Workplace Privacy, Data Management & Security Report : Privacy Lawyers & Attorneys : Jackson Lewis Law Firm : Data Security, HIPAA & Confidentiality Issues

In recognition of Data Privacy Day (January 28, 2012) and to facilitate a more interactive experience for our readers and subscribers, we want to extend to you the opportunity to tell us what is on your mind in the world of data privacy, social media and information management.

For the last two years, we have brought you developments on a wide range of issues concerning these topics. We realize many of you might like us to report on or provide information concerning certain issues/topics that we have not covered before. If so, please tell us!

To submit a topic, you can email us at informationrisk@jacksonlewis.com, or reach out to us through our Workplace Privacy Report on Facebook and Twitter. Feel free to “Like” our Facebook page and “Follow” us on Twitter by clicking on the corresponding buttons on the right below. If we select your topic, we will reach out to you privately to see if you would like us to identify you in the responsive post.

Of course, what would any communication from a lawyer be without a DISCLAIMER?

We look forward to hearing from you!

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Today, the NLRB's Acting General Counsel posted a second report concerning social media issues and the National Labor Relations Act. The cases discussed in this report should provide further guidance to employers struggling with developing strategies for using social media in their business, developing employee policies regulating activity in social media, and enforcing those policies. Look for follow up analysis from us and our Labor partners.

Check out our prior reporting on related developments.

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In addition to concerns about social media, school districts across the country need to address a growing interest in the personal data of the students they educate. No, this interest does not stem from a desire to see if kids are reading at the desired level, or if the children have the resources they need to receive an adequate education. Data thieves want this information to commit identity theft. 

As reported by the Huffington Post:

Identity theft in schools is more than theoretical. Last July, Sheyla Diaz, 44, a former Broward County, Florida high school teacher, was sentenced to six months of house arrest for stealing the identities of former students. In 2009, Jonathan E. Kelly, who worked as a police officer for the Palm Beach County School District, was sentenced to eight years in prison for stealing the identities of former students and teachers.

The thieves know that children have pristine credit and that school districts, hampered by substantial budget cuts, may not be doing all they could to safeguard this information. Parents and school districts need to take steps to address this growing risk.

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 As the holidays approach, I am reminded of an employment law attorney I used to know who wrote a column about this time of year about holiday parties. He would warn Human Resources (“HR”) professionals to beware of sexual harassment issues as the punch flows and inhibitions dissipate at the annual office get-together.  How things have changed. In this era of Facebook and I-phones, every day is a holiday party in terms of potential liability. It used to be the only photographic evidence of employee carousal was a black and white photocopy of someone’s derriere. Now, smart phones capture everything in full color pixilation and the evidence is posted instantly. We may never know what Herman Cain and his associates were up to in the 1990s, but if it had happened now, you can bet there would be a text, tweet, or digital photo to add fuel to the Yule log fire.

As 2011 draws to a close, most employers have realized they cannot ignore social media. Social media exponentially increases a company’s opportunity for marketing. But HR folks also know that social media exponentially increases the opportunities for employees to do silly things and get in trouble. More than one fast food franchise has had to respond to digital photos posted on line of teen-aged employees bathing in a restaurant sink. Even folks who ought to know better, including an NFL quarterback and a United States Congressman, allegedly sent digital photos of their sugarplums to women who either did not want them, or did not mind sharing them on the Internet.

Based on my conversations with members of corporate HR departments, in the 2012 New Year they will be facing Social Media 2.0 – Rise of the Smart Phones.  Anyone who does not already have a smart phone will probably get one for Hanukkah or Christmas. All employers should already have a social media policy addressing expectations of privacy, anti-harassment, overtime, trade secret protection, Federal Trade Commission (FTC) restrictions, and exceptions for concerted activity and protected speech under the National Labor Relations Act.  Next year, employers will need to consider whether certain categories of employees should be required to keep smart phones locked away during business hours and will also need to respond to the growing demands by employees that they be allowed to conduct confidential company business on their personal I-phone.

Many employment law attorneys and HR managers may be asking Santa for a respite from the technology onslaught, and may need a drink at the holiday party as much as the next employee.

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Today, the Office for Civil Rights formally announced it is implementing the audit requirement under the American Recovery and Reinvestment Act of 2009, in Section 13411 of the HITECH Act. The agency confirmed that it is piloting a program to perform up to 150 audits of covered entities to assess privacy and security compliance, and that the pilot phase will begin November 2011 and conclude by December 2012.

