Category: Uncategorized

More States Attempt to Ban Sodas from Kids’ Meals

Recently introduced Kids’ Meal Bills in Connecticut and Rhode Island would prohibit restaurants from including soft drink beverages on children’s menus and in children’s meals. More specifically, Connecticut House Bill 7006 would limit beverages listed on children’s menus to “water, sparkling water, flavored water with no added sweeteners, unflavored milk or a nondairy milk alternative,” effective January 1, 2020. It was referred to the Joint Committee on Children on January 31, 2019, and is one of the agenda items to be considered at the Committee’s Public Hearing this Thursday.

Connecticut’s bill defines “Nondairy milk alternative” as “a fluid milk substitute that meets the standards established pursuant to the National School Lunch Program meal requirements for lunches and requirements for afterschool snacks.” By way of background, flavored, low-fat milk was temporarily added to the milk option in the National School Lunch Program in November 2017 and on December 12, 2018, USDA published a final rule in the Federal Register to codified that change, effective February 11, 2019 (see 86 FR 63776).

Rhode Island’s Health Beverage Act, 2019 – S 0179, was introduced on January 24, 2019, and referred to the State’s Senate Special Legislation and Veterans Affairs Committee. It specifies that default beverages in children’s meals must be one of the following:

  • Water, sparkling water, or flavored water, with no added natural or artificial sweeteners;
  • Nonfat or 1% milk or non-dairy milk alternative containing no more than 130 calories per container and/or serving; or
  • 100% fruit juice or fruit juice combined with water or carbonated water, with no added sweeteners.

While several states introduced similar legislation last year, California was the only state to pass a Kids’ Meal Bill (see our August 29, 2019 blog for details). However, efforts to eliminate sweetened soft drinks from children’s menus are continuing into the current legislative session.

 

© 2019 Keller and Heckman LLP

Health Care Enforcement 2019: How 2018’s Enforcement Actions Can Shape Your Compliance Plan

While it’s impossible to predict what government enforcement officials are currently working on, the trends from 2018 provide strong guidance for planning compliance efforts in 2019. In fact, 2018 was another busy year for the Department of Justice (the DOJ) and the Office of the Inspector General for Health and Human Services (the OIG). The following are some notable enforcement trends that may be helpful in planning your 2019 compliance initiatives.

Anti-Kickback and Physician Self-Referral Law Enforcement

One of the most notable trends in the last several years is the prevalence of False Claims Act cases premised on physician compensation relationships that are alleged to violate the Physician Self-Referral Law (Stark) and/or the Anti-Kickback Statute (the AKS). Here is a summary of a few exemplary cases that were resolved in 2018:

  • The University of Pittsburgh Medical Center Hamot was alleged to have entered into medical director or administrative services contracts with twelve physicians that violated both Stark and the AKS. The government contended that there was no legitimate need for the agreements because the services were either not performed or were duplicative in that they were already being provided by other physicians who were not being paid. The case was resolved for $20.75 million.

  • Montana-based Kalispell Regional Healthcare System (KRH) was alleged to have paid excessive full-time compensation to 60 specialists, many of whom worked less than full-time, to induce referrals. In addition, a subsidiary of KRH allegedly provided administrative services at below fair market value to a hospital joint venture owned by both the KRH subsidiary and an affiliated physician group in order to reduce expenses and increase the profits for the physician investors as a means of inducing referrals. The whistleblower was the CFO of the physicians’ network for the health system. The allegations were resolved for $24 million.

  • Detroit’s William Beaumont Hospital paid $85.5 million to resolve the allegations made by four whistleblowers that Beaumont paid compensation substantially in excess of fair market value to physicians and provided office space and employees at below fair market value to physician groups. Specifically, the allegations made by the whistleblowers included:

    • Full-time salaried cardiologists were paid in excess of fair market value as evidenced by the fact that they also continued to maintain separate private practices from which they retained the compensation;

    • The hospital provided office space and leased employees to the physicians’ practices at less than fair market value; and

    • 56 salaried medical directorships and other leadership positions had no job descriptions, no performance standards, no metrics, and no recorded evidence of any activities in exchange for the payment and were above fair market value. Some physicians in these positions also maintained full-time private practices.

The settlement also resolved claims that Beaumont allegedly misrepresented that a CT radiology center qualified as an outpatient department of Beaumont.

False Claims Enforcement Related to Medical Necessity

Cases involving medically unnecessary services continue to be a significant focus for the DOJ. Importantly, the legal community awaits a long-pending decision by the 11th Circuit Court of Appeals that may impact the government’s ability to bring FCA cases based on a lack of medical necessity. In U.S. ex rel. Paradise vs. AseraCare (Docket No. 16-13004), the trial judge found that the government could not bring FCA claims against a hospice provider for medically unnecessary services. The judge reasoned that, because determinations of medical necessity are subjective medical determinations, the government’s expert testimony that patients were not terminally ill (and, therefore, the services were not medically necessary) was insufficient to establish that the claims were false. The government argued that determining the falsity of hospice claims does not rest simply on two conflicting expert opinions on subjective medical determinations. Rather, the government contended that the expert testimony goes to the more objective determination of whether the medical records contained clinical information and documentation to support the patient’s terminal prognosis.

