The National Law Forum

The Unions Are Coming…The Unions Are Coming! We Don’t Need Paul Revere’s Lantern To See Who’s Coming!

On December 16, 2014, the term of NLRB Board Member Nancy Schiffer ends. This is a critical date for the union movement because on that date the pro-Union members of the Board will lose their 3-2 majority status and their effective control over the NLRB. So what’s coming next for private employers?

On July 29, 2014, the General Counsel of the NLRB issued an advice memorandum to the NLRB Regional Directors identifying his game plan regarding re-establishing a new definition for joint employer, to make it easier for unions to organize:

“The new broader standard will allow employees to use traditional economic weapons to exert lawful economic pressure on those parties to realistically control the economics of their relationship even if they do not directly control working conditions.”

Prior to that public announcement, the General Counsel had stated that the objective of the Board has been to consistently uphold unions organizing very small subsets of employees, called “micro-units,” instead of the traditional wall-to-wall bargaining units. Quite simply, these “micro units” are easier for unions to gerrymander and, ultimately, to organize.

The final step in this trifecta is the most troubling for employers – the new NLRB Election Rules. Through rule-making, the NLRB is seeking to re-write the NLRA in such a way as to greatly speed up the elections. The new rules reduce the timeline for elections from over 35 days to under 20 days between the time of the petition and the election. These “quickie” or “ambush” elections will undoubtedly benefit unions, because it gives the employer less time to explain to the employee the pros and cons of joining a union. These rules are on a fast track and clearly support the union movement.

So, undoubtedly, the unions are indeed coming after management! This is a watershed moment for the unions. The union’s financial coffers have been depleted as the union membership numbers continue to plummet. If they don’t get their act together and start to effectively unionize, then they will have to stop blaming employers and/or the NLRB for their organizing failures.

Under the new NLRB Election Rules, nearly all election-related issues will be resolved after the election. This process would be similar to the approach taken in the recent Northwestern University football players’ case, in which the NLRB held the election and then impounded the ballots. The NLRB will sort out any issues after the fact so long as the objections don’t impact more than 20% of the bargaining units.

Employers had better gear up and get ready because the unions are locked and loaded and ready to attack. The stage has been proactively set by the NLRB to give unions their best-ever opportunity to succeed in union organizing. If employers don’t prepare now, they will jeopardize their freedom to deal directly with their employees and reduce their flexibility in running their company. The NLRB Regional Offices are already gearing up to explain the new changes in NLRB election procedure, starting in November, so here come the unions!

ARTICLE BY

Amy O. Bruchs

Carlos R. Pastrana-Torres

Robert W. Mulcahy

Farrah N.W. Rifelj

Brian P. Paul

Michael Best & Friedrich LLP

.bit: Why Brands Need to Pay Attention [VIDEO]

Monica Riva Talley, director at the intellectual property law firm Sterne, Kessler, Goldstein & Fox, P.L.L.C., discusses the unregulated domain .bit and why brands need to pay attention to this “Wild West of the Internet.” As Ms. Talley explains, ‘.bit’ is unlike any customary domain and presents several areas of concern for intellectual property owners including cybersquatting, the use of pirated content, and the absence of oversight or control by any regulatory entity.

ARTICLE BY

Monica Riva Talley

Sterne, Kessler, Goldstein & Fox P.L.L.C.

2015 COLAs (Cost of Living Adjustments) for Employee Benefit Plans

The Internal Revenue Service has announced the 2015 cost of living adjustments to various limits on employee benefit plans. The adjusted amounts generally apply for plan years beginning in 2015. Some of the adjusted amounts, however, apply to calendar year 2015:

1. he limit on an employee’s contributions made during the 2015 calendar year to a 401(k) or a 403(b) tax-sheltered annuity increases to $18,000. Participants who are age 50 or older by the end of 2015 may make an additional $6,000 catch-up contribution, which also increases from the 2014 limit.

2. The limit on an employee’s contributions made during the 2015 calendar year to a 457 plan sponsored by a governmental unit or a tax-exempt organization also increases to $18,000. Participants who are age 50 or older by the end of the 2015 plan year may make an additional $6,000 catch-up contribution, which also increases from the 2014 limit.

3. The limit on an employee’s compensation that may be considered for retirement plan purposes increases to $265,000 for plan years beginning in 2015.

4. The limit on annual benefits payable under defined benefit plans remains the same at $210,000 for plan years beginning in 2015.

5. The limit on allocations to individual accounts in defined contribution plans increases to the smaller of $53,000 or 100% of compensation for plan years beginning in 2015.

