New York Proposes First State Bitcoin Regulations

Proskauer Law firm

One might have thought the biggest news in the digital currency world lately was Dell announcing that it was now accepting bitcoin. However, after a series of highly-publicized hearings in January, New York State rolled out its proposed regulations surrounding bitcoin and virtual currency – the first state in the nation to propose licensing requirements for virtual currency businesses.

 

The July 23rd New York State Register includes a Notice of Proposed Rule Making from the New York State Department of Financial Services (the “NYSDFS”) regarding the regulation of virtual currency (“Regulation of the Conduct of Virtual Currency Businesses,” No. DFS-29-14-00015-P). The proposed rule calls for the creation of the “bitlicense” which the NYSDFS has hinted at in the past. The state agency goals are two-fold: to protect New York consumers and users and ensure the safety and soundness of New York licensed providers of virtual currency products and services. Virtual currency is still a nascent industry that is generally unregulated outside of federal anti-money laundering regulations, and while anti-establishment bitcoin pioneers may revel in the “wild west” atmosphere of the digital currency, the NYSDFS feels that their proposed regulations will protect consumers from undue risk, encourage prudent practices for those engaged in virtual currency business activity and foster the growth of the New York financial sector.

 

The Notice, which refers to the full text of the proposed rule originally made available by NYSDFS on July 17th, marks the beginning of a 45-day window for public comment on the proposed rule. Interestingly, the NYSDFS concurrently released a copy of the proposed regulations on the social news site Reddit to elicit debate (note, Ben Lawsky, Superintendent of Financial Services at the NYSDFS, participated in a Reddit AMA (“Ask Me Anything”) session in February as the agency was developing the rules).

 

The proposed rule appears to be drafted to carefully exclude merchants and bitcoin miners from the scope of the licensing requirement, but include exchanges, digital wallet services, merchant service providers and others in the virtual currency ecosystem. It imposes many of the same types of requirements that we already have in the area of money transmission and clearing house services, including capital requirements, anti-money laundering safeguards, and “know your customer” type issues. It also includes requirements with respect to business continuity and cyber security issues.

 

This alert will outline some of the major elements of the “bitlicense” regulations.

 

Who’s Covered?

 

Under the proposed regulations, “Virtual Currency Business Activity” means any one of the following activities involving New York or a New York resident:

 

(1) receiving Virtual Currency for transmission or transmitting the same;

(2) securing, storing, holding, or maintaining custody or control of Virtual Currency on behalf of others;

(3) buying and selling Virtual Currency as a customer business;

(4) performing retail conversion services, including the conversion or exchange of Fiat Currency or other value into Virtual Currency, the conversion or exchange of Virtual Currency into Fiat Currency or other value, or the conversion or exchange of one form of Virtual Currency into another form of Virtual Currency; or

(5) controlling, administering, or issuing a Virtual Currency.

 

Such “virtual currency businesses” would have to obtain a license from the agency before engaging in any such business activity, though persons chartered under the New York Banking Law to conduct exchange services and are approved by the NYSDFS to engage in virtual currency business activity would be exempt. As previously mentioned, the proposed rules seemingly excludes consumers who buy goods and services with digital currency, merchants who accept digital currency and bitcoin miners from the scope of the licensing requirement, but explicitly include digital currency exchanges, digital wallet apps and services, merchant service providers, virtual currency issuers,  and other similarly situated businesses.  Specially, the agency is not seeking to regulate virtual currency used solely on online gaming platforms or digital units used exclusively for customer affinity or rewards program, but cannot be converted into fiat currency.

 

Other Important Requirements

 

