt to allow medical marijuana in Florida. In 2014, the first attempt to amend the constitution to allow for the use of medical marijuana was presented to the voters of Florida. The original Amendment 2 was substantially similar to the Amendment 2 that eventually passed two years later. As discussed in more detail below, with regards to the 2016 Amendment 2, the original Amendment 2 sought to allow patients with “debilitating medical conditions,” as defined by the amendment, to receive “certifications” from physicians to allow them to use and possess medical marijuana. Importantly, the original amendment set forth the first definition of Medical Marijuana Treatment Centers (“MMTC”), which was later adopted by the 2016 Amendment 2. The amendment provided that MMTCs are defined as:

“an entity that acquires, cultivates, possesses, processes (including development of related products such as food, tinctures, aerosols, oils, or ointments), transfers, transports, sells, distributes, dispenses, or administers marijuana, products containing marijuana, related supplies, or educational materials to qualifying patients or their personal caregivers and is registered by the Department.”

This broad definition in the 2016 Amendment 2 will become critical for later legal challenges. While the 2014 Amendment 2 garnered 57.6% of the vote, it did not reach the required supermajority of 60% of the vote to pass.

However, Florida lawmakers apparently sensed the shifting political wind with nearly 60% of the electorate supporting the legal use of marijuana for medicinal purposes. A conservative Republican legislature began taking steps to, in what many viewed as an effort to avoid another constitutional amendment broadly legalizing medical marijuana, allow for limited use of medical marijuana. The first of these steps was the “Compassionate Medical Cannabis Act.” This act allowed for physicians to prescribe certain “qualified patients” low-THC (less than .8% THC) marijuana. Importantly, this act set up “dispensing organizations.” These dispensing organizations were defined by statute as “an organization approved by the department to cultivate, process, and dispense low-THC cannabis” § 381.986, Fla. Stat. (2014) (emphasis added). This definition of dispensing organizations required that the organization be “vertically integrated,” meaning that a single organization needed to do all the steps – from growing to selling to consumers – of the medical marijuana process. An organization could not, for example, simply grow marijuana or just sell marijuana. It had to do everything.

Additionally, the Compassionate Medical Cannabis Act required that dispensing organizations be limited to five in the entire state and that they meet the following requirements:

  • Possesses a valid certificate of registration issued by the Department of Agriculture and Consumer Services for the cultivation of more than 400,000 plants;
  • Be operated by a nurseryman; and
  • Must have been operating as a registered nursery in Florida for at least 30 continuous years.

§ 381.986(5)(b), Fla. Stat. (2014).

Dispensing Organization Rulemaking and Legal Challenges

Pursuant to the Compassionate Medical Cannabis Act, the Department of Health (“DOH”) began drafting rules to implement the statute. In August and September of 2014, DOH published proposed rules that purported to implement the act. Importantly, these proposed rules:

  • Established a “lottery” system to determine which applicant would be selected for licensure as a dispensing organization per region;
  • Imposed a $150,000 application fee on the selected applicants; and
  • Set forth application criteria to determine which applicants were qualified to be placed in the “lottery” for a chance to be licensed.

These proposed rules were almost immediately challenged. Costa Farms, LLC, Plants of Ruskin, Inc., the Florida Medical Cannabis Association, and Tornello Landscape Corp. a/k/a 3 Boys Farm Company all filed a challenge to these proposed rules. These cases were consolidated and heard by the Florida Division of Administrative Hearings (“DOAH”).

In his Final Order, Administrative Law Judge W. David Watkins, invalidated these proposed rules. As to the lottery system, he held that it violated due process, Florida’s licensure laws, and “contravenes a basic expectation of law for reasoned agency decision-making.” Costa Farms, et al. v. DOH, DOAH Case No. 14-4296RP (DOAH 2014). As to the other challenged requirements, he found that they either violated the enabling statute or that DOH exceeded its statutory authority.

Given the failure of the first proposed rules, for its next attempt at rulemaking, DOH set up a “negotiated” rulemaking process and invited potential applicants to be a part of the new rulemaking process. Importantly, the new proposed rule 64-4.002(2) sets forth seven statutory criteria that an applicant must demonstrate to become a dispensing organization:

  • The technical and technological ability to cultivate and produce low-THC cannabis;
  • The ability to secure the premises, resources, and personnel necessary to operate as a dispensing organization;
  • The ability to maintain accountability of all raw materials, finished products, and any byproducts to prevent diversion or unlawful access to or possession of these substances;
  • An infrastructure reasonably located to dispense low-THC cannabis to registered patients statewide or regionally as determined by the department;
  • The financial ability to maintain operations for the duration of the two-year approval cycle;
  • That all owners and managers have been fingerprinted and have successfully passed a level 2 background screening pursuant to section 435.04, Florida Statutes; and
  • The employment of a medical director who is a physician licensed under chapter 458 or chapter 459, Florida Statutes, to supervise the dispensing organization’s activities.

