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Posts Tagged ‘New York’

States are Busy on the Cyber Front

Posted on: February 19th, 2020

By: Amy C. Bender

2020 is off to a busy start, with several states taking action on cybersecurity legislation and issuing other legal updates. Highlights include:

California – California’s Attorney General has issued revised proposed regulations regarding the California Consumer Privacy Act (“CCPA”), which creates consumer rights relating to the access to, deletion of, and sharing of personal information that is collected by businesses. The updates, which are aimed at providing more relief for consumers and clarity to covered businesses, include changes to definitions, notice and other requirements for covered businesses, and consumer rights and requests. The revised proposed regulations are available here and are currently under a public comment period.

Maryland – In the first decision of its kind under Maryland law, a federal court has ruled that a loss of software and data due to a ransomware attack was covered under a business owner’s property insurance policy. Specifically, the court found that the loss qualified as a “direct physical loss of or damage” to covered property (the affected computer server and networked computers) based on the loss of the data and software in the computer system and the loss of functionality to the computer system itself. The court reasoned that the policy did not limit covered losses to tangible property only or to total property losses. The decision is available here.

Massachusetts – The state’s legislature has stalled a proposed consumer data privacy law (available here) that would have imposed notice and disclosure requirements on businesses that collect consumers’ personal information, provided consumers the right to delete and opt out of third-party disclosure of collected personal information, and allowed consumers to sue for violations of the act without having to show any resulting damage. The bill has been sent to a “study order,” where a committee will study it and report its findings.

New York – The Stop Hacks and Improve Electronic Data Security Act (“SHIELD ACT”), available here, amends the state’s existing data breach notification law to require any person or business that owns or licenses computerized data that includes private information of New York residents to develop, implement, and maintain reasonable safeguards to protect the security, confidentiality, and integrity of the private information, including disposal of data. The data security provisions go into effect on March 21, 2020.

Virginia – Similar to Massachusetts, Virginia’s legislature has delayed and referred to study several privacy-related bills, including bills relating to consumer rights regarding access and sale of their personal data, destruction and disposal of records containing personally identifiable information, and collection and safekeeping of biometric data by employers.

Washington – The legislature has introduced a revised version of a proposed law, the Washington Privacy Act (available here), which would apply to certain private business that control or process consumer personal data and that are located within or targeted to residents of the state. The law would provide consumers rights regarding their personal data, impose responsibilities on covered controllers and processors, and regulate facial recognition services. The bill is now scheduled for a public hearing.

Freeman Mathis & Gary’s Data Privacy and Security Practice Group is here to help clients with policies and training. If you have any questions or would like more information, please contact Amy Bender at [email protected].

“Sanctuary Cities” Get a Reprieve For Now

Posted on: January 10th, 2019

By: Pamela Everett

As many city, county and state attorneys are aware, in 2017 the US. Department of Justice (DOJ) added three conditions to the application process for the Edward Byrne Memorial Justice Assistance Grant (“Byrne JAG”) program in an effort to eliminate so called sanctuary cities. The Byrne JAG program originated from the Omnibus Crime Control and Safe Streets Act of 1968,  which created grants to assist the law enforcement efforts of state and local authorities. Under the Byrne JAG program, states and localities may apply for funds to support criminal justice programs in a variety of categories, including law enforcement, prosecution, crime prevention, corrections, drug treatment, technology, victim and witness services, and mental health.

The first condition, called the “Notice Condition” requires grantees, upon request, to give advance notice to the Department of Homeland Security of the scheduled release date and time of aliens housed in state or local correctional facilities. The second condition, called the “Access Condition,” requires grantees to give federal agents access to aliens in state or local correctional facilities in order to question them about their immigration status. The third condition, called the “Compliance Condition” requires grantees to certify their compliance with 8 U.S.C. § 1373, which prohibits states and localities from restricting their officials from communicating with immigration authorities regarding anyone’s citizenship or immigration status. Grantees are also required to monitor any subgrantees’ compliance with the three conditions, and to notify DOJ if they become aware of credible evidence of a violation of the Compliance Condition. Additionally, all grantees must certify their compliance with the three conditions, which carries the risk of criminal prosecution, civil penalties, and administrative remedies. The DOJ also requires the jurisdictions’’ legal counsel to certify compliance with the conditions.