6. The taxable wage base for Social Security increases to $118,500. This figure may affect the “integration level” for plans that are integrated with Social Security.

7. Employees will be classified as highly compensated employees for the plan year beginning in 2015 if their compensation in the 2014 plan year exceeded $115,000.

8. Health savings accounts (HSAs) are a means of paying health care expenses under a high deductible health care plan. To be a high deductible health care plan, the deductible must be at least a minimum amount for the year and out-of pocket expenses cannot exceed a maximum amount for the year. Contributions to an HSA may be made by the employer or the employee, but the total annual contribution amount from both sources cannot exceed the smaller of the plan’s deductible for the year or the maximum contribution amount for the year. For 2015, the adjusted amounts for HSAs are:

Maximum contribution: Family: $6,650 Self: $3,350
Minimum deductible: Family: $2,600 Self: $1,300
Maximum out of pocket: Family: $12,900 Self: $6,450

9. Participants who attain age 55 by the end of the 2015 plan year may make an additional $1,000 “catch-up” contribution to their HSAs.

The maximum amounts that Social Security recipients may earn during 2015 without loss of Social Security benefits are as follows:

Recipients ages 62 through full retirement age: $1,310/mo. ($15,720/yr.)
Year recipient reaches full retirement age: $3,490/mo. up to the month the recipient reaches full retirement age. ($41,880/yr.)
There is a special rule that applies to earnings for one year, usually the first year of retirement, in which you can get a full social security check for any whole month you are retired, regardless of your yearly earnings.
“Full retirement age” for Social Security is:

Year of Birth	Full Retirement Age
Prior to 1938	Age 65
1938	Age 65 & 2 months
1939	Age 65 & 4 months
1940	Age 65 & 6 months
1941	Age 65 & 8 months
1942	Age 65 & 10 months
1943 – 1954	Age 66
1955	Age 66 & 2 months
1956	Age 66 & 4 months
1957	Age 66 & 6 months
1958	Age 66 & 8 months
1959	Age 66 & 10 months
1960 and later	Age 67

Health Reimbursement Accounts (HRAs) Under the Affordable Care Act

The Issue: Can an employer offer employees a health reimbursement account (HRA) under the Affordable Care Act?

The Solution: Maybe. As a general rule, employers may only offer an HRA if it is integrated with a group health plan (not individual insurance).

Analysis: HRAs are employer-funded accounts designed to reimburse employees for out-of-pocket medical expenses. Employees are not permitted to contribute their own funds, so they are unlike flexible spending accounts or health savings accounts, in which an employee defers a portion of his or her wages into the plan to be used to reimburse co-pays or the employee’s portion of insurance premiums. Because they are employer-funded, HRAs are considered to be group health plans.

As a group health plan, an HRA is generally subject to the Affordable Care Act (ACA). Among other things, the ACA contains certain market reforms that create federal minimum requirements with respect to access to coverage, premiums, benefits, cost-sharing, and consumer protections, including a prohibition on annual benefit limits.

By definition, an HRA imposes an annual benefit limit and thus raises the issue of whether an HRA can be offered under ACA. (The annual benefit limit reform does not apply to a plan that covers fewer than two current employees. This also means that an employer could maintain a retiree-only HRA without violating the market reform requirements, since it would not cover any current employees.)

Assuming the employer’s health plan does cover its current workforce, it could provide an HRA if this feature is “integrated” with a group health plan because, viewed together, there would be no annual limit. In other words, the group health plan generally would not be permitted to impose an annual limit. Even though one element of the health plan, the HRA, itself has a limit, this does not cause the plan to violate the requirement. (Note, however, that the HRA may not be integrated with individual insurance.)

“Integration” – that is, combining an HRA with general group health plan coverage – requires that covered employees have other non-HRA group health plan benefits. This can be done either through the plan of the employer that maintains the HRA or the plan maintained by the employer of the employee’s spouse. The employee must also be given the opportunity to opt out and waive HRA coverage annually. Additional rules may apply as well.

Employers that currently maintain standalone HRAs should talk to their advisers regarding what changes must be made in order to comply with the ACA.

ARTICLE BY

Summer Conley

Drinker Biddle & Reath LLP

California Class Action Suit Alleges LinkedIn Violated Fair Credit Reporting Act (FCRA) By Providing Employers With Reference Reports

Another interesting case filed in California recently highlights the myriad risks employers face when using social media as part of their hiring process.