Despite being subject to administrative challenges, these new rules were eventually upheld as valid. See Baywood Nurseries Co, Inc. v. DOH, DOAH Case No. 15-1694RP (DOAH 2015).

While the new administrative rules were upheld as valid, litigation over the implementation of the Compassionate Use Act would continue. With the new rules in place, and only limited “slots” available to fill for the coveted licenses, the unsuccessful applicants for “dispensing organization” licenses began challenging DOH’s selection of the five successful applicants. Ultimately, the unsuccessful applicants asserted their rights under the Administrative Procedures Act, and challenged the license decisions of DOH, arguing that the scoring was flawed, and the decisions to award were factually and legally incorrect.

Amendment 2 Passes

While these administrative challenges to DOH’s selection of dispensing organizations were taking place, Amendment 2 was back on the ballot in 2016 and passed by an overwhelming majority of the voters. Importantly, the amendment adopted the use of the broadly defined Medical Marijuana Treatment Centers, unlimited in number by the Constitutional Amendment, as opposed to the limit of only five “dispensing organizations.” The Constitutional Amendment further empowered DOH to create regulations regarding the licensing of MMTCs. See Art. X, § 29(b) and (d), Fla. Const. Importantly, a MMTC is defined in the Constitutional Amendment to be:

…an entity that acquires, cultivates, possesses, processes (including development of related products such as food, tinctures, aerosols, oils, or ointments), transfers, transports, sells, distributes, dispenses, or administers marijuana, products containing marijuana, related supplies, or educational materials to qualifying patients or their caregivers and is registered by the Department.

Art. X, § 29(b)(5), Fla. Const. (emphasis added).

Thus, a MMTC is not just a business that treats patients using medical marijuana, it is any business that is anywhere on the medical marijuana supply chain from growing, to transporting, to selling, to even providing educational materials. However, unlike dispensing organizations that were required by statute to be “vertically integrated,” Amendment 2 provided that a MMTC could perform any one of those steps in the medical marijuana process – that is, instead of providing that a MMTC was an entity that “cultivates, possesses, processes… transfers, transports, sells, distributes, dispenses, and administers marijuana,” the Constitution, as the supreme law of land, provided that a MMTC includes any entity that “cultivates, possesses, processes… transfers, transports, sells, distributes, dispenses, or administers marijuana.”

Following the passage of Amendment 2, in June of 2017, the Florida Legislature passed amendments to the original Compassionate Use Act contained in § 381.986, Florida Statutes as enabling legislation purporting to codify the new constitutional amendment. Importantly, this new legislation:

  • Converted existing low-THC and medical cannabis dispensing organization licenses into MMTC licenses;
  • Provided for an addition 10 MMTC licenses;
  • Required that an MMTC shall cultivate, process, transport, and dispense marijuana (i.e., required that MMTCs be “vertically integrated”); and
  • Required that DOH create a procedure for issuing MMTC licenses.

§ 381.986, Fla. Stat. (2017).

With regards to the 10 new MMTC licenses, the amendments to the statute limited these additional licenses only to organizations that had applied for a dispensing organization license under the original statute and were either 1) denied the license and had a pending administrative challenge or 2) within one point of the highest final ranking in the particular region. § 381.986(a), Fla. Stat. (2017). Despite the adoption of the Amendment 2 and the new amendments to statute, DOH did not immediately adopt any rules regarding the registering of new MMTCs.

Almost immediately, litigation ensued.

Florigrown, LLC v. Florida Department of Health

Florigrown, LLC is a Tampa, Florida-based medical marijuana business. On January 17, 2017, days after Amendment 2 became effective and before DOH promulgated any rules regarding the licensing of MMTCs, Florigrown applied to DOH to become a MMTC. This application was denied. After the June 2017 legislative changes, Florigrown filed suit, challenging the constitutionality of the “vertical integration” requirement (i.e., the requirement that a MMTC must provide all aspects of the supply chain from growing to dispensing) and the limitation on the number of new licenses.