A number of jurisdictions have sued the DOJ and the U. S. Attorney General regarding these new conditions and sought a nationwide injunction; however, so far, none have  been successful in obtaining a nationwide injunction.  Recently a partial win was handed to the states of New York, Connecticut, New Jersey, Rhode Island, Washington, and Commonwealths of Massachusetts and Virginia and the City of New York. The States and the City challenged the imposition of the three conditions on five bases: (1) the conditions violates the separation of powers, (2) the conditions were ultra vires under the Administrative Procedure Act (“APA”), (3) the conditions were not in accordance with law under the APA, (4) the conditions were arbitrary and capricious under the APA, and (5) § 1373 violated the Tenth Amendment’s prohibition on commandeering.  This case challenged the authority of the Executive Branch of the federal government to compel states to adopt its preferred immigration policies by imposing conditions on congressionally authorized funding to which the states are otherwise entitled.

While the court held that the plaintiffs did not make a sufficient showing of nationwide impact to demonstrate that a nationwide injunction was necessary to provide relief to them, it did find as follows: (1) The Notice, Access, and Compliance Conditions were ultra vires and not in accordance with law under the APA. (2) 8 U.S.C. § 1373(a)–(b), insofar as it applies to states and localities, is facially unconstitutional under the anticommandeering doctrine of the Tenth Amendment. (3)  The Notice, Access, and Compliance Conditions violated the constitutional separation of powers. (4)The Notice, Access, and Compliance Conditions were arbitrary and capricious under the APA.  (5) The DOJ was mandated to reissue the States’ FY 2017 Byrne JAG award documents without the Notice, Access, or Compliance Conditions, and upon acceptance to disburse those awards as they would in the ordinary course without regard to those conditions.  Additionally, the DOJ was prohibited from imposing or enforcing the Notice, Access, or Compliance Conditions for FY 2017 Byrne JAG funding for the States, the City, or any of their agencies or political subdivisions.

The DOJ was prohibited from imposing or enforcing the Notice, Access, or Compliance Conditions for FY 2017 Byrne JAG funding for the States, the City, or any of their agencies or political subdivisions.

There are several other cases pending, including one filed by the City of San Francisco, seeking the issuance of a nationwide injunction to prohibit the enforcement of the new conditions. Stay tuned for more developments in this area.

If you have any questions or would like more information, please contact Pamela Everett at [email protected].

 

Related litigation: City of Chicago v. Sessions, 264 F. Supp. 3d 933 (N.D. Ill. 2017); affd. appeal, City of Chicago v. Sessions, 888 F.3d 272 (7th Cir. 2018), but later stayed the nationwide scope of the injunction pending en banc review. Conference City of Evanston v. Sessions, No. 18 Civ. 4853, slip op. at 11 (N.D. Ill. Aug. 9, 2018) City of Philadelphia v. Sessions, 280 F. Supp. 3d 579 (E.D. Pa. 2017); City of Philadelphia v. Sessions, 309 F. Supp. 3d 289 (E.D. Pa. 2018)(currently on appeal); California ex rel. Becerra v. Sessions, 284 F. Supp. 3d 1015 (N.D. Cal. 2018)

 

Philadelphia Burdens New Fair Workweek Law to Impact 130,000 Workers & Employers

Posted on: January 9th, 2019

By:  John McAvoy

On December 7, 2018, the Philadelphia City Council passed the Fair Workweek Employment Standards Ordinance by an overwhelming margin of 14-3. Effective January 1, 2020, the objective of the Ordinance, which was introduced in June by Councilwoman Helen Gym (D), is to provide more predictable hours, advanced scheduling, among a slew of other protections for the roughly 130,000 workers in the food, service, and hospitality industries. The Ordinance’s seven co-sponsors hope the new restrictions will help break the cycle of poverty plaguing the nation’s fifth largest city.

