On February 22, 2010, the Office of Civil Rights (OCR) posted on its website its first list of covered entities that have reported breaches of unsecured protected health information affecting more than 500 individuals. OCR acknowledged the HITECH Act requires HHS to make this information public by posting it on an HHS website.

The breach notification rule became effective on September 23, 2009. In short, as we reported previously, the rule requires covered entities to provide notification of breaches of unsecured protected health information directly to the Secretary of HHS, as well as to the affected individuals. Breaches that affect 500 or more individuals must be reported to HHS within 60 days, and covered entities must provide this notification via the online form on the OCR website.

Of course, covered entities need to be aware that breaches reported to HHS will be made public on its site. Some states, such as Maryland and New Hampshire, have had a similar policy in effect for some time for breaches of personal information affecting residents of their states.

Based partially upon an interpretation of Florida law, in Global Policy Partners, LLC, et al. v. Yessin, 2009 U.S. Dist. LEXIS 112472 (Nov. 24, 2009), a Virginia district court has ruled that an LLC’s partner does not always have the authority to access a partner’s e-mails simply by virtue of his status in the company.

Katherine and Brent Yessin, husband and wife and business partners, were feuding as part of a messy divorce and business dissolution. Mrs. Yessin, on behalf of herself and the Florida business, brought suit against Mr. Yessin for his alleged illegal access of her personal e-mails, including those containing attorney-client communications in her divorce case, stored on the company’s server in violation of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. §1030(a), and other federal and state statutes. In a motion to dismiss his wife’s complaint, Mr. Yessin argued that under Florida law, as a manager/partner in his business, he had the authority to access all e-mails stored on the business’s computer server regardless of his reason for doing so. The court disagreed.

The court found that even assuming Florida law authorized managers to access e-mail information stored on a company’s computer system, authorization is limited to carrying out the company’s business. Likewise, under the CFAA, authorization to access a computer system may not simply be based on a person’s status within the organization, but whether the person is accessing information in accordance with the “expected norms or intended use” of the computer network. Because the scope of Mr. Yessin’s authority to access his wife’s e-mails depended upon a detailed factual inquiry into his purposes for doing so, Mr. Yessin’s motion to dismiss the CFAA counts of the complaint was denied and Mrs. Yessin was allowed to proceed in her action.

Caution for employers: This decision has implications for employers in how and why managers may access employee e-mails. While an employer generally has the right to review stored e-mails on the employer’s system, regardless of whether the e-mails are an employee’s personal or business communications, the employer or employer’s agent must have a legitimate business purpose for such review, not a nefarious reason. Note, however, that, some courts have limited an employer’s ability to review an employee’s e-mails in other situations, such as when the e-mail is subject to the attorney-client privilege. Employers’ policies and procedures for accessing employee e-mails should be periodically reviewed and revised, where necessary, to ensure that the individuals who access lawfully stored e-mails not only have the appropriate status within the company, but also are doing so for legitimate business purposes.

It’s been around for a while, but could new products in the “cyber-insurance” market help companies focus on this emerging threat known as “information risk”?

The National Journal reports that for many companies online security is not a priority. Tom Risen’s article cites to a Verizon study conducted between 2004 and 2008 (pdf) that determined

75 percent of breaches were not discovered by the victimized organization, and that 87 percent could have been prevented with reasonable online protection.

Mr. Risen reports that historically cyber-insurance covered “hazards such as unauthorized Web site access, online libel, data privacy loss and repairs to company databases after system failures.” However, with the explosion of data breaches over the last 10 years or so, new, broader policies have emerged, covering costs related to responding to a data breach, such as sending notices, providing credit monitoring services, engaging legal counsel, employing a call center, and defense of claims by affected individuals and federal and state officials. Some companies in this space include Beazley, Chartis, Travelers, Chubb and others.

It may be, as Robert Parisi of Marsh suggested to Mr. Risen, that federal legislation might encourage more awareness of these issues, something we raised as well. Certainly, we are beginning to see greater attention to these issues as businesses are beginning to focus on the Massachusetts data security/identity theft regulations, which become effective March 1, 2010.

Whatever the driving force, businesses need to drill down on their data security needs and address their information risk. Preventive measures – in the form of a written information security program – are certainly necessary and appropriate. But it may not be enough. As anyone who drives knows, for example, it is not enough to drive carefully and wear a seat belt. Insurance can play a critical role in addressing risks that even the best safeguards can’t. For this reason, cyber-insurance should be considered as a part of any business’ comprehensive approach to information risk. 

A recent case emphasizes that employers must ensure they do not make improper medical inquiries related to pre-employment drug test results at the pre-offer stage. John Harrison v. Benchmark Electronics, Inc., No. 08-16656, 2010 App. LEXIS 632 (11th Cir. Jan. 11, 2010). Some valuable lessons for employers are discussed below.

The Eleventh Circuit Court of Appeals permitted an applicant who was not hired after testing positive for drugs used to control his epilepsy to proceed with his lawsuit asserting claims under the Americans with Disabilities Act because there were factual issues whether the employer made an improper medical inquiry and denied employment on that basis.

