TNS, Inc. v. NLRB

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sXO\   716,QFY1/5% 1RV %HIRUH.(11('<*8<DQG%2**6&LUFXLWsXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8(':LOOLDP0(DUQHVW(/$5%((7+203621 75$31(//$WODQWD*HRUJLDIRU3HWLWLRQHU(GZDUG) +XJKHV 1$7,21$/ /$%25 5(/$7,216 %2$5' $33(//$7( &2857 %5$1&+ :DVKLQJWRQ '& IRU 5HVSRQGHQW21%5,():LOOLDP0(DUQHVW5REHUW/ 7KRPSVRQ (/$5%(( 7+203621  75$31(// $WODQWD*HRUJLDIRU3HWLWLRQHU(GZDUG)+XJKHV$LOHHQ $ $UPVWURQJ +RZDUG ( 3HUOVWHLQ 1$7,21$/ /$%25 5(/$7,216%2$5'$33(//$7( &2857%5$1&+ :DVKLQJWRQ'&IRU5HVSRQGHQW'RQDOG(sRVH'DYLG :LHGLV.ULVWHQ%.RPHUs26( :,(',6:HVW&KHVWHU 3HQQV\OYDQLD*HRUJH+&RKHQ/DXUHQFH6*ROGsHUHPLDK $ &ROOLQV 5REHUW $OH[DQGHU %5('+2))  .$,6(5 :DVKLQJWRQ'&IRU,QWHUYHQRU+HDWKHU/0DF'RXJDOO 0F*8,1(661255,6 :,//,$06:DVKLQJWRQ'& IRU$PLFXV&XULDH BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB %2**6&LUFXLWsXGJH7KLVFDVHLVEHIRUHWKHFRXUWXSRQ WKH SHWLWLRQ RI 716 ,QF m716l RU mWKH &RPSDQ\l  WR UHYLHZ DQG WKH FURVVDSSOLFDWLRQ RI WKH 1DWLRQDO /DERU 5HODWLRQV %RDUG m1/5%l RU mWKH %RDUGl  WR HQIRUFH DQ 1/5% RUGHU ILQGLQJ WKDW 716 EUHDFKHG REOLJDWLRQV XQGHU 6HFWLRQRIWKH1DWLRQDO/DERU5HODWLRQV$FW m1/5$l 86&†  DQGRUGHULQJ716WRUHLQVWDWHDQG SD\ EDFN SD\ WR HPSOR\HHV DIIHFWHG E\ WKH &RPSDQ\jV YLRODWLRQ  6HFWLRQ  SURWHFWV HPSOR\HHV ZKR WDNH MRE DFWLRQGXHWRmDEQRUPDOO\GDQJHURXVlZRUNLQJFRQGLWLRQVDW WKHLUSODFHRIHPSOR\PHQW,QDWWKHH[SLUDWLRQRIWKH FROOHFWLYHEDUJDLQLQJDJUHHPHQWWKH\KDGZLWKWKH&RPSDQ\ HPSOR\HHVDW716jVsRQHVERUR7HQQHVVHHSODQWZDONHGRXW 1RV 716,QFY1/5%  FODLPLQJ †  SURWHFWLRQ  :KHQ QHJRWLDWLRQV HYHQWXDOO\ IDLOHGWKH&RPSDQ\KLUHGSHUPDQHQWUHSODFHPHQWZRUNHUV ZKHQWKHSUHYLRXVHPSOR\HHVODWHUVRXJKWUHLQVWDWHPHQWWKH &RPSDQ\UHIXVHG $Q LQIUHTXHQWO\ XVHG SURYLVLRQ RI WKH 1/5$ WKH DSSOLFDELOLW\VFRSHDQGSURWHFWLRQVDIIRUGHGWRZRUNHUVE\ †DUHQRWIDFLDOO\FOHDU$VDUHVXOWWKH%RDUGLQWKH FRXUVH RI WKLV FDVH KDV KDG WR HQJDJH LQ VHYHUDO DFWV RI VWDWXWRU\LQWHUSUHWDWLRQWRFODULI\WKHPHDQLQJRI†EHIRUH LWFRXOGEHDSSOLHGWRWKLVVHWRIIDFWV+DYLQJGRQHVRWKH %RDUGIRXQGWKDW†GLGDSSO\WRWKHMREDFWLRQDQG WKDW716KDGYLRODWHG†E\KLULQJSHUPDQHQWUHSODFHPHQW ZRUNHUVDQGUHIXVLQJWRUHLQVWDWHLWVSUHYLRXVHPSOR\HHV 2Q DSSHDO 716 PDNHV VHYHUDO DUJXPHQWV LQ VXSSRUW RI RYHUWXUQLQJWKH%RDUGGHFLVLRQLQFOXGLQJ  WKDWWKH%RDUG HUUHGLQLQWHUSUHWLQJ†WRSURWHFWZRUNHUVZKRZHUHQRW SURKLELWHGIURPVWULNLQJE\HLWKHUDVWDWXWRU\RUFRQWUDFWXDO QRVWULNHSURYLVLRQ  WKDWWKH%RDUGHUUHGLQLQWHUSUHWLQJ †  WR UHTXLUH RQO\ D JRRG IDLWK EHOLHI LQ GDQJHURXV FRQGLWLRQV VXSSRUWHGE\REMHFWLYHHYLGHQFH RQWKHSDUWRI ZRUNHUV DV RSSRVHG WR D PRUH VWULQJHQW UHTXLUHPHQW WKDW DEQRUPDOO\GDQJHURXVFRQGLWLRQVDFWXDOO\H[LVW  WKDWWKH %RDUGHUUHGLQLQWHUSUHWLQJ†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jVDUJXPHQWVWRWKLVFRXUWFDQIDLUO\EHGLYLGHGLQWR WKUHHFDWHJRULHV7KHILUVWWKUHHDUJXPHQWVDUHFKDOOHQJHVWR WKH%RDUGjVDFWVRIVWDWXWRU\LQWHUSUHWDWLRQ7KHIRXUWKDQG  716,QFY1/5% 1RV 1RV 716,QFY1/5%  ILIWK DUJXPHQWV DUH FKDOOHQJHV WR WKH %RDUGjV IDFWXDO XQGHU †  UDWKHU WKDQ UHPDQGLQJ LW IRU IXUWKHU GHWHUPLQDWLRQV  7KH ILQDO DUJXPHQW LV DQ HTXLWDEOH RQH FRQVLGHUDWLRQ DVNLQJWKLVFRXUWWRUHIXVHWRHQIRUFHWKH%RDUGjVDZDUGGXH WRWKH%RDUGjVGHOD\LQWKLVFDVH:HUHMHFW716jVVWDWXWRU\ LQWHUSUHWDWLRQDUJXPHQWVEHFDXVHWKH%RDUGjVFRQVWUXFWLRQVRI †  ZLWKVWDQG WKH GHIHUHQWLDO UHYLHZ ZH DUH ERXQG E\ 6XSUHPH&RXUWSUHFHGHQWWRJLYHWKHP:HUHMHFWLQSDUWDQG DFFHSWLQSDUW716jVFKDOOHQJHVWRWKH%RDUGjVIDFWILQGLQJ :H DOVR DJUHH ZLWK 716jV LQH[FXVDEOH GHOD\ DUJXPHQW $FFRUGLQJO\ZH9$&$7(WKH%RDUGjVGHFLVLRQ , 716 PDQXIDFWXUHV DUPRUSLHUFLQJ SURMHFWLOHV FDOOHG mSHQHWUDWRUVl DW LWV SODQW LQ sRQHVERUR 7HQQHVVHH  7KH SULQFLSDO LQJUHGLHQW LQ SHQHWUDWRUV LV GHSOHWHG XUDQLXP m'8l DUDGLRDFWLYHVXEVWDQFHZLWKFDUFLQRJHQLFSURSHUWLHV ZKHQLQKDOHGRULQJHVWHGRYHUORQJSHULRGVRIWLPH'8DOVR PD\SRVHDWR[LFULVNWRWKHNLGQH\V 7KH3DSHU$OOLHG,QGXVWULDO&KHPLFDODQG(QHUJ\:RUNHUV 8QLRQ WKH m8QLRQl  UHSUHVHQWHG WKH HPSOR\HHV DW 716 'XULQJWKHUHOHYDQWWLPHDMRLQWPDQDJHPHQWODERUKHDOWKDQG VDIHW\FRPPLWWHHXQGHUWRRNPRQWKO\LQVSHFWLRQVRIWKHSODQW DQGUHSRUWHGYDULRXVSUREOHPVZLWKWKHOHYHOVRI'8GXVWWR ZKLFKHPSOR\HHVZHUHH[SRVHGDQGZLWKWKHIXQFWLRQLQJRI VDIHW\SURFHGXUHVDQGGHYLFHVLQWHQGHGWRNHHS'8H[SRVXUH ORZ  2Q 0DUFK   DOOHJHGO\ LQ UHVSRQVH WR WKHVH SUREOHPV DQG DOOHJHGO\ DIWHU WKH &RPSDQ\ KDG IDLOHG WR UHFWLI\WKHPWKH8QLRQVHQWWKHIROORZLQJXOWLPDWXPWR716 >(@PSOR\HHVZLOOQRWUHWXUQWRZRUNDIWHU$SULOXQWLO WKHWHUPVZKLFKDUHRQWKHKHDOWKDQGVDIHW\UHSRUWKDYH EHHQFRUUHFWHGDQG>WKH&RPSDQ\@LVVDIHDQGKHDOWK\IRU WKH HPSOR\HHV WR ZRUN  7KLV LQFOXGHV WKH LWHPV IURP SDVW LQVSHFWLRQV DV ZHOO DV LWHPV ZKLFK ZLOO EH OLVWHG GXULQJWKH$SULOLQVSHFWLRQ 2Q 0DUFK   WKH 8QLRQ DQG 716 FRPPHQFHG QHJRWLDWLRQV RYHU D QHZ FROOHFWLYH EDUJDLQLQJ DJUHHPHQW ,QLWLDOO\716PDGHDQRIIHULQFOXGLQJDZDJHLQFUHDVHDQ  716,QFY1/5% 1RV 1RV 716,QFY1/5%  &RPSDQ\@ RU JLYHQ WKH %RDUG RU XQLRQ DQ XQIDLU H[WHQGHGOD\RIISHULRGDQH[WHQGHGSUREDWLRQDU\SHULRGIRU DGYDQWDJHjl1/5%Y+XE3ODVWLFV)G WK QHZZRUNHUVDQGUHWHQWLRQRIWKH&RPSDQ\jVH[LVWLQJKHDOWK &LU  TXRWLQJ1/5%Y0LFK5XEEHU3URGV,QF DQGVDIHW\FODXVHLQWKHFRQWUDFW SURWHFWLQJKHDOWKFRQFHUQV  )G   WK &LU   VHH DOVR 1/5% Y 7D\ORU 7KH8QLRQUHVSRQGHGZLWKDOHQJWK\QHZKHDOWKDQGVDIHW\ 0DFK3URGV)G WK&LU  VDPH  FODXVHDSURSRVDOIRUQHZVDIHW\LQVSHFWLRQVDQGREMHFWLRQV ,QWKHSUHVHQWFDVH716VXEPLWVWKDWLWZRXOGEHSUHMXGLFHG WRH[WHQGLQJWKHOD\RIIDQGSUREDWLRQDU\SHULRGVDPRQJRWKHU E\WKH%RDUGjVGHFLVLRQLQWKDWWKHGHFLVLRQRUGHUVEDFNSD\ WKLQJV7KHUHZHUHHLJKWPRUHPHHWLQJVEHIRUHWKHFRQWUDFW DQGUHLQVWDWHPHQW6LQFHWKLVFDVHGUDJJHGRQIRU\HDUV H[SLUHGRQ0D\'XULQJWKHVHPHHWLQJVWKH8QLRQ EHWZHHQILOLQJDQGWKH%RDUGjVVHFRQGGHFLVLRQWKHEDFNSD\ FODLPV LW ZDV FRQFHUQHG RQO\ ZLWK WKH VDIHW\ LVVXHV ZKLOH WKDWWKH%RDUGRUGHUHGKDVSRWHQWLDOO\EHHQPRXQWLQJVLQFH 716FODLPVWKH8QLRQIRXJKWRYHUHFRQRPLFLVVXHV WKHQ)XUWKHUWKH&RPSDQ\DOOHJHVWKDWLWVRSHUDWLRQVKDYHVR FKDQJHG WKDW RUGHULQJ UHLQVWDWHPHQW RI ZRUNHUV ZRXOG EH 2Q0D\716HPSOR\HHVZKRZHUHPHPEHUVRIWKH XQUHDOLVWLF 8QLRQ EHJDQ D ZRUN VWRSSDJH DW WKH H[SLUDWLRQ RI WKHLU FROOHFWLYHEDUJDLQLQJDJUHHPHQW7KH8QLRQDOOHJHGWKDWWKH ,QDFDVHZLWKD%RDUGRUGHUHGUHPHG\VLPLODUWRWKLVRQH ZRUN VWRSSDJH ZDV QRW D VWULNH DV GHILQHG E\ WKH 1/5$ WKH6HFRQG&LUFXLWPRGLILHGWKH%RDUGjVDZDUGRIEDFNSD\ EHFDXVHLWIHOOXQGHUWKH†H[HPSWLRQIRUmTXLWWLQJRIODERU DQGUHLQVWDWHPHQWEHFDXVH WKH FDVHKDGGUDJJHGRQIRUVL[ E\ DQ HPSOR\HH RU HPSOR\HHV LQ JRRG IDLWK EHFDXVH RI \HDUVGXULQJZKLFKWLPHWKHEDFNSD\ILJXUHKDGPRXQWHGDQG DEQRUPDOO\ GDQJHURXV FRQGLWLRQV IRU ZRUN DW WKH SODFH RI WKHFRPSDQ\KDGFKDQJHGLWVLQWHUQDOVWUXFWXUHWRWKHH[WHQW HPSOR\PHQWRIVXFKHPSOR\HHRUHPSOR\HHVl WKDWUHLQVWDWHPHQWZDVXQUHDOLVWLF6HH2OLYHWWL2IILFH86$ ,QFY1/5%)G G&LU . 