A class action lawsuit was filed in the Central District of California against LinkedIn based on allegations that thereference reports LinkedIn generates for premium subscribers, including many employers, violate the Fair Credit Reporting Act(“FCRA”). According to the plaintiffs in Sweet, et. al. v. LinkedIn Corporation, an employer who is a premium subscriber can generate a report containing the names, locations, employment areas, current employers, and current positions of all persons in a user’s network who may have worked with a job applicant and also contact the applicant’s “references.” An employer, according to the allegations, can run such a “reference report” on a job applicant without the applicant receiving any notification whatsoever. Thus, as the complaint alleges, “any potential employer can anonymously dig into the employment history of any LinkedIn member, and make hiring and firing decisions based upon the information they gather, without the knowledge of the member, and without any safeguards in place as to the accuracy of the information that the potential employer has obtained.” The complaint claims this activity potentially violates both the FCRA’s purposes, which include safeguards as to the accuracy, fairness, and privacy of the information that a potential employer obtains, and the FCRA’s customer notification requirements.

This latest lawsuit against LinkedIn serves as another example of the complex legal issues and risks that an employer faces when using social media to make recruiting and hiring decisions.

ARTICLE BY

Alexander Nestor

Nisha Verma

Allen Matkins Leck Gamble Mallory & Natsis LLP

GCI 10 Inspiring Women Lawyers to Lead – General Counsel Institute

Lawyers are trained for many things, to represent clients in court, provide advice on legal matters and work hard to protect their clients’ interests. Most law schools, however, do not prepare lawyers to lead. Yet to succeed as in-house counsel, lawyers must be able to lead diverse teams and handle a variety of subject matters. At the National Association of Women Lawyers® (“NAWL”) Tenth Annual General Counsel Institute® (“GCI 10”) Strategic Leadership: Developing Legal Expertise and Skills to Enable and Empower Yourself and Others in the 21st Century on November 6th and 7th, 2014, eleven leaders will share inspiring stories of how they lead through change, adapt to the ever evolving regulatory, cyber, global and other matters that are challenging their corporations today. Additionally, they will share how they tailor their approaches to successfully tackle the tasks at hand.

In honor of the tenth anniversary of the General Counsel Institute®, ten of these eleven inspiring leaders are General Counsels. Brad Smith, General Counsel and Executive Vice President of Legal and Corporate Affairs, Microsoft Corporation, will discuss Top Leadership Traits Critical to Leading, Engaging and Motivating a Global Corporation as the lunch keynote speaker on Thursday, November 6th. Smith believes that a commitment to continual learning and to diversity and inclusion are two traits critical to successful leadership. He is committed to diversifying the legal profession to reflect the diversity of the United States as a whole. To that end, Smith serves as the Chair of the Leadership Council on Legal Diversity (LCLD), an organization of more than 200 corporate chief legal officers and law firm managing partners who share that vision. When asked about learning, developing and growing as a leader, Smith said that he makes it a priority to stretch himself in new ways every year. “I think it’s imperative that one keep growing to adapt to a changing world . . . the three best ways to learn are through reading, listening, and doing.” He added that . . . “the single best thing one can do is surround oneself at work with people who bring diverse experiences, backgrounds, and points of view to a topic.”

Sandra Leung, General Counsel and Corporate Secretary, Bristol-Myers Squibb Company, will be the keynote speaker at 9:00 a.m. on Friday, November 7th. She joined the company after leaving the Manhattan District Attorney’s Office where she was part of the original Special Victims Bureau. Leung rose through the ranks at Bristol-Myers Squibb Company, taking the helm during a crisis, and is now also responsible for Environment, Health & Safety, Corporate Security and Philanthropy. In her role, Leung has restructured the legal department to meet business objectives and reduced costs, which helped the company thrive in a challenging business and regulatory environment. She advises leaders to “. . . have great personal integrity and be someone people can trust” as well as “. . . be respectful of people, not just your superiors but everyone.” At GCI 10, Leung will be discussing what it takes to thrive in today’s regulatory environment.

Rebecca S. Halstead, CEO and Founder of STEADFAST Leadership, is Brigadier General, U.S. Army, Retired, and she will be inspiring GCI 10 attendees as the keynote speaker at lunch on November 7th. She served as a Commissioner on the President’s Military Leadership Diversity Commission 2009 – 2010 and is the first female graduate of West Point to be promoted to General Officer. Halstead is also the author of the book 24/7: The First Person You Must Lead is YOU in which she outlines five fundamental truths to support her definition of leadership. She founded STEADFAST Leadership to extend the lessons she learned throughout her life, including in the military, to future leaders. Halstead advises that “leadership is about the led . . . therefore one must understand who the people are, what the organization is about, what are the current challenges facing them, and how are they organized.”

