Hi, How Can We Help You?

Blog Posts

Fourth Circuit Rules that an Employee Taking and Misusing Confidential Computer Data Does Not Violate the Computer Fraud and Abuse Act

In a recent decision that the court acknowledged would disappoint employers hoping to rein in rogue employees, the Fourth Circuit refused to apply the federal Computer Fraud and Abuse Act (“CFAA”) to workers who access computers or information in bad faith, or who disregard a technology use policy. That decision is WEC Carolina Energy Solutions, LLC v. Miller.

The CFAA is primarily a criminal statute designed to combat computer hackers.  However, the statute also provides a civil remedy to a private party, such as an employer, who suffers damage or loss by reason of a violation of the statute.  Employers have increasingly been relying on the statute to seek damages from former employees who accessed a computer without authorization or exceeded their authorized access.  Typically, the central issue in such cases is whether the former employee was permitted to access the computer data when it was retrieved.

In the Miller decision, the employee allegedly downloaded information from the employer’s computer system while working there, then resigned and used that information to obtain a potential client for a competitor.  While some courts have held that such conduct violates the CFAA because it violates the employee’s duty of loyalty, thereby terminating her agency relationship and automatically stripping her of any authority to access the computer, other courts have adopted a narrower approach.   These courts have limited their interpretation of the CFAA, which prohibits computer access that is “without authorization” or “exceeds authorized authority.”  They have held that the CFAA only applies to situations where an individual accesses a computer or computer data without actual permission.  In affirming dismissal of the CFAA claim against the employee, the Fourth Circuit adopted this latter approach.

Noting that the CFAA does not define “authorization,” the court held that the ordinary meaning of “authorization” means “approved” or “sanctioned by,” and that an employee “exceeds authorized access” when he has approval to access a computer, but uses his access to obtain or alter information that falls outside the bounds of approved access.  Thus, because the employee had authorization when she allegedly downloaded the computer data of her employer, she did not violate the CFAA, even if she kept that data and later used it for competitive purposes.

The court noted the problems that would logically follow if it were to interpret “authorization” more broadly.  For instance, if “authorization” were broadly construed, an employee might be liable under the CFAA if the employee disregards his employer’s policy against downloading information so that he can work from home in order to meet deadlines set by his employer. Furthermore, the court rejected the cessation-of-agency theory adopted by some courts, noting that if the rule were taken seriously, it “would mean that any employee who checked the latest Facebook posting or sporting event scores in contravention of his employer’s use policy would be subject to the instantaneous cessation of his agency and, as a result, would be left without any authorization to access his employer’s computer systems.”

Because of the split between the federal circuit courts on breadth of this increasingly important statute, this issue may ultimately have to be addressed by the Supreme Court.  Until then, employers in Virginia now face more difficulties in suing former employees under the CFAA.

Read More

Answer to the Employment Law Question for September 2012

As a recent lawsuit shows, an employer can generally discipline an at-will employee for such conduct, and may even bring legal action against him or her. (Employment at will is the default and most common employment relationship, allowing termination for any reason or no reason.) Before reacting, however, an employer should take care to avoid several common pitfalls. Important legal considerations apply that employers should know about before they take action against an employee who has posted grievances online.

 Claims of Illegal Actions. First, if the employee complains of illegal actions by the employer, the employer should proceed cautiously. Federal whistleblower and retaliation laws protect employee complaints of unlawful conduct such as discrimination or harassment, unsafe working conditions, or fraud in servicing government clients. Generally speaking, posting such claims on the internet instead of notifying the employer weakens the employee’s protection and, in certain circumstances, may even justify discipline or discharge. Nevertheless, to protect against liability, employers should consult legal counsel to investigate the claims and to guide their response to the employee’s claims.

• Complaints about Terms of Employment. Second, if the employee complains about terms of employment like pay, hours, or hiring or firing decisions, federal labor law likely protects the employee. The National Labor Relations Act protects employees who communicate with other employees about their terms of employment at the company. Several large companies have had to change their social media policies at the insistence of the National Labor Relations Board so that they do not discourage acts of employee solidarity. Nevertheless, with appropriate legal advice, employers can often effectively counter such online complaints about working conditions within the limitations imposed by federal labor law.