A new page on OCR's website answers some helpful questions for covered entities and business associates... 

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CLICK HERE FOR UPDATED INFORMATION CONCERNING THE AUDIT PROGRAM

The Health Information Technology for Economic and Clinical Health law (“HITECH”) made a number of changes for HIPAA covered entities and business associates. One key change stems from Section 13411 of HITECH, which gives the Secretary of the Department of Health and Human Services authority to conduct “periodic audits to ensure that covered entities and business associates” comply with the privacy and security mandates under HIPAA. Susan McAndrew, the Deputy Director for Health Information Privacy at the Office of Civil Rights ("OCR"), has been speaking out about the nature, scope and timing of these audits, which are expected to begin in February 2012. A summary of reports about the audit program follows below.  

Covered entities and business associates need to be prepared and take stock of their HIPAA compliance. One hundred percent compliance can be an elusive goal, particularly in a short time frame. So, perhaps a more efficient way to prepare for the coming wave of audits it to look, at a minimum, for the low hanging fruit, such as: (i) having clear policies and procedures on topics such as access management, breach notification, discipline, passwords, managing portable data storage devices, distributing notices of privacy practices, and similar items, (ii) conducting and documenting training of workforce members, and (iii) ensuring appropriate agreements are in place with business associates and subcontractors.   

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Connecticut Attorney General George Jepsen announced on September 14, 2011, the creation of a Privacy Task Force to help educate the public about data protection requirements and to focus his Office’s response to Internet privacy concerns and data breaches that affect consumers. According to Attorney General Jepsen's press release, “Internet and data privacy have been among the biggest issues affecting the broad public interest during my first eight months in office” and nearly a dozen investigations have been initiated or pursued regarding security breaches that resulted in the loss of medical and insurance records or personal customer information.

Like nearly all states across the country, Connecticut has a data breach notification law. The State's Insurance Commissioner has also adopted rules concerning data breach notification requirements for its licensees. Among other laws, the Nutmeg state has also enacted specific protections for Social Security Numbers, employment applications, and personal information, which includes:

information capable of being associated with a particular individual through one or more identifiers, including, but not limited to, a Social Security number, a driver's license number, a state identification card number, an account number, a credit or debit card number, a passport number, an alien registration number or a health insurance identification number.  

The Task Force will be responsible for all investigations of consumer privacy breaches, which we are assuming will apply to breaches of any personal information for which notification is required, including patients and employees. The Task Force will also help to educate the public and business community about their responsibilities, which include protecting personally sensitive data and promptly notifying affected individuals when breaches do occur.

Clearly a sign of increased attention to and enforcement of the state's data security and consumer protection mandates, Connecticut businesses and businesses maintaining personal information of Connecticut residents should revisit their information security programs and data breach response plans to ensure they could withstand the scrutiny of an inquiry by the Attorney General's office.  

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As we suspected, California's current governor, Edmund G. “Jerry” Brown, Jr. (D), signed into law S.B. 24, which adds some additional protections to the state's current data breach notification requirements. The champion of this law and its recent enhancements, State Sen. Joe Simitian (D-Palo Alto), has finally succeeded after a number of prior attempts to pass this measure were vetoed by then-Gov. Arnold Schwarzenegger (R).

Summary of Changes

Under S.B. 24, breaches occurring on and after January 1, 2012, that require notification to California residents will have to meet the following additional requirements:

• The notifications themselves will need to satisfy specific content requirements, such as including a description of the type of information breached, time of breach, and toll-free telephone numbers and addresses of the major credit reporting agencies;
• If more than 500 California residents are affected by a single breach, an electronic copy of the breach notification must be send to the California Attorney General;
• If the law's "substitute notice" provisions are used, notice also must be provided to the Office of Information Security or the Office of Privacy Protection. Substitute notice is permitted when the person or business required to provide the notice demonstrates that (I)(i) the cost of providing notice would exceed two hundred fifty thousand dollars ($250,000), or (ii) that the affected class of subject persons to be notified exceeds 500,000, or (II) the person or business does not have sufficient contact information. Prior to the change, substitute notice consisted of only email notification, conspicuous posting of the notice on the person or business' website, and notification to statewide media.

Companies responding to multi-state breaches face significant challenges trying to harmonize the various state law requirements. See, for example, the recent changes to the Illinois statute. Presently, a number of bills are being considered in Congress that would preempt all of the state laws in this area, however, passage of one of these laws does not appear to be imminent. As data breaches go global, similar concerns exist as countries are enacting their own breach notification mandates.