In addition to the keynote speakers, eight General Counsels will conduct interactive workshops at GCI 10 where attendees will have the opportunity to earn CLE credit. These workshops include leading edge topics such as anti-bribery compliance and conducting global business in the cloud, as well as skills such as gaining executive presence to command attention and influence change. The General Counsels leading these workshops offer the following advice to emerging leaders as a prelude to the conference:

Donna Costa, Executive Vice President, General Counsel and Chief Compliance Officer, Mitsubishi Chemical Holdings America, Inc., advises new leaders to have “. . . vision and aspiration, . . . to continually re-evaluate what they are doing. Getting input widely and often from those around you.”

Beth DeSimone, Executive Vice President, General Counsel and Secretary, CommunityOne Bancorp, says “The worst that anyone can say if you ask for something is ‘no’ so you might as well ask – they might say ‘yes’!” She also advises that you should always make time for family, continue your education, and follow your dreams.

Vicki Donati, General Counsel, Crate & Barrel Holdings, Inc., advises that one should “. . . speak up when you know something is amiss or when your gut tells you there are considerations not coming to the fore.” She also shares that leadership is a constant honing process and that by observing people in power you can pick and choose the aspects that fit you to develop your own personal leadership style.

Cynthia Gibson, Executive Vice President, Chief Legal Officer and Corporate Secretary, Scripps Networks Interactive, Inc., encourages being true to yourself, including admitting that you don’t know everything and that seeking input from others is key to success as a leader.

Leigh M. Harlan, Senior Vice President, Secretary and General Counsel, Tiffany & Co., when asked about evaluating two equally qualified candidates for a leadership position, she states that her selection would be “. . . the individual whose skills, demeanor and values align in such a way that he or she is likely to inspire others to perform at their highest capacity and to promote a fair, respectful and collaborative work environment.

Jennifer Rochon, General Counsel for Girl Scouts of the United States of America, has the distinction of serving as the first General Counsel of the Girl Scouts. She believes that it is critical for leaders to have confidence in themselves, to stretch outside their comfort zones, and to bring those they lead along with them.

Monica Weed, Executive Vice President, General Counsel and Corporate Secretary, Navigant Consulting, Inc., points out that assuming a leadership position”. . . requires you to move away from the very things that recommended you for leadership to begin with into areas in which you are unproven.” The ability to learn from others and to be flexible as circumstances change are characteristics that every leader should possess.

Linda Willett, Senior Vice President, General Counsel and Secretary, Horizon Blue Cross Blue Shield of New Jersey, advises new leaders to “identify role models, observe their leadership behaviors, and adopt those that work for you.” Willett also shares that the art of tailoring a message to the intended audience is an important skill for leaders to develop and encourages emerging leaders to join not-for-profit boards to experience “sitting on the other side of the table.”

There’s still time to register for GCI 10, so come be inspired by these 11 leaders by going to Programs & Events at www.nawl.org!

About GCI 10: The General Counsel Institute is designed to increase the effectiveness of in-house women lawyers at the top tiers of their corporate law departments. This annual program targets in-house counsel who want to build professional and management skills to improve the functioning of their practice groups or legal departments and their interaction with C-suite executives with focus on pressure points, strategic decision-making, measurements of success for in-house counsel and what it takes to improve such skills. The General Counsel Institute is collegial and interactive and a terrific opportunity to talk and network with the presenters and professionals from Fortune 500 companies.

About NAWL: The National Association of Women Lawyers (“NAWL”) is a national voluntary legal professional organization devoted to the interests of women lawyers and women’s rights. Founded in 1899, long before most local and national bar associations admitted women, the Association is an educational forum and has an active voice for the concerns of women in the legal profession.

NAWL continues to support and advance the interests of women in and under the law and the social, political, and professional empowerment of women. Today, members of the Association represent all areas of legal expertise: public and private sectors; for-profit and not-for-profit; and large and small organizations. Through its programs and network, NAWL provides the tools for women in the profession to advance, prosper, and enrich the profession.

ARTICLE BY

Stacey Werner Shapiro

National Association of Women Lawyers

They Know It When They See It: Patentable Subject Matter After Alice

To those with even a casual interest in the preparation and prosecution of patents in the United States, the holding in the Supreme Court’s June 2014 decision in Alice Corp. v. CLS Bank International is well known: claims directed to intermediated settlement encompass an abstract idea, and generic recitation of a computer implementation in such claims fails to transform the abstract idea into patent-eligible subject matter. Predictably, numerous articles have since been published extolling the virtues (or lack thereof, as the case may be) of theAlice decision. While the patent eligibility debate is good and necessary, it leaves open the question of many would-be patentees: may I get a patent on my software-based innovation?