  • Application Details:  Applicants would have to submit financial, insurance and banking particulars; organization charts and background reports for the principal officers and stockholders (along with fingerprints for officers, principals and employees); and an explanation of the methods used to calculate the value of virtual currency in fiat currency, among other things. Upon filing of an application, the agency will investigate the financial condition and responsibility of the applicant before issuing the bitlicense, and may revoke the license on sufficient grounds. Moreover, if the licensee wants to make a “material change” to an existing product or service, it would need the NYSDFS’s prior approval; similar approval would be required in the event of any changes of control or mergers and acquisitions.
  • Compliance: Applicants would have to comply with all federal and state laws and regulations, appoint a compliance officer to monitor activity within the business, and maintain written compliance policies relating to anti-fraud, anti-money laundering, cybersecurity, and privacy and data security. In addition, virtual currency businesses would have to submit quarterly financial statements and audited annual financial statements to the NYSDFS.
  • Capital Requirements: The proposed regulations do not outline specific capital requirements. Rather, the text suggests that licensee shall maintain levels of capital as the NYSDFS determines is sufficient to ensure financial stability, taking into account basic financial barometers. The proposed regulations also would require licensees to only invest earnings in high-quality investments with maturities of up to one year, such as certificates of deposit regulated under U.S. law, money market funds, state or municipal bonds, or U.S. Gov’t securities.
  • Anti-Money Laundering: Each licensee would be expected to enforce an anti-money laundering program with adequate internal controls and training, as well as a written policy reviewed and approved by the licensee’s board. Under the regulations, virtual currency records would have to include records containing the identity and physical addresses of the parties involved, the amount of the transaction, the method of payment, the date(s) on which the transaction was initiated and completed, a description of the transaction, and special reports of any aggregate daily transactions that exceed $10,000 or otherwise involve suspicious activity. Covered businesses would also have to conduct adequate due diligence on new customers, with enhanced scrutiny for foreign entities. Such regulations are presumably similar to the March 2013 Financial Crimes Enforcement Network (“FinCEN”) Guidance (FIN-2013-G001), which clarified that federal anti-money laundering regulations covering  “money services businesses” also applied to virtual currency exchanges.
  • Examinations: Each licensee would have to permit the NYSDFS to examine the licensee’s accounting and operations at least once every two years to determine financial stability, business soundness and compliance.
  • Cybersecurity: Under the bitlicense regulations, each licensee would have to establish an effective cybersecurity program for their electronic systems and maintain a written cybersecurity policy that covers data and network security, data governance, access controls, business continuity and disaster recovery, customer privacy, vendor management, and incident response, among others. Licensees would also have to appoint a Chief Information Security Officer responsible for implementing the cybersecurity program and also submit an annual report assessing the cybersecurity program.
  • Protection of Customer Assets: The regulations would require each licensee to maintain a bond or trust account for the benefit of its customers in an amount acceptable to the NYSDFS, and hold virtual currency of the same type and amount the licensee is storing for a customer. The licensee would be prohibited from selling or encumbering virtual currency assets stored on behalf of a customer.
  • Consumer Protection: The proposed regulations require certain disclosures before a consumer may enter into a transaction, including disclosure of the material risks associated with digital currency (e.g., digital currency is not legal tender, transactions are generally irreversible, values may fluctuate, and cyberattacks are a real concern), the general terms and conditions of conducting business with the licensee, and a detailed receipt following the completion of any transaction.

 

Looking Ahead

 

All entities involved in or planning on being involved in virtual currency-related businesses should study this proposed rule carefully. There is still an opportunity to voice concerns and have the final rule reflect any issues that the NYSDFS views as important (for example, some commentators have suggested that the regulations should contain exemptions for smaller digital currency start-ups that handle small transactions, while the Bitcoin Foundation suggests that the comment period should be open for a longer period of time to allow the industry to digest the proposal). It is likely that whatever is enacted in New York will be used as a model in other states that wish to enact a similar virtual currency licensing structure. Moreover, the regulations, as they stand today, require that any entity engaged in a “virtual currency business activity” would have to apply for a license within 45 days of the effective date of the regulations or risk being deemed to be conducting an unlicensed virtual currency business, further suggesting the importance in getting up to speed with the emerging digital currency regulatory environment in New York. It remains to be seen how onerous the final regulations and compliance obligations will be to both established digital currency service providers and start-ups alike.

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New York Nonprofit Revitalization Act Rollout Challenges

Proskauer

As the July 1, 2014 compliance date of the New York Nonprofit Revitalization Act of 2013 (the “Revitalization Act”) quickly approaches, many charities operating in New York are confronting some difficult rollout challenges. While parts of the Revitalization Act are clear and welcomed (such as new rules that broaden the use of electronic communications and eliminate the need for supermajority board approvals of routine property transactions), other new requirements are puzzling to many of these charities’ officers and directors. Indeed, as we counsel our clients, we are finding that certain new Revitalization Act rules that concern board operations are causing some charities, in particular family foundations and corporate foundations, to wonder whether operating through corporations formed in New York is desirable.

