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Abortion-Related Travel Benefits Post-Dobbs

Immediately following the Supreme Court decision in Dobbs v. Jackson returning the power to regulate abortion to the states, a number of large employers announced that they would offer out-of-state travel benefits for employees living in states where abortion-related medical care is unavailable. Employers considering offering abortion-related travel benefits have several key considerations to keep in mind. The law currently allows health plans to provide reimbursement for travel primarily for and essential to medical care. Although this area of the law is evolving, employers with self-funded medical plans may amend their existing medical plans to provide abortion-related travel benefits while those with fully insured medical plans may face more obstacles in providing such benefits.

In Dobbs v. Jackson, an abortion clinic challenged a Mississippi law that would ban abortion after 15 weeks of pregnancy, with limited exceptions. In establishing the constitutional right to abortion in Roe v. Wade, the Supreme Court restricted states in their ability to limit or ban abortions before viability of the fetus, or 24 weeks from the time of conception. In upholding the Mississippi law, the Supreme Court overturned Roe and held that the protection or regulation of abortion is a decision for each state.

Alabama, Arkansas, Kentucky, Missouri, Oklahoma and South Dakota have already banned or made abortion illegal pursuant to trigger laws which went into effect as of the Supreme Court decision on June 24, 2022. Also, a number of additional states are expected to soon have similar legislation in effect, either by virtue of expected legislative action or trigger laws with slightly delayed effective dates. In response, a number of employers have announced that they will reimburse all or a portion of abortion-related travel expenses for employees in states where abortions are banned or otherwise not available.

Under Section 213(d) of the Internal Revenue Code, the definition of “medical care” includes transportation that is both “primarily for and essential to” the medical care sought by an individual. These types of travel benefits have historically been utilized in connection with certain specialized medical treatments, such as organ transplants. However, Section 213(d) is not limited to particular types of procedures, and thus forms the framework for providing abortion-related travel benefits through existing medical plans.

Although Code Section 213(d) applies to both self-insured and insured medical plans, the substantive coverage provisions of insured medical plans will generally be governed by the state insurance code of the state in which the insurance policy is issued. Coverage for abortion services or any related travel benefits may not be permitted under the insurance code of the state in which the policy is issued, or an insurer may not offer a travel benefit for such services even if permitted to do so. Self-insured plans, by contrast, provide employers more flexibility in plan design, including control, consistent with existing federal requirements, over the types and levels of benefits covered under the plan. As noted above, existing plans may already cover travel-related benefits for certain types of medical procedures.

Employers with high-deductible health plans tied to health savings accounts (HSAs) will need to consider the impact of adding abortion-related travel benefits to such plans. Travel-related benefits of any type would not appear to be eligible for first dollar coverage, and thus may be of minimal benefit to participants enrolled in high-deductible health plans.

Employers with fully insured medical plans that do not cover abortion-related travel benefits may be able to offer a medical travel reimbursement program through an integrated health reimbursement arrangement (HRA). An integrated HRA is an employer-funded group health plan from which employees enrolled in the employer’s traditional group medical insurance plan are reimbursed for qualifying expenses not paid by the traditional plan.

Another potential option for employers with fully insured medical plans may be to offer a stipend entirely outside of any established group health plan. Such reimbursement programs may result in taxable compensation for employees who receive such reimbursements. Also, employers would need to be sensitive to privacy and confidentiality considerations of such a policy, which should generally be minimized if offered in accordance with the existing protections of HIPAA through a medical plan and under which claims are processed by an insurer or third-party administrator rather than by the employer itself.

Additionally, some state laws may attempt to criminalize or otherwise sanction so-called aiding and abetting actions related to the procurement of abortion services in another state. This is an untested area of the law, and it is unclear whether any actions brought under such statutes would be legally viable. In this regard, Justice Kavanaugh stated as follows in his concurring opinion in Dobbs: “For example, may a State bar a resident of that State from traveling to another State to obtain an abortion? In my view, the answer is no based on the constitutional right to interstate travel.” (Kavanaugh Concurring Opinion, page 10.) This is an area that will require continual monitoring by employers who offer abortion-related travel benefits.

Article By Thomas G. Hancuch, Philip L. Mowery, and Amal Rafiq of Vedder Price

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What the C-Suite and Board Should Know About the New CCO Certification Requirement from DOJ

U.S. Department of Justice (DOJ) Deputy Attorney General Lisa Monaco presented a new policy at a Securities Industry and Financial Markets Association event that requires chief compliance officers (CCO) to certify that compliance programs have been “reasonably designed to prevent anti-corruption violations.”¹ The policy is an outgrowth of a settlement involving US$1 billion in criminal and civil penalties imposed on mining giant, Glencore International AG (Glencore), after it pleaded guilty to bribery and market manipulation charges.² According to Monaco, this new policy is meant to ensure that CCOs stay in the loop on potential company violations and have the necessary resources to prevent financial crime.³ While the expressed intention of this new policy is to empower CCOs, it has raised concerns about potential liability for CCOs.