To that laudable yet impracticable end, the Fair Workweek Ordinance imposes significant restrictions and standards on large service industry employers with respect to how they schedule, hire, and pay their workers. It also provides for a private right of action against employers that permits recovery of back pay, presumed damages, liquidated damages up to $2,000, attorneys’ fees and equitable relief.

After much debate with local businesses, the new Ordinance as enacted covers only those “retail establishments,” “hospitality establishments,” and “food services establishments” that employ 250 or more employees overall and have 30 or more locations worldwide, including chains and franchise locations.

New York, San Francisco and other large municipalities through the country have been implementing similar “fair workweek” laws since 2014. Philadelphia is the second largest city to adopt the practice. Like similar legislation enacted across the country, Philadelphia Fair Workweek Ordinance imposes four main requirements on employers:

  1. Schedules in Advance. Employers must provide new hires with a written, good faith estimate of the employee’s work schedule. That schedule can change, but the initial estimate must include: the hours the employee can expect to work over a typical 90-day period; whether the employee can expect to work any on-call shifts; and “a subset of days and a subset of times or shifts that the employee can typically expect to work, or days of the week and times or shifts on which the employee will not be scheduled to work.” The employee can request a different work schedule, but the employer is free to grant or deny the request for any reason that is not unlawful. Employers will also have to consider employee work schedule requests, including requests not to be scheduled for certain shifts, days, times or locations as well as requests for changes in hours worked. Additionally, employers must provide employees with a written work schedule at least 10 days before the first day of a scheduled period (14-days effective January 1, 2021). Employees must receive notice of any proposed changes to the posted work schedule as promptly as possible and prior to the change taking effect, and they have the right to decline to work any hours not reflected on the posted work schedule.

 

  1. Predictability Pay. The Ordinance requires employers to compensate employees for changes to the work schedule. This is commonly referred to as “predictability pay.” The amount of the mandated compensation is to be determined. There are, however, exceptions to this requirement. For example, if the employee initiates the schedule change, or there’s a mutual agreement between the employer and employee, an emergency, or for one of the other less common reasons outlined in the Ordinance, then employers are under no obligation to provide predictability pay.

 

  1. Rest Between Shifts. An employee may decline, without penalty, any work hours that are scheduled or otherwise occur less than 9 hours after his or her prior shift ends. However, if the employee works that second shift, the company must pay that employee $40.

 

  1. Offer Work to Existing Employees. Employees must offer extra shifts to current employees before hiring a new employee. However, if existing employees turn down the offer of extra shifts or if extra shifts would implicate overtime pay, then employers are free to hire new employees.

Employers who violate these requirements subject their business to potential liability. The Free Workweek Ordinance makes it unlawful to interfere with, restrain, or deny the exercise of protected rights under the ordinance. Retaliation is also prohibited, with a rebuttable presumption of retaliation for any adverse action within 90-days of an employee exercising protected rights, unless the adverse action was due to well-documented disciplinary reasons that constitute just cause. The Office of the Mayor of Philadelphia is charged with enforcing the new Ordinance, raising questions as to enforcement policy and litigation.

Prudent employers should start preparing their businesses now, Even though the new requirements and standards imposed by the Ordinance do not take effect for another year. Complicating matters further is the fact that the Ordinance, as a whole, is rather vague and ambiguous in terms of the restrictions it imposes and the ways in which those restrictions will be enforced. Although the legislature should eventually issue regulations to resolve some of the uncertainty, it is unclear when that will occur or if it will happen before the Ordinance takes effect next January. As a result, employers are left fending for themselves to make sweeping changes to their scheduling, hiring, and payment policies, practices, and procedures towards complying with the Ordinance.

The uncertainty and other difficulties employers will likely experience navigating the exacting requirements of Philadelphia’s Fair Workweek Ordinance is nothing new. Employment law is rapidly changing and evolving in Philadelphia at an unparalleled pace. The Fair Workweek Ordinance joins the ranks of similarly taxing legislation such as Philadelphia’s Salary History Ban Law and its Ban-the-Box Law, to name but two of the many legislative minefields presently impacting local employers.