• Anonymous Complaints or Re-Posts. Third, an employer must cautiously approach situations in which it merely suspects an employee of posting anonymous complaints, or in which it learns that the employee has “Like”-d, “Re-Tweet”-ed, or forwarded links to complaints by others. A local federal court decision recently held that employees of a public official are not protected from discipline for “Like”-ing his opponent on Facebook. Yet a Federal law passed in the 1990s, the Communications Decency Act, protects most users from legal liability for re-posting web content. While employers may generally discipline or discharge employees who re-post or forward others’ criticisms, this immunity limits the types of legal action an employer may take. Additionally, these protections also apply to internet providers and thus create obstacles to proving who posted anonymous complaints online.

Given the complicated legal landscape surrounding employee online conduct, employers should seek legal assistance in confronting these situations, and implement effective technology use and social media policies. With this guidance, employers can prevent harm to their businesses and protect themselves against potential legal liability from employee online complaints.

This is intended for educational purposes only, and is not intended to provide legal advice nor is it intended to create an attorney client relationship with the recipient of this email.

Read More

Automatic Deduction of Meal Periods Is Acceptable but Risky

Every employer knows that the Fair Labor Standards Act requires that nonexempt employees be paid the federal minimum wage for all time worked and that they receive overtime pay for all hours worked in excess of 40 hours per week.  Employers are also keenly aware of the need to maintain time records that document the employee’s hours.  If employees are not paid for all time worked, significant monetary liability can result.

Some employers have adopted policies requiring their employees to take 30 minute breaks.  In accordance with this break policy, employers may choose to automatically deduct a 30 minute break from the employee’s daily hours.  But what happens if the employee disregards the employer’s break policy and opts to work through lunch? This situation was recently addressed in Quickley v. University of Maryland Medical System Corporation, et al. where a hospital found out that giving employees a little extra freedom to control their workday cost may potentially come at a high cost to the employer.

In Quickley, the hospital employees clocked in at the beginning of a shift and clocked out at the end of their shift.  The employees did not clock out for lunch, but the hospital maintained a policy of automatically deducting 30 minutes per day to account for lunch.  If the employee worked through lunch, it was up to the employee to notify the hospital so that the 30 minute break would not be deducted from their hours.

The plaintiff in Quickley sued the hospital over the automatic 30 minute deduction, claiming that she was “suffered or permitted to work” during her lunch and that the hospital must pay her for it regardless of its break policy.  In its defense, the hospital argued that the automatic deduction of time did not violate the FLSA and that the employees had the responsibility of informing it that they were working through their meal break period.

The court agreed with the hospital that the automatic deduction of time was not a per se violation of the FLSA, but noted that this was not the real issue.  An automatic deduction of time is permissible, but it is incumbent on the employer to ensure that the employees are not, in fact, working during that time.  When the employer shifts the burden to the employee to report time worked during meal breaks, the employer must make that responsibility clear to the employee and must make every effort to facilitate the employee’s reporting opportunities.

In Quickley, the court noted that based upon the pleadings it appeared that the employer did not provide an easy mechanism for the employee to inform the employer of the need to credit portions of the meal period back to the employee.  While this is not the end of the case for the employer, and the employer may still be able to prove that it did, in fact, provide the employee with reasonable ways of reporting work during meal periods, the employer now faces the prospect of prolonged litigation in order to prove that it did not violate the FLSA.

Read More

How does Obamacare affect my company? The answer to the Employment Law Question for July 2012

The answer to this question will largely depend on the size of your business.

 

Medium-to-Large Businesses
Small Businesses

The Patient Protection and Affordable Care Act of 2010, commonly referred to as Obamacare, goes into full effect in 2014; however, employers are already struggling to comply with its many mandates, some of which are already in effect.