On August 2, 2018, Judge Charles Dodson issued an order that found that these requirements were unconstitutional as they violated the plain language of Amendment 2. However, Judge Dodson denied Florigrown’s request for a preliminary injunction, finding that DOH’s rulemaking process was still ongoing and that he would allow more time for that process to finish.

However, two months after that order, Judge Dodson found that DOH had made “no significant changes in [its] regulations or [its] action on the application of Florigrown. In other words, the court order was ignored by [DOH].” Based on this finding, Judge Dodson granted Florigrown’s temporary injunction:

(1) immediately enjoining the Department of Health from registering or licensing any MMTC pursuant to the unconstitutional legislative scheme set forth in Section 381.986, Florida Statutes, (2) requiring the Department by 5:00 PM Friday, October 19, 2018 to commence registering MMTCs in accordance with the plain language of the Medical Marijuana Amendment, and (3) requiring the Department to register Florigrown as an MMTC by 5:00 PM Friday, October 19, 2018, unless the Department can clearly demonstrate that such registration would result in unsafe use of medical marijuana by qualifying patients.

DOH appealed this injunction. On appeal, Florida’s First District Court of Appeal agreed that the new legislation was unconstitutional and that DOH should be prohibited from enforcing those unconstitutional provisions. Specifically, the Court found that:

Section 381.986(8)(e) thus creates a vertically integrated business model which amends the constitutional definition of MMTC by requiring an entity to undertake several of the activities described in the amendment before the Department can license it. Under the statute, an entity must conform to a more restricted definition than is provided in the amendment; therefore, all MMTCs under the statute would qualify as MMTCs under the constitutional amendment, but the reverse is not true.

We thus find the statutory language directly conflicts with the constitutional amendment, and appellee has demonstrated a substantial likelihood of success in procuring a judgment declaring section 381.986(8)(e) unconstitutional.

Florida Dep’t of Health v. Florigrown, LLC, 44 Fla. L. Weekly D1744 (Fla. 1st DCA July 9, 2019), review granted, SC19-1464, 2019 WL 5208142 (Fla. Oct. 16, 2019) (emphasis added).

Further, the appeal court certified the following question as one of great public importance to the Florida Supreme Court:

Whether the plaintiffs have demonstrated a substantial likelihood of success on the merits of their claims that the statutory requirements of vertical integration and caps on the number of medical marijuana treatment center licenses as set forth in section 381.986(8), Florida Statutes, are in direct conflict with article X, section 29, of the Florida Constitution?

Florida Dep’t of Health v. Florigrown, LLC, 44 Fla. L. Weekly D2182 (Fla. 1st DCA Aug. 27, 2019).

On October 16, 2019, the Florida Supreme Court accepted jurisdiction of this case and oral argument is set for April 22, 2020.

DOH’s Issuance of MMTC Licenses

While the Florigrown lawsuit challenging the constitutionality of the MMTC statute was pending, DOH was still moving forward with issuing MMTC licenses pursuant to the revised statute and rules that Judge Dodson had found to be unconstitutional. Thus, in addition to awarding the existing dispensing organizations with MMTC licenses, numerous entities that were currently challenging their entitlement to dispensing organization licenses settled their cases with DOH in exchange for MMTC licenses.

The process of litigation and settlement was convoluted and DOH’s response to the mounting legal challenges was chaotic. DOH implemented Emergency Rules to create criteria for determining which challengers would now be eligible, per the amended statute, for MMTC licenses. The key issue was the “One Point Condition” contained in the new statute that allowed an award of an MMTC license to an organization that applied for a dispensing organization license and was “within one point of the highest final ranking in the particular region.” § 381.986(a), Fla. Stat. (2017). The legal conundrum created by the “one point rule” was made clear by Administrative Law Judge John Van Laningham who stated:

The One Point Condition operates retroactively in that it establishes a previously nonexistent basis for licensure that depends upon pre-enactment events. This is analogous to the legislative creation of a new cause of action, involving as it does the imposition of a new duty (to issue licenses) on the Department and the bestowal of a new right (to become licensed) on former applicants based on their past actions.

Nature’s Way Nursery of Miami, Inc. v. DOH, DOAH Case No. 17-5801RE (DOAH 2018).

Nature’s Way challenged these emergency rules, claiming that it was entitled to a MMTC license pursuant to statue as it was within one point of the entity awarded a dispensing organization license, but the new emergency rules would fail to award it a MMTC license.

