Amendments to Data Breach Notification Statute in Maryland Take Effect January 1, 2018

Amendments to the Maryland Personal Information Protection Act took effect January 1, 2018. The amendments primarily expand the definition of what constitutes “personal information” and include specifications regarding notification procedures in the event of a breach.

Prior to the amendments taking effect, the definition of “personal information” was limited to an individual’s first name or first initial and last name in combination with the following information when not encrypted or otherwise protected to make it unreadable or unusable: a social security number; a driver’s license number; a financial account number, including a credit card number or debit card number, in combination with any security or access code or password that would permit access to the individual’s financial account; or an individual taxpayer identification number. Under the amendments, the definition of “personal information” has been expanded to include: a taxpayer identification number, passport number, or other identification number issued by the federal government; a state identification card number; health information, including information about an individual’s mental health; a health insurance policy or certificate number or health insurance subscriber identification number that, in combination with “a unique identifier used by an insurer or an employer that is self-insured,” permits access to the individual’s health information; biometric data generated by automatic measurements of an individual’s biological characteristics, such as fingerprint, voice print, genetic print, retina or iris image, or other unique biological characteristic that can be used to authenticate the individual’s identity; and a user name or email address in combination with a password or security question and answer that permits access to an individual’s email account. The amendments define “health information” as any information protected by the Health Insurance Portability and Accountability Act (“HIPAA”).

Previously, the statute imposed requirements on businesses when destroying a customer’s “personal information.” Now the amendments apply those procedures to the destruction of “personal information” for current and former employees too.

Another significant requirement of the amendments is the time within which notification must be provided when there is a data breach. Previously, a business had to provide notification “as soon as reasonably practicable” after it determined a misuse of personal information has occurred or is likely to occur as a result of a data breach. Now the amendments require a business to provide notice to affected individuals if it determines that a data breach “creates a likelihood that personal information has been or will be misused” and the notification must be given “as soon as reasonably practicable, but not later than 45 days after the business concludes” its investigation into a suspected data breach. Similarly, when a business “maintains computerized data that includes personal information of an individual residing in [Maryland] that the business does not own or license,” the business also shall notify the owner or licensee of the personal information of the breach as soon as practicable, but no later than 45 days after discovering the breach. There are certain limited exceptions where the notification can be delayed.

Lastly, the amendments also include an alternative notification procedure when a data breach involves only information that permits access to an individual’s email account. In that case, the company may provide notice that directs the individual whose personal information has been breached to promptly: (1) change the account password and security question or answer; or (2) take other steps “appropriate to protect the email account” and “all other online accounts for which the individual uses the user name or email and password or security question or answer.” If the notice given to the affected individuals is to be given electronically, there are certain limitations on when/how that notice can be provided, namely that the notice be “clear and conspicuous” and “delivered to the individual online while the individual is connected to the affected email account from an Internet protocol address or online location from which the business knows the individual customarily accesses the account.”

With data breaches becoming more common, it is important that businesses understand their obligations in the event of a breach. With requirements varying by state, as well as at the federal and international level, it is important to conduct a comprehensive review of potentially applicable laws so that businesses understand how to respond, not only substantively but procedurally and timely, in the event of a data breach. With respect to companies affected by the Maryland Personal Information Protection Act, it is important to keep in mind that this post focuses on the amendments that took effect earlier this year and there are additional obligations for companies to follow in terms of data protection that were in effect prior to the amendments.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585 or Amitis Darabnia at adarabnia@hwlaw.com or (410) 260-6592.

DISCLAIMER: This Blog/Website is for educational purposes and to provide readers with general information about developments in the law. This Blog/Website is not intended and should not be relied on for legal advice. This Blog/Website does not constitute an advertisement for legal services and it does not endorse, promote, or recommend the products, services, or websites of any third party. Reading, reviewing, or any other use of this Blog/Website does not create an attorney-client relationship between the reader and the firm or any attorney at the firm.

