Ask the average person what they know about Bitcoin and they might be able to tell you that it is a digital currency. Most have probably heard the name mentioned in articles about its giant fluctuations in value or in connection with black market internet transactions. Beyond that, how Bitcoin actually operates remains relatively unknown to the general public. Public opinion of Bitcoin varies wildly and headlines range from “Bitcoin is Flawed, But It Will Still Take Over the World” to “Welcome to 21st-century Ponzi scheme: Bitcoin.

Recent problems with one of the largest Bitcoin exchanges provides some validation for people’s hesitancy to jump into the world of digital currencies. But it is important to remember that Bitcoin and other so-called “crypto currencies” are a new technology and their prevalence is growing – rapidly. In its 2013 Annual Report to Congress, the Taxpayer Advocate Service, an independent organization within the IRS, noted:

In the four months between July and December 2013, Bitcoin usage has increased by over 75 percent – from about 1,700 transactions per hour to over 3,000. Over the same period, the market value of bitcoins in circulation increased more than ten-fold from about $1.1 billion to $12.6 billion.

The allure of lower transaction costs and publicity has also allowed Bitcoin to gain a footing in the business world. Expensify, an online expense reporting company, even allows its client businesses to reimburse their employees with bitcoins.

While this post is not intended as an in-depth discussion of how Bitcoin or any other crypto currency works, a basic understanding is needed to know why it could be important to your organization and employees.

Bitcoins may be exchanged over the internet, but they are not digital credits to some online account. Commentators usually analogize bitcoins to cash or gold, meaning there is an aspect of possession. Bitcoins are held in “wallets” and there are three general types: desktop, mobile, and web-based. Different wallet applications have different features. Some wallets will only store the bitcoin on the device, where others may have web-based backup. To put it more simply, if you have not taken precautions and lose your Bitcoin wallet, you lose your bitcoins. A quick internet search will turn up a number of sad stories about people who tossed out their old computers now worth millions.

As the prevalence of digital currencies increase, so does the chance that an employee may be storing bitcoins on his or her mobile device. That same mobile device might also contain an employer’s sensitive data. So what should an employer do if an employee calls to say, “I lost my phone, and by the way, my Bitcoin wallet has $1,700 in it?”

A common practice by employers to protect confidential information when an employee loses a company mobile device is the “remote wipe.” A remote wipe is typically executed by a system administrator by sending an email to the employee’s account. In some cases, a remote wipe will simply terminate access to company email and other applications. More commonplace, however, is that the system administrator is hitting the reset button, erasing all data from the phone and returning the device to the original factory settings as if it were just pulled out of the box. Unless an employee is running a wallet application with backup protocols or has taken other prudent security measures, an employer may be deleting its employee’s bitcoins in an effort to prevent unauthorized access to confidential company data.

Bitcoin is illustrative of the problems that employee property on either company or bring-your-own-device phones might create because there is an ascertainable value. But family photos, personal notes, and downloaded media also have value to employees. Rather than taking a wait-and-see approach to how the law may develop relating to issues surrounding the deletion of employee property stored on their phone, employers should be proactive and take the time to review their mobile device policies. Although employees may have notice that a remote wipe is possible, they should also be advised that it is their responsibility to backup and protect their personal property, including their “wallets.”

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.