GLENCORE SETTLEMENT

Glencore is among the largest companies that dominate global trading of oil, fuel, metals, minerals, and food.⁴ In 2018, Glencore was subject to a multi-year investigation by the DOJ for violations of the Foreign Corrupt Practices Act (FCPA) and a commodity price manipulation scheme.⁵ According to admissions and court documents filed in the Southern District of New York, Glencore, acting through its employees and agents, engaged in a scheme for over a decade to pay more than US$100 million to third-party intermediaries in order to secure improper advantages to obtain and retain business with state-owned and state-controlled entities. A significant portion of these payments were used to pay bribes to officials in Nigeria, Cameroon, Ivory Coast, Equatorial Guinea, Brazil, Venezuela, and the Democratic Republic of the Congo.⁶ Glencore resolved the government’s investigations by entering into a plea agreement (Plea Agreement)⁷According to the Plea Agreement, Glencore admitted to one count of conspiracy to violate the FCPA.⁸ Shaun Teichner, the general counsel for the company, told a federal judge in New York that Glencore “knowingly and willingly entered into a conspiracy to violate the Foreign Corrupt Practices Act by making payments to corrupt government officials.”⁹

Glencore expects to pay about US$1 billion to U.S. authorities, after accounting for credits and offsets payable to other jurisdictions and agencies, and about US$40 million to Brazil.¹⁰ A related payment by Glencore to the United Kingdom will be finalized after a hearing next month.¹¹

The Plea Agreement requires that Glencore, among other things: (1) implement two independent compliance monitors, one in the United States and one abroad, to prevent the reoccurrence of crimes; (2) retain a compliance monitor for three years; and (3) have its chief executive officer (CEO) and CCO submit a document certifying to the DOJ’s fraud section that the company has met its compliance obligations (the CCO Certification Requirement or the Certification).¹²

WHY THE CCO CERTIFICATION REQUIREMENT HAS RAISED CONCERNS

The CCO Certification Requirement has raised concerns in the compliance space over potential increases in CCO liability.¹³ Specifically, compliance officials worry that this policy transfers corporate liability into potential individual liability for the CCO. The Certification form asks the CEO and CCO to certify that the compliance program has been “reasonably designed” to prevent future anti-corruption violations.¹⁴ Critics worry that these new certifications may discourage CCOs from taking jobs at companies that are or may be parties to agreements with the DOJ.¹⁵

The DOJ stated that liability will depend on the facts and circumstances of the case but that the new policy is not aimed at going after CEOs or CCOs.¹⁶ Assistant Attorney General Kenneth A. Polite Jr. stated, “if there is a knowing misrepresentation on the part of the CEO or CCO, then that could certainly result in some form of personal liability.”¹⁷ Depending on the circumstances, the DOJ may consider it a breach of the corporation’s obligations under the Plea Agreement if there is either a misrepresentation in one of these certifications or a failure to provide the same.¹⁸ Polite added that “the certification memorializes the company’s commitment to take its compliance obligations seriously.”¹⁹

Critics question how realistic the CCO Certification Requirement is for large, multinational companies.²⁰ They also question the due diligence required to actually ensure that compliance programs are “reasonably designed,” especially for companies operating in over 50 countries. Would it be realistic to expect a CCO or CEO to keep tabs on compliance across their company with that level of specificity?²¹

WHAT THE C SUITE AND BOARD SHOULD CONSIDER MOVING FORWARD

The questions to consider are: (1) where will the expressed policy lead? And (2) how do we best prepare for the Certification?

The DOJ has specifically stated its intention to “prosecute the individuals who commit and profit from corporate malfeasance.”²² Regardless of Monaco’s comments, the Certification appears to create potential for an extension of that policy.

The fact of the policy gives rise to a number of subsidiary questions. Is the Certification, which targets foreign corrupt practices, a harbinger for other such certifications in areas such as health care fraud, defense contractor fraud, money laundering, etc.? And is DOJ gearing toward providing its prosecutors with more tools for individual culpability at the highest corporate levels consistent with its expressed policy?

Moving forward, in-house counsel should work with the CEO and CCO to consider areas of corporate business practices that are specifically subject to compliance programs. They should develop practices including auditing, tracking, training, and reviewing to ensure the programs are “reasonably designed” to prevent future wrongdoing. Further, they should be sure to document their corporate business practices. Obviously, these programs become much more complex when operations include foreign jurisdictions and foreign laws with respect to matters such as privacy and employee rights.

Although this process may not be new to protect corporations from criminal charges, the newly-announced policy will certainly focus the spotlight on CEOs and CCOs in the FCPA context and arguably beyond.

FOOTNOTES

¹Al Barbarino, DOJ Defends New CCO Certifications Amid Industry Worry, LAW360 (May 26, 2022), https://www.law360.com/whitecollar/articles/1496108/doj-defends-new-cco-….

²Id.

³ Id.

⁴ Chris Strohm, Chris Dolmetsch & Jack Farchy, Glencore Pleads Guilty to Decade of Bribery and Manipulation, BLOOMBERG (May 24, 2022), https://www.bloomberg.com/news/articles/2022-05-24/glencore-to-appear-in-us-uk-courts-over-resolutions-of-probes.

⁵ Id.