Continue Reading ADA Confidentiality: Drug Test Results May Not Be Used Against Applicant at Pre-Offer Stage

On January 29, 2009, I had the opportunity to attend a brief presentation sponsored by Minnesota CLE entitled, “Corporate Data Privacy & Security: 10 Legal Practice Tips,” given by Brad Bolin, Senior Corporate Counsel for Best Buy, Inc. a Fortune 500 electronics retailer headquartered in Richfield, Minnesota. Bolin is a specialist in information security and privacy law. I was curious to hear what data privacy issues were on the mind of someone who monitors these issues for a living on behalf of a large corporation, especially a company that sells some of the very devices that make data privacy more challenging and which is known for its “results oriented” work environment. Many of the issues relate to topics discussed on this blog. The views expressed were strictly those of Bolin, not Best Buy. Here were his observations:

1. Work/Life Balance.  Electronic connections are collapsing the distinctions between work and personal life. Employees expect to be connected 24 -7. Bolin quoted Best Buy CEO Brian Dunn as noting, “Technology is … a constant backdrop in people’s lives, at home, at work, on the road and literally in the palms of their hands. We call it the ‘connected world’ and, as exciting as it is, it’s also increasingly complex, and difficult to keep pace with.”

12259312. Smart Phones Part 1.  Smart phones are becoming common and are a great example of how the “limited personal use” exception is swallowing the rule. He cited a survey showing that 20% of companies allow their employees to use personal devices for work, and the number is surely growing. Bolin discussed how under the old corporate model, a company that pays for an employee’s smart phone ought to take it back from the employee upon his or her departure, erase the contents and either recycle or reuse the device to prevent the disclosure of confidential corporate information. But what about the employee’s personal photographs, “apps”, movies, contacts and downloaded songs? What if the employee paid for the device but the company reimburses the cost? Securing employee-owned smart phones is not the same as securing corporate-owned devices, he emphasized.

3. Smart Phones Part 2.  Bolin said that, whatever rules you choose, a departing employee should be able to take his or her personal data, while IT should be able to ensure that any corporate information has been safely removed. The process should be simple and transparent to all. Adopt simple rules that make corporate data on an employee’s smart phone easier to identify and control. For example, distinguish between media files on the one hand, and xls doc, ppt, and pdf documents on the other. Have a transparent dialog with employees about the trade-offs that exist cost when placing personal phones on the corporate network. For example, an employee might be required to archive SMS text messages on his phone for e-discovery purposes.

4. Texting Issues.  While e-mail typically is stored on a common server, text messages usually are stored by cell phone companies or directly on phones, and often the employer does not directly pay for their storage. Employers must have either a warrant or the employee’s permission to see cell phone text messages that are not stored by the employer or by someone the employer pays for storage, Bolin said, citing Quon v. Arch Wireless, et al. 529 F.3d 892 (9th Cir. 2008),  The case is now under review by the United States Supreme Court.

5. TMI = Too much information.  An embedded Global Positioning System (GPS) feature is great for supporting and measuring effectiveness of a mobile sales force, but it raises the danger of collecting information about employees regarding the personal part of their life.

Continue Reading Best Buy Counsel Speaks on Data Privacy

Effectively managing company data means more than HIPAA compliance and avoiding data breaches. As two of my colleagues Brett Anders and Cliff Atlas would tell us, failing to preserve electronic evidence can jeopardize a company’s litigation strategy. Their recent article discusses a new decision that illustrates the kind of sanctions litigants could suffer even where the failure to preserve appropriate information was not the result of an intentional act, but was merely negligence.

The Hon. Shira Scheindlin, whose decisions have been perhaps the most influential in the area of e-discovery, wrote the decision in Pension Committee of the Univ. of Montreal Pension Plan v. Banc of America Securities, LLC, No. 05 Civ. 9016 (S.D.N.Y. Jan. 15, 2010) (pdf). The plaintiffs in the case failed to issue litigation hold notices until 2007, even though the litigation commenced in February 2004. The sanctions were significant:

  • attorney’s fees and costs incurred by the defendants in bringing their motion,
  • costs of discovery relating to uncovering the facts of the wrongdoing, and
  • a jury instruction highlighting certain of the plaintiffs’ gross negligence in complying with discovery and explaining how the jury can conclude that an adverse inference should be drawn against those plaintiffs.

So, not only was there a direct monetary sanction, but the court made it more difficult for the plaintiffs to win their case. Brett and Cliff provide the following tips for managing e-discovery obligations, which they expand upon in their article:

  • For plaintiffs, anticipate litigation well before the case is filed and take appropriate steps then to preserve the appropriate information.
  • Cast a wide preservation net so that you collect records from all employees, even those with only a passing encounter with the issues in the litigation.
  • Back up tapes can be critical when “they are the sole source of relevant information or when they relate to key players, if the relevant information maintained by those players is not obtainable from readily accessible sources.”
  • Make sure those preserving the data understand what they need to do and are appropriately supervised.
  • Maintain a litigation hold policy and plan ahead!