Despite the pending 11th Circuit decision, several significant FCA cases based on medically unnecessary services were resolved in 2018. A key theme in several of these cases was that, when there was a vendor or supplier providing the services in a hospital or skilled nursing facility, the government pursued both entities for submitting false claims or causing false claims to be submitted. Therefore, effective compliance programs must monitor the medical necessity of services provided by any vendor or supplier. The following are several representative examples of resolutions involving medically unnecessary services:

  • Two cases were resolved in which the government contended that the hospitals billed Medicare for medically unnecessary inpatient stays, when less expensive outpatient or observation care could have been provided. Banner Health settled for $18 million and Prime Healthcare Services settled for $65 million.

  • Healogics settled allegations that it caused the submission of claims for medically unnecessary hyperbaric oxygen (HBO) therapy. Healogics managed hospital-based wound clinics and was alleged to have caused those clinics to submit claims for medically unnecessary HBO therapy. The case settled for $22.5 million. In addition, the OIG issued an audit report (A-01-15-00515) in 2018 concerning medically unnecessary HBO therapy. Medicare only pays for HBO therapy for diabetic patients that meet certain coverage criteria. The OIG audit found that a significant portion of HBO claims it analyzed were not supported by sufficient documentation that the beneficiary met the coverage criteria for diabetic patients.

  • The government continues to aggressively pursue medically unnecessary rehabilitation services provided by long term care facilities. Signature HealthCARE paid $30 million to resolve allegations of medically unnecessary rehabilitation claims caused by presumptively placing patients in the highest therapy reimbursement category rather than individually evaluating patients to determine the level of need and by pressuring therapists to complete planned therapy minutes even when the patients were ill or declined treatment. Similarly, Southern SNF Management, Rehab Services in Motion, and several skilled nursing facilities where they provided therapy services, paid $10 million to resolve allegations related to medically unnecessary therapy.

  • A post-acute medical management company and four hospitals paid $1.7 million to resolve allegations that they provided medically unnecessary intensive outpatient psychotherapy to patients.

Opioid-Related Enforcement

Opioid-related enforcement continues to be a major focus of DOJ. Most states now have an opioid task force that includes the DOJ and federal and local law enforcement. The DOJ’s 2018 national “health care fraud takedown” announced a significant number of opioid enforcement matters. Most of these were criminal “pill mill” type cases focused on providers unlawfully distributing of controlled substances, including opioids. As part of the takedown, the U.S. Attorney’s Office for the Eastern District of Wisconsin announced the indictment of an advanced nurse practitioner and several other individuals related to a cash-only pain clinic for conspiring to distribute oxycodone and methadone outside of professional medical practice and not for legitimate medical purposes.

The DEA continues to be a significant player in opioid enforcement related to institutional providers. In August, the DEA announced a $4.3 million civil settlement with the University of Michigan Health System primarily related to violations of the Controlled Substances Act’s (CSA) record-keeping requirement. After the opioid overdoses of two UMHS providers (one of which was fatal), the DEA conducted an investigation and concluded that a number of the hospital’s practices concerning controlled substances were in violation of the CSA. For example, UMHS failed to secure DEA registrations for 15 off-site ambulatory care locations, each of which received narcotics from the main hospital’s pharmacy and dispensed them to patients. The DEA also determined that UMHS failed to maintain complete and accurate records of certain controlled substances that it received, sold, delivered or otherwise disposed of, and failed to notify the DEA in a timely manner regarding certain instances of thefts or significant losses of controlled substances. It is note-worthy that the DEA has had a number of significant settlements in recent years related to providers failing to timely notify it of thefts or losses of controlled substances.

The Department of Health and Human Services (HHS) is also adding to the conversation of opioid related enforcement. In June, HHS’s Office of Evaluations and Inspections (OEI) issued a data brief concerning opioid use in Medicare Part D that ultimately focused on prescribers who issued an aberrant number of opioid prescriptions. OEI identified Medicare Part D beneficiaries receiving large numbers of opioid prescriptions and then drilled down to the prescribers issuing those prescriptions. The report concluded that, based on the data analyzed, there were 282 prescribers that stood out for questionable prescribing. The report specifically identified providers who ordered opioids for a high number of beneficiaries with non-cancer diagnoses who were receiving “extreme” amounts of opioids and those providers who wrote prescriptions for beneficiaries that the data showed the patient was likely doctor-shopping. It is likely that the OIG is looking further into the providers identified by OEI’s data analysis.

