One of the biggest threats to an employer's competitive edge is the potential theft of the employer's trade secrets. Trade secrets include an employer's customer list, vendor list, market research, and financial projections. With the proliferation of computer networks in the workplace, including remote access, a disgruntled employee could steal the employer's trade secrets simply by downloading them to a disc or emailing them to a personal email account.
When an employee steals trade secrets, many employers have turned to the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. §1030, for injunctive relief and damages. The CFAA is essentially a criminal statute that permits some victims of computer hackers to maintain civil lawsuits against the hackers.
A person who accesses a computer "without authorization" or "exceeds authorized access" could be found liable under the CFAA. But while the CFAA provides a definition for the term "exceed authorized access" (to access a computer with authorization to obtain or alter information that the accesser is not entitled to obtain or alter), the CFAA does not provide a definition for the term "without authorization."
Because the CFAA has both criminal and noncriminal applications, courts are resolving any ambiguities in the statute in favor of lenity. See, e.g. LVRC Holdings v. Brekka, -- F.3d ----, 2009 WL 2928952 (9th Dist. Sept. 15, 2009, Case No. 07-17116) (employee who had emailed employer trade secrets to his personal computer did not violate the CFAA). The courts are narrowly construing the CFAA's terms so as to prevent convicting a criminal defendant under novel interpretations of the CFAA. Therefore, courts are generally interpreting "without authorization" as meaning with absolutely no permission to access the computer, such as an outside hacker. "Exceeds authorized access" generally means that the person had permission to access the computer but did not have permission to access the specific information.
If a disgruntled employee makes an electronic copy of an employer's trade secrets, these interpretations of the CFAA would not help the employer who gave the employee permission to access the trade secrets on the computer. Therefore, it is of the utmost importance that employers clearly define what information an employee is allowed to access. Employers should consult with their attorneys to prepare the documents that inform the employees which trade secrets they have permission to access.
September 22, 2009
September 20, 2009
Senator Baucus Mark-up of Senate Health Care Reform Bill
On September 16, 2009, Senate Finance Committee Chairman Sen. Max Baucus (D-Mt.) released his comments, or "marks", on a draft of the health care reform bill prepared by the Senate Finance Committee. It bans insurance companies from denying coverage based upon pre-existing conditions and mandates all Americans to obtain some form of health insurance. It does not include a public insurance option but allows the government to provide seed money to set up private, non-profit health care co-operatives.
The bill has not yet been introduced to the Senate or reconciled with the House's health care reform bill, America's Affordable Health Choices Act of 2009, H.3200, introduced July 31, 2009. Some marks of Sen. Baucus directly affect employers who offer health insurance coverage to their employees. The following is just a brief overview of some of those marks.
Safe Harbor Benefits received under a qualified small employer's cafeteria plans would still be eligible to be treated as a cafeteria plan if the plan excludes employees 1) under 21; 2) worked fewer than 1000 hours the preceding year or has worked less than one year; or 3) covered by a collective bargaining agreement. "Eligible small employers" would be employers who have employed an average of 100 or fewer employees a day for the past 2 years. If an employer is an eligible small employer and continues the cafeteria plan, it would remain an eligible small employer until it employs an average of 200 employees a day in one year.
Small Business Tax Credit Currently, the cost to an employer of providing health insurance coverage to its employees is tax deductible. Under Sen. Baucus's marks, the employer may be eligible for a tax credit instead of a deduction from gross income. To qualify for this tax credit, the employer would have to have 25 or fewer full-time employees during the year. Those employees could not earn an average of more than $40,000.00 a year. The phased-in tax credit would be up to 50% of the premiums the employer paid for employee coverage.
Employer Offer of Health Insurance Coverage Employers of 50 or more employees who do not offer coverage to employees would be required to pay a fee for each employee who qualifies for a tax credit for health insurance.
Excise Taxes In 2014, there would be an excise tax of 35% imposed upon employer-sponsored health coverage that exceeds threshold amounts: $8,000 for individual coverage and $21,000 for family coverage. The tax would be imposed pro rata on the issuers of the insurance and the plan administrator on amounts over the threshold. The employer must calculate the amount that is taxable to each insurance issuer and the plan administrator. Regardless as to whether an excise tax is imposed, employers would be required to report on the employee's W-2 form the value of the benefits the employee received from the employer.
Flexible Spending Arrangements An employee who reduces cash compensation to have that amount available for use as reimbursement for medical expenses (Flexible Spending Arrangement, or "Health FSA") currently does not pay any tax on the reduction in compensation. Under Sen. Baucus's marks, Health FSAs would be limited to $2,000 a year.
The bill has not yet been introduced to the Senate or reconciled with the House's health care reform bill, America's Affordable Health Choices Act of 2009, H.3200, introduced July 31, 2009. Some marks of Sen. Baucus directly affect employers who offer health insurance coverage to their employees. The following is just a brief overview of some of those marks.