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In a 23-page report, the Acting General Counsel for the National Labor Relations Board summarizes the Board's positions on social media and labor relations. This report is an interesting read and provides insight into one aspect of drafting social media policies - whether the policy will violate an employee's right to take part in protected concerted activity.

The report notes that:

Recent developments in the Office of the General Counsel have presented emerging issues concerning the protected and/or concerted nature of employees’ Facebook and Twitter postings, the coercive impact of a union’s Facebook and YouTube postings, and the lawfulness of employers’ social media policies and rules. This report discusses these cases, as well as a recent case involving an employer’s policy restricting employee contacts with the media. All of these cases were decided upon a request for advice from a Regional Director.

Social media clearly is an important issue for the Board and this memorandum likely is not its last word on the rules that will shape employer policy concerning the use of this media. The following discussion summarizes the memorandum and its effects on social media policy.

See related articles concerning NLRB activity concerning social media.

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Co-Author:  Joseph J. Lazzarotti

The pervasiveness of social media in professional and everyday communication is a hot button issue (discussed at length here), particularly for private and public employers and organizations.  In fact, many organizations have adopted, or are considering adopting, social media policies for employees and providing training for how employees should interact in cyberspace.  But what should those policies say and what should the training focus on?

To answer those questions, organizations should, among other things, develop and shape their policies, training and discipline concerning social media with an eye toward their particular businesses, regulatory environments, and whether they are in the public or private sectors. A number of recent developments show why this is critical:

·         Two recent Third Circuit opinions handed down on June 13, 2011-- J.S. v. Blue Mountain School District and Layshock v. Hermitage School District (discussed below)-- illustrate the importance of educating employees (teachers and administrators) about student’s First Amendment rights concerning social media and when discipline is appropriate,

·         FTC’s guidelines for endorsement of products or services are important for businesses whose employees are likely to be commenting online about the company’s products and services,

·         The NLRB’s recent actions regarding social media use and the National Labor Relations Act are important for all employers, particularly those in traditionally union-dominated industries,

·         The use of social media in the health care setting is presenting a range of challenges under HIPAA and patient privacy generally.

In addressing the extent to which school officials can regulate student speech, the Third Circuit Court of Appeals has held that school officials violated students’ First Amendment free speech rights by disciplining students for creating, outside of school, “fake” social networking profiles ridiculing their school principals. 

In Blue Mountain School District, 8^th grader J.S., using her home computer, created a MySpace profile in the name of her principal.  The profile was presented as a self-portrayal of a bisexual Alabama middle-school principal named “M-Hoe,” and contained crude and vulgar content. Upon learning of the content, the School District suspended J.S. for 10 days.  The Court held that because J.S. was suspended for speech that caused no substantial disruption in school and that could not reasonably have led school officials to forecast substantial disruption in school, the School District’s actions violated J.S.’s First Amendment free speech rights.  

In Layshock, Justin Layshock, a high school senior, using his grandmother’s computer, also created a MySpace profile in the name of his principal.  The profile included “degrading” content regarding the principal.  Upon learning of the profile, the School District suspended Justin for 10 days.  In analyzing whether a school district may punish a student for expressive conduct that originated outside of the schoolhouse, did not disturb the school environment, and was not related to any school-sponsored event, the Court found the School District was prohibited from reaching beyond the school yard.  

These decisions were based on the Supreme Court’s landmark case on the First Amendment’s application to public schools is Tinker v. Des Moines Indep. Cmty. Sch. Dist., 393 U.S. 503 (1969).  In Tinker, a group of high school students decided to wear black armbands to school to protest the war in Vietnam.  When school officials learned of the plan, they preemptively prohibited students from wearing armbands.  Several students who ignored the prohibition and wore armbands to school were suspended.  Eventually, the students brought suit alleging their First Amendment rights had been violated.  The Supreme Court overruled the district and circuit courts, holding that student expression may not be suppressed unless school officials reasonably conclude that such expression will “materially and substantially" disrupt the work and discipline of the school. 

These cases demonstrate the court's struggle in addressing social media content, especially where there are additional constitutional concerns when a party is a public entity.  For many organizations, First Amendment issues will not be at issue, but there likely will be other considerations.  As each and every industry is impacted by social media, attempting to address it in a one-size-fits-all manner without taking appropriate considerations into account is not only impractical, but in some cases unlawful.  As these developments have shown, efforts to address social media must include an effective industry specific social media policy coupled with training programs to educate employees on the use of social media in all facets of employment and conducting the entity's business. 