Court Grants Summary Judgment to Association That Did Not Sue Its Former Law Firm Pursuant to a Prior Settlement Agreement

In Hanrahan v. Wyndham Condominium Association, Inc. , Case No. 13-C-16-109204, a case defended by Hyatt & Weber attorneys Stephen Stern and Amitis Darabnia, the Circuit Court of Maryland for Howard County granted summary judgment to Wyndham Condominium Association, Inc. (“Wyndham”), and dismissed an eight count complaint (that, as a practical matter, asserted ten different causes of action). This lawsuit was premised on multiple prior lawsuits between the parties (the Plaintiffs being Brian and Judith Hanrahan) dating back as much as ten years. The case involved claims for breach of contract, intentional misrepresentation, abuse of process, violations of the Maryland Consumer Debt Collection Act (“MCDCA”), and defamation.

The primary dispute between the parties involved a claim for breach of a settlement agreement, which raised a number of complicated issues involving contract interpretation, legal ethics/public policy, and the interpretation/enforceability of releases. The settlement agreement included a provision that stated Wyndham will “promptly . . . commence litigation against . . . [its] Prior Counsel [with] the goal of recovering legal fees paid by Wyndham to [P]rior [C]ounsel and to obtain any other relief that may be available against . . . Prior Counsel.” The settlement agreement also stated that Wyndham “will pursue the New Lawsuit to trial so long as it obtains legal representation . . . on a 100% contingency basis.” The settlement agreement further provided that Wyndham “will not voluntarily enter into any settlement . . . unless such settlement obtains a gross value of $800,000.” In the event that Wyndham breached the settlement provision, there was a liquidated damages provision that included a formula that would result in a payment to the Plaintiffs of approximately $207,000. The settlement agreement called for the attorney who represented the Plaintiffs in the settled lawsuit to become Wyndham’s counsel in the New Lawsuit against Wyndham’s prior counsel. The settlement agreement additionally provided that “in the event that [the attorney who will be representing Wyndham] is . . . not willing or able to proceed, Wyndham agrees to make diligent efforts to obtain other counsel to proceed.” The settlement agreement included mutual releases of “any liability . . . losses, damages or causes of action of whatsoever kind and nature.”

After nearly three years of Wyndham not filing a lawsuit against its former attorneys, the Plaintiffs filed the instant lawsuit against Wyndham, claiming breach of contract. The Plaintiffs further claimed that the alleged breach equitably tolled their release of claims and permitted them to file a number of other claims that were available to them at the time the settlement agreement was entered into – namely abuse of process and two MCDCA claims. The original complaint included three causes of action for defamation, but the court dismissed those claims in response to Wyndham’s motion to dismiss based on the applicable statute of limitations having expired. The Plaintiffs subsequently amended their complaint to add three (as a practical matter, five) new claims for defamation.

On the day that trial was to begin, the court held a hearing to address Wyndham’s motion for summary judgment, which sought dismissal of the entire case. In a lengthy oral opinion that was stated on the record after the court conducted a hearing for several hours, the court granted Wyndham’s motion for summary judgment in its entirety.

The court spent most of its time addressing the complex issues raised by the breach of contract claim. The court started its analysis by noting that there are essentially two arguments regarding the alleged breach: (1) that Wyndham did not file a lawsuit “promptly” and (2) that Wyndham did not exercise “diligent efforts” after its attorney withdrew as counsel. The court found that neither of those arguments had merit.

With respect to the “promptness” argument, the court noted that “prompt” could take on various meanings, but it must account for an attorney to exercise his/her duty of competence to investigate and evaluate a claim to avoid the filing of a frivolous lawsuit. In this case, the attorney who initially represented Wyndham represented Wyndham for nearly two years and, at the time he withdrew as counsel, he had determined that there was not enough of a basis upon which he could proceed. The court also noted that the statute of limitations should be accounted for when evaluating what is “prompt” and part of acting “promptly” in this case was out of Wyndham’s control in that the speed with which Wyndham would act, if at all, was largely in the attorney’s control.