This challenge led to an in-depth review of DOH’s prior scoring of the dispensing organization license applications. While an entire article could be written on the numerous problems with DOH’s Emergency Rule and original scoring of applicants, ALJ Van Laningham aptly described the problem as a “colossal blunder that turned the scoring process into a dumpster fire.” Id. (emphasis added). Accordingly, he invalidated the emergency rules and found that the scoring methodology used to rank dispensing organization applications was not valid either.

Following this, Nature’s Way and DOH entered into a settlement agreement wherein Nature’s Way would be issued a MMTC license. With this, other challengers appeared and, based on ALJ Van Laningham’s order, DOH quickly settled with them as well, granting eight new MMTC licenses to Spring Oaks Greenhouses, Inc., Redland Nursery, Inc., Dewar Nurseries, Inc, Tree King-Tree Farm, Inc., Perkins Nursery, Inc., Bill’s Nursery, Inc., DeLeon’s Bromeliads, Inc., and Hart’s Plant Nursery Inc., all under one joint settlement agreement.

The hard-fought battle for these MMTC licenses may well be worth the effort, as shortly after receiving MMTC licenses, many entities put them up for sale, including one that was reportedly sold for $53 million.

While the constitutional challenge is still ongoing, DOH has now issued 22 MMTC licenses. If Florigrown’s lawsuit is successful at the Florida Supreme Court, expect those numbers to increase significantly.

Hemp/CBD Statutes and Rules

In 2018, the Federal Hemp Farming Act was signed into law. This act removed hemp (which is defined a cannabis with less than 0.3% THC – compare this to the 0.8% THC content allowed under Florida’s Compassionate Use statute) from the schedule 1 controlled substances list. Further, it enabled states to enact “plans” to regulate the cultivation and sale of hemp. Hemp and CBD are contained in numerous types of products ranging from oils, vapes, pills, skin products, drinks, all the way to “gummy bear” candies.

Moreover, the statutes and rulemaking process for allowing hemp and CBD in Florida appears to be running much more smoothly. The statute and rulemaking process, from the beginning, has been a much more cooperative process, as opposed to the confrontational process that medical marijuana has been. While some disputes and issues have emerged, at this point, the hemp and CBD process has stood in stark contrast to the medical marijuana approval process.

With the passage of the Federal Hemp Farming Act, the Florida Legislature issued wide-sweeping statutes regarding hemp and hemp extracts (“CBD”). In 2019, Florida’s Governor signed into law Senate Bill 1020. This law, codified at Section 581.217, Florida Statutes, sets forth the general guidelines for hemp cultivation and the distribution and sale of hemp extracts. Importantly, these guidelines empower Florida’s Department of Agriculture to implement rules in these areas. These new rules, located at 5K-4.034, Florida Administrative Code, took effect January 1, 2020.

The biggest change is that anyone who cultivates hemp or manufactures or sells CBD for human or animal consumption must be licensed. Guidance from the Department of Agriculture states that this licensing requirement applies to everyone in the distribution and retail chain – including manufactures, middlemen, and the individual stores that sell CBD products.

Further, the statute requires that CBD may only be sold in Florida if it has a certificate of analysis prepared by an independent testing laboratory proving:

      The hemp extract is the product of a batch tested by the independent testing laboratory;
      The batch contained a total delta-9-tetrahydrocannabinol concentration that did not exceed 0.3 percent on a dry-weight basis pursuant to the testing of a random sample of the batch; and
      The batch does not contain contaminants unsafe for human consumption.

Fla. Stat. § 581.217(7)(a).

The statute also mandates labeling requirements that include:

  • A scannable barcode or quick response code linked to the certificate of analysis of the hemp extract by an independent testing laboratory;
  • The batch number;
  • The internet address of a website where batch information may be obtained;
  • The expiration date;
  • The number of milligrams of hemp extract; and
  • A statement that the product contains a total delta-9-tetrahydrocannabinol concentration that does not exceed 0.3 percent on a dry-weight basis.

Fla. Stat. § 581.217(7)(a).

The Florida Department of Agriculture has already started sending out enforcement teams to inspect cultivation and retail establishments for compliance with these new laws and regulations.

While the federal government does issue hemp growing licenses, states like Florida can submit hemp production plans to the USDA and, once approved, become the sole licensing authority in that state. Florida has chosen this option. Florida has submitted plans for seed, cultivation, food safety and animal feed. Unfortunately, the cultivation plan had was not approved by the USDA. While the other plans have been approved, cultivation is still at issue.