The charities that seem to be facing the hardest issues are foundations with small boards, and with directors that either directly and appropriately exert substantial influence over foundation operations (such as in a family foundation), or are employed by the businesses that have founded and fund these charities to do their good works.

We are finding that many, but not all, of the requirements causing concern are tied to vague drafting in the Revitalization Act. The good news is that we have also identified what we believe are reasonable interpretations of the law that align with workable solutions for many clients.

This client alert notes just a few of the more pressing Revitalization Act issues, as well as relevant potential solutions, as they appear to us today. We will be highlighting other aspects of the Revitalization Act rollout over the coming year. We stress that the New York State Attorney General’s Charities Bureau may issue clarifying Revitalization Act guidance, and it is also possible that follow-up legislation may address some of these issues. Importantly, it is possible that this guidance or future legislation will not support our interpretations, although we hope that it does. Stay tuned.

Three Independent Directors

The Revitalization Act will require many charities to identify at least three individuals that satisfy detailed requirements of “independence” to serve as directors and oversee specified audit and financial reporting activities. (Three are needed because that is the fewest number of directors required by New York law to perform delegated board-level functions.) For many family foundations, corporate foundations, and labor/management charities – with small boards that are typically composed of individuals tied in some way to the charity or related entities – this requirement has created concern. This concern may be heightened when membership on the board has been finely balanced to achieve acceptable approaches to shared governance.

Most important for these charities to keep in mind is that the requirement is limited to charities that raise or “solicit” funding from the general public. However, some of these charities, in their annual charities filing with the New York Attorney General, may have been filing as soliciting charities even though they do not actually solicit funding. We suggest that such charities consider amending their filing status and we urge that any change in filing status in response to the Revitalization Act be made in consultation with corporate and tax counsel, closely assessing individualized factors and risks. For example, part of the analysis may be to examine whether the charity has been filing its annual Form 990 with the Internal Revenue Service (“IRS”) as a “public charity” (based on “public support” concepts of the IRS that differ from the New York concepts of “solicitation”). While we do not believe that the New York charitable solicitation concepts match the IRS concepts, tailored assessments should be made with both New York charitable solicitation laws and U.S. federal tax laws in mind.

For those charities that do solicit within the meaning of New York law, and whose small boards are populated by individuals employed by related entities, it will be worthwhile to take a hard look, again guided by counsel, at the kind of control exerted by a charity’s affiliated corporate entities over the charity. Under the Revitalization Act, whether that employment disqualifies a director as “independent” will depend on whether the particular corporate or other entity that employs the director “controls” or is “under common control with” the charity. Notably, the Revitalization Act does not define “control.”

Conflicts Policy Quagmire

Although the Revitalization Act is clear that the requirement for independent-director oversight of auditing and financial matters is limited to “soliciting” charities, the law is less clear about whether independent director oversight also applies to the law’s requirements on conflicts policies.

Essentially, the Revitalization Act codifies the widespread practice already adopted by many charities – many motivated by the IRS Form 990 conflicts policy checkbox – to have a written conflicts policy. It also requires oversight of adoption, implementation, and compliance with the conflicts policy by the Board or the audit committee. Certain provisions of the Revitalization Act can be read as requiring these oversight functions to be handled by independent directors only. While our interpretation is not free from doubt, we believe that to the extent there is an obligation to have independent directors oversee conflicts policy administration, a close and reasonable reading of the Revitalization Act supports the interpretation that such requirement is also confined to soliciting charities. If not, many private foundations will be forced to make drastic board changes for conflicts policy oversight, while permitted to use directors that do not satisfy independence criteria for what is generally viewed as the critical audit oversight function – a seemingly absurd result.

Charities with conflicts policies based on the IRS form are probably already aware that they will need to amend those policies to satisfy Revitalization Act requirements, since the IRS form does not track all of the components of a conflicts policy required by the Revitalization Act. As these policies are drafted, special attention should be paid to the annual conflicts questionnaire required by the Revitalization Act. Many charities already distribute an IRS Form 990 annual questionnaire to directors, officers and key employees. Revitalization Act questionnaires will now be covering some, but not all, of the same territory. To avoid bombarding individuals with duplicative annual forms, consideration should be given as to whether to use a single questionnaire that reasonably covers both IRS and Revitalization Act requirements.

