Category: Uncategorized

EEOC Proposes Rule Requiring Employers to Disclose Pay Data on EEO-1 Forms and Key Recent Pro-Employee Changes in New York State’s and New York City’s Employment Laws and Regulations

EEOC EEO-1 Form Pay Data Requirement Raises Risks for Management

In a proposed regulation announced on January 29, 2015, the U.S. Equal Employment Opportunity Commission set forth changes that would require federal contractors and all other private-sector employers throughout the nation of more than 100 employees to report wage and salary data on their annual EEO-1 Forms. This new rule would mandate that such employers disclose compensation ranges and hours worked on their EEO-1 Forms, which already must contain data on employees’ gender, ethnicity, and race.

The Commission’s plans to require management to submit this data is part of the Obama Administration’s aggressive efforts to enforce the federal Equal Pay Act and other fair employment statutes and to promote pay equity in the workplace. Complying with the new regulation would require employers to spend substantial additional time and resources in gathering compensation information, which often involves many variables, and then organizing it into the format that the EEOC will mandate. Reporting this data to the EEOC would give the U.S. Government data without context and may lead to burdensome Commission investigations and enforcement actions based on misunderstandings of incomplete compensation information. Further, even though EEO-1 data enjoys some protections, the confidential status of employers’compensation information will now be vulnerable either to Freedom of Information Act requests or to kind of hacking attacks to which the federal government, with its antiquated IT systems in agencies such as the EEOC, has already suffered.

In sum, employers in New Jersey, New York, and around the country would become subject to higher EEOC scrutiny of their payroll practices, would face more Commission inquiries and litigations, would have to expend additional resources to complete EEO-1 Forms, and would need to live with a higher risk that their competitors will be able to obtain the confidential compensation data that the new rule would require management to submit each year to the EEOC.

Key Pro-Employee Changes in New York State and New York City Employment Laws and Regulations

New York State and New York City made significant changes in their labor and employment laws and regulations last year and this month. The NYS Legislature enacted, and Governor Cuomo signed, key revisions to laws that affect management throughout New York State. Mayor de Blasio and the City Council expanded local laws that further burden employers in the City. These important developments include:

A. New York State Women’s Equality Agenda

The Women’s Equality Agenda that went into effect on January 19, 2016 significantly amended New York State’s sex discrimination, sexual harassment, and equal pay laws to afford women greater protection in the workplace. These new statutes promoting gender equality in New York State include provisions that:

1. Amend New York State’s Equal Pay Act to require that an employer which pays lower wages to women than to men, for a job of equal skill, effort, and responsibility, demonstrate that such disparity is due to a bona fide factor other than sex, such as education, training, or experience, and that the difference in pay is job related and consistent with business necessity.

2. Make it unlawful for employers, in general, to prohibit employees from discussing or disclosing their wages — a new provision which affects both women and men.

3. Significantly increase the penalties for New York State Equal Pay Act violations by allowing employees to recover liquidated damages of three times (300%) the unlawfully unpaid wages, in addition to making the employee whole by requiring payment of the unpaid wages.

4. Allow a court to award attorneys’ fees to a prevailing plaintiff in sexual harassment and other sex discrimination actions.

5. Add familial status as a protected class under the New York State Human Rights Law. This new provision applies equally to men and women who are parents or guardians.

6. Expand the New York State Human Rights Law’s coverage of sexual harassment claims to all employers, including employers of from one to three employees who were not previously covered.

7. Require employers to provide reasonable accommodation for pregnancy-related medical conditions.

B. New NYS and NYC Protections for Transgender Individuals

1. Earlier this month, the New York State Division of Human Rights adopted regulations that make discrimination on the basis of a person being transgender unlawful under the New York State Human Rights Law. These regulations also prohibit harassment of transgender persons and require New York employers to reasonably accommodate employees who have been diagnosed with a “gender dysphoria” medical condition.

2. On December 21, 2015, the New York City Commission on Human Rights issued new enforcement guidelines on discrimination against transgender individuals, which the New York City Human Rights Law prohibits. The guidelines provide for penalties of up to $250,000 for violations that are found to be willful, wanton, or malicious.

C. New NYC Protections for Caregivers

1. The New York City Council has amended the New York City Human Rights Law to include caregiver as a protected class. The new local legislation, which Mayor de Blasio signed on January 5, 2016, defines caregivers as persons who provide direct and ongoing care for a minor child or a care recipient, such as a relative or individual with a disability who resides in the caregiver’s household. This amendment will go into effect on May 4, 2016.

Article By David I. Rosen, Galit Kierkut & Charles H. Kaplan of Sills Cummis & Gross P.C.

© Copyright 2016 Sills Cummis & Gross P.C.

Uber-Complicated: Insurance Gaps for Rideshare Vehicles Can Create Uncertainty for Passengers and Drivers

Many of us have come to enjoy the convenience of summoning a ride via our Smartphones with a rideshare service company such as Uber, Lyft, or Sidecar.  However, significant issues exist over whether rideshare vehicles have adequate insurance coverage to compensate people injured in accidents involving those vehicles.