While the Court provided virtually no “bright line” rules in answer to this question, the decision nevertheless suggests various approaches that may be employed going forward to best ensure your patent application embraces patent-eligible subject matter.

Background

Alice Corporation obtained various patents directed to, as the Court put it, “a computerized scheme for mitigating ‘settlement risk’—i.e., the risk that only one party to an agreed-upon financial exchange will satisfy its obligation.” In a highly fractured opinion, the Court of Appeals for the Federal Circuit concluded that all of Alice’s claims were directed to patent-ineligible subject matter.

On further appeal, the Court cited its recent decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., in which the Court laid out its two-step process for separating patents directed to patent ineligible concepts from “those that claim patent-eligible applications of those concepts.” First, one must “determine whether the claims at issue are directed to . . . patent ineligible concepts.” If so, in the second step, one must then ask what else is in the claims that may be sufficient to “transform” the ineligible concept into a patent-eligible application thereof.

Unfortunately, the Court provides no guidance how one goes about determining whether claims are directed to ineligible concepts in the first step. In fact, the Court expressly takes a pass on the issue, stating that it “need not labor to delimit the precise contours” of what constitutes a patent-ineligible concept. Instead, the Court noted that it’s Bilski decision concerned claims directed to “hedging,” which “all members of the Court agreed” constituted an abstract idea. Without further reference to the actual language of the claims, the Court stated that Alice’s “claims . . . are drawn to the concept of intermediated settlement.” With this setup, the Court quickly concluded that “[l]ike the risk hedging in Bilski, the concept of intermediated settlement is a ‘fundamental economic practice long prevalent in our system of commerce.'”

Turning to the second step, the Court had little trouble in determining that various other recitations in the claim beyond the abstract idea failed to “do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer.” Looking at “the claim elements separately,” the Court stated that “each step does no more than require a generic computer to perform generic computer functions.” Further, considering the claimed computer elements “as an ordered combination” did not add anything “that is not already present when the steps are considered separately.”

Going Forward

So, you are now considering patent protection for your new, software-implemented invention, but the Court’s “guidance” in Alice has left you unsure whether it makes sense to proceed. Despite the outcome in Alice, patents based on software-implemented innovations have not been knocked out entirely, though they did take a pretty good punch to the gut. Going forward, would-be patentees must take greater care to ensure that they claim and present their inventions in a manner that minimizes the likelihood of being interpreted as an “abstract idea.” The following observations should help you avoid that pitfall.

1. Stay As Far Away From Bilski and Alice As You Can

As noted, the closest the Court came to providing concrete guidance for identifying patent-ineligible abstract ideas was to measure how close the underlying “inventive concept” of an invention comes to the abstract ideas found in Bilski and, in the future, Alice. That is, if the subject matter of your claims is reasonably analogous to the risk hedging claimed in Bilski or the intermediated settlement in Alice, it’s almost certainly going to be viewed as embracing an abstract idea. Instead, try to find a way to describe the subject matter of your invention as something other than a concept that is related to these concepts.

Even more so than before, for software-implemented ideas, application drafting will require a careful balancing of what you say in the specification and in the claims. That is, the difference between whatever abstract idea is arguably discussed in the specification versus the limitations in your claims (∆abst) should be as large as possible.

For example, assume an invention concerns a new technique for completing payments for goods and services via mobile, wireless devices, which method facilitates a more rapid exchange of certain types of data. Having a method claim that begins “A method for completing payments via mobile, wireless devices” strongly suggests that the “inventive concept” is directed to the mere idea of completing financial transactions, which starts to sound awfully similar to the intermediated settlement of Alice. Rather than focusing the claim on the novelty of the financial transaction itself, attempt to focus the claim on the effect the method has on the underlying mobile device, e.g., “A method for communicating transactional data by a mobile, wireless device.”

2. Get “Technical”

Perhaps more importantly, even if you can strongly contrast your claims to the underlying abstract idea, you may still be on shaky grounds if your application doesn’t somehow discuss how it leads to a technological improvement. In Alice, when rejecting the sufficiency of a generic computer implementation to rescue claims otherwise directed to an abstract idea, the Court specifically noted that the claim did not “purport to improve the functioning of the computer itself . . . [or] effect an improvement in any other technology or technical field.” Stated another way, rather than directing your specification and claims as teaching improvements to a traditionally human-implemented field of endeavor (e.g., hedging risk, mediating settlement risk), they should clearly establish how the innovation improves the operation of a machine (i.e., the computer implementing the software-driven method) or an overarching “technology or technical field” in which the computer-implemented method is employed.