Yates Memo Revisions

After the change in administrations, there was a lot of buzz about comments from DOJ officials that the Yates Memo (officially, the “Memorandum on Individual Accountability for Wrongdoing”) was being “reviewed.” Recently, Deputy Attorney General Rod Rosenstein announced the results of that review but the changes are likely to be considered only minor adjustments or clarifications, rather than the hoped-for large-scale revisions. For criminal liability, the revisions clarify that companies seeking cooperation credit must identify every individual who was substantially involved in or responsible for any criminal conduct, rather than every employee involved regardless of relative culpability. Further, the revisions to the policy for civil cases recognizes that civil cases primarily target the recovery of funds and that pursuing all employees involved in wrong-doing may not be an efficient use of resources. As a result, the new policy makes clear that cooperation in a civil case is not an “all or nothing” proposition and that a company that identifies senior management but not lower level employees involved in wrongful conduct may qualify for at least partial cooperation credit.

HIPAA Enforcement

The penalties for violations of the Health Insurance Portability and Accountability Act (HIPAA) continue to stiffen. While providers for many years were focused on implementing HIPAA policies and procedures, the enforcement trends suggest the growing importance of rigorous audits and enforcement of those policies. The following are representative examples:

  • University of Texas MD Anderson Cancer Center (MD Anderson) was found to have violated HIPAA’s Privacy and Security Rules by an administrative law judge and ordered to pay $4,348,000 in civil money penalties. OCR investigated MD Anderson following three separate data breach reports in 2012 and 2013 involving the theft of an unencrypted laptop of an MD Anderson employee and the loss of two unencrypted USB drives containing the electronic protected health information (ePHI) of over 33,500 individuals. OCR’s investigation found that MD Anderson had written encryption policies as far back as 2006 and that MD Anderson’s own risk analyses had found that the lack of device-level encryption posed a high risk to the security of ePHI. Despite the policies and risk analysis findings, MD Anderson did not begin to adopt an enterprise-wide solution to implement encryption of ePHI until 2011 and failed to encrypt its inventory of electronic devices containing ePHI until 2013.

  • In February, a physician in Massachusetts pleaded guilty to a misdemeanor count of wrongful disclosure of individually identifiable health information in violation of HIPAA. The physician allowed a pharmaceutical sales representative to access the confidential medical information of patients to identify potential candidates for one of the pharmaceutical company’s drugs.

Conclusion

One of the hallmarks of an effective compliance program is to regularly engage in an assessment of the risks faced by the organization. One method of assessing those risks is to be familiar with the recent enforcement trends and evaluate whether those trends apply to the organization. Based on the past year, financial relationships with physicians and the medical necessity of services billed to Medicare and Medicaid are enforcement risk areas and should be considered for incorporation into compliance planning. As noted above, the evaluation of the medical necessity of services should not be limited to those provided internally as the government has sought to impose liability for services provided by external business partners. Moreover, with the ongoing and significant impact of the opioid epidemic on the country, law enforcement will undoubtedly continue to be focused on enforcing the Controlled Substances Act. Finally, while for many years providers have been focused on implementing HIPAA policies and procedures, the enforcement trends suggest that the focus needs to shift to ensuring that those policies and procedures are monitored and enforced to avoid exposure to increasing penalties.

 

©2019 von Briesen & Roper, s.c.
Read more health legal news on the National Law Review’s Health Page.

HHS Proposes to Revise Discount Safe Harbor Protection for Drug Rebates

On January 31, 2019, the Department of Health and Human Services (HHS) released a notice of proposed rulemaking (the Proposed Rule) as part of ongoing administration drug pricing reform efforts. The Proposed Rule would modify a regulatory provision that had previously protected certain pharmaceutical manufacturer rebates from criminal prosecution and financial penalties under the federal Anti-Kickback Statute.

Specifically, the Proposed Rule would exclude from “safe harbor” protection rebates and other discounts on prescription pharmaceutical products offered by pharmaceutical manufacturers to Medicare Part D plan sponsors or Medicaid Managed Care Organizations (MCOs), unless the price reduction is required by law (such as rebates required under the Medicaid Drug Rebate Program). The proposed exclusion would apply to rebates offered directly to Part D plan sponsors and Medicaid MCOs, as well as those negotiated by or paid through a pharmacy benefit manager (PBM). HHS stated that it does not intend for the revisions in this Proposed Rule to negatively impact protection of prescription pharmaceutical product discounts offered to other entities such as wholesalers, hospitals, physicians, pharmacies and third-party payors in other federal health care programs. The proposed effective date of this regulatory modification is January 1, 2020, although HHS has sought comments regarding whether this allows sufficient time for parties to restructure existing arrangements.

In addition, the Proposed Rule would add two new regulatory safe harbors for:

  • Certain price reductions that are fully passed through to the dispensing pharmacy and applied to the price charged to the member at the point-of-sale; and

  • Fixed fee payments from manufacturers to PBMs for the services that PBMs provide those manufacturers. In order to be protected, the fees would have to be for services that relate to the PBM’s arrangements with health plans (e.g., services that rely on data collected from health plan customers).