As for the “diligent efforts” argument, the court noted that it could not find any standard under Maryland law that articulated what constituted “diligent efforts.” The court, however, located a journal article that compared “diligent efforts” to “best efforts” and the article contended that summary judgment should rarely be granted in “best efforts” cases, as what constituted “best efforts” typically is a fact issue for the jury. Despite the article’s position on summary judgment with respect to “best efforts” or “diligent efforts” cases, the court found that the standard requires good faith and diligence and those standards were satisfied in this case. The court specifically noted that Wyndham’s new outside General Counsel, Andrew Robinson, was tasked with finding a replacement for the attorney who withdrew from representation. Robinson contacted multiple attorneys in this endeavor and they all said they would not represent Wyndham in the lawsuit it was supposed to file against its former law firm. This alone was sufficient for the court to conclude that Wyndham engaged in “diligent efforts” to replace its counsel. The court, however, also noted that some of the contract’s unique provisions should be accounted for when determining what was “diligent” in this case. For example, although the court stated it would not rule on Wyndham’s public policy arguments regarding the enforcement of certain provisions of the settlement agreement, the court noted there were a number of provisions in the settlement agreement that raised “red flags” (i.e., ethical issues) for an attorney representing Wyndham in a lawsuit against its former law firm and it was understandable that Wyndham might have had difficulty finding another attorney to represent it in a lawsuit against its former law firm.

Even if the Plaintiffs could establish that Wyndham breached the settlement agreement, the court found that they could not establish damages. The claim for damages against Wyndham’s former law firm appeared to be premised on excessive attorneys’ fees allegedly being charged to Wyndham. To establish that Wyndham’s former law firm charged Wyndham excessive or unreasonable attorneys’ fees, the court concluded that the Plaintiffs would need an expert witness to testify what constitutes reasonable attorneys’ fees under the circumstances. The Plaintiffs’ designated expert, however, was not designated for that purpose. Thus, the Plaintiffs could not establish damages (or that Wyndham would have won the case against its former law firm) even if they were able to establish a breach. Thus, the court dismissed the breach of contract claim for this reason as well and, by dismissing the breach of contract claim, the court necessarily dismissed the intentional misrepresentation claim (which concerned the same contract).

As for the abuse of process and MCDCA claims, the court held that the statute of limitations and the release in the settlement agreement barred each of these claims, as the alleged facts underlying each of these claims occurred more than three years before the original complaint was filed and those claims were based on events that occurred before the settlement was entered into (on or about November 1, 2013). The court rejected the Plaintiffs’ equitable tolling argument, finding that equitable tolling would apply only if there is a breach of the settlement agreement. The court also noted that it could not find any case law where a release was tolled and, even if equitable tolling could apply to a release, there are public policy concerns for such an application that might incentivize frivolous lawsuits. The court further found that even if the release could be equitably tolled, there would be no equitable tolling in this case. In this regard, there was a severability provision in the settlement agreement and the court found that the liquidated damages clause in the litigation section of the settlement agreement was a standalone provision, meaning that the remedy in the event of a breach of the settlement agreement would not be to void the release, but that the Plaintiffs could sue to recover the amount of the liquidated damages provision. The court also found that the abuse of process claim and MCDCA claims failed for other reasons that are beyond the scope of this post.

Lastly, the court granted summary judgment to Wyndham with respect to all five allegedly defamatory statements. The court found that the statements were not defamatory in the context in which they were made and, even if they were, a qualified privilege applied to at least some of the statements. In addition, the court found that there was no evidence that four of the five alleged defamatory statements were made by anyone who was acting within their scope as a Wyndham Board member or at the direction of Wyndham’s Board.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585 or Amitis Darabnia at adarabnia@hwlaw.com or (410) 260-6592.

DISCLAIMER: This Blog/Website is for educational purposes and to provide readers with general information about developments in the law. This Blog/Website is not intended and should not be relied on for legal advice. This Blog/Website does not constitute an advertisement for legal services and it does not endorse, promote, or recommend the products, services, or websites of any third party. Reading, reviewing, or any other use of this Blog/Website does not create an attorney-client relationship between the reader and the firm or any attorney at the firm.

Sixth Circuit Holds Title VII Prohibits Transgender or Transitional Status Discrimination

In E.E.O.C. v. R.G. & G.R. Harris Funeral Homes, Inc. , — F.3d –, No. 16-2424, 2018 WL 1177669 (6th Cir. Mar. 7, 2018), the United States Court of Appeals for the Sixth Circuit held that discrimination on the basis of transgender or transitional status constitutes discrimination on the basis of sex in violation of Title VII of the Civil Rights Act of 1964, as amended (“Title VII”).