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Reuters and other news outlets are reporting that Representative Mary Bono Mack has circulated draft legislation in response to the steady stream of data breaches that have occurred this year. According to the report, Senate Majority leader Harry Reid also has asked four Senate committees to pull together a comprehensive cybersecurity bill, hoping it will be brought to the floor by late summer. After years of failed attempts at data breach legislation, the federal government could be poised to enact broadly applicable requirements for safeguarding data and responding to data breaches. 

Some key provisions of the draft legislation would require covered entities (basically, any person engaged in interstate commerce) to:

• establish and implement policies and procedures to protect personal information (defined in a manner similar to most current state breach notification laws) to include, without limitation, designating a point person to manage information security, and having a process for identifying and assessing foreseeable vulnerabilities;
• erase personal data that is no longer needed and otherwise take steps to minimize the amount of personal information maintained;
• notify law enforcement within 48 hours of a data breach, and if data could be used to steal a customer's identity, notify the Federal Trade Commission within 48 hours and begin contacting the affected persons; and
• provide 2 years of credit reporting services or credit monitoring services to individuals affected by a covered data breach.

The law would be enforceable by state attorneys general and the Federal Trade Commission with maximum penalties running into the millions of dollars. The law would generally preempt similar state laws, but would not permit private lawsuits. 

Of course, companies should not be waiting to see if any action is taken at the federal level. There are a number of states with similar laws already on the books. In addition, exposure from a data breach, particularly when there were no safeguards in place to prevent the breach, should be sufficient motivation to take steps to safeguard personal data.

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Prior to the Health Information Technology for Economic and Clinical Health (HITECH) Act becoming law, the HIPAA Privacy Rule required covered entities to provide individuals with an accounting of certain disclosures of their protected health information (PHI). HITECH enhances these accounting rules and requires that individuals be able to know who has accessed their electronic PHI. The U.S. Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) is proposing changes to the Privacy Rule to implement these new requirements and is seeking comments from the public to help shape the law so as to provide the greatest transparency for individuals with respect to access to and disclosures of their PHI, while minimizing the burden on covered entities and business associates. Remember, under HITECH, business associate are subject to nearly all of the requirements under the HIPAA Privacy and Security Rules as covered entities. The discussion below touches on some of the key proposals.

HHS' Notice of Proposed Rulemaking would enhance the rules concerning the obligation to provide an accounting of certain disclosures of PHI and fleshes out the right of individuals to get a report on who has electronically accessed their PHI. These two rights, to an accounting of disclosures and to an access report, would be distinct but complementary. The right to an access report would provide information on who has accessed electronic PHI in a designated record set (including access for purposes of treatment, payment, and health care operations), while the right to an accounting would provide additional information about the disclosure of designated record set information (whether hard-copy or electronic) to persons outside the covered entity and its business associates for certain purposes (e.g., law enforcement, judicial hearings, public health investigations). The intent of the access report is to allow individuals to learn if specific persons have accessed their electronic designated record set information.  In contrast, the intent of the accounting of disclosures is to provide more detailed information (a “full accounting”) for certain disclosures that are most likely to impact the individual.

In general, designated record sets include the medical and health care payment records maintained by or for a covered entity, and other records used by or for the covered entity to make decisions about individuals. See the definition of “designated record set” at 45 CFR § 164.501. An example of PHI that is outside the designated record set are transcripts of customer calls that are used only for purposes of customer service review, rather than to make decisions about the individual.

HHS believes the access report requirement will not present an unreasonable burden on covered entities and business associates because by limiting the access report to information maintained in an electronic designated record set, the report will include information that a covered entity is already required to collect under the HIPAA Security Rule. That is, under §§ 164.308(a)(1)(ii)(D) and 164.312(b) of the HIPAA Security Rule, a covered entity is required to record and examine activity in information systems and to regularly review records of such activity. Access reports would cover a three-year period, and would provide the individual with information about who has accessed the individual's electronic PHI held by a covered entity or business associate. They would not distinguish between “uses” and “disclosures,” and thus, would apply when any person accesses an electronic designated record set, whether that person is a member of the workforce or a person outside the covered entity. The report would be required to identify the date, time, and name of the person (or name of the entity if the person's name is unavailable) who accessed the information, and potentially a description of the protected health information that was accessed and the user's action, if that information is available.