These new safe harbors would become effective 60 days after HHS publishes a final rule.

The potential implications of the Proposed Rule extend beyond the context of federal Anti-Kickback Statute compliance to drug reimbursement in the United States more broadly. The proposals will likely be subject to significant public debate and legal scrutiny.

The Proposed Rule is scheduled to be published in the Federal Register on February 6, 2019, and public comments on the proposals would be due 60 days later. The Proposed Rule can be found here and the HHS Factsheet is available here.

 

© 2019 McDermott Will & Emery

Is Paris Burning? France Considers Whether Damages for Employee Dismissals Should Be Capped

The latest version of Article L. 1235-3 of the French Labor Code, based on the “Macron Ordinances,” has recently been the subject of major dispute, with several labor tribunals issuing conflicting decisions.

The article limits a judge’s ability to determine compensation for an employee whose dismissal has been recognized as having no “real and serious” cause. It caps the damages awarded at an amount between 0.5 months’ salary (for an employee with less than one year of continuous service) and 20 months’ salary (for an employee with more than 29 years of continuous service).

However, this system is not applicable in a number of cases, particularly where the dismissal is declared null and void because, for example, of a “violation of a basic human right,” an “act of harassment,” or its “discriminatory” nature.

By introducing this new system, the government intended to “remove uncertainty” about the “cost of a termination” by allowing the employer to anticipate the risk incurred if the dismissal was found to be without real and serious cause (Report to the President of the Republic on Order No. 2017-1387 of 22 September 2017 on the predictability and security of labor relations).

However, in a series of decisions issued in December 2018 and January 2019, labor courts have ruled that this system conflicts with several international conventions applicable in France.

Even if the Constitutional Council had approved, both in principle (C.C., 2017-751 DC of 7 September 2017) and in its implementation (C.C., 2018-761 DC of 21 March 2018), the concept of a cap on compensation for damage caused by the fault of an employer, it is not up to the Council to ensure compliance of this system with the international agreements ratified by France.

It is judges who are responsible for checking that the system established by the labor tribunal complies with the international conventions applicable in France.

However, Article 10 of Convention 158 of the International Labour Organization stipulates that a judge who finds that a dismissal is unjustified, but does not propose reinstatement of the employee to his or her original position, must be able to order the “payment of adequate compensation or such other relief as may be deemed appropriate.” Similarly, Article 24 of the European Social Charter provides for the “the right of workers whose employment is terminated without a valid reason to adequate compensation or other appropriate relief.”

Considering these stipulations, two labor tribunals (Le Mans and Caen, the latter being ruled by a professional judge) adopted the applicable scale, considering that it provided for “appropriate” compensation for damages.

By contrast, the labor tribunals of Troyes, Amiens, Lyon, Grenoble, and Angers decided, in highly publicized decisions, not to apply the mandatory scale stipulated by Article L. 1235-3. As a result, they granted compensation in excess of the legal maximum. None of these five cases fell into the provided categories allowing a judge to exceed this maximum.

At present, while other councils could follow this reasoning, the impact remains limited. The Administrative Supreme Court has already been called upon in urgent situations to rule on the validity of these measures. It considered that because of the possibility of deviation from the scale when the dismissal is deemed null and void, so that the scale is compliant with the stipulations of the conventions (CE, 7 December 2017, CGT, N° 415243).

It will be up to the Courts of Appeal and then to the Court of Cassation, France’s Supreme Court, to decide whether it is appropriate to continue to apply this system or whether the international conventions ratified by France require that it be overruled.

Pending these decisions, the possibility that the scale is inapplicable may divide the courts and create judicial uncertainty in labor tribunal disputes. The underlying objective of legal certainty is therefore, at least temporarily, severely compromised: neither employees nor employers can use this scale to assess with certainty the chances of profit or the risks involved when making a decision on any given dismissal.

A rapid resolution would be desirable. To this end, referral to the Court of Cassation for a legal opinion in accordance with the provisions of Article L. 441-1 of the Code of Judicial Organization and Article 1031-1 of the Code of Civil Procedure (referral for an opinion) might have seemed particularly appropriate if the Court of Cassation had not recently refused to grant such an opinion regarding the compliance to conventional rules of another legal text (Cass, avis, 12 juillet 2017, 17-70.009).

Thus, it can only be hoped that a litigant whose rights are “imperiled” by a ruling requests that a Court of Appeals set a day for a priority hearing (Article 917 of the Code of Civil Procedure). Such proceedings would reduce the delay before the appeal hearing and would provide a finer outlook on the future of the mandatory scale.