⁶ News Release, U.S. Dep’t of Just., Office of Pub. Affs., Glencore Entered Guilty Pleas to Foreign Bribery and Market Manipulation Schemes, (May 24, 2022), https://www.justice.gov/opa/pr/glencore-entered-guilty-pleas-foreign-bribery-and-market-manipulation-schemes.

⁷ Id.

⁸ Id.

⁹Strohm, supra note 4.

¹⁰ Id.

¹¹ Id.

¹² Id.

¹³Barbarino, supra note 1.

¹⁴ Id.

¹⁵ Id.

¹⁶ Id.

¹⁷ Id.

¹⁸ Id.

¹⁹ Id.

²⁰ Id.

²¹ Id.

²² News Release, U.S. Dep’t of Just., Attorney General Merrick B. Garland Delivers Remarks Announcing Glencore Guilty Pleas in Connection with Foreign Bribery and Market Manipulation Schemes (May 24, 2022), https://www.justice.gov/opa/speech/attorney-general-merrick-b-garland-delivers-remarks-announcing-glencore-guilty-pleas.

Article By Mark A. Rush and Nadia J. Brooks of K&L Gates

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Update: In Opioid Liability Ruling for Doctors, SCOTUS Deals Blow to DOJ

On June 27, 2022, the United States Supreme Court ruled that doctors who act in subjective good faith in prescribing controlled substances to their patients cannot be convicted under the Controlled Substance Act (“CSA”). The Court’s decision will have broad implications for physicians and patients alike. Practitioners who sincerely and honestly believe – even if mistakenly – that their prescriptions are within the usual course of professional practice will be shielded from criminal liability.

The ruling stemmed from the convictions of Dr. Xiulu Ruan and Dr. Shakeel Kahn for unlawfully prescribing opioid painkillers. At their trials, the district courts rejected any consideration of good faith and instructed the members of the jury that the doctors could be convicted if they prescribed opioids outside the recognized standards of medical practice. The Tenth and Eleventh Circuits affirmed the instructions. Drs. Ruan and Kahn were sentenced to 21 and 25 years in prison, respectively.

The Court vacated the decisions of the courts of appeals and sent the cases back for further review.

The question before the court concerned the state of mind that the Government must prove to convict a doctor of violating the CSA. Justice Breyer framed the issue: “To prove that a doctor’s dispensation of drugs via prescription falls within the statute’s prohibition and outside the authorization exception, is it sufficient for the Government to prove that a prescription was in fact not authorized, or must the Government prove that the doctor knew or intended that the prescription was unauthorized?”

The doctors urged the Court to adopt a subjective good-faith standard that would protect practitioners from criminal prosecution if they sincerely and honestly believed their prescriptions were within the usual course of professional practice. The Government argued for an objective, good-faith standard based on the hypothetical “reasonable” doctor. The Court took it one step further.

Justice Breyer delivered the opinion of the Court. He said that for purposes of a criminal conviction under the CSA, “the Government must prove beyond a reasonable doubt that the defendant knowingly or intentionally acted in an unauthorized manner.” To hold otherwise “would turn a defendant’s criminal liability on the mental state of a hypothetical ‘reasonable’ doctor” and “reduce culpability on the all-important element of the crime to negligence,” he explained. The Court has “long been reluctant to infer that a negligence standard was intended in criminal statutes,” wrote Justice Breyer.

Justice Samuel Alito wrote a concurring opinion, which Justice Clarence Thomas joined and Justice Amy Coney Barrett joined in part. Although Justice Alito would vacate the judgments below and remand for further proceedings, he would hold that the “except as authorized” clause of the CSA creates an affirmative defense that defendant doctors must prove by a preponderance of the evidence.

The Court’s decision will protect patient access to prescriptions written in good faith. However, for the government, the Court’s decision means prosecutors face an uphill battle in charging, much less convicting, physicians under the CSA. Indeed, the Court’s decision may have a chilling effect on the recent surge in DOJ prosecutions of medical practitioners and pain clinics.

Article By Lindsay K. Gerdes and Madeline R. Pinto of Dinsmore & Shohl LLP

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Why ‘Don’t Say Gay’ Bills are Antithetical to an Equitable and Inclusive Education

According to a 2019 GLSEN national survey of LGBTQ+ students, nearly 60% of surveyed students reported they felt unsafe at school because of their sexual orientation and 43% because of their gender expression. Within the same survey, nearly all (98.8%) LGBTQ+ students reported hearing “gay” used in a negative way at school, 95% heard other homophobic remarks, and 87% heard transphobic remarks.

When I was an educator, it was essential to my practice that all my students felt safe. If I were to hear any negative remarks about a student or become aware one of my students felt unsafe due to their identity, it would be my ethical, and moral, obligation to do something to create a safer and more inclusive learning environment; a core part of my role as an educator was to teach empathy and compassion in my students. This could be as simple as having a classroom discussion about the choices of language and how using words such as “gay” with a negative connotation can be hurtful to their classmates. This could also mean sharing my own identity as a queer man so my LGBTQ+ students knew they had someone they could turn to for support, and to normalize queer identities for all my students and their families. Either of these actions would require I discuss the importance of accepting all sexual orientations and gender identities.