If one is injured by a Greyhound bus, for example, there is little question that Greyhound likely would have adequate insurance to cover any injuries and likely would have sufficient resources to compensate the injured party even without insurance.

By contrast, if one is injured by a rideshare driver, there are several potential obstacles to securing adequate compensation.

First, the rideshare company may classify the driver as an independent contractor instead of an employee, meaning that the company will not accept responsibility for the driver’s actions.  Second, even if the rideshare company accepts responsibility, the company’s insurance may not provide coverage, as discussed below.  In that event, the injured party is left to rely on the driver’s insurance, which also may be inadequate and may even exclude coverage for rideshare-related accidents.

The independent contractor issue has been litigated in numerous states with different outcomes.  Uber currently is facing two class action lawsuits in California related to this issue: Ghazi v. Uber Technologies, Inc., et al., No. CGC-15-545532 (Superior Court of California, County of San Francisco) and O’Connor v. Uber Technologies, Inc., et al., No. CV-13-3826 (U.S. District Court for the Northern District of California).[1]

Even if rideshare companies accept responsibility for a driver’s conduct, the companies typically have provided only limited insurance for their drivers.  Specifically, rideshare companies typically have not provided coverage in the following two periods: (1) when the rideshare app is turned off, or (2) when the app is turned on but no passenger is in the vehicle.

But, a horrific accident involving an Uber vehicle helped to start changing this dynamic.  Uber was sued in 2014 in California after a driver struck and killed a child during period (2) above, when he had his app turned on but had not yet picked up a passenger.  The case is captioned Liu v. Uber Technologies Inc., et al., No. CGC-14-536979 (Superior Court of the State of California, County of San Francisco).

California and other states recently have started requiring rideshare companies to maintain some coverage for their drivers in period (2), but that coverage is limited.  The companies typically provide contingent liability coverage with $50,000 per person/$100,000 per accident bodily injury coverage, but this insurance typically pays only for losses not covered by the driver’s personal policy.

And, even when rideshare company coverage is in place, insurers have relied on certain insurance policy exclusions in an effort to avoid paying claims.  One insurer is currently making such arguments in the coverage dispute with Uber over the Liu settlement See Evanston Insurance Co. v. Uber Technologies, Inc., No. C15-03988 WHA (U.S. District Court for the Northern District of California).

If a rideshare company’s commercial insurance is inadequate to fully compensate an injured party, that person is left to rely on a driver’s personal insurance.  But the driver’s insurance may be of no help because personal auto policies often contain an exclusion (the “livery exclusion”) for accidents occurring during commercial use of the vehicle, such as when a driver is transporting a passenger for hire.

Recently, there has been some effort in the insurance industry to close the insurance gaps discussed above, particularly during period (2), when a rideshare driver is using a mobile app but has not yet picked up a passenger.

In March 2015, the National Association of Insurance Commissioners adopted a white paper on insurance coverage for rideshare companies titled “Transportation Network Company Insurance Principles for Legislators and Regulators.”  The paper recommends that rideshare companies provide full coverage for period (2) or that drivers purchase individual commercial coverage during that period.

Similar to California, legislatures in Colorado, Illinois, and Virginia have passed laws requiring rideshare companies to offer full insurance during period (2).

In addition, some insurance companies are offering products to rideshare drivers to protect them in the event that rideshare companies’ commercial insurance does not pay.  For example, Geico (in Maryland and Virginia) and Progressive (in Pennsylvania) are offering individual commercial insurance to rideshare drivers that has lower rates than most commercial insurance.  USAA (in Colorado and Texas) offers a commercial insurance policy to rideshare drivers for an extra $6 to $8 per month.  Erie Insurance (in Illinois and Indiana) has removed an exclusion from personal auto policies purchased with a “business use” designation such that rideshare drivers now may be covered.

Overall, many options are emerging to provide additional insurance coverage on rideshare vehicles for the benefit of passengers and other third parties at all stages of the transportation process – from the time a rideshare driver turns on the app through the transport of a passenger.  Passengers, drivers, and affected third parties should continue to monitor these developments to make sure they are adequately protected.

Article By Natalie A. Baughman of Gilbert LLP
© 2016 Gilbert LLP

[1] One consequence of the driver being classified as an independent contractor is that rideshare companies do not have to provide worker’s compensation insurance for a driver’s on-the-job injuries.  The Ghazi case addresses whether Uber drivers actually are employees and thus Uber must provide worker’s compensation insurance.

Automated Retail: Stores without Staff, but Not Without Issues

For many, air travel is required for business while for others it is used for pleasure. As millions of people are hustling through airports to make their flights, some may have taken a moment to stop to shop at one of the many staffless stores that are opening in airports. These staffless stores, which are often referred to as automated retail, sell goods that range from electronics such as headphones and chargers to cosmetics and clothing.