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
This post was written by Jean-Marc Albiol and Thibaud Lauxerois of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Nursing Shortage Expected to Continue Through 2024: How CMS Is Easing the Burden on Hospice Agencies

The U.S. Department of Labor’s Bureau of Labor Statistics has forecast a nursing shortage through 2024, with the United States projected to need more than half a million new nurses to replace those who leave the profession. This nursing shortage stems from a convergence of factors. First, the healthcare arena has experienced an influx of new patients due to the Affordable Care Act and an aging population, increasing the demand for healthcare services. Second, many baby boomers have already reached or will soon reach retirement age. Finally, there are barriers to education for new nurses, including a lack of programs, faculty, and clinical sites to support training needs.

Extraordinary Circumstance Designation

On December 21, 2018, the director of the Quality, Safety & Oversight Group of the Centers for Medicare & Medicaid Services (CMS) issued a memorandum that officially extends CMS’s designation of the national nursing shortage as an “extraordinary circumstance.” This extension will permit hospice agencies to use contract workers to provide core nursing services through September 30, 2020.

Under 42 C.F.R. 418.64, hospice agencies “must routinely provide substantially all core services” through their own employees. Hospice agencies may use contract staff in their facilities only if there are “extraordinary or other non-routine circumstances.” These circumstances are generally unforeseen temporary events, such as “[u]nanticipated periods of high patient loads, staffing shortages due to illness or other short-term temporary situations that interrupt patient care; and temporary travel of a patient outside of the hospice’s service area.”

CMS’s designation of the nursing shortage as an “extraordinary circumstance” means that hospice agencies are exempt from the general rule requiring them to employ their own nurses to provide core nursing services. While this exemption will allow hospice agencies to hire contractors to supplement their own employee workforces, these agencies still will be responsible for all professional, financial, and administrative functions, as well as counseling, medical social services, and other core hospice services.

The memorandum also eases the paperwork burden on hospice agencies. CMS previously required that hospice agencies provide notification and a stated justification to CMS and the agency’s state survey agency whenever they used contract staff during extraordinary circumstances. Under this memorandum, the notification and justification are no longer required. Documentation, however, is still required if a hospice agency uses contract staff for other reasons and will be reviewed as part of the routine survey process.

Key Takeaways

This may be welcome news for hospice agencies struggling to care for patients, but there are some limitations these agencies may want to keep in mind. Notably, the “extraordinary circumstances” designation permits agencies to use contract staff only to supplement—not replace—their core nursing staff. Additionally, although hospice agencies may hire contract staff for core nursing functions, the exemption does not apply to other professional, financial, and administrative functions. Finally, hospice agencies should remember that they must still document their use of contract staff when it is due to a reason other than the nursing shortage.

 

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

CCPA Part 2 – What Does Your Business Need to Know? Consumer Requests and Notice to Consumers of Personal Information Collected

This week we continue our series of articles on the California Consumer Privacy Act of 2018 (CCPA). We’ve been discussing the broad nature of this privacy law and answering some general questions, such as what is it? Who does it apply to? What protections are included for consumers? How does it affect businesses? What rights do consumers have regarding their personal information? What happens if there is a violation? This series is a follow up to our earlier post on the CCPA.

In Part 1 of this series, we discussed the purpose of the CCPA, the types of businesses impacted, and the rights of consumers regarding their personal information. This week we’ll review consumer requests and businesses obligations regarding data collection, the categories and specific pieces of personal information the business has collected, and how the categories of personal information shall be used.

We begin with two questions regarding data collection:

  • What notice does a business need to provide to the consumer to tell a consumer what personal information it collects?
  • What is a business required to do if that consumer makes a verified request to disclose the categories and specific pieces of personal information the business has collected?

First, the CCPA requires businesses to notify a consumer, at or before the point of collection, as to the categories of personal information to be collected and the purposes for which the categories of personal information shall be used. A business shall not collect additional categories of personal information or use personal information collected for additional purposes without providing the consumer with notice consistent with this section. Cal. Civ. Code §1798.100.

Second, under the CCPA, businesses shall, upon request of the consumer, be required to inform consumers as to the categories of personal information to be collected and the purposes for which the categories of personal information shall be used. The CCPA states that “a business that receives a verifiable consumer request from a consumer to access personal information shall promptly take steps to disclose and deliver, free of charge to the consumer, the personal information required by this section. The information may be delivered by mail or electronically, and if provided electronically, the information shall be in a portable and, to the extent technically feasible, in a readily useable format that allows the consumer to transmit this information to another entity without hindrance. A business may provide personal information to a consumer at any time, but shall not be required to provide personal information to a consumer more than twice in a 12-month period.” Section 1798.100 (d).

Section 1798.130 (a) states that to comply with the law, a business shall, in a form that is reasonably accessible to consumers, (1) make available to consumers two or more designated methods for submitting requests for information required to be disclosed, including, at a minimum, a toll-free telephone number, and if the business maintains an Internet web site, a web dite address; and (2) disclose and deliver the required information to a consumer free of charge within forty-five (45) days of receiving a verifiable request from the consumer.