The right to an accounting of disclosures would encompass disclosures of both hard copy and electronic PHI that is maintained in a designated record set. It would cover a three-year period (down from the current six year period), and would require a covered entity and its business associates to account for the disclosures of PHI believed to be of most interest to individuals. That is, the proposed rule explicitly lists the types of disclosures that are subject to the accounting requirement, rather than the previous approach of listing the types of disclosures for which an accounting was not required. In general, the proposed rule would continue to include in the accounting requirement, without limitation, disclosures for public health activities (except those involving reports of child abuse or neglect), for judicial and administrative proceedings, for law enforcement activities, to avert a serious threat to health or safety, for military and veterans activities, for the Department of State's medical suitability determinations, to government programs providing public benefits, and for workers' compensation.  Also, covered entities will continue to be required to account for disclosures that are impermissible under the Privacy Rule, even if those disclosures did not amount to a "breach" under the Breach Notification Rule at § 164.404.

While the proposed rules referenced above may vary when made final, they will require covered entities to re-examine their current practices to comply with the new rules. In addition, covered entities and business associates may need to make modifications to business associate agreements (as well as agreements with subcontractors and other vendors).  The Notice of Privacy Practices also will require modification to explain to individuals these new and modified rights concerning their PHI.

In regard to when action is needed, the rules propose that covered entities (including small health plans) and business associates comply with the modifications to the accounting of disclosures requirement beginning 180 days after the effective date of the final regulation (240 days after publication). As for the right to an access report, the rules propose that covered entities and business associates be prepared to make this available beginning January 1, 2013, for electronic designated record set systems acquired after January 1, 2009, and beginning January 1, 2014, for electronic designated record set systems acquired as of January 1, 2009.

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In a report issued earlier this week, the Office of Inspector General found that the Center for Medicare and Medicaid Services' (CMS) oversight and enforcement actions were not sufficient to ensure that covered entities, such as hospitals, effectively implemented the HIPAA Security Rule.

OIG's recommendation: Continue the compliance review process (audits) that began in 2009 and implement procedures for conducting compliance reviews to ensure that HIPAA Security Rule controls are in place and operating as intended to protect ePHI at covered entities.

To reach this conclusion, OIG audited 7 hospitals throughout the country (locations in California, Georgia, Illinois, Massachusetts, Missouri, New York, and Texas).  These audits focused primarily on:

1. wireless electronic communications network or security measures the security management staff implemented in its computerized information systems (technical safeguards);
2. the physical access to electronic information systems and the facilities in which they are housed (physical safeguards); and
3. the policies and procedures developed and implemented for the security measures to protect the confidentiality, integrity, and availability of ePHI (administrative safeguards).

Significant vulnerabilities identified. The audits identified 151 vulnerabilities in the systems and controls intended to protect ePHI, of which 124 were categorized as high impact. A high vulnerability refers to one that

may result in the highly costly loss of major tangible assets or resources; may significantly violate, harm, or impede an organization’s mission, reputation, or interest; or may result in human death or serious injury.

The report noted that outsiders or employees at some hospitals could have accessed, and at one hospital did access, systems and beneficiaries’ personal data and performed unauthorized acts without the hospitals’ knowledge. Although each of the seven hospitals had implemented some controls, policies, and procedures to protect ePHI from improper alteration or destruction, none had sufficiently implemented the administrative, technical, and physical safeguard provisions of the Security Rule. Clearly, mediocre compliance is not sufficient.  

Some of the more significant vulnerabilities found related to (i) wireless access; (ii) access controls, and (iii) integrity controls. In the case of wireless access problems, the report identified vulnerabilities including ineffective encryption, rogue wireless access points, no firewall separating wireless from internal wired networks, the inability to detect rogue devices intruding on the wireless network, and no procedures for continuously monitoring the wireless networks. Access control problems included inadequate password settings, computers that did not log users off after periods of inactivity, unencrypted laptops containing ePHI, and excessive access to root folders. According to the OIG, these conditions could have led to unauthorized individuals viewing or altering ePHI data on nonclinical workstations that were not automatically logged off after a period of inactivity; ePHI being compromised on lost or stolen unencrypted laptops; and unauthorized users circumventing system controls and harming system files.

The list goes on and on.

The Office of Civil Rights (OCR), the arm of HHS now charged with enforcing the HIPAA security regulations, may be listening. As reported here earlier, OCR appears to be taking steps to improve its enforcement efforts, which likely will include increasing the number of compliance reviews/audits at hospitals and health care providers around the country. These efforts include a request by the agency to increase its budget for 2012 by $5.6 million, or 13.6%, to be aimed at enforcement. 