Due to concerns raised by the USDA, on March 6, 2020, Florida published new proposed rules on hemp cultivation, located at Rule 5B-57.014, F.A.C., that Florida believes will bring its cultivation plan into compliance with USDA rules. These rules include numerous changes, including a requirement that state agents collect a representative sample at least 15 days prior to harvest for sampling to ensure that the THC content does not exceed the regulatory maximum. Assuming there are no challenges to these rules, 21 days after publication, they will be adopted and become effective 20 days after that. After these rules become effective, they will need to be approved by the USDA. Assuming this process goes smoothly, cultivation licenses should start becoming available by the middle or end of summer 2020.

Looking into the Crystal Ball

So, what does the future hold for marijuana and hemp-related industries in Florida? One sure bet is that the industry will be highly regulated. Regardless of the Florida Supreme Court’s ultimate decision in the Florigrown case, Florida’s Legislature and DOH seem intent on making the process as difficult and limited as possible. Even assuming caps on the number of licenses and the vertical integration requirements are stricken down as unconstitutional, it is unlikely that Florida lawmakers will allow a MMTC free-for-all.

While no one can predict what a Court will do, Judge Dodson and Florida’s First District Court of Appeal set forth detailed, well-reasoned positions as to why the statute was unconstitutional. It is likely the Florida Supreme Court will agree. If this happens, the Florida Legislature will need to consider a new regulatory scheme to handle the licensing of MMTCs. Whether the Legislature will allow for the issuance of a MMTC license to any entity that meets a certain set of minimum criteria (unlikely) or set up an new regime that requires DOH to determine the need for new MMTC licenses in a particular area for a particular time period and only issue the “needed” number of license (much more likely), new requirements are likely to be forthcoming.

Regardless of the new rules, one thing that has been consistent throughout this process is that incumbents and entities challenging the current regime have been given a statutory leg-up over their competitors. Any entity thinking about entering the Florida Medical Marijuana market should seriously consider attempting to get in now, even if the current system would prohibit them from getting a MMTC license. As the recent past has shown, even entities that were denied a dispensing organization license but challenged the denial were given MMTC licenses. Challenging the current MMTC licensure system may end up being a good foot in the door for whatever the Florida Legislature comes up with next.

Additionally, recreational marijuana is on Florida’s horizon. While a proposed constitutional amendment for recreational marijuana did not garner enough signatures in time to appear on the 2020 ballot, by 2022 the amendment is expected to have enough votes to appear. That is, of course, unless the Legislature listens to the will of the people and makes it legal before then. In any case, the question of recreational marijuana in Florida is a question of when – not if.

Like medical marijuana, it is expected that incumbent providers will have a regulatory leg-up on recreational marijuana licensing when it finally occurs. Entities that wait for the legal dust to settle on all these issues may end up being too late.
Meanwhile, hemp cultivation licenses are on the horizon. Entities looking to apply for these licensed can review the proposed rules and began preparing to submit applications once they become effective and approved by the USDA. Anyone looking to get in on this process, should start working on their applications now, if they haven’t already.

Conclusion

Florida’s Medical Marijuana statutes are currently up in the air. If the Florida Supreme Court upholds the unconstitutionality of the existing statutes, all new licensing statutes and regulations will be coming. Further, even non-THC hemp and CBD products are coming under increasing regulations. In addition, when recreational marijuana becomes legal in Florida, new statutes and regulations will be added for that.

If you are a business entity thinking of breaking into Florida’s massive medical marijuana market, now may be your time to act. As history has shown, Florida’s Legislature has tipped the scales in favor of incumbents and that is not likely to change. Getting in now, while medical marijuana is in its infancy, may be your only chance (though thorough consideration of its illegality under federal law should be considered as well).

If you have questions about establishing a Medical Marijuana Treatment Center in Florida, please contact an attorney at Smith & Associates for a free consultation.

Have You Been Contacted by the BSA? Don’t Wait to Contact an Attorney.

In past articles, we have discussed what to do if you have been contacted by the Business Software Alliance (“BSA”) regarding potentially unlicensed software. See Driving Your Computer without a License: Beware the Wrath of the BSA and Software Audit Demand from the BSA.

This article, however, will focus on the importance of getting an attorney involved early in the process. Recently, a potential client contacted the firm who was in the middle of negotiations with the BSA over alleged unlicensed software. By the time we were contacted, the company had already conducted an audit, without any limitations, and provided the results to the BSA. The company had subsequently received a settlement offer from the BSA and was looking for legal advice regarding the offer.