Many have suggested during the rule-making process that there should be an easy to follow and standardized process for consumers to make their requests so that it’s clear for both consumers and businesses that a consumer has made the verified request. This would be welcome so that it would make this aspect of compliance simpler for the consumer as well as the business.

When businesses respond to consumers’ requests, having a clear website privacy policy that explains the types of information collected, a documented process for consumers to make a verified requests, a protocol for responding to consumer requests, audit logs of consumer requests and business responses, a dedicated website link, and clear and understandable language in  privacy notices, are all suggestions that will help businesses respond to consumers and provide documentation of the business’ response.

As we continue to explore the CCPA and its provisions, we strive to understand the law and translate the rights conferred by the law into business operations, processes and practices to ensure compliance with the law. In the coming weeks, we’ll focus on understanding more of these provisions and the challenges they present.

 

Copyright © 2019 Robinson & Cole LLP. All rights reserved.
This post was written by Deborah A. George of Robinson & Cole LLP.

New Washington State Privacy Bill Incorporates Some GDPR Concepts

A new bill, titled the “Washington Privacy Act,” was introduced in the Washington State Senate on January 18, 2019. If enacted, Washington would follow California to become the second state to adopt a comprehensive privacy law.

Similar to the California Consumer Privacy Act (CCPA), the Washington bill applies to entities that conduct business in the state or produce products or services that are intentionally targeted to residents of Washington and includes similar, though not identical size triggers. For example, it would apply to businesses that 1) control or process data of 100,000 or more consumers; or 2) derive 50 percent or more of gross revenue from the sale of personal information, and process or control personal information of 25,000 or more consumers. The bill would not apply to certain data sets regulated by some federal laws, or employment records and would not apply to state or local governments.

The bill incorporates aspects of the EU’s General Data Protection Regulation (GDPR) and borrows the “controller”/“processor” lexicon in identifying obligations for each role from the GDPR. It defines personal data as any information relating to an identified or identifiable natural person, but does not include de-identified data. Similar to the GDPR, it treats certain types of sensitive information differently. Unlike the CCPA, the bill excludes from the definition of “consumer” employees and contractors acting in the scope of their employment. Additionally, the definition of “sale” is narrower and limited to the exchange of personal data to a third party, “for purposes of licensing or selling personal data at the third party’s discretion to additional third parties,” while excluding any exchange that is “consistent with a consumer’s reasonable expectations considering the context in which the consumer provided the personal data to the controller.”

Another element similar to the GDPR in the bill, requires businesses to conduct and document comprehensive risk assessments when their data processing procedures materially change and on an annual basis. In addition, it would impose notice requirements when engaging in profiling and a prohibition against decision-making solely based on profiling.

Consumer rights 

Similar to both the GDPR and the CCPA, the bill outlines specific consumer rights.  Specifically, upon request from the consumer, a controller must:

  • Confirm if a consumer’s personal data is being processed and provide access to such data.
  • Correct inaccurate consumer data.
  • Delete the consumer’s personal data if certain grounds apply, such as in cases where the data is no longer necessary for the purpose for which it was collected.
  • Restrict the processing of such information if certain grounds apply, including the right to object to the processing of personal data related to direct marketing. If the consumer objects to processing for any purpose other than direct marketing, the controller may continue processing the personal data if the controller can demonstrate a compelling legitimate ground to process such data.

If a controller sells personal data to data brokers or processes personal data for direct marketing purposes, it must disclose such processing as well as how a consumer may exercise the right to object to such processing.

The bill specifically addresses the use of facial recognition technologies. It requires controllers that use facial recognition for profiling purposes to employ meaningful human review prior to making final decisions and obtain consumer consent prior to deploying facial recognition services. State and local government agencies are prohibited from using facial recognition technology to engage in ongoing surveillance of specified individuals in public spaces, absent a court order or in the case of an emergency.

The Washington State Attorney General would enforce the act and would have the authority to obtain not more than $2,500 for each violation or $7,500 for each intentional violation. There is no private right of action.

The Washington Senate Committee on Environment, Energy & Technology held a public hearing on January 22, 2019 to solicit public opinions on this proposed legislation. At the beginning of the public hearing, the Chief Privacy Officer of Washington, Alex Alben, commented that the proposed legislation would be just in time to address a “point of crisis [when] our economy has shifted into a data-driven economy” in the absence of federal legislation regarding data security and privacy protection.

Industry reaction to the bill

Companies and industry groups with an interest in this process applauded this proposed legislation as good news for entities that have become, or are on their way, to becoming compliant with the GDPR. Many also shared suggestions or criticisms. Among others, some speakers cautioned that by setting a high standard closely resembling the GDPR, the bill might drive small- or medium-sized companies to block Washington customers, just as they have done in the past to avoid compliance with the GDPR.