In other words, I would have to say “gay.” But in six states — as of now — I would not have been able to do this.

The state of Florida attracted national attention earlier this year with the adoption of H.B. 1557, the “Parental Rights in Education” bill, more commonly known as the “Don’t Say Gay” bill. The bill, which has since been signed into law, dictates classroom instruction by “school staff” on “sexual orientation or gender identity may not occur in kindergarten through grade 3 or in a manner that is not age-appropriate or developmentally appropriate for students.” Five other states, according to the Movement Advancement Project, have similar laws enacted and several more have bills pending in their state legislatures. Some proponents of these bills argue the legislation is necessary to ensure parents have greater say when, if, and how LGBTQ+ issues are discussed with their children.

Yet these laws are designed to ensure only some parents have greater say, as the parents of LGBTQ+ children are certainly not reflected in these efforts.

At a time when youth mental health is reaching a crisis, state legislatures are advancing bills that would perpetuate, and arguably exacerbate, harmful school-based experiences for LGBTQ+ youth and worsen their well-being. A 2022 survey by the Trevor Project found 45% of LGBTQ+ youth seriously considered attempting suicide in the past year, and over half of transgender and nonbinary youth considered suicide. The 2019 GLSEN survey also found LGBTQ+ students who experienced forms of victimization based on their sexual orientation or gender identity (e.g., being bullied, hearing homophobic or transphobic remarks, etc.) had lower levels of self-esteem, higher levels of depression, and were less likely to say they belonged in school.

Some may argue “Don’t Say Gay” bills would not preclude educators from addressing instances of homophobia or transphobia in their classrooms and try to suggest that prohibitions on such actions are not the intent of the bills. However, regardless of intent, these bills often have the insidious impact to “chill” educators’ actions out of fear they may run afoul of the law and open themselves to reprimands, including being terminated.

All students deserve to have a safe, supportive, and affirming learning environment. All educators should be empowered to protect their students, and not feel afraid to step in when they notice a student being bullied because of their identity. And every parent should have the resources to be a partner in their child’s education. Unfortunately, state laws such as the “Don’t Say Gay” bills will only stand in way of these notions from becoming realities.

It is impossible to support all students when LGBTQ+ children continue to be targeted merely because of their identities.

Article By Sean A. Worley of Nelson Mullins

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U.S. Supreme Court Sides with Public High School Coach in Free Speech/Freedom of Religion Case

The U.S. Supreme Court issued a ruling which will have wide-ranging effects on the ability of governmental entities to react to religious and other speech of public employees. In Kennedy v. Bremerton Schools, the Court ruled that a public high school could not discipline or disfavor a football coach for his practice of kneeling on the 50-yard line and praying at the conclusion of each game, eventually growing to include most of the football team and opposing players as well. The school district had attempted to accommodate the coach’s desire for prayer, but concerns mounted when one parent complained that her son felt compelled to participate despite being an atheist. The coach was eventually placed on administrative leave and not extended an offer to return to coaching the next school year. Both the district court and the U.S. Court of Appeals for the Ninth Circuit rejected the coach’s First Amendment challenges.

With a 6-3 majority, the Supreme Court reversed. In doing so, the Court first found a violation of the Free Exercise Clause. The Court discounted the school district’s stated concerns that the coach’s practice could violate the Establishment Clause or interfere with students’ right of free exercise. The Court held that absent evidence of “direct” coercion the Establishment Clause was not implicated and then concluded that the coach’s position of authority over the players was insufficient to constitute direct coercion. The Court distinguished earlier cases involving prayers at football games and civic meetings, by emphasizing that the speech for which the coach was disciplined was not publicly broadcast or recited to a captive audience. Additionally, students were not required or formally expected to participate.

With respect to the Free Speech issue, the Court concluded that the coach’s prayers were not unprotected “government speech,” and in doing so applied a restrictive view of what could be considered “government speech.” The Court held that because the coach’s job duties did not include leading prayers, the fact that the speech occurred on the field immediately after the game was insufficient to transform it from private speech to government speech. “To hold differently,” the Court stated, “would be to treat religious expression as second-class speech and eviscerate this Court’s repeated promise that teachers do not ‘shed their constitutional rights to freedom of speech or expression at the schoolhouse gate.’”

The decision, together with Shurtleff v. Boston decided earlier this Term, suggests a sharp break with past Court jurisprudence on the balance between the dictates of the Establishment and Free Exercise Clauses. Government entities should review their policies on religious activity on government property or by employees in connection with their positions in light of these two decisions.

Article By Ahmad Chehab, Scott R. Eldridge, and Robert T. Zielinski of Miller Canfield

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Preparing Corporate Messaging in the Wake of Dobbs

The United States Supreme Court (“SCOTUS”), in Dobbs v. Jackson Women’s Health Organization, has held that there is no constitutional right to abortion, overruling Roe v. Wade and Casey v. Planned Parenthood.

Employers, who increasingly are finding themselves on the front lines of many societal issues, will need to decide quickly whether and how they might address the Dobbs decision, as public reaction has been and is likely to remain strong. Board members, employees, and shareholders may advocate for corporations to take a visible stand on the issue of abortion and reproductive rights. And employees may want to speak up themselves (possibly via employer social media accounts).