2QsXO\716QRWLILHGWKHHPSOR\HHVHQJDJHGLQ WKHZRUNVWRSSDJHWKDWLWZRXOGKLUHSHUPDQHQWUHSODFHPHQWV 7KH%RDUGFRQWHQGVWKDWWKHUHZDVQRLQH[FXVDEOHGHOD\LQ RQsXO\7KHHPSOR\HHVGLGQRWUHOHQW2Q)HEUXDU\ WKDWWKHFDVHSUHVHQWHGQRYHOLVVXHVSURGXFHGDYROXPLQRXV WKH8QLRQPDGHDQXQFRQGLWLRQDORIIHUWRUHWXUQWR UHFRUG DQG UHVXOWHG LQ D OHQJWK\ SDJH GHFLVLRQ E\ WKH ZRUN RQ EHKDOI RI WKH HPSOR\HHV HQJDJHG LQ WKH ZRUN $/s WZR FRPSUHKHQVLYH %RDUG GHFLVLRQV DQG D FRXUW RI VWRSSDJH+RZHYHU716UHIXVHGWRUHLQVWDWHWKHHPSOR\HHV DSSHDOVUHPDQGDVZHOODVWLPHVSHQWE\WKH%RDUGWU\LQJWR UHDFK D VHWWOHPHQW EHWZHHQ WKH SDUWLHV  7KLV LV DOO WUXH +RZHYHUWKHXQGLVSXWHGIDFWLVWKDWWKHFDVHZDVILOHGZLWK WKH%RDUGLQ7KH%RDUGjV$/sGLGQRWLVVXHDGHFLVLRQ XQWLO7KH%RDUGGLGQRWLVVXHLWVGHFLVLRQDIILUPLQJWKH  6HFWLRQ   86& †   UHDGV $/s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jVGHFLVLRQILQGLQJ716WRKDYHEUHDFKHGLWVREOLJDWLRQV HPSOR\HHV LQ JRRG IDLWK EHFDXVH RI DEQRUPDOO\ GDQJHURXV FRQGLWLRQV IRU ZRUN DW WKH SODFH RI HPSOR\PHQW RI VXFK HPSOR\HH RU HPSOR\HHV EH GHHPHG D VWULNH XQGHU WKLV $FW  716,QFY1/5% 1RV 1RV 716,QFY1/5%  2Q$XJXVWWKH8QLRQILOHGDFRPSODLQWZLWKWKH 8QLYHUVDO&DPHUD86DW,QWKHSUHVHQWFDVHWKUHH 1/5%DOOHJLQJWKDW716HQJDJHGLQXQIDLUODERUSUDFWLFHVE\ RIWKHIRXUSLHFHVRIHYLGHQFHUHOLHGXSRQE\WKH%RDUGDUH KLULQJSHUPDQHQWUHSODFHPHQWZRUNHUVWRUHSODFHHPSOR\HHV QRW WHUULEO\ SHUVXDVLYH DQG RQH SLHFH RI HYLGHQFH WKH HQJDJHGLQWKHZRUNVWRSSDJHDQGWKHQUHIXVLQJWRUHLQVWDWH UHVSLUDWRU XVH  LV HLWKHU LUUHOHYDQW WR WKH GDQJHU LQTXLU\ RU WKH8QLRQHPSOR\HHVDIWHUWKH8QLRQPDGHDQXQFRQGLWLRQDO HYLGHQFHRILPSURYHGFRQGLWLRQV:KHQZHDOVRWDNHLQWR RIIHUWRUHWXUQWRZRUN716ILOHGDPRWLRQWRGLVPLVVWKH DFFRXQWWKH15&DQG7'5+VWDQGDUGVDQGWKRVHDJHQFLHVj FRPSODLQWUHO\LQJRQWKHIDFWWKDWWKHFRPSODLQWDOOHJHGWKDW ODFNRIGHFLVLYHUHJXODWRU\DFWLRQDVHYLGHQFHFRQWUDGLFWLQJ WKHHPSOR\HHVZHUHHQJDJHGLQDZRUNVWRSSDJHEHFDXVHRI WKDWHYLGHQFHLWEHFRPHVFOHDUWKDWWKH%RDUGjVFRQFOXVLRQo WKHmJRRGIDLWKEHOLHIWKDWWKHLUFRQGLWLRQVIRUZRUNDWWKHLU WKDWREMHFWLYHHYLGHQFHVXSSRUWHGWKHHPSOR\HHVjEHOLHIWKDW SODFHRIHPSOR\PHQWZHUHDEQRUPDOO\GDQJHURXVlUDWKHUWKDQ WKHLUZRUNSODFHKDGEHFRPHWRRGDQJHURXVWRZRUNLQoLV IRUWKHUHDVRQDOOHJHGO\UHTXLUHGE\†WKDWWKHHPSOR\HHV VLPSO\QRWVXSSRUWHGE\VXEVWDQWLDOHYLGHQFHRQWKHUHFRUG FHDVHGZRUNmLQJRRGIDLWKEHFDXVHFRQGLWLRQVIRUZRUNDW FRQVLGHUHGDVDZKROH WKHLUSODFHRIHPSOR\PHQWZHUHDEQRUPDOO\GDQJHURXVl,Q RWKHUZRUGVWKH8QLRQDOOHJHGEHOLHIWKDWWKHFRQGLWLRQVZHUH ,QH[FXVDEOH'HOD\ GDQJHURXV UDWKHU WKDQ WKDW WKH FRQGLWLRQV ZHUH GDQJHURXV sXGJH6FKOHVLQJHUDQ$GPLQLVWUDWLYH/DZsXGJH m$/sl RI 6LQFH FRXUWV DUH WR EH GHIHUHQWLDO LQ UHYLHZLQJ DJHQF\ WKH 1/5% JUDQWHG D PRWLRQ WR DPHQG WKH FRPSODLQW RQ GHWHUPLQDWLRQVGHQ\LQJHQIRUFHPHQWRIDQRUGHUVROHO\RQWKH $XJXVW   DQG WKH 8QLRQ FKDQJHG LWV DOOHJDWLRQ EDVLVRIGHOD\LVLQDSSURSULDWH6HHHJ1/5%Y,QWjO$VVjQ DFFRUGLQJO\2Q$XJXVW716ILOHGZLWKWKH1/5% RI%ULGJH6WUXFWXUDO 2UQDPHQWDO,URQZRUNHUV/RFDO D UHTXHVW WR DSSHDO WKH JUDQWLQJ RI WKH PRWLRQ WR DPHQG 86   SHUFXULDP 1/5%Ys+5XWWHU ZKLFKWKH1/5%UHMHFWHG 5H[0IJ&R86  7KLVLVEHFDXVH LQVLWXDWLRQVZKHUHWKHTXHVWLRQHGDZDUGZRXOGEHSD\PHQW $IWHU WKH DSSHDO DQRWKHU $/s sXGJH 6FKOHVLQJHU ZDV RUDFWLRQLQIDYRURIWKHFRPSDQ\jVHPSOR\HHVmWKH%RDUGLV UHFXVHG XQGHUWRRNDKHDULQJGHQRYRDVSHUWKH1/5%RUGHU QRWUHTXLUHGWRSODFHWKHFRQVHTXHQFHVRILWVRZQGHOD\HYHQ DQGIRXQG716OLDEOHIRUYLRODWLQJ† VUHTXLUHPHQWVLQDQ LI LQRUGLQDWH XSRQ ZURQJHG HPSOR\HHV WR WKH EHQHILW RI RSLQLRQGDWHGsXO\0RUHWKDQILYH\HDUVODWHURQ ZURQJGRLQJHPSOR\HUVls+5XWWHU5H[0IJ&R86 'HFHPEHU   WKH %RDUG LVVXHG D 6XSSOHPHQWDO DW 'HFLVLRQDQG2UGHUZKHUHLQWKUHHRXWRIIRXU%RDUGPHPEHUV YRWHG WR UHYHUVH WKH $/s GLVPLVVLQJ DOO XQIDLU ODERU 6WLOOWKH$GPLQLVWUDWLYH3URFHGXUHV$FWKROGVm>Z@LWKGXH DOOHJDWLRQV  6HH 716 ,QF DQG 2LO &KHP DQG $WRPLF UHJDUGIRUWKHFRQYHQLHQFHDQGQHFHVVLW\RIWKHSDUWLHVRUWKHLU :RUNHUV,QWjO8QLRQ1/5%  +RZHYHU UHSUHVHQWDWLYHV DQG ZLWKLQ D UHDVRQDEOH WLPH HDFK DJHQF\ WKH %RDUG ZDV IUDFWXUHG RQ WKH DQDO\VLV RI †  DQG QR VKDOOSURFHHGWRFRQFOXGHDPDWWHUSUHVHQWHGWRLWl86& VLQJOHUHDVRQLQJFRPPDQGHGDPDMRULW\ †  E    HPSKDVLV DGGHG   $FFRUGLQJO\ FRXUWV VRPHWLPHVUHIXVHWRHQIRUFHDJHQF\DZDUGVZKHQXQGXHGHOD\ 7KH8QLRQDSSHDOHGDQGRQ)HEUXDU\WKH'& KDV PDGH WKHLU HQIRUFHPHQW LQHTXLWDEOH  6HH HJ (PKDUW &LUFXLWUHPDQGHGWKHFDVHWRWKH%RDUGVWDWLQJWKDWLWFRXOG ,QGXV Y 1/5%  )G   G &LU  QRWGLVFHUQD%RDUGSRVLWLRQDQGWKDWWKH%RDUGKDGIDLOHGWR UHIXVLQJHQIRUFHPHQWDIWHUVL[\HDUGHOD\  DUWLFXODWHDQDSSURSULDWHOHJDOVWDQGDUGIRUWKHUHVROXWLRQRI WKHFDVH7KHFRXUWKHOGWKDWm>W@KH%RDUGPXVWµDUWLFXODWHD 7KLVFLUFXLWKDVIROORZHGDUXOHXQGHUZKLFKLWZLOOHQIRUFH PDMRULW\VXSSRUWHG VWDWHPHQW RI WKH UXOH WKDW >LW@ ZLOO EH %RDUG GHFLVLRQV HYHQ LI GHOD\HG ZKHQ WKHUH LV mµQR DOOHJDWLRQ WKDW WKH GHOD\ KDV LQ DQ\ ZD\ SUHMXGLFHG >WKH  716,QFY1/5% 1RV 1RV 716,QFY1/5%  H[FHHGWKHQRQELQGLQJJXLGHOLQHVHWRXWE\WKH15&WKH\DUH DSSO\LQJ QRZ DQG LQ WKH IXWXUHjl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j EHOLHI WKDW WKHLU ZRUNSODFH ZDV DEQRUPDOO\ HDUOLHUSRVLWLRQ7KHVHFRQGGHFLVLRQIRXQG†DSSOLFDEOH GDQJHURXVPHUHO\VKRZWKDW716KDGODUJHO\FRPSOLHGZLWK WRWKHMREDFWLRQDQGLWIRXQGWKDW716KDGHQJDJHGLQXQIDLU UHJXODWRU\OLPLWVVHWZLWKDFRQVLGHUDEOHPDUJLQIRUVDIHW\ ODERUSUDFWLFHVE\KLULQJSHUPDQHQWUHSODFHPHQWZRUNHUVDQG UHIXVLQJWRUHKLUHWKHHPSOR\HHVLQYROYHG,QILQGLQJ† $VZHH[SODLQHGDERYHDODFNRIHPHUJHQF\DFWLRQE\WKH DSSOLFDEOHWRWKHSUHVHQWFDVHWKHGHFLVLRQVHWXSDQHZIRXU 15&RULWVVWDWHFRXQWHUSDUWGRHVQRWSURKLELWDVDPDWWHURI SDUWWHVWIRUGHWHUPLQLQJWKHDSSOLFDELOLW\RI†LQFDVHV ODZ DQ 1/5% ILQGLQJ WKDW REMHFWLYH HYLGHQFH H[LVWHG WR LQYROYLQJFXPXODWLYHVORZDFWLQJGDQJHUVWRHPSOR\HHKHDOWK VXSSRUWWKHHPSOR\HHVj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jEHOLHILVVXSSRUWHGE\DVFHUWDLQDEOHREMHFWLYH DEQRUPDOGDQJHULQWKHIDFHRIWKHPZLWKRXWIXUWKHUVXSSRUW HYLGHQFH DQG WKDW WKH SHUFHLYHG GDQJHU SRVHG DQ )RULQVWDQFHWKHUHFRXOGEHHJUHJLRXVHYLGHQFHVLPSO\QRW LPPHGLDWHWKUHDWRIKDUPWRHPSOR\HHKHDOWKRUVDIHW\ DGGUHVVHG RU XQGHUVWRRG E\ WKH UHJXODWRU RU WKH UHJXODWRU FRXOGKDYHEHHQPRYLQJWRRVORZO\IRUWKHFLUFXPVWDQFHVRU 