The staffless store phenomena is not limited to just airports as there is an increasing trend towards using these retail outlets in shopping centers throughout the country. We wrote on this new trend back in August of 2014 when the focus was on brick and mortar stores without staff, such as fitness centers and mattress stores. The 2016 version of staffless stores are a hybrid of the traditional kiosks/carts and a vending machine. They are typically similar in size to a vending machine but are situated in locations comparable to that of a traditional kiosk or inside of department stores. While branded in a manner similar to a kiosk, these automated outlets allow the retailer to avoid the cost of staffing the location.

The staffless store offers landlords and tenants a number of positive opportunities. For example, by offering tenants a lower cost way of penetrating a new market and giving landlords a way to increase revenues through the use of spaces that cannot be utilized effectively with traditional kiosks or carts. It can also introduce new retailers that otherwise would not be willing to incur the operating expense of having employees. Establishing the retailer in the Center initially through the use of an automated retail operation could also lead to later expansion opportunities with that retailer.

A landlord and tenant will often document the relationship for a staffless store by using a traditional kiosk or specialty lease form. However, there are a number of items that the parties should review when documenting the relationship. Some of those items include:

  • Many kiosk leases include operational and staff requirements so any language requiring a certain number of staff at the location or staff attire needs to be addressed.

  • Kiosk or cart leases often require that the kiosk/cart be adequately stocked with merchandise. While this requirement may still be applicable, the retailer needs to confirm that it has an adequate inventory monitoring process or software to ensure that the automated retail machine does not run out of product.

  • The exchange/refund policy may need to be modified to address the fact that retailer personnel will not be present to make any exchange of product.

  • The use of Center gift cards to pay for goods should be addressed in the Lease and by the automated retailer.

  • Confirming that the insurance requirements for the tenant are appropriate given that there will not be staff located at the leased premises. The indemnification provisions should also be carefully reviewed for accuracy given the facts of a given situation.

Article By Chris A. Jenny & William R. West of von Briesen & Roper, S.C.

©2016 von Briesen & Roper, s.c

2015 Union Membership Rate Relatively Stable Despite New NLRB Election Rules

national labor relations boardDespite the National Labor Relations Board’s “quickie election rules,” the percentage of unionized workers in the private sector remained stable during 2015, according to the Bureau of Labor Statistics of the U.S. Department of Labor: 6.7% of private-sector workers were in unions in 2015, up from 6.6% in 2014. Not surprisingly, public-sector workers had a much higher union membership rate: 35.2%.

According to the report, men had a higher union membership rate than women: 11.5% versus 10.6%. In addition, the percentage of African-American workers who were union members was greater than Caucasian workers.

New York (24.6%), Alaska (22.8%), and Hawaii (21.8%) had the highest unionization rates, whereas South Carolina (2.2%), Mississippi (3.7%), and Utah (3.7%) had the lowest.

The report found the median weekly earnings of nonunion workers were lower than the median weekly earnings for unionized workers ($776 per week versus $980 per week). The report, however, recognizes that this comparison may not be valid because the “comparisons of earnings in [the] release are on a broad level and do not control for many factors that can be important in explaining earnings differences.” Indeed, this is likely the case.

Article By Howard M. Bloom & Philip B. Rosen of Jackson Lewis P.C.

Jackson Lewis P.C. © 2016

Travel to the United States in 2016: The Year of Fear – Restrictions on the Visa Waiver Program (VWP) ESTA

On January 21, 2016, the United States began implementing changes under the Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015.

Nationals of Visa Waiver Program countries who have traveled to or been present in Iran, Iraq, Sudan, or Syria on or after March 1, 2011, will no longer be able to participate in the Visa Waiver Program.  In addition, nationals of Visa Waiver Program countries who are also nationals of Iran, Iraq, Sudan, or Syria will not be able to participate even if they have not visited or been present in those countries. 

There will be limited exceptions for individuals who are traveling on behalf of international organizations, regional organizations and subnational governments on official duty; who are there on behalf of a humanitarian NGO on official duty; or are journalists traveling for reporting purposes.  Certain individuals traveling to Iran for legitimate business-related purposes following the conclusion of the Joint Comprehensive Plan of Action of July 2015 and other individuals traveling to Iraq for legitimate business related purposes may be exempt as well.

Currently, thirty-eight (38) countries are participants in the Visa Waiver Program:

Andorra

Hungary

New Zealand

Australia

Iceland

Norway

Austria

Ireland

Portugal

Belgium

Italy

San Marino

Brunei

Japan

Singapore

Chile

Republic of Korea

Slovakia

Czech Republic

Latvia

Slovenia

Denmark

Liechtenstein

Spain

Estonia

Lithuania

Sweden

Finland

Luxembourg

Switzerland

France

Malta

Taiwan**

Germany

Monaco

United Kingdom*

Greece

The Netherlands

Individuals impacted may still travel to the United States as visitors for business or pleasure, if they successfully complete the normal process for applying for a non-immigrant visa at a United States Embassy or Consulate, as others who are not nationals of Visa Waiver Program countries, regularly do.  However, there certainly is concern that there will be backlogs and delays associated with the visa application process.