It is important to remember that company communication decisions and actions regarding the Dobbs ruling, as well as other political and social issues, can have practical and legal implications.

The first question is whether your company will comment on Dobbs. If you decide to comment, there are many factors to consider. Your message is an important starting point. Who is your intended audience? Will your employees consider it an opportunity to join in the conversation? What will you say? Even if your message is internal, keep in mind that it may not stay that way, given the nature of social media. And before you think, “I’ll just stay out of it,” remember that some will view silence or neutrality as a statement in and of itself. If you choose not to speak, are you prepared to deal with any potential reaction from customers, employees, or shareholders?

Internally, employees may have questions about health benefits or other terms and conditions of employment because of Dobbs. It will be important to arm all key stakeholders, including leadership, corporate communications, and human resources, with tools to consistently manage these communications and responses.

Whether it’s internal or external communications, expect feedback! How that feedback is handled is as important as the initial communication (or lack thereof).

Certain industries, like healthcare and insurance, may also feel compelled to make an affirmative statement if the Dobbs decision has a direct impact on services and/or products. In those cases, the need to consider all implications is even more pressing.

In thinking through these decisions, employers should also consider who may need to approve any messaging. The board of directors, senior executives, legal, and marketing and communications teams are among the key stakeholders who may need to be consulted. And don’t forget that your public-facing employees may bear the brunt of your response. Are they prepared?

Employers should also keep in mind various laws that may govern their reaction, including those they might otherwise not consider. For example, the National Labor Relations Act protects employees’ rights to collectively discuss terms and conditions of employment at work and off duty – and that applies to employers with and without a unionized workforce. The current Biden-appointed General Counsel of the National Labor Relations Board has taken an expanded view of topics that are connected to the workplace. Moreover, some states, including California and New York, have enacted off-duty conduct laws that prohibit employers from disciplining employees for lawful conduct outside of work, which may include political advocacy. There may also be anti-discrimination laws and potential civil and criminal liability associated with your statements, depending on their wording.

Reactions to the Dobbs decision may vary. Some reaction may be comparable to what we’ve seen with respect to other recent political and/or social justice movements, such as Black Lives Matter and #MeToo; others may react differently, or not at all. In these rapidly changing times, companies — particularly publicly traded and consumer-facing ones — need to be make informed decisions. Clear, consistent messaging is key to establishing confident and consistent responses to potential concerns by employees and other stakeholders.

Article By M. Carter DeLorme, Frank C. Morris, JR, Susan Gross Sholinsky, Jennifer Barna, and Erin E. Schaefer of Epstein Becker & Green, P.C.

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U.S. Supreme Court Overturns Roe and Casey: What This Decision Means for Employers

As many expected based on the draft opinion that was leaked months ago, the U.S. Supreme Court has held the U.S. Constitution does not protect the right to obtain an abortion. Dobbs v. Jackson Women’s Health Organization, No. 19-1392 (June 24, 2022).

Dobbs overturns nearly 50 years of precedent from the Court’s decision in Roe v. Wade and Planned Parenthood Pennsylvania v. Casey on the issue.

The impact of Dobbs will vary, as states are now at liberty to enforce and create abortion legislation without restrictions arising out of constitutional protections.

What does this mean for employers?

As pressure mounts on this issue, some employers may be considering what, if anything, they can or should do. Many states have enacted legislation that restricts individual abortion rights and potentially third parties who assist individuals who seek abortions. To the extent any state laws were not enforced because of the Court’s holding in Roe or Casey, states can move forward now to implement and enforce those laws.

Laws often referred to as “trigger laws,” those that are in place but unenforceable due to overriding federal restrictions, become enforceable once those federal restrictions are lifted. As a result of Dobbs, abortion-related “trigger laws” previously unenforceable can take effect, creating new standards for individuals and others that will redefine the national abortion law landscape.

Some existing state laws and trigger laws may affect employers and put employers at risk of violating state law if they implement policies to assist employees seeking an abortion or even continue to cover abortions under group health plans. For example, a state law may create liability for anyone who “aids or abets” a person who obtains an abortion. Employers also must be cognizant of how they apply their leave policies, who may seek accommodations based on a sincerely held religious belief, and whether certain provisions of the Pregnancy Discrimination Act apply to women who are seeking or who have had an abortion.

In addition, the Court’s ruling may affect employee benefit plans. Many employers are considering additional benefits for their employees, and their covered dependents, such as travel reimbursement for seeking an abortion outside of the local jurisdiction due to state law restrictions. There are many legal issues to consider in connection with the coverage of abortion-related services under employee benefit plans. (For additional guidance on the issue, see our article, Group Health Plan Considerations in the Face of (Potentially) Changing Abortion Laws.) Depending on how the state laws are enacted, there also may be issues with relying on ERISA preemption provisions to avoid these obligations.

Corporate management and directors should plan for changes and be aware of policies and fiduciary responsibilities. This can include preparing for public and employee reactions (for and against), legislative and law enforcement threats, social media posts, and other employee demonstrations. Pressure from a variety of groups to take a corporate public opinion also may occur.