The graph below illustrates the apparent “sliding scale” nature of the abstract idea and technology aspects of the Alice decision. As shown, the connection of the claimed subject matter to improvement to a particular technology is shown along one axis, and the distinction of the claims over an encompassed abstract idea (∆abst) is shown along the other. For claimed subject matter that demonstrates little distinction from the alleged abstract idea and that demonstrates a weak connection to a technological improvement, there is little likelihood (“No Chance”) of demonstrating subject-matter eligibility. Oppositely, for claimed subject matter that is strongly distinguished from the alleged abstract idea and that clearly concerns a technological improvement, there is a much greater likelihood (“No Problem”) of demonstrating subject-matter eligibility. It is to be expected, however, that the relative areas of the illustrated outcomes will be different according to the particular realm of abstract ideas at hand, i.e., the “No Chance” area is likely to be much larger when dealing with finance-related inventions versus inventions concerning, say, telecommunications.

For example, assume an invention concerns a new process applicable to trading platforms for various financial instruments, e.g., stocks, commodities, etc. Where possible, one should not stress how the claimed process makes trading markets more efficient or enables different types of financial instruments to be traded. Instead, it may be better to acknowledge in the specification that electronic trading is well-known and that the invention leads to better operation of the underlying machines (e.g., where the claimed process enables the machine to complete more trades per unit of time, complete the trades more accurately, in a manner less consuming of resources, etc.) or broadens the capabilities of such machines (e.g., where the process provides a function that was previously unavailable). In drafting the specification, carefully ascribe certain steps to humans versus machines where possible and then make sure the claims don’t include any of the human-performed steps.

3. Get to Know a European Patent Attorney

It has been observed by many commentators that the Alice decision is yet another nudge of U.S. practice in the direction of European practice, i.e., focused on a “technical problem” for which your invention must provide a “technical solution.” European patent attorneys have been dealing with such issues for many years and may be able to offer valuable insights how to best position your invention in an application.

4. Be Prepared to Make Decision Makers Prove “Abstractness”

A concern with the Court’s lack of guidance when assessing whether a claim embraces excluded subject matter is that, not unlike those seeking to obtain patents, the examiners at the U.S. Patent & Trademark Office (USPTO) and federal district court judges will be equally in the dark. Unfettered from concrete guidance, it may be anticipated that examiners and judges will be more apt to make unsubstantiated assertions that claims encompass abstract ideas. Having drafted your claims and specification as noted above, i.e., emphasizing less how the invention helps achieve a business goal or perform human tasks better and instead illustrating how it improves/extends operation of an underlying machine or overarching technology, you will at least have a stronger foundation for arguing against the alleged abstract idea.

ARTICLE BY

Christopher P. Moreno

Vedder Price

Paid Sick Leave Spreads Throughout New Jersey

While the New Jersey Senate and Assembly continue to debate state-wide sick leave laws, four more New Jersey municipalities have enacted mandatory sick leave laws for private employers. Effective January 2015, East Orange, Paterson, Irvington and Passaic will join Newark and Jersey City in requiring paid sick time for employees.

Under the recently passed ordinances of those municipalities, most employees of private employers who work a total of 80 hours or more in a covered municipality will accrue at least one hour of paid sick time for every 30 hours worked. For employees who are exempt from the overtime requirements of the Fair Labor Standards Act, employers should assume a 40 hour workweek, unless the employee’s normal workweek is less than 40 hours. If the exempt employee’s normal workweek is less than 40 hours, accrual may be based on the employee’s normal workweek.

Employees who work for employers with 10 or more employees in the municipality may accrue up to 40 hours of paid sick time in a calendar year, while employees who work for employers with less than 10 employees in the municipality may accrue up to 24 hours of paid sick time per calendar year, with some exceptions. For example, home health care workers and food service workers may accrue up to 40 hours per calendar year regardless of the size of the employer.

Paid sick time accrual begins upon the effective date of the applicable ordinance and thereafter upon the date of hire. However, accrued time may not be used until after the 90th calendar day of employment. After 90 calendar days of employment, employees must be permitted to use accrued sick time for several reasons including:

To care for their own or a family member’s sickness, need for medical diagnosis, care or treatment of a sickness, or need for preventative medical care; or
Due to a forced closing of the employee’s place of business or to care for a child whose school or place of care has a forced closing, or to care for a family member when a health authority or a health care provider has determined that the family member’s exposure to a communicable disease would jeopardize the health of other’s in the community.