The Year of Fear

The real question which yet remains unanswered is precisely how will this change be implemented.  Customs and Border Protection (CBP) of the United States Department of Homeland Security advises that it will be modifying its Visa Waiver Program (ESTA) questionnaire to identify individuals who might be ineligible and provide them an opportunity to explain why an exemption might be applicable.  How such applications will be processed and assessed remains unknown.

In addition, it is not clear how implementation will take place with reference to those individuals who are already ESTA Visa Waiver Program participants.  The inference is, that they will be notified, perhaps by e-mail, but it is unclear.  Accordingly, it would make sense for those, who are subject to these new restrictions, to be prudent and simply and proactively apply for visas at appropriate American Embassies or Consulates, or at the very least, reach out to CBP.  The CBP website is www.cbp.gov and the CBP Information Center can be reached at www.cbp.gov/contact.

Canadians and Americans

Canadians are generally visa exempt but do not participate in the Visa Waiver Program, and accordingly these provisions are not applicable to them.  Of course, the United States imposes no  restrictions with reference to United States citizens, but one can anticipate that there might be in the coming months, restrictions or, backlash, or reaction from other countries.

More to Come – Passport Restrictions

Beginning April 1, 2016, passports must be electronic  and fraud resistant, and contain additional biographic and biometric information not previously required.  In addition to being machine readable, passports must contain an electronic chip that stores biographic data, biometric identifier, a digital signature and a unique chip identification number.

In addition, Visa Waiver countries by October 1, 2016  must have the capability to validate passports at key points of entry with heightened ability to screen travelers.

So what does the rest of 2016 hold for us?  It looks like it will be a battle between those forces that would like to see this be a year of hope, as compared to those who will settle for it being a year of fear.  Each has a legitimate agenda.  We are a compassionate country that  wants to present a welcome face to visitors, business persons, refugees and those in need.  But, on the other hand, we certainly do have much to fear from those who would be very happy to take advantage of our benevolence and of our open society to do harm.

Ultimately, I think our security concerns will predominate, but hopefully, we will find a sensible balance and equilibrium as time goes by.

Article By David Grunblatt of Proskauer Rose LLP
© 2016 Proskauer Rose LLP.

US Treasury and Commerce Departments Announce New Changes to Cuba Regulations

On January 25, 2016, the US Treasury Department’s Office of Foreign Assets Control (OFAC) and the US Commerce Department’s Bureau of Industry and Security (BIS) announced new changes to existing US sanctions on Cuba, including OFAC’s Cuban Assets Control Regulations (CACR) and BIS’s Export Administration Regulations (EAR). These changes expand allowable financing for certain authorized exports, allow more flexibility in a number of sectors to export to Cuba, permit air carriers to serve customers in Cuba and further liberalize travel rules. These new regulatory changes may constitute the most that President Obama can do to liberalize trade and travel with Cuba in the absence of congressional legislation to lift the embargo in whole or in part.

Authorized Export Transactions

Amendments to the CACR and EAR to increase support for the Cuban people and facilitate authorized exports include the following:

  • The CACR have been amended to remove financing restrictions for most types of authorized non-agricultural exports. (OFAC is required by statute to maintain the existing limitations on payment and financing terms for the export and reexport of agricultural commodities and agricultural items). Permissible payment and financing terms for authorized non-agricultural exports and reexports now include payment of cash in advance, sales on open account, and financing by third-country financial institutions or US financial institutions.

  • OFAC expanded an existing general license to authorize certain additional travel-related transactions directly related to market research, commercial marketing, sales or contract negotiation, accompanied delivery, installation, leasing, or servicing in Cuba of items consistent with the export or reexport licensing policy of the Department of Commerce, provided that the traveler’s schedule of activities does not include free time or recreation in excess of that consistent with a full-time schedule.

  • BIS now will generally approve license applications for exports and reexports of telecommunications items that would improve communications to, from, and among the Cuban people; certain agricultural items not eligible for a license exception, including insecticides, pesticides, and herbicides; and items necessary to ensure the safety of civil aviation and the safe operation of commercial aircraft engaged in international air transportation.

  • BIS ended its policy of denial and now will consider on a case-by-case basis license applications for exports and reexports of items to meet the needs of the Cuban people, including exports and reexports for such purposes made to state-owned enterprises and agencies and organizations of the Cuban government that provide goods and services to the Cuban people. Exports and reexports eligible for this licensing policy include items for: agricultural production; artistic endeavors (including the creation of public content, historic and cultural works and preservation); education; food processing; disaster preparedness, relief and response; public health and sanitation; residential construction and renovation; public transportation; and the construction of infrastructure that directly benefits the Cuban people (e.g., facilities for treating public water supplies and supplying energy to the general public).