Whether changes to leave policies, employee benefits, travel reimbursement, or handling accommodation requests, employers considering policies or benefit offerings in response to Dobbs must carefully review and consider federal and state laws, including state abortion-related legislation to evaluate the risk of potential liability.

Article By Patricia Anderson Pryor, Joy Napier-Joyce, Melissa Ostrower, and Tasos C. Paindiris of Jackson Lewis P.C.

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The Way to Protect Your Business? What You Need to Know About Trade Secrets

What do Coca-Cola’s secret formula, McDonalds’ special sauce, and Google’s search algorithm have in common? Each is a protected trade secret. In other words, they are proprietary information vital to these companies’ survival and are among their most valuable corporate secrets.

A trade secret can be anything of value to your company that is unique and not known to persons outside the company. For example, a trade secret can be a recipe, process, formula, strategy, technique, or device that your competitors do not know, do not have, and cannot use.

Trade secret law can be less risky in some respects than other forms of intellectual property like patents, copyrights, and trademarks. The application process for a patent requires that a company disclose the secret itself. With that comes an inherent risk—should the application be denied, the secret is no longer a secret. While the protection afforded by trade secret law may be considered fragile, meaning constant vigilance is required to maintain secrecy, the secret remains a secret; while a patent, even after issuance, carries some risk of post-grant invalidation. By contrast, a trade secret owner may ultimately enjoy greater certainty by maintaining protection, potentially forever. However, a trade secret is entitled to protection only for as long as it is kept a secret. If the information is lawfully disclosed to the public, it is no longer confidential and loses its trade secret protection forever.

Governing Law: Both federal and state law recognize the time and money invested to gain competitive advantages like trade secrets and protect those advantages. Federal Law: Under the controlling federal legislation passed by Congress in 2016, the Defend Trade Secrets Act (“DTSA”) defines a trade secret as something used in a company’s business that (a) is not known or readily accessible by competitors, (b) has commercial value or that provides a competitive advantage in the marketplace, and (c) the owner of the information protects from disclosure through reasonable efforts to maintain its secrecy. Prior to the DTSA’s enactment in 2016, no federal statute promulgated a federal trade secret private right of action.

In addition to the DTSA’s rules regarding trade secrets, additional federal rules apply. The Economic Espionage Act of 1996 makes the theft of trade secrets a federal crime. The Act prohibits the theft of a trade secret by a person intending or knowing that the offense will injure a trade secret owner. The Act also makes it a federal crime to receive, buy, or possess trade secret information knowing it to have been stolen. The Act allows the government to punish thefts of trade secrets by imprisonment up to 15 years and/or fines up to $5 million, depending on whether the defendant is an individual or a corporation. A private party can still sue for trade secret theft even if the federal government files a criminal case under the Economic Espionage Act.

New York State Law: Prior to federal law, most states had some form of trade secret law that varied state to state. The Uniform Trade Secrets Act (“UTSA”) was published in 1979 and amended in 1985 to provide a uniform trade secret law. Many states, including Pennsylvania in 2004 and New Jersey in 2012, adopted the UTSA. Notably, New York did not adopt the UTSA and does not have its own state trade secret statute, and thus relies on the common law.

Under New York common law, “misappropriation” refers to the acquisition of a trade secret by someone who knows that the trade secret was acquired by improper means—theft, bribery, misrepresentation, breach, or inducement of a breach of duty to maintain secrecy. The New York statute of limitations requires that any action for misappropriation be filed three years from the date the misappropriation is discovered. Further, New York law requires that the use of the trade secret be continuous in the operation of a business, rather than one-time use.

Cartier v. Tiffany: Cartier recently filed suit against its luxury rival Tiffany & Co. in New York state court. Cartier v. Tiffany & Co., et al.,650925/2022 (N.Y. Sup.). Richemont-owned Cartier sets out claims against LVMH’s Tiffany & Co. for various contractual and tort claims and trade secret misappropriation against both defendants [Who is the other defendant?]. Cartier seeks preliminary and permanent injunctive relief to require defendants to refrain from using the allegedly misappropriated information and return it to Cartier, as well as a judgment for any “compensatory damages that may be caused by [Tiffany’s] wrongful conduct.”

The complaint states that Tiffany & Co. lured former Cartier employee Megan Marino away from her role as its Assistant Manager for Jewelry Merchandising to learn more about Cartier’s “High Jewelry” collection, where pieces typically cost $50,000 to $10 million.

Cartier claims Marino was bound by non-disclosure and non-solicitation agreements she had signed as part of her role at Cartier and that she breached those agreements by using Cartier’s confidential business information to benefit Tiffany. This information includes Cartier’s “very sensitive and valuable” internal company documents that Marino forwarded to her personal email. Specifically, Marino “referenced a [Cartier] Excel spreadsheet” that “detailed Cartier’s confidential, High Jewelry assortment information.” Based on that spreadsheet, Cartier alleges, Marino “created a new Excel document, derived entirely from Cartier’s confidential information,” including “the total number of High Jewelry pieces at various Cartier locations in the U.S.” Cartier maintains this information is “only accessible by a limited number of Cartier employees [and] not known outside of Cartier” and “allow[s] a sophisticated competitor to replicate key strategies and, with relative ease, to reverse engineer how Cartier allocates, merchandises, and prices its High Jewelry stock.” Cartier claims the proprietary and confidential nature of this information amounts to a trade secret-protected asset.