716,QFDQG2LO&KHPDQG$WRPLF:RUNHUV,QWjO8QLRQ LWFRXOGEHWKDWWKHUHJXODWRUZDVQRWIXOO\DSSULVHGRIRULQ  1/5% 1R   :/  DW  6HSW  FRQWURORIWKHVLWXDWLRQ1RQDFWLRQE\WKHUHOHYDQWUHJXODWRU  $VPHQWLRQHGDERYHWKHGHFLVLRQRUGHUHGWKDW716 LVFHUWDLQO\QRWLSVRIDFWRSURRIRIDODFNRIDEQRUPDOGDQJHU UHLQVWDWHDQGSURYLGHEDFNSD\ WRWKHHPSOR\HHVZKRWRRN EXWLWPXVWZHLJKDJDLQVWDILQGLQJWKDWWKHHPSOR\HHVjEHOLHI SDUW LQ WKH ZRUN VWRSSDJH  ,W LV IURP WKLV RUGHU WKDW 716 WKDW WKHLU ZRUNSODFH ZDV WRR GDQJHURXV WR ZRUN LQ ZDV DSSHDOVWRWKLVFRXUWDQGLWLVWKLVRUGHUWKDWWKH%RDUGDVNV VXSSRUWHGE\REMHFWLYHSURRI WKLVFRXUWWRHQIRUFH $VPHQWLRQHGDERYHWKH6XSUHPH&RXUWKDVLQVWUXFWHGWKDW ,, ZKHQ UHYLHZLQJ IDFWILQGLQJ E\ WKH %RDUG FRXUWV DUH WR GHWHUPLQH ZKHWKHU WKH ILQGLQJV RI IDFW DUH VXSSRUWHG E\ 716jV&KDOOHQJHVWRWKH%RDUGjV6WDWXWRU\ VXEVWDQWLDOHYLGHQFHE\WDNLQJLQWRDFFRXQWWKHHYLGHQFHXSRQ ,QWHUSUHWDWLRQ ZKLFK WKH %RDUG UHOLHV DQG mFRQWUDGLFWRU\ HYLGHQFH RU HYLGHQFHIURPZKLFKFRQIOLFWLQJLQIHUHQFHVFRXOGEHGUDZQl :HILUVWDGGUHVV716jVFKDOOHQJHVWRWKH%RDUGjVYDULRXV DFWV RI VWDWXWRU\ LQWHUSUHWDWLRQ  ,Q UHYLHZLQJ 1/5%  716,QFY1/5% 1RV 1RV 716,QFY1/5%  LQWHUSUHWDWLRQVRIWKH1/5$WKLVFRXUWIROORZVWKHVWDQGDUG SXEOLVKHG E\ WKH 8QLWHG 6WDWHV $UP\ IRU WHVWLQJ XUDQLXP VHW RXW E\ WKH 6XSUHPH &RXUW LQ &KHYURQ 86$ ,QF Y OHYHOVLQHPSOR\HHVjNLGQH\V WKH'$5&20VWDQGDUG 7KH 1DWXUDO5HVRXUFHV'HIHQVH&RXQFLO,QF86 '$5&20 PDQXDO VHW D mQRWLFHl OHYHO RI  XJO DQG DQ   6HH1/5%Y:HEFRU3DFNDJLQJ)G mDFWLRQlOHYHORIXJO$JDLQWKHUHZDVDJUHDWGHDORI  WK &LU   DSSO\LQJ &KHYURQ WR 1/5% GLVFXVVLRQLQWKHUHFRUGLQWKLVFDVHDERXWYDU\LQJUHVXOWVDW LQWHUSUHWDWLRQVRIWKH1/5$ +ROO\)DUPV&RUSY1/5% YDU\LQJWLPHVKRZHYHUERWKSDUWLHVDQGWKH%RDUGDJUHHZLWK 86   DSSO\LQJ&KHYURQWRD%RDUG WKH FRQFOXVLRQ RI WKH 1,26+ UHSRUW WKDW IURP  GHFLVLRQ 8QGHUWKLVVWDQGDUGWKHFRXUWILUVWDVNVmZKHWKHU  RI 716 HPSOR\HHV KDG RQH RU PRUH XULQH VDPSOHV &RQJUHVVKDVGLUHFWO\VSRNHQWRWKHSUHFLVHTXHVWLRQDWLVVXHl JUHDWHUWKDQWKH'$5&20QRWLFHOHYHORIXJODQG &KHYURQ86DW,IVRWKHFRXUWPXVWJLYHHIIHFWWR KDGRQHRUPRUHVDPSOHVDERYHWKHDFWLRQOHYHORIXJO &RQJUHVVjV LQWHUSUHWDWLRQ  ,G DW   +RZHYHU LI 7KH 1,26+ UHSRUW GLG QRW VHW IRUWK VWDWLVWLFV LOOXVWUDWLQJ &RQJUHVVKDVQRWFOHDUO\VSRNHQWRDTXHVWLRQWKLVFRXUWLV ZKHWKHUDQ\HPSOR\HHVKDGXUDQLXPLQXULQHFRQFHQWUDWLRQV OLPLWHGWRGHWHUPLQLQJmZKHWKHUWKHDJHQF\jVDQVZHULVEDVHG DW RU DERYH WKH GDQJHU OHYHO RI  XJO VHW E\ WKH 15& RQ D SHUPLVVLEOH FRQVWUXFWLRQ RI WKH VWDWXWHl ,G DW  JXLGHOLQH+RZHYHUWKHUHSRUWVXPPDULO\VWDWHGWKDWmXULQH $FFRUG+ROO\)DUPV86DW,QDSSO\LQJWKLV XUDQLXP FRQFHQWUDWLRQV H[FHHGHG 15& JXLGHOLQHV IRU mSHUPLVVLEOHFRQVWUXFWLRQlVWDQGDUGWKLVFRXUWPXVWXSKROG ELRDVVD\ DW XUDQLXP PLOOV EXW QRW WKH OHVV VWULQJHQW WKH%RDUGFRQVWUXFWLRQLILWLVmSHUPLVVLEOHlDQGmUHDVRQDEOHl >'$5&20@VWDQGDUGVHQIRUFHGE\WKHVWDWHl6RMXVWDVZLWK HYHQLILWLVQRWWKHRQO\FRQVWUXFWLRQWKH%RDUGPLJKWKDYH WKH ZKROH ERG\ H[SRVXUH GDWD WKH XUDQLXPLQXULQH GDWD DGRSWHGDQGHYHQLILWLVQRWWKHRQHWKDWWKLVFRXUWZRXOGKDYH UHOLHGXSRQE\WKH%RDUGDVSURYLGLQJREMHFWLYHHYLGHQFHWR DGRSWHGLIIDFHGZLWKWKHTXHVWLRQGHQRYR&KHYURQ VXSSRUW WKH HPSOR\HHVj EHOLHI WKDW WKHLU ZRUNSODFH ZDV 86DWDQGQ DEQRUPDOO\GDQJHURXVFRQVLVWHGRIVFLHQWLILFPHDVXUHPHQWV ZLWKLQWKHOLPLWVVHWE\WKHUHOHYDQWQXFOHDUUHJXODWRU\DJHQF\  :KHWKHUWKH%RDUGHUUHGLQLQWHUSUHWLQJ†WRDSSO\ LQVLWXDWLRQVZKHUHWKHUHLVQRmQRVWULNHlSURYLVLRQ 7KHVH IDFWV DUH LPSRUWDQW QRW EHFDXVH WKH\ VKRZ 716 FRPSO\LQJZLWKUHJXODWRU\UXOHVEXWEHFDXVHWKHOLPLWVDVVHW 716ILUVWDUJXHVWKDW†GRHVQRWDSSO\WRWKLVVLWXDWLRQ E\WKH15&DQGDGRSWHGE\WKH7'5+DUHHVWDEOLVKHGZLWKD DW DOO EHFDXVH †  RQO\ DSSOLHV WR VLWXDWLRQV ZKHUH FRQVLGHUDEOHPDUJLQIRUVDIHW\VXFKWKDWZKHQFRPSOLHGZLWK HPSOR\HHVDUHERXQGE\HLWKHUDFRQWUDFWXDORULPSOLHGmQR QRLQMXU\ZRXOGEHH[SHFWHGLQWKHH[SRVHGZRUNIRUFH6HH VWULNHlSURYLVLRQ$FFRUGLQJO\716FRQWHQGVWKDWWKH%RDUG sRKQVRQY8QLWHG6WDWHV)6XSS '.DQ HUUHGLQLQWHUSUHWLQJ†WRFRYHUVLWXDWLRQVoVXFKDVWKH    $V WKH 15& LWVHOI KDV H[SODLQHG LWV GRVH OLPLWV SUHVHQWFDVHoZKHUHWKHUHOHYDQWHPSOR\HHVDUHQRWERXQGE\ LQFRUSRUDWH D mVLJQLILFDQW VDIHW\ IDFWRUl VR WKDW VXEVWDQWLDO VXFKDSURYLVLRQ7KHUHLVERWKFDVHODZDQGORJLFDOVXSSRUW LQMXU\RUGDPDJHVKRXOGQRWRFFXUXQOHVVH[SRVXUHH[FHHGV IRUWKHDUJXPHQWWKDW†VKRXOGDSSO\RQO\WRVLWXDWLRQV WKRVH OLPLWV E\ D mVLJQLILFDQW PXOWLSOHl   &)5 LQYROYLQJDmQRVWULNHlSURYLVLRQWKHUHE\PDNLQJLWDGLIILFXOW † E    ,QGHHGHYHQWKH$/sUHFRJQL]HGWKH TXHVWLRQKRZHYHUVLQFHWKHUHLVDOVRVXSSRUWIRUWKH%RDUGjV YDOXH RI UHIHUHQFH WR WKH OLPLWV VHW RXW E\ WKH UHJXODWRU\ LQWHUSUHWDWLRQ DQG EHFDXVH ZH DUH WR UHYLHZ WKH %RDUGjV DJHQFLHV6KHZURWHm,FDQFRQFHLYHRIQRPRUHREMHFWLYH VWDWXWRU\ LQWHUSUHWDWLRQV XQGHU WKH GHIHUHQWLDO &KHYURQ PHDQVWRDVVHVVZKHWKHUWKH716HPSOR\HHVZHUHVXEMHFWHG VWDQGDUGZHPXVWDIILUPWKH%RDUGjVLQWHUSUHWDWLRQ WRDEQRUPDOGDQJHUVWKDQWRH[DPLQHWKHHYLGHQFHLQWKLVFDVH LQOLJKWRIWKHDGPLQLVWUDWLYHVWDQGDUGVl7161/5% DW:KLOHWKHXULQHVDPSOHVSRLQWHGWRE\WKH%RDUG  716,QFY1/5% 1RV 1RV 716,QFY1/5%  LQRWKHUSDUWVRIWKHXUDQLXPIXHOF\FOHDQGRWKHU86 716FLWHVVHYHUDOFDVHVDVVXSSRUWIRUWKHSURSRVLWLRQWKDW QXFOHDULQGXVWULHVl †DSSOLHVRQO\LQWKHFRQWH[WRIDmQRVWULNHlSURYLVLRQ 6HHHJ:KLUOSRRO&RUSY0DUVKDOO86Q ,GDW7KH7'5+KDGDGRSWHG15&UHJXODWLRQVVWDWLQJ   WKHmHIIHFWRIWKLVVHFWLRQLVWRFUHDWHDQH[FHSWLRQWR WKDWH[WHUQDOH[SRVXUHWRUDGLDWLRQZDVQRWWRH[FHHGUHPV DQRVWULNHREOLJDWLRQLQDFROOHFWLYHEDUJDLQLQJDJUHHPHQWl  SHU\HDU7KHUHIRUHDFFRUGLQJWRWKH%RDUGjVUHDGLQJRIWKH *DWHZD\&RDO&RY8QLWHG0LQH:RUNHUVRI$PHULFD IDFWV716jVZRUNHUVoZKLOHDSSDUHQWO\UHFHLYLQJKLJKHUWKDQ 86     m7KLV VHFWLRQ SURYLGHV D OLPLWHG DYHUDJHH[SRVXUHIRU8QLWHG6WDWHVQXFOHDULQGXVWULHVoGLG H[FHSWLRQ WR DQ H[SUHVV RU LPSOLHG QRVWULNH REOLJDWLRQl QRW UHFHLYH UDGLDWLRQ H[SRVXUH DERYH WKDW SHUPLWWHG E\ WKHUHE\LQVXODWLQJSDUWLFLSDQWVIURPLQMXQFWLRQVOLDELOLW\IRU 15&7'5+UHJXODWLRQV GDPDJHV RU WHUPLQDWLRQ ZKHQ D FHVVDWLRQ RI ZRUN LV QHFHVVDU\mWRSURWHFWHPSOR\HHVIURPLPPHGLDWHGDQJHUl  )LQDOO\WKH%RDUGPHQWLRQHGWKHXUDQLXPLQXULQHOHYHOVRI 3ODLQ'HDOHU3XEOjJ&RY&OHYHODQG7\SRJUDSKLFDO8QLRQ 716jVHPSOR\HHV6LQFHWKH'8XVHGLQWKHPDQXIDFWXULQJ 1R   )G   WK &LU   m7KLV SURFHVV DW 716jV IDFLOLW\ LV ERWK D ORZOHYHO UDGLRDFWLYH UHFRJQLWLRQ RI D ULJKW WR UHIXVH WR ZRUN SURYLGHV D OLPLWHG PDWHULDODQGDWR[LFKHDY\PHWDOWKH7'5+PRQLWRUHGVDIHW\ H[FHSWLRQ WR DQ H[SUHVV RU LPSOLHG QRVWULNH REOLJDWLRQl OHYHOVDWWKHSODQWZLWKUHVSHFWWRH[SRVXUHWRUDGLDWLRQDQG FLWLQJ*DWHZD\&RDO 1/5%Y7DPDUD)RRGV,QF LQWDNH RI XUDQLXP  7KHUH