Travel

OFAC has expanded several existing allowable travel categories to facilitate travel to Cuba, including the following:

  • OFAC will authorize travel-related and other transactions directly incident to professional media or artistic productions of information or informational materials for exportation, importation, or transmission, including the filming or production of media programs (such as movies and television programs), music recordings, and the creation of artworks in Cuba by persons that are regularly employed in or have demonstrated professional experience in a field relevant to such professional media or artistic productions.

  • OFAC is expanding the general license for travel-related and other transactions to organize professional meetings or conferences in Cuba. The existing general license authorized only attendance at such meetings or conferences.

  • OFAC is authorizing by general license travel-related and other transactions to organize amateur and semi-professional international sports federation competitions and public performances, clinics, workshops, other athletic or non-athletic competitions, and exhibitions in Cuba.  OFAC is also removing requirements that US profits from certain events must be donated to certain organizations and that certain events be run at least in part by US travelers.

Conclusion

These changes to the regulations offer important changes and will allow for additional market opportunities for US businesses looking to enter the Cuba market. Still, the embargo is in place, and US companies should proceed with caution to ensure full compliance with all existing US and Cuban laws.

Article By Benjamin O. Kostrzewa, David J. Levine & Raymond Paretzky of McDermott Will & Emery

© 2016 McDermott Will & Emery

Top Manufacturing Trends to Watch for in 2016

Cybersecurity

Manufacturers continued to face challenges and find opportunities related to cybersecurity in 2015, and those trends can only be expected to intensify in 2016. New laws and new threats (discussed in more detail here and here) have either incentivized or required manufacturers to evaluate their cybersecurity strengths and weaknesses, then capitalize on the former and work to eliminate the latter. In light of the rapid evolution of cybersecurity technology and threats, manufacturers can expect to devote, or continue to devote, significant resources to cybersecurity issues in 2016.

Disruptive Technology/Internet of Things

Smart products, big data, and analytics are not just for tech companies anymore. Many manufacturers are now constantly looking for ways to leverage these tools to improve their process, their products, and their customers’ satisfaction, and those who aren’t may be falling behind. In an increasingly connected world, manufacturers need to keep pace and ensure that their products not only stay relevant, but push the envelope whenever possible. Potential regulation of the open Internet (discussed here) only complicates matters, and gives manufacturers more reason to carefully watch this trend in 2016.

Regulatory Developments in China

In 2015, manufacturers saw dramatic changes in China’s regulatory landscape (discussed in more detail here, here, and here), including new restrictions on hazardous substances for electronics manufacturers, data-flow and content restrictions, and currency devaluations that significantly complicated the international trade landscape. Additional changes are surely coming in 2016, with new implementing measures for defective auto product recalls and a more aggressive climate policy being only some of the changes to watch. Manufacturers currently operating or selling products in China or looking to expand there in 2016 should pay close attention to these and other developments.

Article By Louis J. Thorson of Foley & Lardner LLP

© 2016 Foley & Lardner LLP

True Green for True Blue: Blue Buffalo Promises $32 Million Settlement

Pet-food maker Blue Buffalo will pay $32 million to settle 13 consumer class action suits, the company announced last month.

The 13 class actions—which pet owners originally filed in California, Connecticut, Florida, Illinois, Louisiana, Massachusetts, Missouri, New York, Ohio, and South Carolina federal courts—were consolidated in the Eastern District of Missouri in October 2014.  The consolidated action centers on Blue Buffalo’s “True Blue Promise” labels, which allegedly appeared on all Blue Buffalo products.  Blue Buffalo’s True Blue Promise was that its brand of pet food contains “Only the Finest Natural Ingredients,” with

  • real meat first ingredients,

  • “NO Chicken or Poultry By-Product Meals,”

  • “NO Corn, Wheat or Soy,” and

  • “NO Artificial Preservatives, Colors or Flavors.”

These True Blue Promise claims were allegedly restated on the front and back labels of every Blue Buffalo product and in other Blue Buffalo promotional materials. The class action plaintiffs also asserted that they paid a higher price for Blue Buffalo’s products because of the True Blue Promise.

But according to the class action plaintiffs, independent tests showed that some Blue Buffalo products did, in fact, contain chicken and poultry by-products.  In addition, the tests indicated the presence of rice and corn in some products, including products from Blue Buffalo’s “Wilderness” and “Freedom” product lines, which were advertised as being grain-free.

Blue Buffalo denied any wrongdoing in entering into the settlement, stating that it agreed to the settlement to eliminate the uncertainties, burden and expense of further litigation. Under the terms of the deal, Blue Buffalo will pay the $32 million into a settlement fund.  From this fund, Blue Buffalo will pay its class member customers an amount of money based on the number of Blue Buffalo products they purchased during the class period, and subject to certain conditions.  Attorneys’ fees and costs will also be paid from the settlement fund.  The court has given the settlement agreement preliminary approval, and will hold a fairness hearing on May 19, 2016.  At that time, the court will decide whether to give the settlement final approval.