The plaintiff, Aimee Stephens, was formerly known as Anthony Stephens. She worked for R.G. & G.R. Harris Funeral Homes, Inc., which was a closely held for profit corporation. Stephens was terminated from employment shortly after she advised the owner of the funeral home that she intended to transition from male to female and would represent herself as a woman at work, including dressing as a woman. The federal district court recognized a claim for discrimination based on failing to conform to sex stereotypes, but the district court ruled that Stephens could not advance an alternative theory of sex discrimination based on her transgender or transitional status. The Sixth Circuit affirmed the district court’s decision with respect to sex stereotyping claim, but devoted much of its lengthy opinion to the issue of transgender/transitional status discrimination.

The EEOC and Stephens argued that transgender discrimination is based on non-conformance of an individual’s gender identity and appearance based on sex-based norms and expectations, which constitutes a form of sex discrimination. The funeral home argued that transgender status refers to one’s self-assigned gender identity, not that person’s sex, and therefore does not constitute sex discrimination. The Sixth Circuit found that the EEOC and Stephens had the better argument for two reasons.

First, the Sixth Circuit found that it is “analytically impossible to fire an employee based on that employee’s status as a transgender person without being motivated, at least in part, by the employee’s sex.” While the funeral home argued that its decision to terminate Stephens’ employment was based on her refusal to comply with the company’s dress code for men, the court framed the question as “whether Stephens would have been fired if Stephens had been a woman who sought to comply with the women’s dress code.” The court concluded that the answer “obviously is no” and, thus, “confirm[ed] that Stephens’[] sex impermissibly affected [the company’s] decision to fire Stephens.” The court buttressed its conclusion by comparing the case before it to a case where an employee was fired after the employee converted from one religion to another and the court found the termination constituted discrimination “because of religion” in that discrimination because of religion “easily encompasses discrimination because of a change in religion.” (emphasis added by court).

Second, the Sixth Circuit concluded that “discrimination against transgender persons necessarily implicates Title VII’s proscriptions against sex stereotyping.” In this regard, the court noted that a transgender person is someone who “fails to act and/or identify with his or her gender” – “i.e., someone who is inherently ‘gender non-conforming.’” As a result, the Sixth Circuit concluded that “an employer cannot discriminate on the basis of transgender status without imposing its stereotypical notions of how sexual organs and gender identity ought to align.” “There is no way to disaggregate discrimination on the basis of transgender status from discrimination on the basis of gender non-conformity, and we see no reason to try.”

The funeral home also asserted other defenses beyond the viability of a claim premised on transgender status. One of those defenses was the ministerial exception under Title VII. In order for the ministerial exception to bar a claim, the employer must be a religious institution and the employee must have been a ministerial employee. Although the ministerial exception is not limited to a church, diocese, synagogue, or any entity operated by a traditional religious organization, to qualify for the exception, the institution must be “marked by clear or obvious religious characteristics.” The court found that the funeral home, however, had no religious characteristics. In this regard, the funeral home did not purport to “establish and advance” Christian values, it was not affiliated with any church, its articles of incorporation did not avow any religious purpose, its employees are not required to hold any particular religious views, and it served people of all religions. The fact that the funeral home’s mission statement stated that “its highest priority is to honor G-d in all that we do as a company and as individuals” was not sufficient to overcome the absence of the many other indicia of being a religious institution. Even if the funeral home could establish that it was a religious institution, Stephens was not a “ministerial employee,” which further precluded the exception from applying.

Another defense the funeral home asserted was based on the Religious Freedom Restoration Act (“RFRA”). The RFRA precludes the government from “substantially burden[ing] a person’s exercise of religion even if the burden results from a rule of general applicability” unless the government “demonstrates that the application of the burden to the person – (1) is in furtherance of a compelling government interest; and (2) is the least restrictive means of furthering that compelling governmental interest.” In responding to this defense, the court noted that Congress intended the RFRA to apply “only to suits in which the government is a party.” While the lawsuit was filed by the EEOC, Stephens became an intervenor at the appellate level. The funeral home contended that the question of the RFRA’s application to Title VII suits between private parties “is a new and complicated issue that has never been part of this case and has never been briefed by the parties.” The court agreed with the funeral home that it would be prejudicial to allow Stephens to intervene on appeal and use that as a basis to remand the case without applying the RFRA. The court spent several pages addressing the various steps to apply the RFRA defense and ultimately concluded that it did not apply.