Approval of Director, Officer, and Key Employee Compensation

The Revitalization Act imposes significant new requirements concerning related-party transactions. Among other things, the Revitalization Act imposes a new requirement to “contemporaneously document in writing the basis for the board or authorized committee’s approval” of a related party transaction, “including its consideration of any alternative transactions.” The Revitalization Act also provides the Attorney General with enhanced enforcement authority to void, rescind, seek restitution, and remove directors in connection with a transaction that is not properly approved or that was not reasonable or in the best interests of the corporation at the time the transaction was approved.

Because the Revitalization Act broadly defines a “related party transaction” as “any transaction, agreement, or any other arrangement in which a related party [including a director, officer or key employee] of the corporation has a financial interest and in which the corporation or any affiliate of the corporation is a participant,” there is some question as to whether compensation arrangements with directors, officers, and key employees are related party transactions. While the matter is not free from doubt, we believe that there is a reasonable basis for considering these compensation arrangements to be regulated in a manner distinct from related party transactions under the Revitalization Act. Clarification on this issue, however, would be helpful.

In addition, the Revitalization Act appears to define all directors as “related parties,” and prohibit all related parties from participating in deliberations and voting pertaining to related party transactions, without specifically distinguishing between directors who have an interest in the particular transaction and those who do not. Guidance clarifying that the Revitalization Act will not be construed or enforced in such an impracticable manner would be helpful.

Also, certain ambiguous language in the Revitalization Act can be read as expressly prohibiting any director from being present at or participating in any board deliberations or vote concerning director compensation, while apparently requiring director approval of the compensation. While we believe that such a reading of the Revitalization Act would be unreasonable and contrary to principles of statutory construction, clarifying guidance would help avoid uncertainty on an important governance issue. In the interim, boards may wish to approve director compensation arrangements prior to July 1.

Extraterritorial Application of Revitalization Act

Finally, some commentators have raised concerns that certain provisions of the Revitalization Act relating to board composition and operation may be applicable to charitable organizations formed outside of New York, such as Delaware non-stock corporations. We have not found this to be a reasonable interpretation of the Revitalization Act. Again, however, clarifying guidance would be welcome.

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New York Federal Judge Finally Tosses Aside Limits on Contributions to New York Super PACs (Political Action Committees)

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Super PACs in the Empire State and in the Big Apple are about to become more “super.”  On April 24th, a New York federal court finally (albeit begrudgingly) struck down a state law that effectively capped contributions to state Super PACs at no more than $150,000.  Prior to today’s ruling, New York had been one of a few holdout states refusing to recognize the application of Citizens United to state laws limiting contributions to independent political groups.  Indeed, the New York Attorney General defended the limit even after the Second Circuit concluded that it was likely unconstitutional as applied to the Super PAC that challenged it.  It is not clear whether the state will appeal the decision and face a near-certain loss.  If the decision stands—as we expect it will—donors may now contribute unlimited sums to independent political committees that run ads for or against New York state or city candidates.

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Rolex Says "Time is Up" for Alleged Craigslist Counterfeiter

Womble Carlyle

 

On February 5, 2014, Rolex Watch U.S.A.,Inc. (“Rolex”) of New York, New York, filed a complaint against Nicholas Peter Karettis (“the defendant”) of Tyrone, Georgia, allegingTrademark Counterfeiting and Infringement under 15 U.S.C. § 1114.

The complaint alleges Mr. Karettis sold, offered for sale, distributed, promoted, and advertised merchandise that was counterfeit and infringing upon Rolex’s federally registered trademarks.

Rolex owns numerous trademarks and trade names including at least the following:

CROWN DEVICE (design) Registration no. 657,756 Registered on 1/28/1958 for timepieces of all kinds and parts thereof.

DATEJUST Registration no. 674,177 Registered on 2/17/1959 for timepieces and parts thereof.

DAY-DATE Registration no. 831,652 Registered on 7/4/1967 for wrist watches.

DAYTONA Registration no. 2,331,145 Registered on 3/21/2000 for watches.

EXPLORER Registration no. 2,518,894 Registered on 12/18/2001 for watches.

EXPLORER II Registration no. 2,445,357 Registered on 4/24/2001 for watches.

GMT-MASTER Registration no. 683,249 Registered on 8/11/1959 for watches.