This case serves as a cautionary reminder of the potential liabilities of false advertising class actions. Nestle Purina, a competing pet food maker, commented that this $32 million settlement is the largest pet food class action settlement ever.  In May 2014, Nestle Purina filed a false advertising lawsuit against Blue Buffalo on the basis of similar claims.  That separate false advertising case against Blue Buffalo is ongoing before the same judge who presided over the consolidated consumer class actions, Judge Rodney W. Sippel.

Article By Lawrence I Weinstein & Tiffany Woo of Proskauer Rose LLP

© 2016 Proskauer Rose LLP.

UN Secretary-General Election

After ten years in office, Ban Ki-moon, the UN Secretary General (UNSG),  will retire from the UN at the end of 2016. The race for his successor is already underway. Last December, the Presidents of the Security Council (UNSC) and of the UN General Assembly (UNGA) sent out a joint letter soliciting candidates from member countries.

The UN consists of 193 member states, traditionally divided into geographical groups, such as African, Latin American, etc. Certain important positions, including that of the UNSG, rotate among these groups, although this happens by custom and precedent rather than by some written rule of the UN Charter. After the Middle Eastern group (Boutros Boutros-Ghali), the African group (Kofi Annan) and the Asian group (the incumbent), the rotation system would have the Eastern European group take up the office of the Secretary General for the next four years (with the possibility of reelection).

Several candidates have already been put forward in response to the letter of the two presidents. Croatia has nominated Vesna Pusić, until recently the country’s first deputy prime minister and minister for foreign affairs. Alas, her government collapsed soon after her nomination was submitted and it is unclear whether she still enjoys her country’s support.

The former Yugoslav Republic of Macedonia has nominated its former foreign minister and a former UNGA President, Srgjan Kerim. And Montenegro has nominated Igor Lukšić, its current foreign minister.

The letter of the two presidents invites candidates to come forward by the end of July, though it doesn’t actually specify when the nomination process would close. A number of other candidates will emerge, and several are waiting in the wings. The ex-Yugoslav contingent is complemented by Danilo Türk from Slovenia, a former UN Assistant Secretary-General and a former President of his country, who declared his candidacy some two years ago, as well as by Vuk Jeremić, the former Serbian Foreign Minister who is reputed to have made quite a mess of his job as President of the UN General Assembly (2012-13).

Bulgaria is the home of no fewer than two potential candidates: Irina Bokova, the Director-General of UNESCO, and Kristalina Georgieva, a second-term European Commissioner and currently a Vice-President of the Commission. Bokova used to be favored by her government – but her government, too, has since changed and the new Bulgarian government, with a right-of-center orientation, prefers Georgieva.

Nowhere is it stated that a country could not put forward two candidates (however strange that would be). This sheds some light on the situation in Slovakia which also features two potential candidates: Miroslav Lajčák and Ján Kubiš. Lajčák is currently the country’s Deputy Prime Minister and Foreign Minister. Kubiš is a veteran of a number of international organizations. He has served as the Secretary General of the Organization for Security and Cooperation in Europe (OSCE), as EU’s special envoy for Central Asia, as Slovak Foreign Minister, etc. Currently, he serves as Ban Ki-moon’s Special Representative in Afghanistan.

This plethora of candidates and possible candidates may thin out as months pass – while others may throw their hat in. Consider that none of the past eight Secretaries-General has been a female. Is it a woman’s turn now? As much sympathy as the idea evokes, there is no rule to force it. Kristalina Georgieva, however, is considered by many as the ideal candidate, gender considerations aside.

In a novel approach, candidates will be asked to make presentations during open hearings that the current UNGA President intends to hold. Following Art. 97 of the UN Charter, their merits will then be considered by the Security Council which will recommend its favorite to the General Assembly. It has not been specified when this is supposed to happen but late fall is the likely time. This is based on the assumption that the US would want the decision made before its own elections. Also, Russia will want to take care of the matter during its October chairmanship of the Security Council.

Even though the UNSC only makes a recommendation, its views are critical. Its recommendation has always been followed. Moreover, the UNSC customarily submits only a single recommendation – no options left for the 193 nations. This follows from a 1946 resolution of the UNGA according to which submitting a single recommendation is “desirable”. And in the Security Council, it will be its five permanent members (the “P5”) who will carry the day.

Some skeptical but wise voices argue that the whole selection may boil down to a bargain between the US and Russia. In the past, the US has not expressed its views before actual decision time.  It might be inclined toward a female candidate and Kristalina Georgieva could be viewed favorably.

On the other hand, the Russians often oppose any European Union diplomat, for any position. This logic would make them oppose just about anyone mentioned above, except for some of the West Balkan candidates – after all, it was a powerful Russian lobbying campaign which hoisted Vuk Jeremić of Serbia into the GA Presidency a couple of years ago. Additionally, the Russians might support someone who studied in Moscow, in their Diplomatic Institute (MGIMO), including the two Slovak diplomats or Irina Bokova. They have their files.

So – the race for the next UN Secretary General is in flux and nothing will be decided very soon. Before the end of the year, however, one of the fairly obscure Eastern European names mentioned above may turn into an important international actor.