Because HIPAA now applies to business associates, it would not be surprising to see business associates on an audit list. Accordingly, covered entities and business associates should be taking steps now to ensure compliance.

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Acknowledging the need "to help states combat the growing threat of business identity theft," the National Association of Secretaries of State (NASS) announced on April 18, 2011, the formation of a "Business Identity Theft Task Force." The focus of this task force is to assist states (not necessarily private business) with combating business identity theft in areas such as "the types of technology used by states in housing business documents, solutions for securing state business filing information and records, and key partnerships/liaisons for conducting outreach."

However, this action by the NASS highlights a growing problem for small and medium sized businesses: 

"With the downturn in the economy, the newest victims of identity theft are small and medium-sized businesses, including dormant or inactive companies," said NASS President Mark Ritchie of Minnesota, who serves on the task force. "As the state officials who oversee business registrations and corporate filings, secretaries of state have come together to educate business owners on how they can reduce their chances of falling prey to identity thieves and to explore safeguards for state filing systems." 

Identity thieves are not just attacking state filing systems, so businesses need to take steps of their own to safeguard not only personal information of customers, employees and others, but also the businesses' corporate and financial data. Many of the same principles that apply in the safeguarding of personal information also would apply to safeguarding the information of the business. Two critical steps in this process are conducting a risk assessment and developing a written information security program.

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HHS continues to show signs of increased enforcement of HIPAA. Earlier this month, the agency announced it would hold 2-day, instructor-led HIPAA Enforcement Training courses in 4 locations across the country. Some Attorneys General, such as Connecticut's former Attorney General Richard Blumenthal, have already used their new found authority to enforce HIPAA. This announcement follows two significant, high profile Office of Civil Rights (OCR) press releases touting its own enforcement activities, one involving the first imposition of penalties under HIPAA and the other involving a significant settlement with a Massachusetts hospital. 

The Health Information Technology for Clinical and Economic Health (HITECH) Act (pdf), part of the American Recovery and Reinvestment Act of 2009, gave State Attorneys General the authority to bring civil actions on behalf of state residents for violations of the HIPAA Privacy and Security Rules. The HITECH Act permits State Attorneys General to obtain damages on behalf of state residents or to enjoin further violations of the HIPAA Privacy and Security Rules.

Attendees at each of the HIPAA Enforcement Training sessions will receive instruction on a number of enforcement topics including:

• Investigative techniques for identifying and prosecuting potential violations
• A review of HIPAA and State Law
• The role and responsibility of an Attorney General under HIPAA and the HITECH Act
• Resources available to Attorneys General to pursue alleged HIPAA violations

In addition to training, OCR promises that it will collaborate with and assist State Attorneys General seeking to bring civil actions to enforce HIPAA and Security Rules. This collaboration and assistance will include OCR providing to Attorneys General (i) information upon request about pending or concluded OCR actions against covered entities or business associates related to attorney general investigations, and (ii) guidance regarding the HIPAA statute, the HITECH Act, and the HIPAA Privacy, Security, and Enforcement Rules as well as the Breach Notification Rule.  

While years of lax enforcement may have lulled many HIPAA covered entities and business associates to not take HIPAA seriously, these recent activities should spur renewed efforts toward compliance. 

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The U.S. Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) has imposed its first civil monetary penalty since the Privacy Rule of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) became effective in April 2003. HHS issued a Notice of Final Determination finding that Cignet Health of Prince George’s County, Md., (Cignet) violated the Privacy Rule and imposed $4.3 million in penalties for the violations. The penalty amount is based on the increased penalty amounts authorized by Section 13410(d) of the Health Information Technology for Economic and Clinical Health (HITECH) Act.

In a Notice of Proposed Determination issued Oct. 20, 2010, OCR found that Cignet violated 41 patients’ rights by denying them access to their medical records when requested between September 2008 and October 2009. These patients individually filed complaints with OCR, initiating investigations of each complaint. The HIPAA Privacy Rule requires that a covered entity provide a patient with a copy of their medical records within 30 (and no later than 60) days of the patient’s request. The penalty for these violations is $1.3 million.

During the investigations, Cignet refused to respond to OCR’s demands to produce the records. Additionally, Cignet failed to cooperate with OCR’s investigations of the complaints and produce the records in response to OCR’s subpoena. OCR filed a petition to enforce its subpoena in United States District Court and obtained a default judgment against Cignet on March 30, 2010. On April 7, 2010, Cignet produced the medical records to OCR, but otherwise made no efforts to resolve the complaints through informal means. When Cignet did produce the records, it included certain records of 4,500 unrelated patients.