GMT-MASTER II Registration no. 2,985,308 Registered on 8/16/2005 for watches and parts thereof.

OYSTER Registration no. 239,383 Registered on 3/6/28 for watches, movements, cases, dials, and other parts of watches.

OYSTER PERPETUAL Registration no. 1,105,602 Registered on 11/7/1978 for watches and parts thereof.

PRESIDENT Registration no. 520,309 Registered on 1/24/1950 for wristbands and bracelets for watches made wholly or in part or plated with precious metals, sold separately from watches.

ROLEX Registration no. 101,819 Registered on 1/12/1915 for watches, clocks, parts of watches and clocks, and their cases.

ROLEX DAYTONA Registration no. 1,960,768 Registered on 3/5/1996 for watches.

ROLEX DEEP SEA Registration no. 3,703,603 Registered on 10/27/2009 for watches.

SEA-DWELLER Registration no. 860,527 Registered on 11/19/1968 for watches, clocks and parts thereof.

SUBMARINER Registration no. 1,782,604 Registered on 7/20/1993 for watches.

TURN-O-GRAPH Registration no. 2,950,028 Registered on 5/10/2005 for watches and parts thereof.

YACHTMASTER Registration no. 1,749,374 Registered on 1/26/1993 for watches.

Rolex Trademark Infringement
The Rolex Crown Device design

According to the complaint, Rolex discovered a classified advertisement appearing on the website “www.craigslist.org” (“Craigslist”) advertising for sale watches bearing counterfeits and infringements of the Rolex Registered Trademarks. These watches were allegedly advertised as “AAA Quality Replica” watches and listed for sale at a price of $200. 

Also according to the complaint, Rolex forwarded the Craigslist add to its private investigator who then called the number provided on the advertisement and arranged a meeting with a man identifying himself as “Nick.”  Rolex’s investigator also arranged for members of the Douglas County Sheriff’s Department to be present at this meeting.  At the meeting, members of the Douglas County Sheriff’s Department arrested the defendant and seized five (5) watches identified by Rolex’s investigator as bearing counterfeits and infringements of the Rolex Registered Trademarks.

Thereafter, the defendant was charged with forged or counterfeited trademarks, service marks, or copyrighted or registered designs, constituting unauthorized reproductions as defined in O.C.G.A. § 10-1-454. Defendant’s vehicle was impounded and the Douglas County Sheriff’s Department seized $14,800.00 in cash found on the defendant’s person at the time of his arrest.

The complaint further alleges irreparable harm, unjust enrichment, willful and malicious infringement, and that the case is exceptional under 15 U.S.C. § 1117(a) because of the defendant’s alleged reckless disregard or willful blindness in connection with unlawful activities.

Rolex seeks an injunction and treble damages or statutory damages under 15 U.S.C. § 1117(c).  Rolex also seeks legal and investigative fees along with any further relief as the court deems just and proper.

The case is Rolex Watch U.S.A., Inc. v. Karettis No. 3:14-cv-12-TCB filed in United States District Court for the Northern District of Georgia, Newnan Division on February 5, 2014, and is assigned to Judge Timothy C. Batten.

 
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Federal Court Prohibits Union From Striking To Prevent Sale Of Business To Non-Union Employer

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Last week a New York federal district court granted a preliminary injunction against the Teamsters union after it threatened to go on strike against Will Poultry, Inc. if the company proceeded to sell its business to a non-union purchaser who had no plans of assuming the parties’ collective bargaining agreement (CBA).The parties’ CBA did not have a “successor clause” or any other language obligating a purchaser to assume or otherwise recognize the Teamsters union upon a sale. When the Teamsters demanded that Will Poultry modify the CBA to include a “successor clause” in advance of the sale or face a strike, the company filed for an injunction in federal court.

teamsters union litigation

While the CBA did not contain an express “no strike clause,” it did have a grievance/arbitration provision, and the court held that constituted an “implied” no strike clause. Accordingly, the court issued an order prohibiting the union from striking in violation of the implied no strike clause, which almost certainly would have killed the pending sale.

While the New York federal court correctly found an implied no strike clause in this case, this case should serve as a reminder that you should always review your CBA in advance of successor contract negotiations to make sure any language issues (like the lack of a no strike clause) can be addressed.

The Teamsters have filed for an appeal of the decision, but a copy of the district court’s order can be found here.