Article By Karel Kovanda of Covington & Burling LLP

© 2016 Covington & Burling LLP

Criminal or Civil Liability for Sharing Streaming Accounts?

We are at the beginning of a new era of media consumption.  Traditional content delivery systems such as satellite and cable television are hemorrhaging customers to a wave of “cord cutting” that has been facilitated by the availability of streaming services such as Hulu Plus, Netflix and HBO Go.[1]  Now that smart televisions are becoming more common place, cord cutting is no longer limited to the technologically hip youth, as accessing a Netflix account is as easy as changing the channel.

1-26-2016 3-38-45 PM​But with the proliferation of streaming services, users have elected to share the benefits of the accounts―i.e. their passwords―with others.  A staggering 46% of accountholders admit to sharing their streaming account password with people outside of their household.[2]  This raises some interesting questions of federal and state criminal, tort and contract laws.  What sort of liability might someone have for sharing their account with friends or family?  For using a shared account of a friend?

But in order to figure out if sharing of passwords violates the law, we first have to see if it violates the streaming service’s terms of service.

Netflix

Netflix is arguably the pioneer in password sharing.  For years Netflix has allowed multiple user profiles to better enable its suggestion algorithm to tailor its offerings to a targeted user.  By tactical use of user profiles, parents can limit the likelihood that Netflix will suggest the latest episode of Barney and Friends based on their child’s viewing of Teletubbies the week before.[3]  Netflix has also long offered the ability to stream its services on a limited number of devices simultaneously. [4]  Netflix’s commitment to account sharing was recently echoed by its CEO Reed Hastings who stated:  “As kids move on in their life, they like to have control of their life, and as they have an income, we see them separately subscribe. It really hasn’t been a problem.”[5]  But Netflix’s position on non-family members sharing the passwords has been a little more vague.

Hulu Plus

Hulu has not taken the vocal stance on account sharing that Netflix has.  Though it is apparent that Hulu has at least contemplated password sharing to some degree.  In section 5 of its terms of use, Hulu acknowledges that people within the same household are likely to use the account, and holds the primary account holder accountable  for their activities:  “You are responsible for all use of your account, including use of your account by other members of your household. By allowing others to access your account, you agree to be responsible for ensuring that they comply with these Terms and you agree to be responsible for their activity using the Services.”[6]  However unlike Netflix, Hulu Plus accounts are limited to streaming on one device at a time, which minimizes the advantage of sharing.

HBO Go

Like Netflix, HBO Go specifically contemplates the idea of multiple users within the same household.  HBO has two tiers of accounts.  The first is a “Registered Account” which consists of account holders who meet certain eligibility criteria, namely, they subscribe to HBO and HBO On Demand or Cinemax and Cinemax on Demand.[7]  These Registered Account holders can create “Household Member Accounts” for members of their household.  The Register Account serves as the master account for the Household Member Accounts and can control what content the junior accounts have access to.  However, despite the ability to create Household Member Accounts, HBO Go appears to take an antagonistic view of sharing the master account password itself.  HBO Go’s terms of service specifically state that “You are responsible for all activity occurring under your Registered Account and any Subaccount authorized by you, including maintaining the confidentiality of each Username and Password, and you agree that any household member account users authorized by you will not permit the disclosure of any Username and Password to any person.”   Contrast the above statements to Hulu’s request to “Please keep your password confidential,” and it is apparent that one is an order, and the other a request.

But statements by HBO’s CEO bely the strict terms of their agreement. In an interview with Buzzfeed, HBO’s CEO stated:  “It’s not that we’re ignoring it, and we’re looking at different ways to affect password sharing. I’m simply telling you: it’s not a fundamental problem, and the externality of it is that it presents the brand to more and more people, and gives them an opportunity hopefully to become addicted to it. What we’re in the business of doing is building addicts, of building video addicts. The way we do that is by exposing our product, our brand, our shows, to more and more people.”[8]

So HBO intends on building a legion of addicts, and with shows like Game of Thrones, they are well on their way to being the Pablo Escobar of digital content.  But like any drug dealer, the first sample is free, but the second is going to cost you.  No one knows for sure when HBO will start demanding money for that next “hit.”

It is apparent that these three streaming services all authorize sharing of an account among members of a household. A reasonable argument could be made that this extends to college age children who are away from the home during the school year, but whose primary residence is still their family home.

But what about sharing the account with third parties?  What liability might an individual incur if they use a friend’s account with the friend’s permission?  Arguably such activity goes beyond the terms of service of a user’s account, and presents some interesting questions of both state and federal law.

Trouble in Tennessee

In 2011, Tennessee, the home of Nashville and the birthplace of country music, became one of the first states to formally criminalize user account sharing.  HB1783, effective July 1, 2011, modifies Tennessee Code Annotated Section 39-11-106 subdivision 35 by adding “entertainment subscription service” to the list of services protected by its theft of services offence.[9]   Section 39-14-104 defines theft of services as any person who: “(1) intentionally obtains services by deception, fraud, coercion, false pretense or any other means to avoid payment for the service; (2) having control over the disposition of services to others, knowingly diverts those services to the person’s own benefit or to the benefit of another not entitled thereto.”  The punishment for violation of this provision ranges from a misdemeanor to a felony depending on the value of the services rendered.