Given this is a rapidly changing and developing area of the law, employers are encouraged to charge someone in their human resources and/or compliance departments with staying current on Philadelphia’s new employment ordinances and regulations. Noncompliance with an applicable regulation or ordinance, no matter how vague it may be written, can lead to civil liability and ignorance of the law is no defense. Therefore, it is important that employers stay apprised of the rapidly changing employment laws. The person charged with this responsibility should understand the impact a new or proposed law might have on the business and recognize what, if any, changes in the law require an amendment to company policies. It is also suggested that employers consult with experienced legal counsel to ensure that their policies and procedures are fully complaint with new legislation.

Need help understanding/navigating Philadelphia’s new legislation or want to learn more about what Philadelphia’s Fair Workweek Ordinance means for your local business? Let Freeman Mathis & Gary’s employment experts help. Feel free to call or email John McAvoy (215.789.4919 [email protected]) for assistance with your company’s policies and procedures.

Come See the Debtor Side of Sears – Legal Issues for Creditors

Posted on: November 7th, 2018

By: Matthew Weiss

On Monday October 15, Sears Holdings filed for Chapter 11 bankruptcy in the Southern District of New York, claiming approximately $7 billion in assets and $11 billion in liabilities. The bankruptcy of what was at one time the nation’s largest retail company is anticipated to result in the closing of 142 of Sears’ remaining stores before the end of the year.  It is believed that Sears currently has more than 100,000 creditors.

It remains to be seen whether Sears will be able to successfully reorganize, or whether it will suffer the same fate as other recent retailers in bankruptcy such as Toys-R-Us and be forced to liquidate its assets. As Sears’ substantial debts are sorted out, creditors and vendors of the retailer should keep the following in mind to preserve their interests:

Reclamation Demands: Vendors may issue reclamation demands on Sears pursuant to section 546(c) of the Bankruptcy Code, which authorizes a seller of goods to reclaim those goods if the debtor received them while insolvent, within 45 days before the commencement of a bankruptcy case. Because Sears has been legally insolvent for a long time, all vendors who have provided goods to Sears within 45 days of the bankruptcy filing (since September 1, 2018) have the ability to demand the reclamation of those goods by filing a written notice with the bankruptcy court.

Clawback Claims: Creditors are actively investigating whether claims exist against Sears’ former CEO, Eddie Lampert, for engaging in improper transactions involving the debtor. Lampert has had interests on both sides of transactions involving Sears in recent years and remains the Chairman even though he has resigned as CEO. For example, he is also the chairman of Sears’ real estate spinoff entity, Seritage Growth Properties, which acquired the real estate on which 230 Sears and Kmart stores are located (valued at $2.7 billion) and now collects rent from those stores. Additionally, Lampert individually and through his hedge fund, ESL Investments, Inc., has loaned Sears $2.66 billion through a variety of financing transactions.  These transactions have allowed Lampert to control the terms of the financing arrangements and benefit from interest payments by Sears. Thus, creditors will attempt to argue that Lampert deliberately stripped Sears of its assets through fraudulent transfers. The Official Committee of Creditors will likely argue that these assets should be clawed back into the bankruptcy estate pursuant to section 548 of the Bankruptcy Code.  Under relevant Delaware law, creditors have four years to assert fraudulent transfer claims and they must prove both that Sears was insolvent at the time the transactions occurred and that it did not receive reasonably equivalent value for the transfers. Other claims could be asserted against Lampert, including fraud and shareholder derivative suits for breach of fiduciary duty, although those will be harder to prove. Lampert and other directors have already settled four lawsuits involving the creation of Seritage Growth Properties for approximately $40 million.

Low Priority Creditors: After Sears’ secured creditors and prior creditors are paid, the remaining creditors, including unsecured vendors, service providers, shareholders, and pensioners, will have to fight over whatever assets remain.  Sears’ largest unsecured creditor is the Pension Benefit Guaranty Corp., a federally chartered corporation that insures pensions. PBGC claims that Sears underfunded its pension obligations by $1.5 billion.