The ordinances allow an employer to require reasonable advance notice where the leave is foreseeable and as soon as practicable where it is not. The ordinances also permit an employer to request that the employee confirm in writing that the time was used for a permissible purpose, and where the employee has been out for three or more consecutive days, the employer may request reasonable supporting documentation from a health care professional. An employer may not, however, require that the documentation explain the nature of the illness. To the extent any health information is disclosed, such information must be treated as confidential and only disclosed to the affected employee or with the affected employee’s permission.

Once accrued, up to 40 hours of paid sick time may be carried over into the next calendar year. An employer may, however, elect to pay its employees for unused sick time at the end of the calendar year in lieu of carry over. Note that even where an employee does carry over accrued paid sick time, an employer is not required to permit the employee to take more than 40 hours of paid sick time in a calendar year. The “calendar year” may be defined by the employer as any regular consecutive 12-month period.

Employers who already have paid time off policies that provide sufficient paid time to satisfy the total annual accrual requirements of the applicable ordinance, and permit such paid time off to be used for the same purposes identified in the ordinance, are not required to provide additional paid time. Employers should be mindful, however, that if their current policy only provides paid time off to full-time employees, either their policy should be modified to extend such paid time off to all employees who work more than 80 hours in a covered municipality or a separate policy should be implemented for part-time and temporary employees that satisfies the minimum requirements of any applicable ordinance.

While none of the ordinances require an employer to pay employees for accrued but unused sick time upon separation, if an employee is rehired within six months, any accrued but unused sick time must be reinstated. Likewise, if an employee is transferred within the municipality the employee retains any unused sick time.

Each of the ordinances provide expansive protections against retaliation and require employers to provide individual employees with notice of their rights under the law. Notice to individual employees must be in English and in the employee’s primary language, provided the employee’s primary language is the primary language of at least 10% of the employer’s workforce. Employers are also required to display a poster in a conspicuous and accessible place in each covered business establishment. In addition, employers must maintain records documenting their compliance with the applicable ordinance.

Failure to comply with these ordinances may result in fines, civil penalties, or a private action by a current or former employee. As such, employers in the covered municipalities should familiarize themselves with the applicable ordinances and take steps to ensure compliance.

ARTICLE BY

Lisa M. Harris

Sheppard, Mullin, Richter & Hampton LLP

Join the ABA for their Securities Fraud Conference in New Orleans – November 13-14

When

Thursday November 13 – Friday November 14, 2014

Where

The Westing New Orleans

Each year this National Institute draws elite officials from both the U.S. Department of Justice and the U.S. Securities and Exchange Commission for an exclusive educational and professional forum to examine current legal and ethical issues relating to securities fraud.

Program highlights include:
Creative Discovery Tactics in Defending Securities Fraud Allegations
Compliance Chiefs: The Role of the Internal Watchdog
Future of Private Plan Securities (including the recent Stanford Supreme Court decision)
Too Big to Fail: If All Else Fails, Do Guilty Pleas Matter?
Sez Who? SEC Targeting Attorneys Who Allegedly Obstruct Enforcement Investigations (ETHICS)

Protecting Trade Secrets in the Cloud

The business community’s growing use of cloud-based computing services provides great benefits due to cost-savings and mobile information access. However, business leaders should understand the risks of storing valuable trade secrets in the cloud. This article provides the business community tips on how to safeguard valuable trade secrets stored in the cloud from being freely disclosed to the public, thus putting the business at risk of losing protections that courts grant trade secrets.

As businesses’ profit margins have continued to shrink since the Great Recession, more companies have looked to reduce costs by reducing growing expenses related to their information technology departments.^[1]The first line item to draw attention in the IT budget is frequently the rising costs associated with maintaining and upgrading system hardware. Businesses often find that housing and operating multiple servers stretches IT budgets thin by increasing maintenance, labor, and operational costs. The solution so many businesses have turned to is to move their valuable data to virtual servers, or the “cloud.”^[2] A recent survey of IT executives provides that companies will triple their IT spending on cloud-based services in 2014 over 2011.^[3] Cloud service providers have also seen demand increase as they increase their cloud capabilities.^[4]

Although cloud-based servers provide businesses with substantial financial and operational benefits, businesses must recognize that there are perils to shifting data to the cloud. One of the key concerns businesses should consider before moving data to the cloud is the risk that its valuable trade secrets will lose protection as a result of insufficient safeguards to protect against disclosure. This article addresses that concern and provides businesses keys for seeking to protect valuable secrets in the cloud.