Some representatives, including the Chief of the Consumer Protection Division of the Washington Attorney General’s Office, call for a private cause of action so that this law would mean more to a private citizen than simply “a click on the banner.” The retail industry, the land title association, and other small business representatives expressed their preference for legislation on a federal level and a higher threshold for applicable businesses. Specifically, Stuart Halsan from the Washington Land Title Association recommended that the Washington Senate consider this bill’s impact on industries, such as the land title insurance industry, where the number of customers is significantly lower than the amount of data it processes in their ordinary course of business.

In response to these industry concerns, the committee acknowledged that this new legislation would need to be very sensitive to apply proportionately to businesses of different sizes and technology capabilities. The committee also recognized the need to make this legislation more administratively feasible for certain industries or entities that face difficulty in compliance (such as the secondary ticketing market) or subject to complicated regulatory frameworks (such as the bank industry). The Washington Senate continues to invite individuals, companies, or industry groups to submit brief written comments here.

 

©2019 Drinker Biddle & Reath LLP. All Rights Reserved

Impact of Government Shutdown on IRS Collections

The government shutdown has impacted many government offices, including the Internal Revenue Service. After the longest government shutdown in history, IRS employees returned to work on January 28, 2019, in most offices across the country. Unfortunately, due to extreme weather conditions in parts of the US, including Michigan, local offices were closed most days during this first week of the IRS reopening. If a taxpayer has outstanding balances with the IRS, the lingering question is what impact did the shutdown have on IRS collections.

While it will take some time for the IRS to resume normal operations, on January 29, 2019 the IRS issued a number of FAQs to assist taxpayers and tax professionals with collection issues that were affected by the shutdown.

Things to Keep in Mind

IRS revenue officers were furloughed during the shutdown. Meaning that they were put on a leave of absence that prohibited them from performing their duties. If you were working with a revenue officer to resolve your balance due account, the officer will be reviewing inventory and should be reaching out to taxpayers within the next week or so. If an appointment was missed, it should be rescheduled. If a payment or information was due during the shutdown, you should have that payment and/or information ready and available when contacted so that you can move your case toward resolution.

Government shutdown stamp over Form 1040 documentThe government shutdown did not affect federal tax law as it relates to the filing of returns and the making of payments to the IRS. Thus, penalties for failure to file, failure to pay, federal tax deposit penalties and estimated tax payment penalties may still apply. Further, since compliance is critical for all collection alternatives, including installment agreements, offers-in-compromise, and currently not collectible status, your collection alternative can be subject to default procedures.

The government shutdown did not affect statutory deadlines for filing timely appeals from enforced collection actions, including the time frame within which to request a Collection Due Process Hearing from the issuance of a Final Notice of Intent to Levy or from a Notice of Federal Tax Lien Filing. Thus, you may find yourself in jeopardy of levy action on income and financial assets.

 

© 2019 Varnum LLP
This post was written by Angelique M. Neal of Varnum LLP.
Read more news on the IRS and other Tax issues on the NLR Tax Type of Law Page.

DHS Publishes Final Rule for H-1B Lottery

On Nov. 30, 2018, the Department of Homeland Security issued the notice of proposed rulemaking to amend its H-1B cap-subject lottery process. On Jan. 31, 2019, USCIS will publish the final rule after a 30-day comment period. The final rule encompasses a pre-registration process and a modified selection process. The registration process will be suspended for FY 2020 cap season to finish testing the H-1B registration system. Below is what employers, attorneys, and employees alike need to know:

How to Register: The USCIS will house the H-1B cap registration process through ICAM, a portal that will allow accounts to submit H-1B cap registrations. A petitioner must submit a separate registration for each beneficiary, and the beneficiary must be named. A petitioner may submit one registration per beneficiary, and as with previous years, if multiple requests for the same beneficiary and same petitioner are found, the registration for that beneficiary will be considered invalid.

Timing: The registration period will last at least 14 calendar days, and will start at least 14 calendar days before the earliest date the H-1B petition can be filed. USCIS will announce the start of the registration period at least 30 days before the first date of open registration. As with previous filings, the start date on the petition may only begin on the first day of the fiscal year, Oct. 1. If for any reason the registration period is open longer than anticipated by USCIS, then the start date may begin later.

Selection Process: USCIS will conduct a random lottery of the registrations it receives. If the cap has not been reached at the end of the period, USCIS will notify all those that are selected and keep the registration period open until the slots have been filled, which will determine the “final registration date.” If the cap is reached at the end of the registration period, USCIS will notify the public of the “final registration period” and will then randomly select via computer the registrations that will move on to the next stage.