OCR also found that Cignet failed to cooperate with OCR’s investigations on a continuing daily basis from March 17, 2009, to April 7, 2010, and that the failure to cooperate was due to Cignet’s willful neglect to comply with the Privacy Rule. Covered entities are required under law to cooperate with the Department’s investigations. The penalty for these violations is $3 million.

There are some important lessons from this case for covered entities and business associates (now subject to the same penalty provisions as covered entities):

• HHS appears to have turned the corner - it is willing to impose substantial penalties for Privacy and Security Rule violations under HIPAA.
• Each day that a violation continues can be treated as a separate violation, allowing penalties to add up quickly. Cignet's failure to provide a patient timely access to his records was a violation, and each day that continued was a separate violation. 
• When responding to an HHS investigation concerning patient or participant information, be sure to include only the information being requested, and not that of unrelated persons.
• Most important, be responsive to the agency. The reason for the significance of the penalties was almost certainly due to Cignet's level of cooperation HHS.  

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Written by: Lillian Moon

As employees become more savvy with electronic communications and employers face increasing challenges with controlling vast amounts of data, the circumstances in this recent San Francisco Examiner story are likely being repeated all over the country – employee takes company information to support her wrongful termination case.

As reported by the Examiner, a Human Services Agency of San Francisco employee, after being terminated for performance issues, e-mailed caseload files, containing Medi-Cal beneficiaries’ names, Social Security numbers, and other personal identifying information belonging to 2400 individuals, to her personal computer, two attorneys and two union representatives.

While the facts are not entirely clear from the report, including why the former employee still had access to her former employer’s systems following termination, such a disclosure could have triggered the breach notification requirements under the HIPAA Privacy and Security Rules, and likely did trigger California’s own breach notification laws. With breach notification mandates in almost every state, few employers are immune from the risks of a data breach or the costs that are associated with responding to a breach when it occurs.

As this situation makes clear, employers need to implement written information security programs containing privacy and security policies. These policies should include data breach detection and response procedures and mandate training for all employees. While being mindful of applicable whistle blower protections, employers should remind employees that confidential company and personal information is not to be used or disseminated, except when consistent with the employee’s assigned job responsibilities. In this case, based on the information reported, the entire incident might have been avoided had the former employee's access to the Agency’s systems been terminated.

Employers must continually assess their risks (e.g., examining what information the company has, the nature of that information, how it moves through the organization and to/from its vendors, and the company's current set of safeguards), determine the best methods of protecting the sensitive information they possess, and create a culture of data security and privacy throughout their organizations. This can only be accomplished when data security and privacy are made a priority through clear policies with frequent training and attention. And, of course, when terminating or disciplining employees, employers should expect employees might begin using and disclosing information in a manner that is not permitted, and should take steps to prevent these kinds of disclosures.
 

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The demand for "data breach" insurance appears to be growing based on our experiences, as well as commentary such as a recent article by Pamela Lewis Dolan of American Medical News.

As we've reported, data breach coverage is something quite different than traditional "cyber-risk" coverage which tends to address "hazards such as unauthorized Web site access, online libel, data privacy loss and repairs to company databases after system failures.” According to Ms. Dolan's article, data breach policies tend to cover the cost of notification and credit monitoring for affected persons, public relations expenses to address reputational harm, breach investigation, legal fees and compensatory damages, judgments and settlements. Of course, as with any type of insurance, businesses should seek appropriate advice concerning the scope of coverage they are purchasing.

Ms. Dolan's focus on health care providers is well placed given the recent HIPAA breach notification mandate and the sensitive protected health information such businesses handle. This is particularly true for small health care practices which often do not have the resources to adequately respond to a data breach - for those, a data breach policy could be a wise investment.  It is also true for those businesses that service the health care industry - many of which are business associates that are also subject to HIPAA and its breach notification requirements. 

Beyond HIPAA, breach notification mandates exist in nearly all states in the U.S. and other jurisdictions. So, many businesses can benefit from addressing this risk through insurance as well as adopting policies and procedures to reduce the likelihood of a breach in the first place. In this connection, Ms. Dolan is also wise to report that data breach insurance doesn't absolve health care practices or any other business for that matter from implementing safeguards to protect personal information or protected health information. Various federal and state laws require to one degree or another businesses to adopt "written information security programs" to safeguard personal information.