As we have discussed before, data breach notification is one of the most rapidly emerging areas of law. Good security incident procedures as well as effective training can help avoid the risk of data breach. (Sample data breach training). 

A case in point: Connecticut’s Attorney General has filed a civil action against Health Net of the Northeast Inc. (“Health Net”) for failing to secure approximately 446,000 individuals’ patient information on a missing portable computer disk drive, and for failing to provide prompt notice of the breach. Among other things, the suit alleges Health Net violated the Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health (HITECH) Act, when it failed to provide prompt notice, failed to encrypt the data, failed to provide for and implement appropriate policies to safeguard the information, and failed to supervise and train its workforce on safeguarding protected health information and personal information. 

As this suit demonstrates, state Attorneys General will use the authority granted by HITECH to enforce the privacy and security protections of HIPAA for protected health information, as many breaches involving such information may not be covered by state data breach laws. Such enforcement will only add to the cost of a data breach, which, according to the 2009 Ponemon Institute Annual Cost of a Data Breach study, continues to rise.

While a company’s first line of defense always should be a comprehensive data security policy, preparation should include an effective security incident procedure. Several key questions, some of which will form the foundation for any good security incident procedure, must be answered immediately following a breach: 

  • How did the breach occur?
  • Are measures in place to contain the breach?
  • What information was compromised? 
  • Whose information was compromised?
  • Will the local authorities be alerted?
  • What potential breach notice laws are implicated?
  • Does notice of the breach have to be provided?
  • If so, to whom and how will notice be provided?
  • Does the company have applicable insurance to cover the notification process?
  • Will any monitoring service be provided for affected individuals?
  • Are measures in place for public relations implications?

However, a security incident procedure is only as strong as the awareness you create among your employees as to what constitutes a data breach and who to notify in the event of a possible breach. Therefore, in addition to an effective security incident procedure, it is essential that training, like the sample above, be provided to employees on a regular basis.   

While most are not taking the day off, January 28 is recognized internationally as Data Privacy Day – a day for people to become more aware of and promote data privacy related issues.

Many organizations support these initiatives and some have created and contributed to a website to promote this day and data privacy and security generally. This website provides a wealth of information and resources related to data privacy in all facets of our lives.

Of course, our focus is on employers and we encourage all employers to use this day as an opportunity to focus on this emerging issue and create awareness in their organizations.

Less than one month into 2010 the trend to address data security, destruction, and encryption has continued among state lawmakers. Specifically, Florida, Michigan, Kentucky, Kansas, Pennsylvania, and New York all have introduced, reintroduced, or amended legislation of this kind. 

  • The Florida and Michigan laws would amend personal data destruction rules for companies.
  • The New York law would mandate data security and encryption measures.
  • The Kentucky bill would require government agencies to protect all personal data under the Gramm-Leach-Bliley Act.
  • The Michigan bill includes a state version of the Federal Trade Commission’s Red Flags Rule and would require creditors in the state to implement programs aimed at spotting “red flags” of possible identity theft and put in place mitigation measures. Michigan is also considering a number of other measures. 
  • The Kansas law would require state agencies to engage in periodic network security reviews.
  • The Pennsylvania bill would require public agencies to notify state residents of a breach of their personal information within seven days of the discovery of the breach.

While 5 states remain without data breach notice bills (Alabama, Kentucky, Mississippi, New Mexico, and South Dakota), Congress is considering legislation, the Data Accountability and Trust Act (DATA) (H.R. 2221), that would preempt all state notification laws and instead establish a national breach notice standard.

As we have previously mentioned, we anticipate data privacy and security legislation and case law to be at the forefront of legal issues in 2010. Employers should begin by reading the Data Security Primer and consider implementing comprehensive data security policies and procedures that would allow them to comply with the various state laws that may impact their business. 

Continue Reading Data Security, Destruction and Encryption Leads the Way for States in 2010

We all are deeply saddened by the tragic situation in Haiti. Many are motivated to help in any way they can, which usually means donating to charities that are able to more effectively bring relief to the suffering. At the same time, many see this as an opportunity to commit identity theft.

CBS News and TBG Fraud Solutions remind us to be aware of charity fraud and donate carefully.

In connection with the earthquake with in Haiti, the FBI suggests the following steps to avoid charity fraud:

  • Do not respond to any unsolicited (spam) incoming e-mails, including clicking links contained within those messages.
  • Be skeptical of individuals representing themselves as surviving victims or officials asking for donations via e-mail or social networking sites.
  • Verify the legitimacy of nonprofit organizations by utilizing various Internet-based resources that may assist in confirming the group’s existence and its nonprofit status rather than following a purported link to the site.
  • Be cautious of e-mails that claim to show pictures of the disaster areas in attached files because the files may contain viruses. Only open attachments from known senders.
  • Make contributions directly to known organizations rather than relying on others to make the donation on your behalf to ensure contributions are received and used for intended purposes.
  • Do not give your personal or financial information to anyone who solicits contributions: Providing such information may compromise your identity and make you vulnerable to identity theft.