Sears has also said that it will continue paying employees’ wages and benefits, honoring member programs, and paying vendors and suppliers in the ordinary course of business for all goods and services provided on or after the date of the bankruptcy filing. Sears specifically has said that customer loyalty programs, warranties, protection agreements, and guarantees would continue for the time being. Nonetheless, because Sears has only received $300 million in debtor-in-possession financing, there is a looming threat that the debtor will be forced to liquidate, which could shut down the entire business as a going concern. Therefore, vendors and customers should be wary about continuing to do business with Sears and Kmart until they appear to be on more solid financial footing.

For more information, please contact Matthew Weiss at [email protected].

New York Passes Sexual Harassment Laws and Issues Employer Guidance

Posted on: September 11th, 2018

By: Will Collins

By October 9, 2018, New York employers must adopt a sexual harassment prevention policy and must provide training on that policy to all employees by January 1, 2019. Last week, New York launched a website that will serve as a hub for all resources related to the state’s new sexual harassment laws. The site contains key guidance setting the baseline for employer compliance. Among the resources, the website provides employers with a:

  • Model Sexual Harassment Policy & Complaint Form;
  • Model Sexual Harassment Prevention Training; and
  • FAQs section addressing the requirements of New York’s sexual harassment laws.

At this point, all guidance on the site is only proposed and subject to change following the close of the public comment period on September 12, 2018. Once final, the model policies and training may be adopted by employers as their own.

Model Sexual Harassment Policy and Complaint Form

At a minimum an employer must adopt a sexual harassment policy that meets or exceeds the standards set by the New York Department of Labor.  The Model Policy expounds on those requirements and:

  • Contains a broad statement of coverage, including “all employees, applicants for employment, interns, whether paid or unpaid, contractors and person conducting business with” an employer;
  • Requires “[a]ll employees, including managers and supervisors,” comply and cooperate with any investigation of sexual harassment;
  • Mandates that any manager or supervisor is “required to report any complaint that they receive, or any harassment they observe” to a designated individual;
  • Outlines the investigation procedure, indicating that the investigation should be complete within 30 days;
  • Contains a document retention component, requiring that an employer maintain documentation memorializing the details of the investigation, including the timeline, facts learned during the investigation, and any witnesses; and
  • Requires that the employer notify the complainant of the employer’s determination at the end of the investigation, including notification of the complainant’s right to file a complaint or charge externally.

Model Sexual Harassment Prevention Training

Employers must provide training to all employees by January 1, 2019. After January 1, 2019, employees must receive training on the employer’s sexual harassment policy annually and new employees must receive training within the first 30 days of their employment. The Model Training guidance:

  • Provides that all employees who work in the state of New York must receive training, even if the employee “works for just one day in New York;”
  • Requires that training be offered in the spoken language of employee; and
  • Tracks the Model Policy language, but contains details of specific examples of conduct illustrative of sexual harassment.

Again, employers do not have to use the training and materials provided by the New York Department of Labor. However, if developing their own training, employers must meet the minimum requirements.

FAQs Section

Among several key topics in the FAQs, this section of the website provides guidance on non-disclosure agreements and arbitration.

  • Non-Disclosure: Beginning July 11, 2018, the law prohibits agreements preventing the disclosure of facts of any alleged sexual harassment unless the NDA is the preference of the individual making the Complaint. The FAQs clarify that the parties must enter into two separate agreements—one setting out the complainant’s preference and a second containing the non-disclosure provisions.
  • Arbitration: The FAQs again reiterate that the law prohibits employers from mandating arbitration to “resolve any allegation or claim of an unlawful discriminatory practice of sexual harassment.”

Bottom Line

These are just a few of the developments in New York’s sweeping response to the #MeToo movement, pushing employers to adopt robust and comprehensive sexual harassment policies and training. Given the broad coverage of the requirements and the fast approaching deadlines, employers should take this opportunity to work with counsel to review their policies, including provisions of their handbook and any arbitration agreements to ensure compliance.

The attorneys in the FMG Labor and Employment Nation Practice Section are available to assist your organization, determine your obligations under New York law, and help you navigate day-to-day compliance as other states, counties, and cities enact similar regulations.

If you have any questions or would like more information, please contact Will Collins at [email protected].