ZDV QR 15& UHJXODWLRQ RQ )G WK&LU  ILQGLQJ†LQDSSOLFDEOH SHUPLVVLEOHXUDQLXPOHYHOVLQHPSOR\HHVjNLGQH\VWKHUHZDV LQ D FDVH ZKHUH WKHUH ZDV QR FROOHFWLYH EDUJDLQLQJ RQO\ D QRQELQGLQJ JXLGHOLQH WKH XVHIXOQHVV RI ZKLFK WKH DJUHHPHQW  .QLJKW 0RUOH\ &RUS  1/5%   SDUWLHVGLVSXWH7KH15&JXLGHOLQHVWDWHGWKDWZRUNHUVIDFH  HQIRUFHG)G WK&LU  KROGLQJWKDW Dm>S@RVVLELOLW\RINLGQH\GDPDJHlLIDQ\VLQJOHXULQHVDPSOH † VSXUSRVHZDVWRJLYHHPSOR\HHVDULJKWWRZDONRIIWKH VKRZVJUHDWHUWKDQPLFURJUDPVRIXUDQLXPSHUOLWHURI MREEHFDXVHRIDEQRUPDOO\GDQJHURXVFRQGLWLRQVmHYHQLQWKH XULQH XJO 6HH15&5HJ*XLGH  7KHJXLGHOLQH IDFHRIDQRVWULNHFODXVHLQWKHLUFRQWUDFWZLWKDQHPSOR\HUl  VHWDmQRWLFHlOHYHORIXJODQGDQmDFWLRQlOHYHORIXJO 7KHmQRWLFHlOHYHOLVHVVHQWLDOO\DQDODUPVLJQDODWZKLFKWKH )XUWKHUWKHUHLVORJLFDOVXSSRUWIRUWKHLGHDWKDW†RQO\ FDXVHRIWKHHOHYDWHGVDPSOHVKRXOGEHLQYHVWLJDWHGZKHQWKH DSSOLHVZKHQHPSOR\HHVDUHIDFHGZLWKHLWKHUDFRQWUDFWXDORU mDFWLRQlOHYHOLVUHDFKHGWKHHPSOR\HHLVWREHUHPRYHGIURP LPSOLHGmQRVWULNHlSURYLVLRQ,I†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† H[SRVXUH OHYHOV ZHUH D PRUH DFFXUDWH FRQVLGHUDWLRQ $ UHYLHZ RI WKH 1,26+ UHSRUW XSRQ ZKLFK WKH %RDUG EDVHG LWV IDFWXDO FRQFOXVLRQV UHYHDOV +RZHYHU DV ERWK VLGHV DGPLW WKHUH LV QRWKLQJ LQ WKH WKDW RQH 716 ZRUNHU LQ  DQG WZR ZRUNHUV LQ  KDG ZKROH ERG\ H[SRVXUHV HTXDO WR RU JUHDWHU WKDQ  UHPV +RZHYHU DFFRUGLQJ WR WKH OHJLVODWLYHKLVWRU\RIHLWKHU†RUWKH1/5$PRUHJHQHUDOO\ UHSRUW QR 716 ZRUNHU ZDV H[SRVHG WR  UHPV RU PRUH DIWHU  WKDWDGGUHVVHVmQRVWULNHSURYLVLRQVl$VH[SODLQHGDERYHLQ 7KHUHIRUH DFFRUGLQJ WR WKH 1,26+ UHSRUW 716 ZDV LQ FRPSOHWH WKHDEVHQFHRIDQH[SUHVVFRQJUHVVLRQDOLPSHUDWLYHRQHZD\ UHJXODWRU\ FRPSOLDQFH LQ WKLV UHJDUG  716,QFY1/5% 1RV 1RV 716,QFY1/5%  RU WKH RWKHU WKH &KHYURQ VWDQGDUG VHUYHV WR SURWHFW WKH (QJLQHHULQJFRQWUROVVXFKDVYHQWLODWLRQHTXLSPHQWVKRXOG %RDUGjV LQWHUSUHWDWLRQ DV ORQJ DV LW LV mUHDVRQDEOHl  6HH NHHSWKHDPRXQWRI'8GXVWLQWKHDLUEHORZ03&,QWKH &KHYURQ86DW,QWKLVFDVHWKH%RDUGKDVD HYHQW WKDW WKHVH FRQWUROV ZHUH LQHIIHFWLYH DW NHHSLQJ GXVW UHDVRQDEOHDQVZHUWRDOPRVWDOORIWKHVXSSRUWFLWHGE\716 EHORZ 03& 7'5+ UHJXODWLRQV FDOOHG IRU WKH XVH RI )LUVW DOO RI WKH FDVHV GLVFXVVLQJ WKH LVVXH H[FHSW 7DPDUD UHVSLUDWRUV WR NHHS WKH GXVW RXW RI HPSOR\HHVj OXQJV  ,Q )RRGV)GDWZHUHGHDOLQJZLWKVLWXDWLRQVZKHUH sDQXDU\716KDGLQVWLWXWHGDSURJUDPRIUHVSLUDWRUXVH HLWKHU DQ H[SUHVV RU LPSOLHG mQRVWULNHl SURYLVLRQ ZDV LQ IRU DUHDV RI LWV SODQW ZLWK H[FHVVLYH GXVW OHYHOV  1HZ HIIHFW,WLVDGLIIHUHQWWKLQJWRVD\WKDW†LVDQH[HPSWLRQ HTXLSPHQWWRUHGXFHGXVWOHYHOVLQWKHDLUKDGEHHQRUGHUHG WRmQRVWULNHlSURYLVLRQVZKHQWKHUHLVDQRVWULNHSURYLVLRQ DQGWKHYHQWLODWRUSURJUDPZDVVHWWRFRQWLQXHXQWLO$XJXVW WKDQLWLVWRVD\WKDW†DSSOLHVRQO\ZKHQWKHUHLVDmQR  ZKHQ WKDW HTXLSPHQW ZRXOG EH LQVWDOOHG  7KH $/s VWULNHl SURYLVLRQ  7KH RQO\ FDVH WKDW HYHQ DUJXDEO\ VD\V GLVFXVVHG DW OHQJWK 716jV YHQWLODWRU XVH QRWLQJ OLNHO\ mRQO\l LV WKH (LJKWK &LUFXLWjV 7DPDUD )RRGV GHFLVLRQ YLRODWLRQV RI 7'5+ YHQWLODWRU SROLFLHV DQG WKH GLVFRPIRUW +RZHYHU WKLV FDVH LV GLVWLQJXLVKDEOH LQ WKDW DOWKRXJK LW H[SHULHQFHGE\HPSOR\HHVIRUFHGWRZHDUWKHP6HH716 GLVFXVVHV QRVWULNH FODXVHV DQG †  LW DFWXDOO\ ILQGV WKH 1/5% DW  WKH $/s GHFLVLRQ LV UHSULQWHG LQ WKH VHFWLRQ LQDSSOLFDEOH EHFDXVH WKHUH ZDV QR mFROOHFWLYH %RDUGjVILUVW716GHFLVLRQEHJLQQLQJDW +RZHYHUWKH EDUJDLQLQJDJUHHPHQWlQRWEHFDXVHWKHUHZDVQRmQRVWULNHl XVHRIYHQWLODWRUVLVEHWWHUUHDGDVDUHVSRQVHWRSRWHQWLDOO\ FODXVH,ELG)XUWKHU7DPDUD)RRGVPHUHO\TXRWHVZLWKRXW GDQJHURXVFRQGLWLRQVUDWKHUWKDQDGDQJHURXVFRQGLWLRQLWVHOI GLVFXVVLRQWKHODQJXDJHRI:KLUOSRROVXJJHVWLQJWKDW†LV LQWKLVZD\716jVYHQWLODWRUSROLF\LVHLWKHUXQUHODWHGWRRU DQ H[FHSWLRQ WR D QRVWULNH SURYLVLRQ ZKLFK DV DOUHDG\ DQDPHOLRUDWLRQRIDSRWHQWLDOO\GDQJHURXVFRQGLWLRQIDFLQJ PHQWLRQHGPDNHVLWVDVVHUWLRQLQDFDVHZKHUHDmQRVWULNHl WKHHPSOR\HHV SURYLVLRQZDVLQHIIHFW ,ELG 7KHUHIRUHERWKDLUERUQHGXVWOHYHOVDQGYHQWLODWRUXVHDUH )URP D ORJLFDO VWDQGSRLQW WKHUH LV DOVR DQ DUJXPHQW RQO\ WDQJHQWLDO WR WKH UHDO IRFXV RI WKH %RDUGjV LQTXLU\ o IDYRULQJ WKH %RDUGjV SRVLWLRQ  ,I †  LV LQWHUSUHWHG WR REMHFWLYHHYLGHQFHRIGDQJHUWRWKHHPSOR\HHVjKHDOWK7KH SURYLGHMRESURWHFWLRQWRHPSOR\HHVHQJDJHGLQDSURWHFWHG WKLUG IDFWRU XQGHUO\LQJ WKH $/s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†WREHOLPLWHGLQWKLV 716 IDFLOLW\ LQ ODWH  DQG TXRWHG IURP WKH UHVXOWDQW ZD\XSXQWLOQRZWKH%RDUGKDVH[SUHVVO\UHVHUYHGUXOLQJRQ 1,26+UHSRUWLQQRWLQJ WKHLVVXH6HH%HNHU,QGXVWULHV&RUS1/5% Q  *LEUDOWDU6WHHO&RUS1/5% 1,26+ IRXQG WKDW mZKROH ERG\ GRVHV IRU SURGXFWLRQ Q  1RZKRZHYHUWKH%RDUGKDVVRUXOHGDQGWKLV ZRUNHUV IURP  WR  UDQJHG IURP  UHPV WR FRXUWLVERXQGWRXSKROGLWVGHWHUPLQDWLRQXQGHUWKH&KHYURQ UHPVlZLWKQRQHKDYLQJmHYHUH[FHHGHGUHPVSHU VWDQGDUGRIUHYLHZEHFDXVH&RQJUHVVKDVQRWVSRNHQRQWKH \HDUZKROHERG\GRVHlVLQFH1,26+FRQFOXGHG LVVXHDQGWKH%RDUGjVLQWHUSUHWDWLRQLVUHDVRQDEOH WKDW WKHVH GRVHV mZKLOH IRU WKH PRVW SDUW ZLWKLQ OHJDO OLPLWVZHUHKLJKHUWKDQGRVHVREVHUYHGDPRQJZRUNHUV  716,QFY1/5% 1RV 1RV 716,QFY1/5%  WKHUHFRUG+RZHYHULQILQGLQJWKDWLWVWKLUGUHTXLUHPHQWZDV  :KHWKHUWKH%RDUGHUUHGLQLQWHUSUHWLQJ†WRUHTXLUH IXOILOOHGQDPHO\WKDWREMHFWLYHHYLGHQFHVXSSRUWHGWKH716 RQO\DJRRGIDLWKEHOLHIRQWKHSDUWRIWKHHPSOR\HHVWKDW HPSOR\HHVj JRRG IDLWK EHOLHI WKDW WKHLU ZRUNSODFH ZDV DEQRUPDOO\ GDQJHURXV FRQGLWLRQV H[LVW DV RSSRVHG WR DEQRUPDOO\ GDQJHURXV WKH %RDUG PHUHO\ FLWHG ZLWKRXW UHTXLULQJWKDWDEQRUPDOO\GDQJHURXVFRQGLWLRQVDFWXDOO\ H[SODQDWLRQIRXUIDFWRUVOLVWHGE\WKH$/sLQKHUGHFLVLRQ H[LVW  DLUTXDOLW\DWWKHIDFLOLW\H[FHHGHG03&>PD[LPXP 7KH%RDUGjVQHZO\DGRSWHGWHVWIRU†DSSOLFDELOLW\LV SHUPLVVLEOHFRQFHQWUDWLRQ@DWZRUNVWDWLRQVIRUDWOHDVW SUHPLVHGRQWKHLGHDWKDW†UHTXLUHVDJRRGIDLWKEHOLHILQ WKHODVWTXDUWHUSUHFHGLQJWKHVWULNH  WKHSURWUDFWHG WKH H[LVWHQFH RI DEQRUPDOO\ GDQJHURXV ZRUNLQJ FRQGLWLRQV XVHRIUHVSLUDWRUVE\DVXEVWDQWLDOQXPEHURIHPSOR\HHV DQGWKDWWKHEHOLHIEHVXSSRUWHGE\DVFHUWDLQDEOHREMHFWLYH ZDV GHOHWHULRXV WR WKHLU KHDOWK   WKH HPSOR\HHV HYLGHQFH716DUJXHVWKDWWKLVLVLQFRUUHFWoWKDWDEQRUPDO DYHUDJHZKROHERG\XUDQLXPH[SRVXUHVZHUHIDUJUHDWHU GDQJHULQIDFWLVUHTXLUHGEHIRUH†ZLOODSSO\WRDZRUN WKDQWKRVHW\SLFDOIRUWKHQXFOHDULQGXVWU\DQG  WKDW VWRSSDJH  :KLOH DJDLQ WKHUH DUH DUJXPHQWV VXSSRUWLQJ UHSHDWHGDQGH[FHVVLYHXUDQLXPLQXULQHOHYHOVLQGLFDWHG 716jVLQWHUSUHWDWLRQRI†&KHYURQDJDLQFRPSHOVWKLV VHULRXVULVNRINLGQH\GDPDJH FRXUWWRDIILUPWKH%RDUGjVFRQWUDU\LQWHUSUHWDWLRQ 716  :/  DW   