The Sixth Circuit’s decision in Harris Funeral Homes is significant because it represents another federal appellate court that has expanded the reach of Title VII sex discrimination claims. Most of the attention regarding sex discrimination claims under Title VII recently has focused on sexual orientation cases, but transgender cases are very similar in that both theories rely heavily on sex role stereotyping and/or gender role conformity to support a claim. While federal appellate courts recognizing sexual orientation discrimination and transgender discrimination as forms of sex discrimination in violation of Title VII remain the minority, the number of circuits recognizing such claims continues to expand.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585 or Amitis Darabnia at adarabnia@hwlaw.com or (410) 260-6592.

DISCLAIMER: This Blog/Website is for educational purposes and to provide readers with general information about developments in the law. This Blog/Website is not intended and should not be relied on for legal advice. This Blog/Website does not constitute an advertisement for legal services and it does not endorse, promote, or recommend the products, services, or websites of any third party. Reading, reviewing, or any other use of this Blog/Website does not create an attorney-client relationship between the reader and the firm or any attorney at the firm.

Hyatt & Weber Welcomes Attorney Scott D. Forney

Hyatt & Weber, P.A. is pleased to welcome attorney Scott D. Forney to the firm’s Insurance Coverage and Business practices. As part of the Insurance Coverage practice, Scott assists clients with homeowners’ policies, insurance coverage issues of medical professionals, construction projects, employment discrimination and auto policies, among others. In the Business practice, Scott works with business owners to provide assistance with contract preparation; mergers, acquisitions, and sales; and employment law.

Prior to joining Hyatt & Weber, Scott served as an associate attorney at Bernstein & Feldman in Annapolis and as in-house counsel at Transamerica Life and Protection in Baltimore. Scott received his Bachelor of Science in Finance from Salisbury University, where he played on the varsity soccer team that reached the national semifinals of the NCAA Division III soccer championship; he was also named to the Capital Athletic Conference All-Academic team.

Scott received his J.D. from the University of Maryland, where he was one of the first two students to graduate from the university’s Business Law program.

In addition to his love for playing soccer, Scott enjoys coaching youth soccer and playing golf. And when he is not spending quality time with his wife, daughter and golden retriever, Scott can be found making renovations to his home in Davidsonville, Maryland.

Since 1979, Hyatt & Weber, P.A. has served Annapolis, Anne Arundel County and the surrounding areas of Maryland, DC and Virginia in our practice areas of real estate, land use and zoning, business and banking, estate planning and probate, employment, maritime, commercial and civil litigation, medical malpractice and personal injury law.

Second Circuit Reverses Precedent and Holds Title VII Prohibits Discrimination on the Basis of Sexual Orientation

In a precedent setting case, the United States Court of Appeals for the Second Circuit reversed course in an en banc decision and held in Zarda v. Altitude Express, Inc. , 883 F.3d 100 (2d Cir. 2018), that sexual orientation discrimination is a form of sex discrimination that is prohibited by Title VII of the Civil Rights Act of 1964, as amended (“Title VII”). The decision by the Second Circuit continues the divide among federal courts on this issue. The decision also is noteworthy because it reverses a decision by the Second Circuit last year that held Title VII does not prohibit sexual orientation discrimination (written about here ).

Donald Zarda was a skydiving instructor with Altitude Express, Inc. With him being in close physical proximity to so many clients when doing tandem dives, many of Zarda’s co-workers routinely referenced his sexual orientation and made sexual jokes around clients. On one instance, a female client complained that Zarda touched her inappropriately during or preparing for a dive and he used his alleged sexual orientation as a basis to excuse his behavior. When the company received the complaint, it terminated his employment. Zarda filed suit alleging that he was terminated from employment because his sexual orientation failed to conform to male sex stereotypes.