What is a Protectable Trade Secret

The initial step for a business to determine how to protect its trade secrets is to understand how the law characterizes a trade secret. Information qualifies as a trade secret only if it derives independent economic value as a result of not being generally known or readily ascertainable, and be subject to reasonable efforts to maintain its secrecy. Trade secrets are broadly defined as information, including technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, strategies, pricing information, and lists of customers, prospective customers, and suppliers.

Businesses Need to Take Reasonable Efforts to Protect Trade Secrets in the Cloud

Trade secrets are only protectable when the owner takes reasonable efforts to prevent them from being freely disclosed to the public so that the information does not become generally known.

Information does not have to be cloaked in absolute secrecy to be a trade secret, as long as a business’s efforts to maintain secrecy or confidentiality are reasonable. It is easy for one to imagine how a business may protect confidential documents that are stored locally. Computer files may be password-protected with several layers of encryption software, with access limited to specified personnel. Similarly, paper files may be stored in locked cabinets, in secured rooms, where only specified personnel are granted access.

However, those seemingly straight-forward security protocols become murky when information is stored in the cloud. Unlike storing data on local servers, storing data in the cloud requires the owner to disclose confidential information to a third-party vendor. In most situations, disclosing data to a third-party eliminates trade secret protections. Therefore, businesses must take additional steps to ensure that its data remains secure.

Three Keys to Protecting Trade Secrets Stored in the Cloud

There are no fail-safe measures to protect data stored in the cloud. The best way for a business to protect its trade secrets is to locally store and protect its most valuable data with the proper data security protocols. A business, however, should not fear the cloud as long as it takes certain steps to ensure that it exercises reasonable efforts to protect its cloud-based data.

First, business leaders must conduct appropriate due diligence before selecting a cloud-provider. The business should conduct necessary research to select a reputable, well-established company that has the physical and technological capabilities to store and protect data.

Conducting due diligence on a provider includes ensuring that the provider has taken necessary steps to establish appropriate physical and virtual security protocols to protect the confidentiality of your information. Inquire how the provider establishes physical security measures, and monitoring capabilities to prevent unauthorized access to its data centers and infrastructure. Also, learn how the provider limits its employees’ access to customer data and determine the internal controls that the provider has in place to prevent unauthorized viewing, copying, or emailing of customer information.

A business should also inquire about the provider’s virtual security protocols. A business must generally understand how its cloud-provider’s encryption software and security management systems work to protect data. If your business is not capable of independently evaluating whether the provider has proper security protocols, a good indicator is to ask the provider for its client list. If the provider has clients that are typically security-conscious companies, such as financial institutions or healthcare facilities, that is a good indication that the provider has been vetted and it has proper security measures in place. Finally, the provider should maintain sufficient data-protection insurance coverage to protect against potential data breaches or system failures.

Second, a business must have contractual safeguards in place with its cloud-provider to adequately protect its intellectual property and trade secrets. The contract should establish that the business owns the data, that it will be segregated from other data groups, and that the business may enjoy unfettered access to the data. The contract should specify that the business can demand that the data be deleted or returned request, and detail how the provider will purge the data to ensure that it is properly deleted upon termination of the relationship. The contract should require regular data backup and recovery tests, while restricting the provider from accessing, using or copying data for its own purpose. Finally, the contract should establish the provider’s obligations to notify the business of a data breach or system failure.

Third, a business should also consider adding multiple layers of authentication and encryption to data containing trade secrets before transmitting it to the cloud-provider. However, a business should consider if the additional encryption efforts could adversely affect the business’s ability to access, utilize, and port data for its normal business use.

Conclusion

There are several financial and operational benefits for a business to store data in the cloud. However, businesses must understand that there are also risks to storing its valuable trade secrets on virtual servers. Businesses need to take reasonable efforts to protect the confidentiality and secrecy of its most valuable data and information.

_{[1] Dave Rosenberg. Reducing IT Infrastructure Costs via Outsourcing. May 7, 2009. news.cnet.com/8301-13846_3-10235742-62.html}

_{[2] Thor Olavsrud. How Cloud Computing Helps Cut Costs, Boost Profits. March 12, 2013. www.cio.com/article/730036/How_Cloud_Computing_Helps_Cut_Costs_Boost_Profits}

_{[3] Andrew Horne. Transformational Change in IT Will Drive 2014 Spending. November 5, 2013. http://blogs.wsj.com/cio/2013/11/05/transformational-change-in-it-will-drive-2014-spending/}

_{[4] IBM Commits $1.2bn to Cloud Data Centre Expansion. January 17, 2014. www.bbc.co.uk/news/business-25773266}

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