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David J. Pryzbylski

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Barnes & Thornburg LLP

Labor and Employment Law: Tri-State Round-Up

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New York

“Pregnant Workers Fairness Act” Becomes Law in New York City

On October 2, 2013, New York City Mayor Michael Bloomberg signed into law the “Pregnant Workers Fairness Act” (PWFA) in an attempt to plug a perceived gap in the Pregnancy Discrimination Act, which does not require accommodation for pregnant employees. Once the new law takes effect in early February 2014, it will require employers in New York City to offer reasonable accommodation for pregnancy, childbirth and related medical conditions.

The PWFA will apply to all businesses in New York City with four or more employees, including independent contractors. It requires that written notice of its provisions be presented to all new employees at the time of hire, and that a poster advising employees of their rights under the PWFA—to be produced by the City’s Commission on Human Rights—be posted within the employer’s facility. Employers that are able to demonstrate that compliance would pose an undue hardship are excluded from compliance. Employees who believe they have been the victims of discrimination in violation of the PWFA have the option of either filing a complaint with the New York City Commission on Human Rights or bringing a court action against their employer.

NYS Department of Labor Proposes New Wage Deduction Regulations

Employers in New York have been waiting since June 2012 for guidance regarding amendments made that month to Section 193 of the New York Labor Law restoring employers’ ability to make deductions from employee wages for overpayments and advances, but only in specific, as-yet-undefined circumstances. The wait, however, appears to be nearing an end.

In May 2013, the NYSDOL issued proposed wage deduction regulations that address not only deductions for overpayments and advances, but also deductions deemed permissible because they are “for the benefit of the employee.” The complete proposed regulations are available on the NYSDOL website (www.labor.ny.gov./legal/wage-deduction-regulation.shtm), but the following is a brief summary:

  • Deductions for Overpayments

    Written authorization from the employee is not required for the employer to make deductions for unintended overpayments. The proposed regulations specify in detail, however, the timing, frequency, amount permitted and advance notice required for such deductions, along with dispute resolution procedures and the method by which improper deductions are to be repaid.

  • Deductions in Repayment of an Advance

    The new regulations state that any provision of money to an employee by an employer that is accompanied by the accrual of interest, fees or a repayment amount of anything other than the specific amount provided to the employee is not an advance, and it may not be recouped via wage deduction. Furthermore, the parties must agree in writing to the terms of repayment before the advance is given; and once agreement is reached, no further permission or notice is required until the entire amount of the advance has been recouped.

  • Deductions for the Benefit of the Employee

    Such deductions are expressly limited to those listed in Section 193 of New York’s Labor Law, along with benefits for health and welfare, pension and savings, charity, representation, transportation, food and lodging.

Employers are encouraged to proceed with caution if they wish to implement a program for recoupment of overpayments and wage advances, as the wage deduction regulations proposed by the NYSDOL are not yet final and are thus subject to change.

New Jersey

New State Law Limits Employer Access to Employees’ Social Media Accounts

A new law set to take effect on December 1, 2013 will make New Jersey the latest of a growing number of states—including Arkansas, California, Colorado, Illinois, Maryland, Michigan, Nevada, New Mexico, Oregon, Utah and Washington—that prohibit employers from requesting access to the social media accounts of current or prospective employees. The law also prohibits employers from retaliating or discriminating against any such individual who either refuses to provide such access or who complains about what he or she believes to be a violation of the law.

The law applies only to those social media accounts that are the exclusive personal property of the employee or prospective employee. Employers are, however, permitted to obtain access to private accounts for the purposes of ensuring legal or regulatory compliance, investigating employment-related misconduct or investigating a potential disclosure of the employer’s proprietary or confidential information. The law does not prohibit employers from accessing accounts its employees use for business-related purposes, and employer review of material that employees or prospective employees post publicly on an otherwise private social media account remains lawful.

Enforcement of New Jersey’s social media law is left solely to the state’s Department of Labor; the law does not provide individuals with a private right of action. Companies may be fined up to $1,000 for their first violation and $2,500 for violations thereafter.

Amendment to NJLAD Prohibits Retaliation Against Employees Who Seek Information About Their Coworkers

An amendment to New Jersey’s Law Against Discrimination (NJLAD), signed into law on August 28, 2013 and given immediate effect, adds a nonretaliation pay equity measure to NJLAD. Intended to protect employees who request information about other employees’ or former employees’ compensation or potential membership in a protected class, the amendment prohibits employer retaliation for such a request, provided the request is made either as part of an investigation into potential discriminatory treatment or to take legal action for such discriminatory treatment with regard to compensation.