Safe Harbor Benefits received under a qualified small employer's cafeteria plans would still be eligible to be treated as a cafeteria plan if the plan excludes employees 1) under 21; 2) worked fewer than 1000 hours the preceding year or has worked less than one year; or 3) covered by a collective bargaining agreement. "Eligible small employers" would be employers who have employed an average of 100 or fewer employees a day for the past 2 years. If an employer is an eligible small employer and continues the cafeteria plan, it would remain an eligible small employer until it employs an average of 200 employees a day in one year.
Small Business Tax Credit Currently, the cost to an employer of providing health insurance coverage to its employees is tax deductible. Under Sen. Baucus's marks, the employer may be eligible for a tax credit instead of a deduction from gross income. To qualify for this tax credit, the employer would have to have 25 or fewer full-time employees during the year. Those employees could not earn an average of more than $40,000.00 a year. The phased-in tax credit would be up to 50% of the premiums the employer paid for employee coverage.
Employer Offer of Health Insurance Coverage Employers of 50 or more employees who do not offer coverage to employees would be required to pay a fee for each employee who qualifies for a tax credit for health insurance.
Excise Taxes In 2014, there would be an excise tax of 35% imposed upon employer-sponsored health coverage that exceeds threshold amounts: $8,000 for individual coverage and $21,000 for family coverage. The tax would be imposed pro rata on the issuers of the insurance and the plan administrator on amounts over the threshold. The employer must calculate the amount that is taxable to each insurance issuer and the plan administrator. Regardless as to whether an excise tax is imposed, employers would be required to report on the employee's W-2 form the value of the benefits the employee received from the employer.
Flexible Spending Arrangements An employee who reduces cash compensation to have that amount available for use as reimbursement for medical expenses (Flexible Spending Arrangement, or "Health FSA") currently does not pay any tax on the reduction in compensation. Under Sen. Baucus's marks, Health FSAs would be limited to $2,000 a year.
September 16, 2009
Ohio House passes bill banning sexual orientation discrimination
On September 15, 2009, the Ohio House of Representatives passed Am.Sub.H.B.No. 176 which prohibits employment discrimination on the basis of sexual orientation or gender identity. The bill now moves on to the Ohio Senate where its fate is unclear.
If the bill becomes law, it would add "sexual orientation" and "gender identity" as protected traits in the workplace, similar to the protections that traits like race and religion currently have in the workplace. The term "sexual orientation" would not be limited to homosexuality under this bill. Rather, it would include "actual or perceived heterosexuality, homosexuality, or bisexuality."
The term "gender identity" in the bill would mean all gender-related characteristics of an individual, with or without regard to the individual's designated sex at birth. This definition would include the codification of the United States Supreme Court's holding in Price Waterhouse v. Hopkins, 490 U.S. 228, in which the Supreme Court allowed an accountant to proceed with her lawsuit that alleged she was passed over for partnership because she was not feminine enough.
The bill would exempt religious associations and parochial schools from some of its provisions on sexual orientation and gender identity. But the exemptions would not apply to the associations or schools' secular business activities unrelated to their religious and educational purposes.
Even though the bill anticipates gender transition, it would not require the construction of new or additional facilities. Under the bill, it would not be an unlawful employment practice based upon gender identity to deny access to shower or dressing facilities where being unclothed would be unavoidable. But the employer must provide reasonable access to these facilities based upon the employee's gender identity at the time of the initial employment or upon notification that the employee is undergoing, or has undergone, gender transition.
The Ohio Civil Rights Commission would not be permitted to collect statistics from employers on employees' sexual orientation or gender identity. The bill would also not permit "disparate impact" claims on the basis of sexual orientation or gender identity. "Disparate impact" claims are based upon a neutral policy that has a negative impact on people with a protected trait.
Because some Ohioans feel strongly that sexual orientation is a choice, a choice to which those Ohioans may have strong objections, passage of the bill in the Ohio Senate is not assured. Nevertheless, many Ohio employers have voluntarily adopted policies against discrimination on account of sexual orientation or gender identity. Employers adopted these policies because they want to keep good employees, regardless of an employee's orientation or gender identity. This bill would make those policies the law of Ohio. If you feel strongly about this bill - one way or the other, you should call your State Senator's office and let him or her know.
If the bill becomes law, it would add "sexual orientation" and "gender identity" as protected traits in the workplace, similar to the protections that traits like race and religion currently have in the workplace. The term "sexual orientation" would not be limited to homosexuality under this bill. Rather, it would include "actual or perceived heterosexuality, homosexuality, or bisexuality."
The term "gender identity" in the bill would mean all gender-related characteristics of an individual, with or without regard to the individual's designated sex at birth. This definition would include the codification of the United States Supreme Court's holding in Price Waterhouse v. Hopkins, 490 U.S. 228, in which the Supreme Court allowed an accountant to proceed with her lawsuit that alleged she was passed over for partnership because she was not feminine enough.
The bill would exempt religious associations and parochial schools from some of its provisions on sexual orientation and gender identity. But the exemptions would not apply to the associations or schools' secular business activities unrelated to their religious and educational purposes.
Even though the bill anticipates gender transition, it would not require the construction of new or additional facilities. Under the bill, it would not be an unlawful employment practice based upon gender identity to deny access to shower or dressing facilities where being unclothed would be unavoidable. But the employer must provide reasonable access to these facilities based upon the employee's gender identity at the time of the initial employment or upon notification that the employee is undergoing, or has undergone, gender transition.