While it is smart to seek out legal representation, by this point almost all the leverage the company had to negotiate was gone. The company had given the BSA everything they had asked for and provided the BSA with evidence, evidence the company itself created, of the infringing software.

Had the company sought legal representation as soon as it received the first demand from the BSA, it would have had significantly more leverage to negotiate and would have likely not sent the BSA evidence that incriminated itself.

The BSA conducts fishing expeditions. The BSA takes some evidence of infringing software (e.g., a former employee reports a company to the BSA for having unlicensed copies of Microsoft Office) and attempts to use that information to “fish” for other potentially unlicensed software belonging to any of their member companies, which include Adobe, ANSYS, Apple, Autodesk, Bentley Systems, CA Technologies, CNC/Mastercam, DataStax, Dell, IBM, Intuit, Microsoft, Minitab, Oracle, salesforce.com, SAS, Siemens PLM, Splunk, Symantec, The MathWorks, Trend Micro, Trimble and Workday.

Essentially, the BSA will request that an audit of all software belonging to any of its member companies be conducted and a report furnished to it, despite only having information to support infringement of one product belonging to only one member company. If a company blindly follows this request, it could be turning over evidence to the BSA that the BSA will turn around and use against it for significant monetary damages (up to $150,000 per infringing work).

Involving an attorney early in the process will help ensure that any audit is limited only to the software for which the BSA has credible evidence of infringement and that any incriminating evidence is not disclosed to the BSA.

By doing this, the company can limit its exposure and keep significant leverage in negotiating any settlement. Once the cat is out of the bag, however, it is too late and the BSA will hold all the cards.

If you have received a demand letter from the BSA, you should contact an attorney at Smith & Associates to discuss your rights.

HIPAA Violations – What are Your Remedies?

Health care providers have a duty under both federal and Florida law to protect your medical information. But what happens when they don’t?

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) provides a way for people who have had their private medical records unlawfully disclosed by a covered health care provider. Complaints can be filed here: https://ocrportal.hhs.gov/ocr/smartscreen/main.jsf. Once a complaint is received, the Office of Civil Rights will review the HIPAA claim and attempt to resolve it with the provider. If the HIPAA claim is proven, the provider may even be assessed a civil money penalty.

Unfortunately, any penalties collected stay with the government – the person who was damaged by the breach does not recover anything at all. What can you do if you have been monetarily damaged by this breach?

Florida Courts have held that a patient has a right to privacy in their medical records. If a health care provider fails to adequately take steps to protect them, they have breached a duty owed to the patient and the patient can recover damages See e.g. Florida Dept. of Corr. V. Abril, 969 So. 2d 201, 206 (Fla. 2007) (“[T]his Court has consistently and rigorously enforced the rights of patients to confidentiality in their medical records. In view of these multiple sources of a duty of confidentiality and privacy,” a health care facility has a duty to maintain their confidentiality.).

Thus, if you have suffered damages due to a breach of your private medical records, you may be entitled to damages.

If you have had your private, confidential medical records disclosed by a health care provider, you should contact an attorney at Smith & Associates to discuss your rights and remedies.

Do You Manufacture or Sell CBD Products? New Rules Could Affect You.

CBD is one of the fastest growing markets in the United States and is expected to be a $20 billion dollar industry within the next few years. Despite the size and growth of this industry, until recently the manufacturing of hemp and the sale of CBD (a hemp extract) were largely unregulated in Florida.

In 2019, however, Florida’s Governor signed into law Senate Bill 1020. This law, codified at Section 581.217, Florida Statutes, sets forth the general guidelines for Hemp Cultivation and the Distribution and Sale of Hemp Extracts (“CBD”). Importantly, these guidelines empower Florida’s Department of Agriculture to implement rules in these areas. These new rules, located at 5K-4.034, Florida Administrative Code, took effect January 1, 2020.

The biggest change is that anyone who cultivates hemp or manufactures or sells CBD for human or animal consumption must be licensed. Guidance from the Department of Agriculture state that this licensing requirement applies to everyone in the distribution and retail chain – including manufactures, middlemen, and the individual stores that sell CBD products.

Further, the statute requires that CBD may only be sold in Florida if it has a certificate of analysis prepared by an independent testing laboratory proving:

  1. The hemp extract is the product of a batch tested by the independent testing laboratory;
  2. The batch contained a total delta-9-tetrahydrocannabinol concentration that did not exceed 0.3 percent on a dry-weight basis pursuant to the testing of a random sample of the batch; and
  3. The batch does not contain contaminants unsafe for human consumption.