The first provision of 39-14-104 targets the friend who is using the primary account holder’s password without permission from the streaming service.  The person has “obtain[ed] services by . . . any other means to avoid payment for the service.”  The second provision targets the account holder who has shared his password with a friend.  That person has control of a subscription service and diverts it to his friend, who is not entitled to the service.

California is Not the Golden State For Sharing

It is unsurprising that California would not take kindly to people sharing the fruits of its most visible industry.  California Penal Code Section 502 is an “anti-hacking” statute that covers a broad variety of activities.  To the extent that sharing a primary accountholder’s password with people outside of the household is beyond the scope of the terms of use of the streaming service, there are several provisions of Section 502 that would criminalize such activity (along with giving a private cause of action), including subsections: (1) “knowingly accesses and without permission  . . . otherwise uses any data in order to . . . wrongfully control or obtain . . . data;” (3) “knowingly and without permission uses or causes to be used computer services;” (6) “knowingly and without permission provides or assists in providing a means of accessing a computer, computer system, or computer network in violation of this section;”  and (7) “knowingly and without permission accesses or causes to be accessed any computer, computer system or computer network.”  Violation of these sections can range from a misdemeanor to a felony.

Like the Tennessee law, sections 1, 3 and 7 apply to the friend who is using the account without permission of the streaming service.  Section 6 applies to the account holder who is sharing the account with a friend without the permission of the streaming service.

It Might Be A Federal Offense

The Computer Fraud and Abuse Act offers broad protection against unauthorized access to computers.  It has been amended a half dozen times in its nearly 20 year history, and likely covers password sharing that is beyond the scope of the terms of service of a streaming account.

18 U.S.C. § 1030(a)(2) makes it a crime to “intentionally access a computer without authorization or exceeds authorized access, and thereby obtains . . . (c) information from any protected computer.”  A “protected computer” is defined by 18 U.S.C. § 1030(e)(2) as any computer “which is used in or affecting interstate or foreign commerce or communication.”  A streaming service’s streaming servers undoubtedly qualify as a protected computer under the Act as they stream their stored media all across the country.

Using a third party’s password to access a streaming service clearly “exceeds authorized access” as it is beyond the scope of the access defined in Netflix, Hulu Plus, or HBO Go’s terms of use.  The user of the password is “obtaining information”―the streamed media―from the protected computer.

An interesting wrinkle is that the Act arguably has a jurisdictional requirement of $5,000 in damages over the course of one year.  18 U.S.C. § 1030(c)(4).   This would probably be hard for a streaming site to demonstrate, especially against an individual who is making use of a friend’s password.  However, it would be easier to meet the limit for the primary account holder who decided to share the account with a group of friends.  All it takes is sharing a $20 dollar a month account with 21 people to meet the $5,000 threshold.

So what does all of this mean?  Sharing an account with members of a household is just fine under Netflix, Hulu Plus, and HBO Go’s terms of use.  Arguably this extends to children of the account holder who are away at school but whose primary residence is still the family home.

But sharing the password with people outside of the household or using someone else’s account opens up the potential for liability.  Not only does sharing a password expose the primary account holder to the possibility of a claim of breach of contract, it also gives rise to various causes of action under both state and federal law for everyone involved.

At the moment none of the sharing services seem to care all that much, and it would be easy for them to mitigate their exposure to shared accounts by simply limiting the number of devices that the account can be used on simultaneously.  Some seem to view account sharing as a marketing tool.  But all that may change without notice.  Sharer beware.

Article By Drew Wilson of Proskauer Rose LLP

© 2016 Proskauer Rose LLP.

[1] Todd Spangler, Cord-Cutting Gets Ugly: U.S. Pay-TV Sector Drops 566,000 Customers in Q2, Variety (August 8, 2015).

[2] Is it Okay to Share Log-Ins for Amazon Prime, HBO Go, Hulu Plus, or Netflix?, Consumerreports.org (Jan. 28, 2015).

[3] Netflix User Profiles, Netflix (Jan 14, 2016) https://help.netflix.com/en/node/10421.

[4] Terms of Use, Netflix (Jan 14, 2016) https://help.netflix.com/legal/termsofuse.

[5] Sarah Perez, Netflix CEO Says Account Sharing is OK, TechCrunch (Jan 11, 2016),

[6] Terms of Use, Hulu (Jan 14, 2016), http://www.hulu.com/terms

[7] Terms of Use, HBO Go (Jan. 14, 2016), http://www.hbogo.com/#terms/

[8] Greg Kumparak, HBO Doesnt Care if You Share Your HBO Go Acccount . . . For Now, TechCrunch (Jan 20, 2014),

[9] http://www.capitol.tn.gov/Bills/107/Bill/HB1783.pdf