The Ohio Civil Rights Commission would not be permitted to collect statistics from employers on employees' sexual orientation or gender identity. The bill would also not permit "disparate impact" claims on the basis of sexual orientation or gender identity. "Disparate impact" claims are based upon a neutral policy that has a negative impact on people with a protected trait.
Because some Ohioans feel strongly that sexual orientation is a choice, a choice to which those Ohioans may have strong objections, passage of the bill in the Ohio Senate is not assured. Nevertheless, many Ohio employers have voluntarily adopted policies against discrimination on account of sexual orientation or gender identity. Employers adopted these policies because they want to keep good employees, regardless of an employee's orientation or gender identity. This bill would make those policies the law of Ohio. If you feel strongly about this bill - one way or the other, you should call your State Senator's office and let him or her know.
September 14, 2009
Employer Liability for Contractor's Discrimination
Ohio employers should be concerned about a recent decision in the United States Second Circuit Court of Appeals. Even though the Second Circuit does not include Ohio, this case could be persuasive authority for district and common pleas courts in Ohio.
In Halpert v. Manhattan Apartments Inc., Case No. 07-4074, the Second Circuit reversed a summary judgment that the District Court had entered in favor of Manhattan Apartments in an age discrimination claim. Michael Halpert had interviewed with Robert Brooks for a position to show rental apartments. In the interview, Halpert alleged that Brooks told him he was "too old" for the position. Manhattan Apartments maintained that Brooks was an independent contractor and not its employee.
The Court found that an employer could potentially be held liable for discrimination by an independent contractor who acts for the employer. The Age Discrimination in Employment Act (ADEA) prohibits an employer from refusing to hire an individual because of the individual's age. The Court stated: "That prohibition applies regardless of whether an employer uses its employees to interview applicants for open positions, or whether it uses intermediaries, such as independent contractors, to fill that role." Title VII, the ADA, and the Ohio Civil Rights Act include similar prohibitions in regards to other protected traits.
The Court found that there was a factual issue as to whether Brooks was acting as the hiring agent for Manhattan Apartments when he interviewed Halpert or whether Brooks was simply hiring on his own. Even though Brooks and Manhattan Apartments submitted affidavits in which they stated that if Halpert had been hired, Brooks - not Manhattan Apartments - would have been compensating him, Halpert submitted evidence that could have indicated that Manhattan Apartments controlled the manner and means by which Brooks conducted interviews. Therefore, according to the Circuit Court, a jury had to determine whether Brooks was conducting interviews to hire for himself or for Manhattan Apartments. If a jury were to find that Brooks was conducting interviews to hire for Manhattan Apartments, Manhattan Apartments would be an employer under the ADEA and could be held liable under that law.
Halpert demonstrates that employers cannot isolate themselves from discrimination liability by simply using independent contractors who then hire employees for themselves. Employers need to be careful that they are not presenting these independent contractors as employees to prospective hirees. Wise employers should have an attorney review the degree of independence the contractors have and the hiring processes of the contractors.
In Halpert v. Manhattan Apartments Inc., Case No. 07-4074, the Second Circuit reversed a summary judgment that the District Court had entered in favor of Manhattan Apartments in an age discrimination claim. Michael Halpert had interviewed with Robert Brooks for a position to show rental apartments. In the interview, Halpert alleged that Brooks told him he was "too old" for the position. Manhattan Apartments maintained that Brooks was an independent contractor and not its employee.
The Court found that an employer could potentially be held liable for discrimination by an independent contractor who acts for the employer. The Age Discrimination in Employment Act (ADEA) prohibits an employer from refusing to hire an individual because of the individual's age. The Court stated: "That prohibition applies regardless of whether an employer uses its employees to interview applicants for open positions, or whether it uses intermediaries, such as independent contractors, to fill that role." Title VII, the ADA, and the Ohio Civil Rights Act include similar prohibitions in regards to other protected traits.
The Court found that there was a factual issue as to whether Brooks was acting as the hiring agent for Manhattan Apartments when he interviewed Halpert or whether Brooks was simply hiring on his own. Even though Brooks and Manhattan Apartments submitted affidavits in which they stated that if Halpert had been hired, Brooks - not Manhattan Apartments - would have been compensating him, Halpert submitted evidence that could have indicated that Manhattan Apartments controlled the manner and means by which Brooks conducted interviews. Therefore, according to the Circuit Court, a jury had to determine whether Brooks was conducting interviews to hire for himself or for Manhattan Apartments. If a jury were to find that Brooks was conducting interviews to hire for Manhattan Apartments, Manhattan Apartments would be an employer under the ADEA and could be held liable under that law.
Halpert demonstrates that employers cannot isolate themselves from discrimination liability by simply using independent contractors who then hire employees for themselves. Employers need to be careful that they are not presenting these independent contractors as employees to prospective hirees. Wise employers should have an attorney review the degree of independence the contractors have and the hiring processes of the contractors.
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