Fla. Stat. § 581.217(7)(a).

The statute also mandates labeling requirements that include:

  1. A scannable barcode or quick response code linked to the certificate of analysis of the hemp extract by an independent testing laboratory;
  2. The batch number;
  3. The Internet address of a website where batch information may be obtained;
  4. The expiration date;
  5. The number of milligrams of hemp extract; and
  6. A statement that the product contains a total delta-9-tetrahydrocannabinol concentration that does not exceed 0.3 percent on a dry-weight basis.

Fla. Stat. § 581.217(7)(a).

The Florida Department of Agriculture has already started sending out enforcement teams to inspect cultivation and retail establishments for compliance with these new laws and regulations.

While the rules related to penalties (Rule 5K-4.035, Florida Administrative Code) have not yet been adopted, it appears that, once they are, penalties for violations can range from orders prohibiting the sale of CBD to fines up to $10,000.00 (or both).

If you have been cited by the Department of Agriculture or if you are concerned as to how these new statues and rules may affect your Hemp or CBD business, you should contact an attorney at Smith & Associates to help evaluate your rights.

BID PROTEST LAW CASE NOTE: THE CLOCK IS STILL TICKING; WAIVER OF RIGHTS FOR FAILURE TO FILE TIMELY NOTICE OF PROTEST

In a reminder that Florida Bid Protest law can be unforgiving with regard to a late-filed Notice of Protest, a recent decision by the Florida Division of Administrative Hearings found that even though a bid protest was meritorious, it was rejected because the protestor failed to file the required Notice of Intent to Protest within 72 hours of the Agency posting its decision.  See prior Article: Bid Protest Law: Know Your Rights- The Clock is Ticking (http://smithlawtlh.com/category/bid-protest-law/).

Cady Studios, LLC v. School Board of Seminole County, Case No. 18-0134BID (DOAH, 2019) involved a bid protest concerning a Request for Proposals for school yearbook and photography services for the school district.  The RFP required that the proposals include a paper copy as well as 10 USB “thumb drives.”  A total of 13 vendors submitted proposals, including Cady Studios.  During the evaluation process, two evaluators tried to open Cady Studios’ “thumb drive” copy of the proposal but found that the USB was blank.  During an evaluation meeting, the other evaluators stated that their copies of the USB worked and could be opened.  Nevertheless, one of the evaluators who could not open the file refused to review a paper copy or another USB thumb drive, instead awarding “0” points to Cady Studios for all scoring categories.  The other evaluator agreed to review a paper copy of the proposal and scored the proposal.

Upon scoring of all proposals, a “Short List” notice was sent to the top seven vendors based upon a “natural break” in the scores at that point.  Cady Studios was the eighth ranked vendor.  It was shown that had the proposal been scored, it would have closed the gap creating the “natural break” in scores, although Cady Studios would still have been eighth in scoring.  The RFP did not specify any number of vendors to be awarded and Cady Studios may have been a selected vendor based upon improved scoring.

After posting of the Notice of Intent to Award, Cady Studios’ representatives contacted the School Board to ask for clarification as to why it did not make the “Short List.”  The School Board agreed to hold a meeting, but it was scheduled for after the time a Notice of Intent to Protest would have been due (within 72 hours of the posting).

Ultimately, Cady Studios learned at the meeting that one evaluator had refused to score the proposal.  Upon learning of this failure to score its proposal, Cady Studios filed a protest.  It was referred to DOAH for a hearing on whether they had waived the right to hearing by failing to file a timely protest; whether there was “equitable tolling” because they had been lulled into the belief that there was no need to file a protest because there was a meeting scheduled to discuss the issues, and they only learned of the problem at that meeting; and whether the School Board acted arbitrarily and capriciously in failing to score the proposal.

The Administrative Law Judge (ALJ) found that the failure to file a Notice of Protest within 72 hours resulted in a waiver of the right to protest.  The ALJ noted that the language in Section 120.57(3) is clear, and that the RFP and other solicitation documents specifically advised that waiver is the penalty for failure to timely file a Notice of Protest.  The ALJ also found that there was no equitable tolling of the time period, even though the challenger was informed of a meeting to discuss the reasons for not making the short list, and even though the challenger only learned of the problem at the meeting.

The ALJ also agreed with Cady Studios’ claim that the School Board’s actions in failing to score the proposal were arbitrary and capricious.  Thus, had a timely protest been filed, there were grounds to set aside the proposed award without Cady Studios as an awarded vendor.