7KH %RDUG KHOG WKDW WKLV ,Q VXSSRUW RI LWV SRVLWLRQ 716 VWDWHV WKDW WKH 6XSUHPH HYLGHQFH mFRQVWLWXWHV REMHFWLYH SURRI VXSSRUWLQJ >WKH &RXUWLQ*DWHZD\&RDOGLFWDWHGDQDSSURDFKUHTXLULQJVXFK HPSOR\HHVj@ EHOLHI WKDW WKHLU ZRUNSODFH KDG EHFRPH WRR DVWDQGDUG,WLVWUXHWKDW*DWHZD\&RDOFDQEHUHDGWKLVZD\ XQVDIHDQHQYLURQPHQWWRFRQWLQXHZRUNLQJl,ELG DVLWUHTXLUHVmREMHFWLYHHYLGHQFHWKDW>DEQRUPDOO\GDQJHURXV@ FRQGLWLRQVDFWXDOO\REWDLQl*DWHZD\&RDO86DW 2QHPXVWJREDFNWRWKH$/sjVGHFLVLRQLQWKLVFDVHWRILOO HPSKDVLV DGGHG   *DWHZD\ &RDO JRHV RQ WR VWDWH WKDW mD RXWWKHGHWDLOVRIWKHIDFWVFLWHGE\WKH%RDUGDVVXSSRUWLQJWKH XQLRQ VHHNLQJ WR MXVWLI\ D FRQWUDFWXDOO\ SURKLELWHG ZRUN HPSOR\HHVjEHOLHIWKDWWKHLUZRUNSODFHZDVWRRGDQJHURXVWR VWRSSDJHXQGHU†PXVWSUHVHQWµDVFHUWDLQDEOHREMHFWLYH ZRUNLQ HYLGHQFH VXSSRUWLQJ LWV FRQFOXVLRQ WKDW DQ DEQRUPDOO\ GDQJHURXVFRQGLWLRQIRUZRUNH[LVWVjl,GDW TXRWLQJ 7KHILUVWSLHFHRIHYLGHQFHFLWHGE\WKH%RDUGGHDOWZLWKWKH *DWHZD\&RDO&RY8QLWHG0LQH:RUNHUVRI$PHULFD DPRXQWRI'8GXVWLQWKHIDFLOLW\jVDLU6LQFHWKH'8XVHGLQ )G G&LU  5RVHQQ&sGLVVHQWLQJ  WKHPDQXIDFWXULQJSURFHVVDW716LVDORZOHYHOUDGLRDFWLYH PDWHULDOWKH7'5+VHWDVWDQGDUGIRUWKH03&RIDLUERUQH 716DOVRFLWHV1/5%Y)UXLQ&ROQRQ&RQVWUXFWLRQ&R '8SDUWLFOHVGHILQHGDVWKHDPRXQWRIDLUERUQHUDGLRDFWLYH )G WK&LU ZKLFKKHOGWKDWHPSOR\HHV PDWHULDO EH\RQG ZKLFK QR ZRUNHU LV WR EH H[SRVHG IRU  OHDYLQJ WKHLU MREV EHFDXVH RI GDQJHURXV FRQGLWLRQV ULVN KRXUVSHUZHHNIRUZHHNV7KRXJKWKHUHLVDJUHDWGHDORI GLVFKDUJHEHFDXVHRIWKHLUQRVWULNHFODXVHmVKRXOGSURRIODWHU EDFNDQGIRUWKLQWKHUHFRUGZLWKUHVSHFWWRLWVVLJQLILFDQFHLW RI WKH SK\VLFDO IDFWV IDLO WR VXSSRUW WKHLU SULRU EHOLHIl LV XQGLVSXWHG WKDW ERWK FRPSDQ\ UHFRUGV DQG 7'5+ )XUWKHU716SRLQWVRXWWKDWWKH%RDUGKDVIROORZHGWKLVYLHZ LQVSHFWLRQV UHYHDOHG '8 GXVW LQ H[FHVV RI 03& DW VRPH LQWKHSDVWKROGLQJWKDWm>L@WLVZHOOVHWWOHGWKDW6HFWLRQ ZRUNVWDWLRQVLQWKH716SODQW DSSOLHVRQO\ZKHUHLWKDVEHHQREMHFWLYHO\HVWDEOLVKHGWKDWWKH ZRUNLQJFRQGLWLRQVDUHDEQRUPDOO\GDQJHURXVl*RRG\HDU +RZHYHUWKHVHFRQGSLHFHRIHYLGHQFHFLWHGE\WKH%RDUG 7LUH  5XEEHU &R  1/5%     %RDUG WKDW HPSOR\HHV ZHUH ZHDULQJ UHVSLUDWRUV ZDV LQ GLUHFW RYHUUXOLQJ DQ $/s GHFLVLRQ KROGLQJ WKDW †  SURWHFWV UHVSRQVHWRWKHKLJKOHYHOVRI'8GXVWIRXQGWREHLQWKHDLU  716,QFY1/5% 1RV 1RV 716,QFY1/5%  HPSOR\HHV ZLWK RQO\ D JRRG IDLWK EHOLHI WKDW DEQRUPDOO\ WRZRUNXQGHUFRQGLWLRQVWKDWWKHHPSOR\HHUHDVRQDEO\ GDQJHURXVFRQGLWLRQVH[LVW  EHOLHYHVSRVHDQLPPLQHQWULVNRIGHDWKRUVHULRXVERGLO\ LQMXU\DQG  WKHHPSOR\HHKDVUHDVRQWREHOLHYHWKDW +RZHYHUWKHUHDUHDJDLQUHVSRQVHVWR716jVDUJXPHQWV WKHUHLVQRWVXIILFLHQWWLPHRURSSRUWXQLW\HLWKHUWRVHHN )RU H[DPSOH WKRXJK WKH ODQJXDJH TXRWHG DERYH IURP HIIHFWLYHUHGUHVVIURPKLVHPSOR\HURUWRDSSULVH26+$ *DWHZD\ &RDO VHHPV WR VXSSRUW 716jV UHDGLQJ RI †  RIWKHGDQJHU *DWHZD\&RDODFWXDOO\GHDOVZLWKDVLWXDWLRQZKHUHDVWULNLQJ XQLRQFODLPHG†SURWHFWLRQEDVHGVROHO\RQWKHLUFODLPRI 1RWKLQJLQWKH$FWVXJJHVWVWKDW WKRVHIHZHPSOR\HHV VXEMHFWLYHEHOLHIRIDEQRUPDOGDQJHU7KHXQLRQRIIHUHGQR ZKRKDYHWRIDFHWKLVGLOHPPDPXVWUHO\H[FOXVLYHO\RQ REMHFWLYHHYLGHQFHWREDFNXSWKLVFODLPDQGLWZDVRQWKLV WKHUHPHGLHVH[SUHVVO\VHWIRUWKLQWKH$FWDWWKHULVNRI EDVLVWKDWWKH&RXUWKHOGWKDW†GLGQRWDSSO\,ELG$V WKHLU RZQ VDIHW\ %XW QRWKLQJ LQ WKH $FW H[SOLFLWO\ IRUWKH(LJKWK&LUFXLWjV)UXLQ&ROQRQGHFLVLRQWKLVWRRZDV SURYLGHV RWKHUZLVH $JDLQVW WKLV EDFNJURXQG RI D VLWXDWLRQ YLUWXDOO\ GHYRLG RI DQ\ HYLGHQFH RI DEQRUPDO OHJLVODWLYH VLOHQFH WKH 6HFUHWDU\ KDV H[HUFLVHG KLV GDQJHU6HH)UXLQ&ROQRQ)GDW UHMHFWLQJ† UXOHPDNLQJSRZHUXQGHU86&†† J   DQGKDV DSSOLFDELOLW\ZKHQHYLGHQFHRIDEQRUPDOGDQJHUZDVmEDVHG GHWHUPLQHGWKDWZKHQDQHPSOR\HHLQJRRGIDLWKILQGV XSRQ LVRODWHG WHVWLPRQ\ RI WKH DOOHJHG GLVFULPLQDWHHV DQG KLPVHOILQVXFKDSUHGLFDPHQWKHPD\UHIXVHWRH[SRVH XQUHDVRQDEOHLQIHUHQFHVZKLFKDUHXQVXEVWDQWLDOFRQVLGHULQJ KLPVHOI WR WKH GDQJHURXV FRQGLWLRQ ZLWKRXW EHLQJ WKHUHFRUGDVDZKROHl  VXEMHFWHG WR VXEVHTXHQW GLVFULPLQDWLRQ E\ WKH HPSOR\HU )XUWKHUZKLOHWKHUHLVFDVHODZWHQGLQJWRVXSSRUW716jV UHDGLQJRI†WKHUHLVDOVRFDVHODZWKDWFOHDUO\VXSSRUWV :KLUOSRRO  86 DW   :KLOH WKHUH DUH FHUWDLQO\ WKH%RDUGjVLQWHUSUHWDWLRQ)RUH[DPSOHWKLVFLUFXLWKDVKHOG GLIIHUHQFHV EHWZHHQ WKLV FDVH DQG:KLUOSRRO IRU H[DPSOH WKDWWKHLPSRUWDQWTXHVWLRQLQD†VLWXDWLRQLVQRWZKHWKHU KHUH WKHUH LV QR H[SUHVV UXOH IURP WKH 6HFUHWDU\ RI /DERU DEQRUPDOGDQJHUDFWXDOO\H[LVWHGEXWZKHWKHULWZDVVKRZQ SHUPLWWLQJ WKH DFWLRQ EDVHG RQ JRRG IDLWK EHOLHI DQG WKH E\REMHFWLYHHYLGHQFHWKDWWKHHPSOR\HHVjZRUNLQJFRQGLWLRQV SURYLVLRQVDUHXQGHUGLIIHUHQWVWDWXWHVZLWKGLIIHUHQWSXUSRVHV mPLJKWUHDVRQDEO\EHFRQVLGHUHGµDEQRUPDOO\ GDQJHURXVjl DQG JRDOV  WKLV FDVH UHSUHVHQWV DQDORJRXV VXSSRUW IRU WKH .QLJKW 0RUOH\  )G DW   ,Q VR KROGLQJ WKLV FRXUW SURSRVLWLRQWKDW WKH%RDUGFDQILQGDSHUPLVVLEOHEDVLVIRU ZURWHWKDW†mH[SUHVVO\OLPLWVWKHULJKWRIPDQDJHPHQWWR HPSOR\HHVWRHQJDJHLQDZRUNVWRSSDJHEDVHGRQUDGLDWLRQ UHTXLUH FRQWLQXDQFH RI ZRUN XQGHU ZKDW WKH HPSOR\HHV LQ VDIHW\HYHQLQWKHDEVHQFHRIGHFLVLYHDFWLRQE\WKH15& JRRGIDLWKEHOLHYHWREHµDEQRUPDOO\GDQJHURXVjFRQGLWLRQVl ,ELG +DYLQJUHMHFWHGWKHSURSRVLWLRQWKDWWKH1/5%FDQQRWDV D PDWWHU RI ODZ ILQG WKDW REMHFWLYH HYLGHQFH VXSSRUWV 7KHUHLVDOVRSHUVXDVLYHDXWKRULW\WRVXSSRUWWKH%RDUGjV HPSOR\HHVj EHOLHI LQ DEQRUPDOO\ GDQJHURXV ZRUNLQJ SRVLWLRQ)RUH[DPSOHLQ%DQ\DUGY1/5%)G FRQGLWLRQVZKHQUHOHYDQWUHJXODWRU\DJHQFLHVKDYHFKRVHQQRW    WKH 'LVWULFW RI &ROXPELD &LUFXLW UHMHFWHG WKH WR WDNH LPPHGLDWH RU HPHUJHQF\ DFWLRQ ZH PXVW FRQVLGHU QRWLRQWKDW†VHWVXSDQXQVDIHLQIDFWVWDQGDUG,QVWHDG ZKHWKHUWKH%RDUGjVIDFWXDOILQGLQJRIREMHFWLYHHYLGHQFHLQ WKH%DQ\DUGFRXUWH[SODLQHGWKDWWKHLVVXHLQ†FDVHVLV WKLVFDVHLVVXSSRUWHGE\VXEVWDQWLDOHYLGHQFH ZKHWKHUmLQWKH%RDUGjVRZQODQJXDJHµWKHDFWXDOZRUNLQJ FRQGLWLRQVVKRZQWRH[LVWE\FRPSHWHQWHYLGHQFHPLJKWLQWKH $V ZRXOG EH H[SHFWHG LQ D FDVH ZLWK WKH FRPSOLFDWHG SURFHGXUDOKLVWRU\RIWKLVRQHWKHUHLVH[WHQVLYHHYLGHQFHLQ  716,QFY1/5% 1RV 1RV 716,QFY1/5%  EXLOGDFUHGLEOHFDVHWKDWDEQRUPDOGDQJHUH[LVWHGWKHUHE\ FLUFXPVWDQFHV UHDVRQDEO\ EH FRQVLGHUHG mDEQRUPDOO\ SURYLGLQJDEDVLVIRUDSURWHFWHGMREDFWLRQ ZKLFKRIFRXUVH GDQJHURXVljl,ELG PLJKW EH XVHG PDQLSXODWLYHO\ WR VHFXUH XQUHODWHG FRQFHVVLRQV 6RPHPD\DUJXHWKDWWKH15&jVEULJKWOLQH )LQDOO\DOWKRXJKWKH%RDUGKDVXVHGODQJXDJHLQSULRUFDVHV UXOHVDQGUDGLDWLRQJXLGHOLQHVZRXOGWKHUHIRUHEHXQGHUPLQHG VXJJHVWLQJWKHXVHRIDGDQJHULQIDFWVWDQGDUGWKH%RDUGKDV E\FRPSDQLHVKDYLQJWRZRUU\QRWMXVWDERXWWKH 15&EXW DOVRIRXQG†DSSOLFDEOHWRZRUNVWRSSDJHVZKHUHLWZDV