This is much like protecting your building/office space from fire damage - you have fire insurance, but you also have a plan to safeguard critical assets and exit the building!

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Co-authored with Marty Payson

The combination of “social media” and the “workplace” raises many traps for the unwary employer:

Can we use social media when hiring? Can employees be prohibited from using social media at work? Can we monitor employees use of social media? What are the essential elements of a social media policy?

As with many issues involving new technology, however, a good part of the analysis typically reverts back to traditional principles of employment law. The same is likely to be true when the use of social media intersects with certain aspects of Labor Law.

Section 7 of the National Labor Relations Act states:

Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all such activities except to the extent that such right may be affected by an agreement requiring membership in a labor organization as a condition of employment as authorized in section 8(a)(3) [section 158(a)(3) of this title].

An employer violates NLRA Section 8(a)(1) by acts and statements reasonably tending to interfere with, restrain, or coerce employees in the exercise of their Section 7 rights. Thus, employers need to remember to consider existing labor principles issues when adopting and enforcing social media policies, discussing social media usage with employees and monitoring usage, and disciplining employees because of their social media usage.

In a recent case (Salon/Spa at Boro, Inc. 9-CA-45349, 9-CA-454426, 9-CA-45538), employees claimed their manager unlawfully threatened them concerning their social media usage. The manager impressed upon the employees that their postings on social networking sites were perhaps more available for public viewing than they realized, and expressed displeasure that certain current employees were choosing to post comments on social network sites belonging to disgruntled former employees. In addition to agreeing with the employer’s statute of limitations arguments, the Administrative Law Judge found the purpose of the manager’s statements concerning publicity to be didactic, not coercive. In regard to the statements about postings on sites belonging to disgruntled employees, the ALJ found no threats, but rather a lawful expression by an employer of opinion, citing NLRB v. Gissel Packing Co., 395 U.S. 575, 617 (1969).

A nonbinding Advice Memorandum from the National Labor Relations Board in Sears Holdings (Roebucks) Case 18-CA-19081 addressed a social media policy and whether it violated Section 7 of the NLRA. The policy stated:

In order to maintain the Company’s reputation and legal standing, the following subjects may not be discussed by associates in any form of social media:

• Company confidential or proprietary information

• Confidential or proprietary information of clients, partners, vendors, and suppliers

• Embargoed information such as launch dates, release dates, and pending reorganizations

• Company intellectual property such as drawings, designs, software, ideas and innovation

• Disparagement of company’s or competitors’ products, services, executive leadership, employees, strategy, and business prospects

• Explicit sexual references

• Reference to illegal drugs

• Obscenity or profanity

• Disparagement of any race, religion, gender, sexual orientation, disability or national origin

The Division of Advice held that while the provision concerning disparagement of the company’s executive leadership, employees, and strategy could “chill” Section 7 activity, the policy should be viewed in context, not by looking at any provision in isolation. The Division of Advice reasoned that the policy does not apply to Section 7 activity because while the statement “could chill the exercise of Section 7 rights if read in isolation, the Policy as a whole provides sufficient context to preclude a reasonable employee from construing the rule as a limit on Section 7 conduct.” This is because virtually all of the other items on the list of proscribed activities in the policy are clearly not protected by Section 7.

These two decisions provide some good news for employers. The bad news is that both of these decisions were made before the significant changes in the make-up of the National Labor Relations Board following Barack Obama’s becoming President. Many believe the current composition of the NLRB is likely to substantially change these results, requiring employers to exercise more care in how they handle social media issues from a labor relations perspective. There also are related issues that may be revisited by the NLRB in the near future, such as Board’s decision in Guard Publishing Co., d/b/a The Register-Guard, 351 NLRB 1110 (2007) (pdf), that a policy prohibiting use of the employer's e-mail system for any "non-job-related solicitations" does not violate the §8(a)(1).

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Beginning March 1, 2010, businesses will be required to safeguard from identity theft and other dangers personal information about Massachusetts residents under a “written information security program” or WISP. Similar requirements exist in other states around the country, although those requirements generally are not as comprehensive as those becoming effective in the Bay state.

Our complimentary webinar is designed to help employers and businesses become compliant. The program will cover:

• the emergence of data security mandates across the country,
• the Massachusetts approach to data security – breach notification, data destruction, the nuts and bolts of the identity theft/data security regulations, and
• best practices when creating a WISP.

We hope you enjoy the webinar.

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