 

Starting in 2014, every individual with annual income over $9,500 for whom health insurance is considered affordable based on family income must be insured or face a penalty. Individuals can turn to government-run “insurance exchanges” for coverage, and low-income employees may receive tax credit subsidies if their employers provide no health insurance, or unaffordable/insufficient health insurance. (“Unaffordable” health insurance requires an employee to pay premiums or co-pays of more than 9.5% of wages, and insufficient benefits fail to cover at least 60% of costs). The Government will finance these subsidies, however, by penalties assessed against the individuals’ employers if they have 50 or more full-time employees (or part-time equivalents).

Medium-to-Large Businesses. Under Obamacare, many medium-to-large businesses will need to adjust health insurance or staffing to comply with the law’s requirements. Obamacare requires businesses with 50 or more employees to offer affordable and sufficient health care coverage to each full-time employee or pay a penalty. This penalty is assessed if even one full-time employee receives a subsidy. The penalty varies depending on whether the employer offers no health insurance, or unaffordable/insufficient insurance. If it provides no health insurance, the penalty equals the total number of full-time employees, minus 30, times $2,000. If it provides unaffordable or inadequate insurance, the penalty is the lesser of either (i) the total number of full-time employees, minus 30, times $2,000; or (ii) the number of subsidized employees times $3,000.

For example, if a 50-person employer provides no health insurance and only two full-time employees receive government subsidies, then that employer would be charged $40,000 in penalties. If it provides unaffordable or insufficient insurance, it would only pay $6,000 in penalties (2 x $3,000 = $6,000, which is less than 20 x $2,000 = $40,000).

Despite these penalties, however, the likely increases in health care costs under Obamacare may make it cheaper for medium-to-large companies to stop providing health care coverage to employees. Obamacare will increase health insurance costs because it will add millions of people to Medicaid (including households below 133% of the Federal Poverty Level), which will likely cause hospitals and doctors to increase costs for private insurers. Additionally, Obamacare imposes expensive new mandates on employer benefits, including:

1. requiring that employee dependents remain covered until age 26;

2. eliminating caps of annual and lifetime reimbursement limits; and

3. imposing new burdens on employers when it comes to reporting costs, including that employer-sponsored insurance report costs on employees’ W-2 Forms beginning in the 2012 tax year.

For many medium-to-large employers, the best course of action will be to adjust wages and staffing. Many employers hovering at the 50-employee threshold can lower their workforce size to below 50 employees by replacing full-time positions with part-time employees. (Obamacare does not penalize employers for uninsured employees working less than 30 hours per week.) Employers can also use independent contractors to stay under the 50-employee threshold. Alternatively, employers can increase salaries or provide alternative benefits to prevent employees from receiving a government subsidy, rather than provide insurance, or reduce wages to recoup any penalties paid. The National Federation of Independent Business provides a useful resource in analyzing the impact of the law.

Small Businesses. Employers with fewer than 50 full-time employees or their equivalent are exempt from penalties, and thus have less incentive to provide health insurance to employees in 2014 and after. To counter this dynamic, the law provides that businesses with 25 employees or less that do provide insurance can qualify for a tax credit if their employees’ average wages are below $50,000. Currently this tax credit is 35 percent (set to increase to 50 percent in 2014). In addition, small businesses with up to 100 employees will have access to government-based Small Business Health Options Program (SHOP) Exchanges to expand their purchasing power with insurance companies. Nevertheless, many small businesses will likely find it cheaper and easier to leave employees on their own to buy insurance through the government-run exchanges.

Increased Medicare Withholding. After December 31, 2012, employers will also be required to withhold additional Medicare tax from the wages of high-earning employees. The Medicare tax is set to increase from 1.45 percent to 2.35 percent for an employee who receives wages of more than $200,000. Businesses are only required to withhold this additional tax if the employee receives over $200,000 from that employer. (Businesses need not consider a spouse’s earnings or earnings from a second job.) This additional tax also applies to wages over $250,000 for joint filers, and wages over $125,000 for separate filers who are married.

To ease the impact of these changes, employers should seek legal guidance and discuss with a qualified employment lawyer the effect of Obamacare’s provisions on their businesses.

This is intended for educational purposes only, and is not intended to provide legal advice nor is it intended to create an attorney client relationship with the recipient of this email.

Read More

Hello world!

Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!

Read More