DOVRDERXWWKH1/5%LQWKHLUUDGLDWLRQSURJUDPV+RZHYHU GHWHUPLQHGWKDWWKHFRPSODLQHGRIZRUNLQJFRQGLWLRQVZHUH WKLV SUDFWLFDO FRQVLGHUDWLRQ LV IRU WKH WLPH EHLQJ PHUHO\ QRW LQ IDFW DEQRUPDOO\ GDQJHURXV  +RZHYHU REMHFWLYH VSHFXODWLYHDVWKH%RDUGDUJXHVULJKWO\WKDWLWGLGQRWPDNHD HYLGHQFH RI DEQRUPDO GDQJHU ZDV UHTXLUHG WR VXSSRUW WKH GHFLVLRQ FRQWUDU\ WR 15& ILQGLQJV EXW PHUHO\ IRXQG HPSOR\HHVjEHOLHI6HH5RDGZD\([SUHVV1/5% REMHFWLYH HYLGHQFH LQ SDUW EDVHG RQ 15&  7'5+ QRQ    DQH[SHULHQFHGWUXFNGULYHUjVRSLQLRQWKDWDWUXFN FRPSOLDQFH OHWWHUV  WR VXSSRUW WKH HPSOR\HHVj JRRG IDLWK ZDVXQVDIHZKHQWKDWRSLQLRQZDVVKDUHGE\RWKHUGULYHUV EHOLHIWKDWWKHLUZRUNSODFHZDVDEQRUPDOO\GDQJHURXV ZDV mREMHFWLYH HQRXJKl HYLGHQFH XQGHU †  mWR OHDG D SHUVRQWRUHDVRQDEO\GHWHUPLQHWKDWKHVKRXOGQRWGULYHVXFK )XUWKHU OHDYLQJ SROLF\ GHFLVLRQV DVLGH WKHUH LV DW OHDVW DWUXFNl 5HGZLQJ&DUULHUV,QF1/5% VRPHVXSSRUWIRUWKH%RDUGjVGHWHUPLQDWLRQWKDWLWQHHGQRW   m:KDW FRQWUROV LV QRW WKH VWDWH RI PLQG RI WKH GHIHU FRPSOHWHO\ WR WKH 15&  ,Q WKH 6XSUHPH &RXUWjV HPSOR\HH    FRQFHUQHG EXW ZKHWKHU WKH DFWXDO ZRUNLQJ :KLUOSRROGHFLVLRQ86DWWKH&RXUWZDVDVNHGWR FRQGLWLRQVVKRZQWRH[LVWE\FRPSHWHQWHYLGHQFHPLJKWLQWKH GHFLGHWKHYDOLGLW\RIDUXOHSURPXOJDWHGE\WKH6HFUHWDU\RI FLUFXPVWDQFHV UHDVRQDEO\ EH FRQVLGHUHG µDEQRUPDOO\ /DERUZKLFKDOORZHGZRUNHUVWRUHIXVHWRHQJDJHLQZRUN GDQJHURXVjl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†ZKLFK WKH H[LVWHQFH RI DQ DGPLQLVWUDWLYH DJHQF\ FKDUJHG ZLWK SURYLGHV LWV SURWHFWLRQ WR WKH mTXLWWLQJ RI ODERU E\ DQ HYDOXDWLQJ VDIHW\ WKHUH ZHUH WLPHV ZKHQ LW ZRXOG EH HPSOR\HHRUHPSOR\HHVLQJRRGIDLWKEHFDXVHRIDEQRUPDOO\ QHFHVVDU\IRUHPSOR\HHVWRWDNHPDWWHUVLQWRWKHLURZQKDQGV GDQJHURXV FRQGLWLRQV IRU ZRUNl  $FFRUGLQJ WR 716 WKLV 'LVFXVVLQJ WKH YDOLGLW\ RI WKH UXOH DOORZLQJ HPSOR\HHV WR ODQJXDJHFOHDUO\H[SUHVVHV&RQJUHVVjVLQWHQWWKDW†RQO\ UHIXVH FHUWDLQ MREV HYHQ ZKHQ 26+$ KDG QRW SURKLELWHG FRYHUFDVHVZKHUHDEQRUPDOO\GDQJHURXVFRQGLWLRQVDFWXDOO\ ZRUNHUVIURPSHUIRUPLQJWKHPWKH&RXUWZURWH H[LVW >&@LUFXPVWDQFHV PD\ VRPHWLPHV H[LVW LQ ZKLFK WKH :KLOHLWLVWUXHWKDW&RQJUHVVFRXOGKDYHGUDIWHGDFOHDUHU HPSOR\HHMXVWLILDEO\EHOLHYHVWKDWWKHH[SUHVVVWDWXWRU\ H[SUHVVLRQRILWVLQWHQWLWLVQRWWUXHWKDWLWGLGLQWKHSUHVHQW DUUDQJHPHQW>WKH26+$FW@GRHVQRWVXIILFLHQWO\SURWHFW FDVH7KHWH[WRI†WDNHQDVDZKROHLVRSHQWRERWK KLP IURP GHDWK RU VHULRXV LQMXU\ 6XFK FLUFXPVWDQFHV LQWHUSUHWDWLRQV DV LV HYLGHQW IURP WKH H[WHQVLYH FDVH ODZ ZLOOSUREDEO\QRWRIWHQRFFXUEXWVXFKDVLWXDWLRQPD\ GLVFXVVHG DERYH DWWHPSWLQJ WR LQWHUSUHW WKH VWDWXWH DQG DULVHZKHQ  WKHHPSOR\HHLVRUGHUHGE\KLVHPSOR\HU FRPLQJ RXW RQ ERWK VLGHV   $V WKH 6XSUHPH &RXUW KDV  716,QFY1/5% 1RV 1RV 716,QFY1/5%  H[SODLQHGm>L@IWKHLQWHQWRI&RQJUHVVLVFOHDUWKDWLVWKHHQG FRXQWHUPDQGV WKH GHWHUPLQDWLRQV RI DJHQFLHV ZLWK WKDW RIWKHPDWWHUIRUWKHFRXUWDVZHOODVWKHDJHQF\PXVWJLYH H[SHUWLVHDQGWKHUHE\IUXVWUDWHVEURDGHUSXUSRVHV6HH/3$ HIIHFWWRWKHXQDPELJXRXVO\H[SUHVVHGLQWHQWRI&RQJUHVVl ,QFDQGWKH1DWjO$VVjQRI0IUV%UDW$VDQH[DPSOH &KHYURQ  86 DW   +RZHYHU mLI WKH VWDWXWH LV LQVSHDNLQJSDUWLFXODUO\RIWKH15&WKH6L[WK&LUFXLWKDV VLOHQW RU DPELJXRXV ZLWK UHVSHFW WR WKH VSHFLILF LVVXH WKH MRLQHGZLWKDOPRVWHYHU\RWKHUFLUFXLWLQKROGLQJWKDW15& TXHVWLRQIRUWKHFRXUWLVZKHWKHUWKHDJHQF\ VDQVZHULVEDVHG VDIHW\UHJXODWLRQVFRQFOXVLYHO\HVWDEOLVKWKHGXW\RIFDUHRZHG RQDSHUPLVVLEOHFRQVWUXFWLRQRIWKHVWDWXWHl,GDW,Q E\ GHIHQGDQWV LQ UDGLDWLRQ VDIHW\ SHUVRQDO LQMXU\ FDVHV WKLV FDVH &RQJUHVVjV LQWHQW RQ WKLV VSHFLILF LVVXH LV JRYHUQHGE\WKHDPHQGPHQWVWRWKH3ULFH$QGHUVRQ$FW DPELJXRXVDQGWKHUHIRUHWKLVFRXUWPXVWDSSO\WKHGHIHUHQWLDO 6HH1LHPDQY1/2,QF)G WK&LU &KHYURQ VWDQGDUG RI UHYLHZ WR WKH %RDUGjV LQWHUSUHWDWLRQ   6LQFHWKHFRQVWUXFWLRQSXWIRUZDUGLVERWKSHUPLVVLEOHDQG UHDVRQDEOHWKLVFRXUWPXVWXSKROGWKH%RDUGjVGHWHUPLQDWLRQ $V IRU WKH %RDUG LW KDV LQ WKH SDVW DFFHSWHG DJHQFLHVj WKDW†UHTXLUHVRQO\DJRRGIDLWKEHOLHIoVXSSRUWHGE\ VWDQGDUGV DQG UHJXODWLRQV JRYHUQLQJ WKH DJHQFLHVj DUHDV RI DVFHUWDLQDEOH REMHFWLYH HYLGHQFH o LQ WKH H[LVWHQFH RI FRQFHUQLQGHWHUPLQLQJZKHWKHUDFODLPRIDEQRUPDOGDQJHU DEQRUPDOO\GDQJHURXVZRUNLQJFRQGLWLRQV ZDVSURYHQE\REMHFWLYHIDFWV6HH*RRG\HDU1/5% DW  %RDUG UHMHFWHG †  FODLP RI DEQRUPDO GDQJHU  :KHWKHUWKH%RDUGHUUHGLQLQWHUSUHWLQJ†WRSURKLELW UHO\LQJ LQ SDUW RQ PDQXIDFWXUHUjV VWDWHPHQWV WKDW IHGHUDO FRPSDQLHVIURPSHUPDQHQWO\UHSODFLQJZRUNHUVZKRTXLW UHJXODWRU\DJHQFLHVKDGQRWUHVWULFWHGXVHRISURGXFW 'DQLHO ZRUNEHFDXVHRIDEQRUPDOO\GDQJHURXVFRQGLWLRQV &RQVWU&R1/5%   %RDUGDIILUPHGWKDW HPSOR\HHjVUHIXVDOWRZRUNLQUDGLDWLRQDUHDGLGQRWIDOOXQGHU 716jVILQDOFKDOOHQJHWRWKH%RDUGjVVWDWXWRU\LQWHUSUHWDWLRQ †EHFDXVHQRREMHFWLYHHYLGHQFHZDVIRXQGWRVXSSRUW LV WKDW WKH %RDUG LQFRUUHFWO\ LQWHUSUHWHG †  WR SUHFOXGH GDQJHUFODLPDQGWKHUHZDVDSSDUHQWIXOOIHGHUDOUHJXODWRU\ HPSOR\HUVIURPSHUPDQHQWO\UHSODFLQJZRUNHUVHQJDJHGLQD FRPSOLDQFH %DNHU0DULQH&RUS1/5%  †ZRUNVWRSSDJH716DUJXHVWKDWDQHPSOR\HUVKRXOG %RDUGUHMHFWHG†FODLPRIDEQRUPDOGDQJHUDIWHU$/s KDYHWKHVDPHULJKWWRUHSODFHZRUNHUVZKRSDUWLFLSDWHLQD QRWHGSURFHGXUHVZLWKLQ26+$VDIHW\VWDQGDUGV  †ZRUNVWRSSDJHDVLWGRHVWRUHSODFHDQ\RWKHUHPSOR\HHV ZKRHQJDJHLQZRUNVWRSSDJHVQRWFDXVHGRUSURORQJHGE\ +RZHYHU LQ WKH SUHVHQW FDVH WKH %RDUG GLG QRW ILQG HPSOR\HUXQIDLUODERUSUDFWLFHV6HH1/5%Y0DFND\5DGLR mDEQRUPDOO\GDQJHURXVlDFRQGLWLRQWKDWWKH15&GLGQRWILQG  7HO &R  86     KROGLQJ WKDW DQ GDQJHURXV,WIRXQGPHUHO\WKDWWKHUHZDVREMHFWLYHHYLGHQFH HPSOR\HUPD\UHSODFHVWULNLQJZRUNHUVZLWKRWKHUVWRFDUU\RQ WRVXSSRUWWKHHPSOR\HHVjEHOLHIWKDWWKHLUZRUNLQJFRQGLWLRQV EXVLQHVVVRORQJDVWKHHPSOR\HULVQRWJXLOW\RIXQIDLUODERU ZHUHDEQRUPDOO\GDQJHURXV7KHUHLVDSUDFWLFDOFRQFHUQWKDW SUDFWLFHV 6HHDOVR%HONQDS,QFY+DOH86 WKLVLVPHUHO\VSOLWWLQJKDLUVDQGWKDWE\SHUPLWWLQJHPSOR\HHV Q   KROGLQJWKDWDEVHQWHYLGHQFHRIDQLQGHSHQGHQW †SURWHFWLRQIRUZRUNVWRSSDJHVLQFDVHVZKHUHUHJXODWRU\ XQODZIXO SXUSRVH LW LV WR EH SUHVXPHG WKDW DQ HPSOR\HUjV DJHQFLHVKDYHQRWVHHQWKHQHHGWRDFWGHFLVLYHO\WKH%RDUG PRWLYHLQSHUPDQHQWO\UHSODFLQJLWVHPSOR\HHVLVWRVHUYHWKH ZRXOGHIIHFWLYHO\EHVHWWLQJKLJKHU DQGGLIIHUHQW VWDQGDUGV OHJLWLPDWHEXVLQHVVLQWHUHVWRIFRQWLQXLQJLWVRSHUDWLRQ 716 IRUQXFOHDUVDIHW\WKDQWKRVHVHWE\WKHH[SHUWDJHQFLHV2QH FODLPV WKDW EHFDXVH LW KDV QRW HQJDJHG LQ DQ XQIDLU ODERU PLJKWDUJXHDFFRUGLQJO\WKDWFRPSDQLHVZRXOGWKHQEHIRUFHG SUDFWLFH JRYHUQHGE\†RI1/5$ LWVKRXOGEHSHUPLWWHG WR FRQWLQXH WR FRPSO\ ZLWK WKH QXFOHDU DJHQFLHVj WRSHUPDQHQWO\UHSODFHZRUNHUVVWULNLQJXQGHU† UHTXLUHPHQWVEXWDWWKHVDPHWLPHPDNHVXUHWKDWoGHVSLWH