It is important to note that the amendment does not require employers to take action in response to such a request from an employee or to provide him or her with the information sought while employers are free to deny such requests; they are, however, prohibited from retaliating against the employee making the request.

Employers in New Jersey should consider examining and, if necessary, revising their policies pertaining to requests for and disclosure of protected information, and they should take steps to make sure that supervisory and managerial employees are aware of NJLAD’s new provisions.

“NJ Safe Act” Requires Unpaid Leave for Employees Affected by Domestic or Sexual Violence

A new law that took effect on October 1, 2013 enables eligible employees within New Jersey to take 20 days of unpaid leave within a 12-month period in the event that the employee, his or her child, parent, spouse or domestic or civil union partner is the victim of domestic or sexual violence.

Dubbed the New Jersey Security and Financial Empowerment Act, but better known as the “NJ Safe Act,” the law applies to employers within the state with 25 or more employees. Its intended purpose is to allow victims of assault, or those who are giving care to such victims of assault, to engage in a series of activities related to such victims’ recovery without fear of losing their jobs.

The NJ Safe Act covers those employees who have worked for a covered employer for at least 12 months and who have worked at least 1,000 hours during the previous 12 months. Leave may be taken within one year of an occurrence of domestic violence or sexual assault, and it may be taken intermittently. If the need for leave is foreseeable, employees seeking such leave are required to provide written notice to their employer as far in advance as possible. Employers are permitted to request documentation from the employee supporting the employee’s need for leave. The act also requires employers to post a notice made available by the New Jersey Commissioner of Labor and Workforce Development to inform employees of their rights.

Employees are provided with a private right of action under the NJ Safe Act and are able to seek relief in the New Jersey Superior Court up to one year after an alleged violation. Prevailing plaintiffs may be entitled to recovery of economic and noneconomic damages, as well as attorneys’ fees, a civil fine and an order of reinstatement. The law, like most of New Jersey’s employment laws, contains a provision that prohibits retaliation against an employee who exercises his or her rights under it.

New Jersey employers with more than 25 employees should take steps to ensure that their leave policies comply with the new law. Such employers should also make sure that any employee training on the subject of retaliation includes information on the NJ Safe Act and that they have posted the required materials within their workplaces.

Connecticut

Significant Changes Made to Connecticut’s Personnel Files Act

As a result of an amendment to Connecticut’s Personnel Files Act that took effect on October 1, 2013, employers within the state now have a dramatically shorter period of time within which to respond to requests from current or former employees to inspect the contents of their personnel files. Whereas the law previously required employers to permit such inspection “within a reasonable period of time,” the law now mandates that current employees be allowed to inspect their files within seven days of a written request; former employees must receive the same opportunity within ten days. Such inspections are to take place during regular business hours and at a location at, or reasonably near, the employee’s place of employment.

The amendment also places a number of other new requirements on Connecticut employers. Among them are the following:

  • Employees must now be provided with a copy of any documented disciplinary action not more than one business day after the action is imposed;
  • Employees must “immediately” be given copies of any documented notice of the termination of their employment;
  • Employers must now include a “clear and conspicuous” statement in any written termination or disciplinary notice that, should an employee disagree with any information contained in such a document, the employee may submit a written explanation of his or her position. If an employee chooses to submit such a statement, employers are required to include it within the employee’s personnel file; employers must also include the employee’s statement with any transmission of or disclosure from the file to any third party.

As before, Connecticut’s Personnel Files Act does not contain a private right of action. The state’s Department of Labor may impose a fine of up to $500 for a first violation and up to $1,000 for subsequent violations involving the same employee.