Cartier further claims Tiffany has a history of poaching employees and maintains a “disturbing culture of misappropriating competitive information.” Given the alleged pattern, Cartier asserts that Tiffany now possesses “a substantial amount of [its] confidential and trade secret information that it obtained from Marino and other former Cartier employees” as a result of their “unlawful taking of Cartier’s valuable confidential information and trade secrets.”

Even if Cartier successfully establishes that it maintains trade secret information that Tiffany misappropriated, the case is hardly straightforward. Establishing damages in cases like this is particularly challenging, as it is difficult to assign a dollar value to trade secret information that will compensate the plaintiff for the economic loss caused by the defendant’s misappropriation. As a result, courts generally have quite a bit of discretion in fashioning damages awards.

Article By David H. Siegel of Norris McLaughlin P.A.

For more intellectual property legal news, click here to visit the National Law Review.

3 Benefits of Cloud-Based Law Firms

Any law firm that’s evaluating practice management software has seen “cloud-based” options. Cloud technology has been around for a while, but some law firms are hesitant to switch to the cloud due to security concerns, lack of control, or downtime. The cloud has numerous benefits for a law firm, however. Instead of relying on filing cabinets and in-office servers, law firms can embrace the cloud and maximize their time and profits.

Why Should My Firm Use Cloud-Based Software?

Traditionally, law firms have relied on in-office software that is installed on a local computer or server within the office space. These servers are only accessible from computers in the same space but limit any remote access or capability. This setup quickly became an issue for law firms looking to sustain business continuity during the pandemic.

A cloud-based solution isn’t installed locally on the office server but is fully hosted on the internet. It uses a remote server maintained by the software provider, and access occurs through the internet. More recently, cloud-based legal practice management software has become the gold standard for law firms to manage and operate their business from anywhere. LPMs have slowly started to replace traditional servers and become the backbone for law firms to handle client management, calendaring, tasks, billing, and document storage.

Even post-pandemic, law firms are still learning to embrace legal technology and leverage the advantages of shifting their practice to the cloud. When done correctly and with the right resources, cloud-based law firms can improve aspects of their business from accessibility, security, client support, and even hiring and retention.

If you’re still on the fence about moving your firm to the cloud, here are 5 benefits that may change your mind:

1. Improved Security

Legal technology has come a long way in recent years with a strong emphasis on compliance and security. Law firms may be concerned about security, but some are realizing the cloud is more secure and cost-efficient than an on-premise solution. This is mostly because on-premise solutions typically require specialized support staff to perform lucrative updates to the system. These updates can cause severe downtime and even cost money calling in support.

With a cloud-based legal practice management software like PracticePanther, the all-in-one platform automatically updates and comes with the security and support your firm needs. The platform comes equipped with ABA and IOLTA compliant features and 256-bit military-grade encryption to ensure confidential information is safeguarded. It also offers two-factor authentication and customized security settings, which allow law firms to limit access to certain aspects of the software for some staff members.

2. Supports Remote and Hybrid Work

Though many law firms are still working out the kinks — remote and hybrid working environments are a mainstay in the legal industry. Many lawyers are enjoying the productivity benefits and work-life balance of remote or hybrid schedules, allowing them to put in the hours they need for casework while also balancing their responsibilities at home.

On-premise legal software limits lawyers with remote work in many ways. Cloud-based legal software enables law firms to work securely within a centralized platform from anywhere. This allows staff to continue their responsibilities without risking accessibility or tasks falling through the cracks when staff are in different locations. For example, PracticePanther can create workflows with triggered tasks for staff to complete a new client onboarding, send documents for electronic signature, and even process payments. This process can be done from anywhere and lives in one system where the appropriate staff can easily access the case or client matter.

3. Streamlined Billing and Online Payments

Clients’ expectations have shifted and they want more convenient processes, especially with legal billing and how they conduct business with law firms. These clients are already using online services for virtually everything, from grocery shopping to accessing medical bills, and they want the same digital experience from their lawyers.

Cloud-based software makes this simple, especially when billing and online payments are built natively. This means firms can track time, create invoices, and send them for payment with easy-to-use payment links embedded. Platforms like PracticePanther also include exclusive reporting functions so firms can gain better insight into where and how their cash flow is generated to make more informed business decisions.

Outlook on Cloud-Based Firms

Cloud-based software offers law firms a unique opportunity to manage their practice and staff while growing their business from virtually anywhere. This structure has proved sustainable for many law firms and will continue to be the standard in the legal industry for firms that want to remain competitive and most importantly, profitable.

Article By Nina Lee of PracticePanther

For more legal marketing and technology news, click here to visit the National Law Review.

Throwing Out the Privacy Policy is a Bad Idea

The public internet has been around for about thirty years and consumers’ browser-based graphic-heavy experience has existed for about twenty-five years. In the early days, commercial websites operated without privacy policies.