WKH FRPSDQLHVj FRPSOLDQFH o HPSOR\HHV ZHUH QRW DEOH WR  716,QFY1/5% 1RV 1RV 716,QFY1/5%  VDIHW\H[LVW>V@l7161/5%DW TXRWLQJ7'5+ 7KLVDUJXPHQWIDLOVLQWKLVFRXUWRQFHDJDLQEHFDXVHRIWKH ,QVSHFWLRQ5HSRUWIURP0DUFKLQVSHFWLRQ  &KHYURQ GRFWULQH  ,Q WKH DEVHQFH RI D FOHDU WH[WXDO GHVFULSWLRQRIZKDWSURWHFWLRQVDUHWREHRIIHUHGWRHPSOR\HHV 716DUJXHVWKDWZKHUHDQH[SHUWDJHQF\PRQLWRULQJWKH HQJDJHGLQ†DFWLRQVWKH%RDUGKDVLQWHUSUHWHG†WR VLWXDWLRQDQGKDYLQJDXWKRULW\WRVKXWGRZQWKHZRUNSODFHRU SURWHFWFRYHUHGHPSOR\HHVIURPEHLQJSHUPDQHQWO\UHSODFHG UHPRYH HPSOR\HHV IURP WKHLU MREV IRU VDIHW\ RU KHDOWK 6LQFHWKLVLQWHUSUHWDWLRQLVVXSSRUWHGE\ORJLFLWLVUHDVRQDEOH UHDVRQVKDVQRWWDNHQVXFKDFWLRQDSSURSULDWHGHIHUHQFHWR DQGPXVWEHXSKHOG WKDW DJHQF\jV H[SHUWLVH UHTXLUHV WKDW WKH %RDUG DSSO\ D SUHVXPSWLRQWKDWQRmDEQRUPDOGDQJHUlH[LVWV 7KLVLQWHUSUHWDWLRQLVVXSSRUWHGE\UHDVRQLQVHYHUDOZD\V )LUVWDVWKH&RXUWUHFRJQL]HGLQ*DWHZD\&RDO86DW 7KH %RDUG UHVSRQGV WKDW LW GLG QRW ILQG WKDW ZRUNLQJ †FRQIHUVmVSHFLDOSURWHFWLRQl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jV QRDEQRUPDOGDQJHUH[LVWHGDW716WKH1/5%mVWLOOZRXOG GHWHUPLQDWLRQWKDWHPSOR\HUVPD\QRWSHUPDQHQWO\UHSODFH QRWKDYHEHHQFRPSHOOHGWRGLVPLVVWKHFRPSODLQWSURYLGHG HPSOR\HHVZKRHQJDJHLQ†MREDFWLRQVFRQIRUPVZLWK WKDW WKH REMHFWLYH UHFRUG HYLGHQFH EHIRUH LW VKRZHG WKDW WKLVFRXUWjVKROGLQJWKDWm>Z@KHQDZRUNVWRSSDJHSURSHUO\ FRQGLWLRQVDWWKHWLPHRIWKHZRUNVWRSSDJHPLJKWUHDVRQDEO\ UHVXOWV IURP DEQRUPDOO\ GDQJHURXV ZRUNLQJ FRQGLWLRQV DQ EH FRQVLGHUHG DEQRUPDOO\ GDQJHURXVl  1/5% %U DW  HPSOR\HUFDQQRWUHVRUWWRWKHZHDSRQVDYDLODEOHWRKLPLQDQ )XUWKHU WKH %RDUG FRQWHQGV WKDW LW GLG QRW E\ LWV ILQGLQJ HFRQRPLFDOO\PRWLYDWHG ZRUN VWRSSDJHl  &ODUN (QJjJ PDNHWKHILQGLQJVRIWKH15&DQGWKH7'5+LUUHOHYDQWRQ &RQVWU&RY8QLWHG%KGRI&DUSHQWHUV sRLQHUV)G WKHFRQWUDU\WKH%RDUGXVHGFLWDWLRQOHWWHUVIURPWKH7'5+  WK&LU  FKDUJLQJ716ZLWKYLRODWLRQVRIUDGLDWLRQVDIHW\VWDQGDUGVDV WKH EDVLV IRU LWV ILQGLQJ WKDW WKHUH ZDV HQRXJK REMHFWLYH 0RUH JHQHUDOO\ WKH 6XSUHPH &RXUW KDV KHOG WKDW D HYLGHQFHWRVXSSRUWWKHHPSOR\HHVjJRRGIDLWKEHOLHI FRPSDQ\jVUHIXVDOWRUHLQVWDWHVWULNHUVLVXQODZIXOXQOHVVLWLV EDVHGRQDOHJLWLPDWHDQGVXEVWDQWLDOEXVLQHVVMXVWLILFDWLRQ ,Q JHQHUDO FRXUWV KDYH KHOG WKDW VFLHQWLILF UHJXODWRU\ 6HH 1/5% Y )OHHWZRRG 7UDLOHU &R  86   DJHQFLHVVXFKDVWKH15&VKRXOGEHJLYHQH[WUHPHGHIHUHQFH  $V716SRLQWVRXWWKH&RXUWLQ0DFND\5DGLR ZLWKLQWKHLUDUHDRIH[SHUWLVH6HH%DOWLPRUH*DV (OHF&R 86DWKHOGWKDWSHUPDQHQWUHSODFHPHQWRIHFRQRPLF Y15'&86  )HG3RZHU&RPPjQY VWULNHUVLVDOHJLWLPDWHEXVLQHVVSXUSRVH+RZHYHUWKH%RDUG )ORULGD 3RZHU  /LJKW &R  86     FRQFOXGHGDVDPDWWHURIVWDWXWRU\LQWHUSUHWDWLRQWKDWWKLVLV %URZQLQJ)HUULV,QGXVY0XV]\QVNL)G G QRWOHJLWLPDWHLQWKHFDVHRID†DFWLRQEHFDXVHLWZRXOG &LU  m&RXUWVVKRXOGEHSDUWLFXODUO\UHOXFWDQWWRVHFRQG GHIHDW SDUW RI WKH SXUSRVH RI DOORZLQJ ZRUNHUV IDFHG ZLWK JXHVVDJHQF\FKRLFHVLQYROYLQJVFLHQWLILFGLVSXWHVWKDWDUHLQ DEQRUPDOGDQJHUWRWDNHMREDFWLRQLIWKH\FRXOGVLPSO\EH WKHDJHQF\jVSURYLQFHRIH[SHUWLVHl $VRQHDPLFXVEULHI UHSODFHG ZLWK QHZ ZRUNHUV ZKR PD\ QRW EH DZDUH RI WKH SRLQWHG RXW WKLV GHIHUHQFH SURPRWHV HIILFLHQF\ DYRLGV GDQJHURXV FRQGLWLRQV  $V PHQWLRQHG &RQJUHVV KDV QRW XQQHFHVVDU\ GXSOLFDWLRQ RI HIIRUW DQG KHOSV WR DYRLG WKH VSRNHQ RQ WKLV LVVXH DQG WKH %RDUGjV LQWHUSUHWDWLRQ LV VLWXDWLRQ ZKHUH DQ DJHQF\ ZLWKRXW H[SHUWLVH LQ DQ DUHD  716,QFY1/5% 1RV 1RV 716,QFY1/5%  UHDVRQDEOHDVVXFKZHDUHERXQGE\&KHYURQWRXSKROGWKH mWKHVDIHW\RIQXFOHDUWHFKQRORJ\>LV@WKHH[FOXVLYHEXVLQHVV %RDUGjVLQWHUSUHWDWLRQ RIWKH)HGHUDO*RYHUQPHQWl &RQJUHVVGHOHJDWHGH[FOXVLYH OLFHQVLQJ DQG UHJXODWRU\ DXWKRULW\ WR WKH $WRPLF (QHUJ\ 716jV&KDOOHQJHVWRWKH%RDUGjV$SSOLFDWLRQRILWV† &RPPLVVLRQZKLFKZDVUHSODFHGE\WKH1XFOHDU5HJXODWRU\ 7HVWWRWKH)DFWVRIWKH3UHVHQW&DVH &RPPLVVLRQ 15&  LQ   6HH 'XNH 3RZHU &R Y &DUROLQD(QYWO6WXG\*URXS,QF86   7KLV FRXUW KDYLQJ UHMHFWHG 716jV YDULRXV DUJXPHQWV IRU 6SHFLILFDOO\ &RQJUHVV JDYH WKH 15& DXWKRULW\ WR UHJXODWH ZK\ WKH %RDUGjV IRXUSDUW WHVW LV QRW D SHUPLVVLEOH QXFOHDUPDWHULDOVWRSURWHFWmSXEOLFKHDOWKDQGVDIHW\l LQWHUSUHWDWLRQRI†ZHQRZWXUQWR716jVFKDOOHQJHVWR &)5† E    WKH%RDUGjVDSSOLFDWLRQRILWVWHVWWRWKHIDFWVRIWKLVFDVH$V QRWHGDERYHLQGHWHUPLQLQJWKDW†DSSOLHGWRWKH716 ,QWXUQSXUVXDQWWR86&†&RQJUHVVSURYLGHG HPSOR\HHVj ZRUN VWRSSDJH LQ D VLWXDWLRQ LQYROYLQJ WKDW WKH 15& PD\ GHOHJDWH FHUWDLQ DVSHFWV RI QXFOHDU mFXPXODWLYH VORZDFWLQJ GDQJHUV WR HPSOR\HH KHDOWK DQG UHJXODWLRQWRVWDWHV6HH86&†  8QGHUWKLV VDIHW\lWKH%RDUGKHOGWKDWWKH1/5%*HQHUDO&RXQVHOKDG SURYLVLRQVWDWHUHJXODWRU\DJHQFLHVPD\DVVXPHUHJXODWRU\ VXFFHVVIXOO\SURYHQE\DSUHSRQGHUDQFHRIWKHHYLGHQFHWKDW DXWKRULW\IRUORZOHYHOUDGLDWLRQVXEMHFWWR15&UHJXODWLRQV  WKHHPSOR\HHVEHOLHYHGLQJRRGIDLWKWKDWWKHLUZRUNLQJ 7HQQHVVHHEHFDPHVXFKDQmDJUHHPHQWVWDWHlLQDQGDV FRQGLWLRQVZHUHDEQRUPDOO\GDQJHURXV  WKHEHOLHIZDVD DUHVXOWWKH7HQQHVVHH'LYLVLRQRI3XEOLF+HDOWK'LYLVLRQRI FRQWULEXWLQJFDXVHRIWKHZRUNVWRSSDJH  WKHHPSOR\HHVj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mWKHUHZLOOSUREDEO\QRWEHDVLQJOHPRPHQWZKHQ FORVH D IDFLOLW\ E\ VXVSHQGLQJ RU UHYRNLQJ LWV OLFHQVH WR µLPPHGLDWHj GHSDUWXUH IURP WKH ZRUNSODFH LV REYLRXVO\ RSHUDWHLQWKHVWDWH QHFHVVDU\l  ,G DW   'HILQHG VR ORRVHO\ WKH IRXUWK UHTXLUHPHQWLVQRWGLIILFXOWWRIXOILOOSRVVLEO\IRUWKLVUHDVRQ )URP  RQZDUGV WKH 7'5+ FRQGXFWHG VHPLDQQXDO 716SULQFLSDOO\DUJXHVWKDWWKH%RDUGHUUHGLQILQGLQJWKDWWKH LQVSHFWLRQVRI716jVRSHUDWLRQV7KHUHLVFRQIOLFWEHWZHHQ ILUVWVHFRQGDQGWKLUGUHTXLUHPHQWVZHUHIXOILOOHG WKHSDUWLHVDVWRZKHWKHU716ZDVLQIXOOFRPSOLDQFHZLWK 15&DQG7'5+UHJXODWLRQV+RZHYHULIQRWKLQJHOVHWKHUH 2QUHYLHZE\WKLVFRXUWILQGLQJVRIIDFWPDGHE\WKH%RDUG VHHPVWREHQRFRQWHQWLRQWKDWWKHDJHQFLHVIRXQGFRQGLWLRQV DUH FRQFOXVLYH LI VXSSRUWHG E\ VXEVWDQWLDO HYLGHQFH RQ WKH DWWKHSODQWWREHLPPHGLDWHO\GDQJHURXVDVHYLGHQFHGE\WKH UHFRUGFRQVLGHUHGDVDZKROH6HH86&† I    IDFW WKDW WKH\ PLJKW KDYH WDNHQ GHFLVLYH UHJXODWRU\ DFWLRQ 7KRXJKGHIHUHQWLDOWKLVVWDQGDUGRIUHYLHZLVQRWWULYLDO$V DJDLQVWWKH&RPSDQ\DQGGLGQRW(YHQWKH%RDUGUHFRJQL]HV WKH6XSUHPH&RXUWKDVSRLQWHGRXWLWLVQRWHQRXJKPHUHO\WR WKLV KDYLQJ TXRWHG LQ LWV ILUVW GHFLVLRQ ODQJXDJH IURP WKH YHULI\ WKDW WKHUH LV HYLGHQFH WR VXSSRUW WKH %RDUGjV UHSRUWRIWKHODVW7'5+LQVSHFWLRQRIWKH716SODQWSULRUWR GHWHUPLQDWLRQ mZLWKRXW WDNLQJ LQWR DFFRXQW FRQWUDGLFWRU\ WKHMREDFWLRQmLQSODQWVLWHLVQRWDVFRQWDPLQDWHGDVQRWHG HYLGHQFHRUHYLGHQFHIURPZKLFKFRQIOLFWLQJLQIHUHQFHVFRXOG