Most notably, the order of selection will change for the petitions filed for FY 2020, though the registration process will take effect FY 2021 due to testing of the proposed system. Instead of the U.S. Master’s degree registrations being selected first for the 20,000 spots, the general pool will go first, where 65,000 regular cap registrations are selected. This means there will be more U.S. Master’s degree registrations mixed within the regular pool. USCIS will announce the “final registration date” after all U.S. Master’s degree registrations have been selected.

USCIS will maintain a reserve pool of registrations in case it needs to increase the number of registrations to meet the H-1B cap (both regular and advanced degree exemption).

Notification: Petitioners will receive an electronic notification that their registration has been selected, and can therefore move forward with filing the H-1B petition, only for the beneficiary named on the registration notice. The H-1B petition must be filed within the filing period indicated on the notice, which will be at least 90 days. If this window is missed, USCIS will deny or reject the H-1B petition.

Fine Text: USCIS makes it very clear that even if the registration process is suspended, the order and manner in which the cap subject petitions are selected will remain in effect.

Implications: The registration process will not go into effect this coming H-1B cap season, but the system will be tested throughout the year for implementation next year. The manner of selecting cap cases will change, with the regular cap going first, then the U.S. Master’s cap. As such, there will be a greater chance for those with U.S. Master’s degrees to be selected in the process.

 

©2019 Greenberg Traurig, LLP. All rights reserved.
This post was written by Kristen W. Ng of Greenberg Traurig, LLP.

Supreme Court Update: SCOTUS Grants CERT on Issue of Punitive Damages for Unseaworthiness and Denies CERT on Maritime Contract Test

Last month, the US Supreme Court decided to take up whether punitive damages are recoverable in general maritime law claims for unseaworthiness when it granted certiorari in Batterton v. Dutra Group, 880 F.3d 1089 (9th Cir. 2018), writ granted Docket No. 18-266 (Dec. 7, 2018). As we reported in June 2018, Batterton brings the issue into focus for the high court because it is directly at odds with a 2014 US Fifth Circuit decision that held that punitive damages are nonpecuniary and therefore not recoverable in unseaworthiness actions. McBride v. Estis Wells Serv., 768 F.3d 382 (5th Cir. 2014).

The US Ninth Circuit in Batterton relied on a prior decision from that circuit, Evich v. Morris, 819 F.2d 256 (9th Cir. 1987), which held that punitive damages are available for general maritime law claims of unseaworthiness if certain conditions are present (i.e., when the conduct constitutes reckless or callous disregard for the rights of others, gross negligence, actual malice, or criminal indifference). The Ninth Circuit also relied on the broad principle announced in Atlantic Sounding v. Townsend, 557 US 404 (2009), that punitive damages have been available under the general maritime law and should, therefore, be available in unseaworthiness actions even though that case concerned the refusal of an employer to pay maintenance and cure benefits to a seaman.

The Fifth Circuit in McBride, however, relied on an earlier Supreme Court decision in answering the same question. In Miles v. Apex Marine Corp., 498 US 119 (1990), the Supreme Court held that a seaman’s damages are limited to pecuniary loss. The Fifth Circuit determined that punitive damages are nonpecuniary, and therefore are not recoverable for an unseaworthiness claim.

The Supreme Court will take up the question in due course, and we will continue to provide updates on this case, as punitive damages can impact the value of a case and present insurance coverage issues.

Separately, the Supreme Court denied cert in December 2018 from In re Crescent Energy Servs., L.L.C., 896 F.3d 350 (5th Cir. 2018), writ denied Docket No. 18-436 (Dec. 10, 2018), the first Fifth Circuit case that applied the new test for determining whether a contract in the oil and gas context is maritime since the en banc court changed the test in In re Larry Doiron Inc., 879 F.3d 568 (5th Cir. 2018). We summarized that line of cases in our August 2018 newsletter. The test under Doiron is two-pronged:

  1. Is the contract to provide services to facilitate the drilling or production of oil and gas on navigable waters?
  2. If the answer to the above question is “yes,” does the contract provide for, or do the parties expect, a vessel to play a substantial role in the completion of the contract? If so, then the contract is maritime in nature.

In In re Crescent Energy Servs., L.L.C., the issue presented on appeal was whether a contract to provide services to oil wells located on fixed platforms in navigable waters within a state is a “maritime” contract when a vessel plays a substantial role in the performance of the contract. The Fifth Circuit applied the Doiron test and answered in the affirmative, finding that the contract was indeed maritime. The Supreme Court denied cert, and the new test for a maritime contract in the oil and gas context adopted by Doiron continues to apply. Whether a contract is maritime in nature plays a role in the enforceability of indemnity obligations among the parties because indemnity provisions are generally enforceable under maritime law, but are often prohibited under oilfield anti-indemnity acts in Texas and Louisiana. If a contract is nonmaritime, then state law applies, which can bar enforcement of the indemnity provisions in the contract.

 

© 2019 Jones Walker LLP
This post was written by Jeanne Amy of Jones Walker LLP.
Read more litigation news on the National Law Review’s Litigation Page.