 

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Vedder Price

Power NY Act of 2011 Swings the Door Open for Renewable Development

Posted in the National Law Review on August 17, 2011 an article written by attorneys: David A. DomanskyJoseph G. Tirone and Brian J. Kelly of Bracewell & Giuliani LLP regarding Power NY Act of 20ll which Gov. Cuomo recently signed into law:

 

On August 4, 2011, Governor Cuomo signed into law the Power NY ACT of 2011 (A. 8510/S. 5844), a comprehensive energy bill that, among other things, reimplements and significantly revises Article X of the New York State Public Service Law. As revised, new Article X provides power project developers a more efficient, streamlined “one-stop” siting process. The new law was sought and supported by both business and environmental groups to remedy a patchwork of inconsistent local siting rules throughout New York, which have hampered project development efforts. Old Article X, which expired on January 1, 2003, was limited to power plants with 80-megawatts or more of nameplate generating capacity. New Article X reduces the capacity threshold to 25-megawatts, thereby allowing smaller generation projects, such as wind, solar and other renewable project developers, an opportunity to take advantage of the streamlined siting process.

Creation and Composition of the Review Board

Following the expiration of former Article X, developers were required to seek the requisite regulatory and environmental permits mandated by state and local laws from the various state and municipal regulatory authorities who had jurisdiction over the site where the proposed power project was to be developed. Under new Article X, the siting and licensing of electric generation facilities of at least 25-megawatts, or the increase in nameplate capacity by 25-megawatts or more of a current power facility, will fall within the purview of the New York State Board on Electric Generation Siting and the Environment (“Board”).The seven member Board will consist of five state agency officials (Department of Environmental Conservation, Department of Economic Development, Department of Health, Department of Agriculture and Markets and the New York State Energy Research and Development Authority), as well as two ad hoc members who are required to reside in the community in which the proposed facility is to be located. The Board will be tasked with determining if the contemplated project should receive a Certificate of Environmental Compatibility and Public Need (“Certificate”), which must be obtained before commencement of any site development or facility construction.

Filing Process

New Article X separates the Certificate process into two distinct phases, a pre-application preliminary scoping statement (the “Pre-Application”) and the actual Certificate application. In  the Pre-Application, an applicant is required to provide the Board with, among other things: (a) a description of the proposed facility and its environmental setting; (b) potential environmental and health impacts resulting from the construction and operation of the proposed facility; (c) proposed studies or programs of studies designed to evaluate the potential environmental and health impacts; (d) measures proposed to minimize environmental impacts; and (e) identification of all other state and federal permits required for the construction, operation or maintenance of the proposed facility.

Prior to submission of the Pre-Application, the applicant must meet with interested parties, including community groups and interested state agencies to address these groups’ concerns  with regard to the proposed facility. Following the applicant’s submission of the Pre-Application, the applicant has the ability to enter into side agreements or stipulations to address any concerns regarding the siting and location of the proposed facility. Once completed, the applicant is then required to file a Certificate application with the Board, which includes: (a) a description of the site and facility to be built; (b) an evaluation of the anticipated environmental and health impacts and safety and security ramifications that the facility will have on the surrounding community; (c) a comprehensive environmental impact analysis; and (d) a comprehensive demographic, economic and physical description of the community within which the facility is to be located, compared and contrasted with the county and with the adjacent communities in which the facility is proposed.

Board Decision Process and Timeline

New Article X requires that the Board issue a final decision on a Certificate application no later than: (a) 12 months after submission of a Certificate application deemed complete by the Board for a new-build facility, and (b) six months after the submission of a complete Certificate application deemed complete by the Board for modifications to (1) an existing facility, or (2) the site of a new facility adjacent or contiguous to an existing facility, provided the new facility would result in greater operating efficiencies and lower environmental impact than the original facility.

New Article X also requires that the Board schedule a hearing on the Certificate application no later than 60 days after the date the Board determines the Certificate application is complete. After conducting and taking testimony at the hearing, the Board may grant the Certificate if it finds that: (a) the facility is a beneficial addition to or substitution for the electric generation capacity of New York; (b) the construction and operation of the facility will serve the public interest; (c) the facility’s environmental impact has been minimized or eliminated to the maximum extent practicable; and (d) the facility complies with all state and local laws and regulations.

Any appeal of the Board’s decision denying or granting a Certificate is first heard by the Board itself. The application for rehearing must be filed no later than 30 days after issuance of the Board’s decision. The Board is required to render a decision on the application no later than 90 days after the expiration of the period for filing rehearing petitions. Thereafter, an aggrieved party may seek judicial relief in the Appellate Division of the New York Supreme Court. Such proceeding must be initiated within 30 days after the issuance of a final decision by the Board on the application for rehearing.

© 2011 Bracewell & Giuliani LLP