VHYHUDO \HDUV DJR     7KHUH DUH PDQ\ DUHDV WKDW QHHG EHGUDZQl8QLYHUVDO&DPHUD&RUSY1/5%86 LPSURYHPHQWDQGFRQVWDQWXSGDWLQJEXWLWDSSHDUVWKDWDWWKH   ,QVWHDGWKHUHYLHZPXVWDOVRmWDNHLQWRDFFRXQW SUHVHQWWLPH QR FULVLVRUHPLQHQW>VLF@WKUHDWWRKHDOWKDQG  716,QFY1/5% 1RV 1RV 716,QFY1/5%  REMHFWLYHHYLGHQFHlRIDEQRUPDOGDQJHU7KH%RDUGGLGWKLV ZKDWHYHULQWKHUHFRUGIDLUO\GHWUDFWVIURPLWVZHLJKWl,GDW LQDVLWXDWLRQZKHUHDOWKRXJKWKHUHOHYDQWQXFOHDUUHJXODWRU\   7KH 6XSUHPH &RXUW KDV GHVFULEHG WKLV VWDQGDUG RI DJHQFLHVVHQWQRQFRPSOLDQFHOHWWHUVDQGFLWHGYLRODWLRQVWKH UHYLHZ DV mUHTXLULQJ D FRXUW WR DVN ZKHWKHU D µUHDVRQDEOH DJHQFLHV GLG QRW VHH DQ LPPHGLDWH DQG VHULRXV GDQJHU PLQG PLJKW DFFHSWj D SDUWLFXODU HYLGHQWLDU\ UHFRUG DV ZDUUDQWLQJGHFLVLYHDFWLRQ:LWKWKDWLQPLQG716DUJXHVLQ µDGHTXDWHWRVXSSRUWDFRQFOXVLRQjl'LFNLQVRQY=XUNR LWV ILQDO FKDOOHQJH WR WKH %RDUGjV IDFWXDO ILQGLQJV WKDW WKLV 86   TXRWLQJ&RQVRO(GLVRQ&RY1/5% FRXUW VKRXOG RYHUWXUQ WKH %RDUGjV ILQGLQJ WKDW HYLGHQFH 86   VXSSRUWHGWKHHPSOR\HHVjEHOLHILQDEQRUPDOGDQJHU  :KHWKHU WKH %RDUG HUUHG LQ LWV IDFWXDO GHWHUPLQDWLRQV 716FDQEHUHDGWREHPDNLQJWZRGLIIHUHQWDUJXPHQWVRQ  WKDWWKH716HPSOR\HHVEHOLHYHGLQJRRGIDLWKWKDW WKLVVFRUHDQGZHZLOOGHDOZLWKHDFKLQWXUQ)LUVW 716 WKHLU ZRUNLQJ FRQGLWLRQV ZHUH DEQRUPDOO\ GDQJHURXV DUJXHVWKDWDVDPDWWHURIODZWKH%RDUGFDQQRWILQGWKDW DQG  WKDWWKHLUEHOLHIZDVDFRQWULEXWLQJFDXVHRIWKH REMHFWLYH HYLGHQFH VXSSRUWV WKH HPSOR\HHVj EHOLHI LQ ZRUNVWRSSDJH DEQRUPDO GDQJHU ZKHQ WKH UHOHYDQW QXFOHDU UHJXODWRU\ DJHQFLHVDUHDFWLYHO\PRQLWRULQJWKH&RPSDQ\jVRSHUDWLRQV 7KH ILUVW WZR IDFWXDO FKDOOHQJHV PDGH E\ 716 DUH EHVW DQGILQGQRFDXVHWRRUGHUFORVXUHRUDQ\W\SHRIHPHUJHQF\ DGGUHVVHGWRJHWKHUDVLWLVLPSRVVLEOHWRVHSDUDWHWKHSURRIRI UHPHGLDODFWLRQ:HUHMHFWWKDWDUJXPHQW$OWHUQDWLYHO\716 RQHIURPWKHSURRIRIWKHRWKHU7KHUHIRUHZHILUVWORRNDW PLJKWDUJXHWKDWLQWKHSUHVHQWFDVHDQGJLYHQWKHPRQLWRULQJ ZKHWKHUWKHUHLVVXEVWDQWLDOHYLGHQFHRQWKHUHFRUGDVDZKROH DQGLQDFWLRQE\WKHUHJXODWRU\ERGLHVWKHDFWXDOILQGLQJVRI WR VXSSRUW WKH %RDUGjV IDFWXDO ILQGLQJV WKDW WKH 716 IDFWV UHOLHG XSRQ E\ WKH %RDUG DV SURYLGLQJ HYLGHQFH HPSOR\HHVEHOLHYHGLQJRRGIDLWKWKDWWKHLUZRUNFRQGLWLRQV VXSSRUWLQJWKHHPSOR\HHVjEHOLHIZHUHLQVXIILFLHQWWRVXSSRUW ZHUH DEQRUPDOO\ GDQJHURXV DQG WKDW WKLV EHOLHI ZDV D WKH%RDUGjVILQGLQJ8WLOL]LQJWKHVWDQGDUGRIUHYLHZZLWK FRQWULEXWLQJFDXVHRIWKHZRUNVWRSSDJH:HILQGWKDWWKHUH ZKLFKWKLVFRXUWH[DPLQHV1/5%IDFWILQGLQJWKLVDUJXPHQW LVVXFKHYLGHQFH ZRXOGUHTXLUHXVWRKROGWKDWWKH%RDUGjVGHWHUPLQDWLRQZDV QRW VXSSRUWHG E\ mVXEVWDQWLDO HYLGHQFH RQ WKH UHFRUG 716 PDNHV D ZHOOGRFXPHQWHG DUJXPHQW WKDW WKH FRQVLGHUHGDVDZKROHl86&† I   :HDJUHH GDQJHURXVZRUNLQJFRQGLWLRQFODLPVZHUHRQO\DSUHWH[WIRU ZLWKWKLVDUJXPHQW WKH VWULNLQJ HPSOR\HHVj DFWXDO HFRQRPLF PRWLYDWLRQV  ,Q VXSSRUWRIWKLVFRQWHQWLRQ716SRLQWVWRWKHWLPLQJRIWKHMRE :HILUVWDGGUHVV716jVDUJXPHQWWKDWWKH%RDUGFRXOGQRW DFWLRQ DW WKH H[SLUDWLRQ RI WKH HPSOR\HHVj FROOHFWLYH DV D PDWWHU RI ODZ ILQG REMHFWLYH HYLGHQFH WR VXSSRUW WKH EDUJDLQLQJ DJUHHPHQW DW D WLPH ZKHQ QHJRWLDWLRQV ZLWK HPSOR\HHVj EHOLHI LQ WKH IDFH RI UHJXODWRU\ QRQDFWLRQ PDQDJHPHQWVHHPHGVWDOOHG 7KH&RPSDQ\DOVRDOOHJHVWKDW +RZHYHUEHIRUHDGGUHVVLQJWKLVDUJXPHQWLWLVQHFHVVDU\WR LWUHFHLYHGQRRIILFLDOFKDOOHQJHVE\HPSOR\HHVRUWKH8QLRQ UHYLHZ WKH QXFOHDU UHJXODWRU\ VFKHPH LQ JHQHUDO DQG WKH WR KHDOWK DQG VDIHW\ FRQGLWLRQV DW WKH SODQW XQWLO DIWHU WKH DJHQFLHVjDFWLRQVZLWKUHVSHFWWR716jVRSHUDWLRQV 0DUFKVWULNHYRWH)XUWKHUWKH&RPSDQ\FLWHV8QLRQ GLVFXVVLRQVDQGJUDIILWLSODFHGRQ716SURSHUW\DVHYLGHQFH $V SDUW RI WKH FRPSOHWH IHGHUDO SUHHPSWLRQ RI QXFOHDU WKDW WKH 8QLRQ ZDV IRFXVHG RQ HFRQRPLF PDWWHUV DQG QRW VDIHW\6LONZRRG Y .HUU0F*HH &RUS  86   ZRUNSODFH VDIHW\ DW WKH WLPH RI WKH YRWH  )LQDOO\ WKH   IHGHUDOJRYHUQPHQWRFFXSLHVHQWLUHILHOGRIQXFOHDU &RPSDQ\ DOOHJHV WKDW UDQN DQG ILOH 8QLRQ PHPEHUV ZHUH VDIHW\  3DF *DV DQG (OHF &R Y 6WDWH (QHUJ\ 5HV XQDZDUHRIPXFKRIWKHmREMHFWLYHHYLGHQFHlRIGDQJHUWKDW &RQVHUYDWLRQ  'HY &RPPjQ  86     716,QFY1/5% 1RV 1RV 716,QFY1/5%  WKH%RDUGFLWHVDQGVRHYHQLIWKHUHZHUHVXFKHYLGHQFHLW ,QVKRUWWKHHYLGHQFHLVVWURQJO\VHWRXWE\ERWKVLGHVLQ FRXOGQRWKDYHEHHQDPRWLYDWLQJIDFWRUIRUWKHZDONRXW WZHQW\ \HDUV RI GRFXPHQWV WUDQVFULSWV DQG WHVWLPRQ\ +RZHYHU JLYHQWKHVWDQGDUGRIUHYLHZWKDWFRQVWUDLQVWKLV 7KH SLFWXUH SDLQWHG E\ WKH %RDUGjV SURIIHUHG HYLGHQFH FRXUWLQH[DPLQLQJIDFWXDOGHWHUPLQDWLRQVRIWKH%RDUGWKH FRXOGQRWEHPRUHGLIIHUHQW7KH%RDUGFLWHVIUHTXHQWVDIHW\ PHUHIDFWWKDWHYLGHQFHJRHVERWKZD\VGRHVQRWKHOS716jV LQVSHFWLRQV DQG UHSRUWV RI FRPSODLQWV PDGH E\ WKH 8QLRQ FDVH  ,QVWHDG LQ RUGHU WR RYHUWXUQ WKH %RDUGjV IDFWXDO VLQFH2FWREHUDVHYLGHQFHRIWKHHPSOR\HHVjFRQFHUQIRU ILQGLQJV ZLWK UHVSHFW WR WKH HPSOR\HHVj EHOLHIV DQG WKHLUVDIHW\)XUWKHUWKH%RDUGQRWHVWKDWWKHXOWLPDWXPVHQW PRWLYDWLRQVZHZRXOGKDYHWREHDEOHWRVD\WKDWWKH%RDUGjV E\WKH8QLRQWRWKH&RPSDQ\RQ0DUFKVWDWHGWKDW GHWHUPLQDWLRQLVQRWVXSSRUWHGE\mVXEVWDQWLDOHYLGHQFHRQWKH LIWKHHPSOR\HHVZDONHGRXWLWZRXOGEHEHFDXVHRIDOOHJHG UHFRUGFRQVLGHUHGDVDZKROHl86&† I    GDQJHUV LQ WKH ZRUNSODFH  7KH %RDUG FLWHV QXPHURXV :HDUHXQDEOHWRGRWKDWKHUH GLVFXVVLRQV DW 8QLRQ PHHWLQJV DQG QXPHURXV ZRUULHV H[SUHVVHGE\HPSOR\HHVDERXWWKHGDQJHUVFDXVHGE\'8GXVW  :KHWKHUWKH%RDUGHUUHGLQILQGLQJREMHFWLYHHYLGHQFHRI LQWKHIDFWRU\7KH8QLRQLQLWVEULHIVWDWHV DEQRUPDO GDQJHU WR H[LVW LQ D SODQW UHJXODWHG PRQLWRUHGDQGSHUPLWWHGWRFRQWLQXHRSHUDWLRQE\WKH ,QWKHSHULRGOHDGLQJXSWRWKHZRUNVWRSSDJHHPSOR\HHV 1XFOHDU 5HJXODWRU\ &RPPLVVLRQ DQG LWV VWDWH NQHZWKDWGXHWRWKH&RPSDQ\jVZRHIXOO\LQDGHTXDWH FRXQWHUSDUW GXVW FRQWURO SURJUDP WKH\ ZHUH LQJHVWLQJ LQRUGLQDWH TXDQWLWLHV RI '8 DQG WKDW VHYHUDO RI WKHP ZHUH $VPHQWLRQHGDERYHLQWKHFRXUVHRIILQGLQJWKDW† H[SHULHQFLQJ GLVWXUELQJ PHGLFDO V\PSWRPV DVVRFLDWHG DSSOLHGWRWKHZRUNVWRSSDJHDW716WKH%RDUGIRXQGWKDWWKH ZLWK NLGQH\ G\VIXQFWLRQ  716 LWVHOI EHJDQ WR LQIRUP HPSOR\HHVjJRRGIDLWKEHOLHILQWKHH[LVWHQFHRIDEQRUPDOO\ VRPHHPSOR\HHVWKDWWKH\KDGKLJKOHYHOVRIXUDQLXPLQ GDQJHURXV FRQGLWLRQV ZDV VXSSRUWHG E\ mDVFHUWDLQDEOH WKHLUXULQH7KHVWHS716WRRNLQUHVSRQVHWRWKHVH GHYHORSPHQWV    ZDV WR LPSOHPHQW DQ REYLRXVO\ LQDGHTXDWHUHVSLUDWRUSURJUDPZKLFKRQO\PDGHLWPRUH DSSDUHQWWKDWWKHHPSOR\HHVjKHDOWKZDVLQJUDYHSHULO VRRW ZRXOG PDNH KLV KDLU VWLII DV EULOOR KH ZRUH SOXJV WR SUHYHQW GLUW IURP HQWHULQJ KLV HDUVl $QRWKHU HPSOR\HH NHSW D WRRWKEUXVK DW KLV ZRUN VWDWLRQ WR UHPRYH GXVW\ SDUWLFOHV ZKLFK  ORGJHG LQ KLV WHHWK