Eventually, people started to realize that they were leaving trails of information online, and in the early ‘aughts the methods for business capturing and profiting from these trails became clear, although the actual uses of the data on individual sites was not clear. People asked for greater transparency from the sites they visited online, and in response received the privacy policy.

A deeply-flawed instrument, the website privacy policy purports to explain how information is gathered and used by a website owner, but most such policies are strangely both imprecise and too long, losing the average reader in a fog of legalese language and marginally relevant facts. Some privacy policies are intentionally obtuse because it doesn’t profit the website operator to make its methods obvious. Many are overly general, in part because the website company doesn’t want to change its policy every time it shifts business practices or vendor alliances. Many are just messy and poorly written.

Part of the reason that privacy policies are confusing is that data privacy is not a precise concept. The definition of data is context dependent. Data can mean the information about a transaction, information gathered from your browser visit (include where you were before and after the visit), information about you or your equipment, or even information derived by analysis of the other information. And we know that de-identified data can be re-identified in many cases, and that even a collection a generic data can lead to one of many ways to identify a person.

The definition of data is context dependent.

The definition of privacy is also untidy. An ecommerce company must capture certain information to fulfill an online order. In this era of connected objects, the company may continue to take information from the item while the consumer is using it. This is true for equipment from televisions to dishwashers to sex toys. The company likely uses this information internally to develop its products. It may use the data to market more goods or services to the consumer. It may transfer the information to other companies so they can market their products more effectively. The company may provide the information to the government. This week’s New Yorker devotes several pages to how the word “privacy” conflates major concepts in US law, including secrecy and autonomy,¹ and is thus confusing to courts and public alike.

All of this is difficult to reflect in a privacy policy, even if the company has incentive to provide useful information to its customers.

Last month the Washington Post ran an article by Geoffrey Fowler that was subtitled “Let’s abolish reading privacy policies.” The article notes a 2019 Pew survey claiming that only 9 percent of Americans say they always read privacy policies. I would suggest that more than half of those Americans are lying. Almost no one always reads privacy policies upon first entering a website or downloading an app. That’s not even really what privacy policies are for.

Fowler shows why people do not read these policies. He writes, “As an experiment, I tallied up all of the privacy policies just for the apps on my phone. It totaled nearly 1 million words. “War and Peace” is about half as long. And that’s just my phone. Back in 2008, Lorrie Cranor, a professor of engineering and public policy at Carnegie Mellon University, and a colleague estimated that reading and consenting to all the privacy policies on websites Americans visit would take 244 hours per year.”

The length, complexity and opacity of online privacy policies are concerning. The best alleviation for this concern would not be to eliminate privacy policies, but to make them less instrumental in the most important decisions about descriptive data.

Limit companies’ use of data and we won’t need to fight through their privacy options.

Website owners should not be expected to write out privacy policies that are both sufficiently detailed and succinctly readable so that consumers can make meaningful choices about use of the data that describes them. This type of system forces a person to be responsible for her own data protection and takes the onus off of the company to limit its use of the data. It is like our current system of waste recycling – both ineffective and supported by polluters, because rather than forcing manufacturers to use more environmentally friendly packaging, it pushes consumers to deal with the problem at home, shifting the burden from industry to us. Similarly, if the legislatures provided a set of simple rules for website operators – here is what you are allowed to do with personal data, and here is what you are not allowed to do with it – then no one would read privacy policies to make sure data about our transactions was spared the worst treatment. The worst treatment would be illegal.

State laws are moving in this direction, providing simpler rules restricting certain uses and transfers of personal data and sensitive data. We are early in the process, but if the trend continues regarding omnibus state privacy laws in the same manner that all states eventually passed data breach disclosure laws, then we can be optimistic and expect full coverage of online privacy rules for all Americans within a decade or so. But we shouldn’t need to wait for all states to comply.

Unlike the data breach disclosure laws which encourage companies to comply only with the laws relevant to their particular loss of data, omnibus privacy laws affect the way companies conduct the normal course of everyday business, so it will only take requirements in a few states before big companies start building their privacy rights recognition functions around the lowest common denominator. It will simply make economic sense for businesses to give every US customer the same rights as most protective state provides its residents. Why build 50 sets of rules when you don’t need to do so? The cost savings of maintaining only one privacy rights-recognition system will offset the cost of providing privacy rights to people in states who haven’t passed omnibus laws yet.

This won’t make privacy policies any easier to read, but it will become less important to read them. Then privacy policies can return to their core function, providing a record of how a company treats data. In other words, a reference document, rather than a set of choices inset into a pillow of legal terms.

We shouldn’t eliminate the privacy policy. We should reduce the importance of such polices, and limit their functions, reducing customer frustration with the privacy policy’s role in our current process. Limit companies’ use of data and we won’t need to fight through their privacy options.

ENDNOTES

1 Privacy law also conflates these meanings with obscurity in a crowd or in public.

Article By Theodore F. Claypoole of Womble Bond Dickinson (US) LLP

For more privacy and cybersecurity legal news, click here to visit the National Law Review.

Tag: legal

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