This case shows that an affected party must timely assert its rights.  Even though a vendor may not be certain of the reason for denial of its bid, the safe course of action is to file the Notice of Protest to allow time to evaluate the situation and determine whether to proceed with a formal bid protest.

The case is now on appeal to the Fifth District Court of Appeal.

If you have a Bid Protest Law question, please contact Geoffrey D. Smith: geoff@smithlawtlh.com.

FLORIDA REAL ESTATE EXPERT WITNESS TESTIMONY. JOHNSON VS DAVIS. BY JASON STEELE

Quite often real estate licensees violate Florida Standards of Practice for real estate practitioners. These actions can lead to civil lawsuits where both buyers and sellers can suffer significant losses. Chapter 475, Florida Statutes, regulates the real estate industry and is the primary law upon which court decisions are made on monetary damages. Courts also look to prior case law decisions and the testimony of expert witnesses.  That is where you may need assistance from a qualified expert witness.  Jason Steele is a licensed real estate broker with the expertise to assist in such matters (see link below).

www.floridarealestateexpertwitness.com

One of the most common violations by real estate licensees deals with the ruling in Johnson vs. Davis concerning defects in the purchased residential property.  Many courts have interpreted and refined the application of this rule of law. From these cases one can conclude that in a home buyer’s nondisclosure claim against the seller, there are four elements: (1) the seller must have knowledge of a defect in the property; (2) the defect must materially affect the value of the property; (3) the defect must not be readily observable and must be unknown to the buyer; and (4) the buyer must establish that the seller failed to disclose the defect to the buyer.

The key to this legal trend has been to establish that a seller has a duty to disclose known defects. The standard makes this an affirmative obligation to disclose – not just if asked but in any instance where known defects exist. Failure to disclose could result in legal action against the seller.  In essence, this turns the tide and makes the duty one of “seller beware” or perhaps “seller disclose.”  Where does disclosure begin? Who is responsible for disclosure?  What is the agent’s responsibility?  Anyone buying a house faces hidden unknowns. The seller is responsible for disclosing those defects if they materially affect the value. There are many types of defects, including Chinese drywall, mold, lawsuits, sinking slabs, unpermitted electrical, plumbing, etc. The best thing for a real estate agent to do is advise the seller to disclose the material defects that are known, and go one step further by getting a certified building contractor to do an in-depth inspection of their home and provide it to the realtor before the property is listed. This report should not be relied on by the realtor or buyer.  It should be viewed as just an opinion of conditions. The realtor’s buyer should always get their own report (this report is not required by law and is used as a precaution).

There is an old saying that I used as a former Florida Realtor GRI instructor:  “When in danger, when in doubt, write it out, write it out.”  Meticulous record-keeping is a must for any real estate agent. Agents have the responsibility to disclose any defects that are known to them. Most real estate agents deliver a material defect disclosure form that the sellers fill out and sign, which become part of the licensee’s records. I have testified in Johnson vs. Davis lawsuits.  They can be extremely expensive for the seller, the real estate agent, and the buyer if defects are not disclosed.  I have also testified in civil cases involving issues of undisclosed defects.  I recently was retained as an expert witness in a major million dollar plus lawsuit that settled prior to trial.  This case involved real estate agents as the sellers, and their son and daughter (also agents), who listed the property. The facts of that case present a good example of what not to do as a real estate agent.  It all boils down to following the requirements of Chapter 475, Florida Statutes, and the rules of the Agency, including:

1. Dealing honestly and fairly.

2. Accounting for all funds.

3. Using skill, care, and diligence in the transaction.

4. Disclosing all known facts that materially affect the value of residential real property and are not readily observable to the BUYER.

5. Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing.

6. Limited confidentiality, unless waived in writing by a party, will prevent disclosure that the SELLER will accept a price less than the asking or listed price; that the BUYER will pay a price greater than the price submitted in a written offer; the motivation of any party for selling or buying the property; that a SELLER or BUYER will agree to financing terms other than those offered; or any other information requested by party to remain confidential.

7. Any additional duties that are entered into by the original agreement or by separate written agreement.

8. Limited representation means that a BUYER or SELLER is not responsible for the acts of the licensee. Additionally, parties are giving up their rights to the undivided loyalty of the licensee. This aspect of limited representation allows a licensee to facilitate a real estate transaction by assisting both the BUYER and the SELLER, but a licensee will not work to represent one party to the detriment of the other party when acting as a transaction broker to both parties.

For more information on expert witness arrangements please contact me at jason@smithlawtlh.com.