The Second Circuit acknowledged that it is “well-settled” that “gender stereotyping” violates Title VII as a form of sex discrimination, but Second Circuit precedent established that sexual orientation discrimination, including in the form of failing to conform to a gender stereotype, was not prohibited by Title VII. The court then noted that in 2015 the Equal Employment Opportunity Commission (“EEOC”) held for the first time that “sexual orientation is inherently a ‘sex-based’ consideration;’ accordingly an allegation of discrimination based on sexual orientation is necessarily an allegation of sex discrimination under Title VII.” The court further noted that since the EEOC’s decision in 2015, two federal appellate courts had addressed the issue and reached different conclusions. In Evans v. Georgia Reg’l Hosp. , 850 F.3d 1248 (11th Cir. 2017), cert. denied , 138 S. Ct. 557 (2017), the United States Court of Appeals for the Eleventh Circuit relied on past precedent to hold sexual orientation was not protected by Title VII. On the other hand, the United States Court of Appeals for the Seventh Circuit in Hively v. Ivy Tech Cmty. Coll. of Ind. , 853 F.3d 339 (7th Cir. 2017) (written about here ), held that “discrimination on the basis of sexual orientation is a form of sex discrimination.” The court also noted its decision in 2017 where a concurring opinion invited an en banc review of the issue.

The court started its analysis of Title VII by looking at the plain text. The operative phrase is that an employer may not discriminate “because of . . . sex.” This phrase has been interpreted to mean that discrimination is prohibited “based on traits that are a function of sex, such as life expectancy . . . and non-conformity with gender norms.” The Second Circuit framed the question it had to answer as “whether an employee’s sex is necessarily a motivating factor in discrimination based on sexual orientation” and, if it is, sexual orientation discrimination is “a subset of actions taken on the basis of sex.” In framing the issue in this way, the Second Circuit specifically rejected the notion that “Title VII protection does not hinge on whether sexual orientation is ‘synonymous with sex discrimination.’”

The court started by finding “the most natural reading” of the phrase “because of . . . sex” “is that it extends to sexual orientation discrimination because sex is necessarily a factor in sexual orientation.” The court found that this conclusion is supported by the notion that sexual orientation can involve sex role stereotyping, which is predicated on assumptions about how persons of a certain sex are supposed to act. The court further found that its conclusion was supported from the perspective of associational discrimination in that when sexual orientation is implicated an employer is opposing an individual’s romantic association with an individual of a particular sex. Furthermore, the court found that examining any person’s sexual orientation necessarily requires an examination of that person’s sex (and that of individuals to whom the person is sexually attracted). For these reasons, the court concluded that “because sexual orientation is a function of sex and sex is a protected characteristic under Title VII, it follows that sexual orientation is also protected.”

After rejecting several arguments offered by the defense and amici, the Second Circuit then examined whether sexual orientation discrimination satisfied the requirement that the employee was treated differently “but for that person’s sex.” The court relied on the fact scenario in Hively (written about here) to illustrate the point. In Hively , the plaintiff was a woman who was attracted to women. She was denied a promotion. According to her theory, if she were a male who was attracted to woman, she would not have been denied the promotion. Under this theory, according to the Second Circuit, Hively would not have been denied her promotion “but for” her sex. The court then examined several other examples and rejected arguments by the defense, and moved on to issues concerning gender stereotyping.

When addressing gender stereotyping, the court concluded that “sexual orientation discrimination is almost invariably rooted in stereotypes about men and women.” To illustrate, the court referenced the United States Supreme Court decision in Price Waterhouse v. Hopkins , 490 U.S. 228 (1989), which concluded that impermissible sex discrimination occurred when adverse employment actions were taken “based on the belief that a female accountant should walk, talk, and dress femininely.” The court then applied the rationale used in Price Waterhouse to conclude when, for example, “an employer . . . acts on the basis of a belief that [men] cannot be [attracted to men], or that [they] must not be,” “but takes no such action against women who are attracted to men, the employer ‘has acted on the basis of gender.’” The court further concluded that failing to recognize sexual orientation discrimination involves sex role stereotyping leads to an unworkable outcome, which has been illustrated by a number of federal district court decisions. To illustrate, the court found it inconsistent to recognize a claim for sex discrimination if a woman is terminated from employment because she was “too macho,” but she fails to state a claim if she alleges she was terminated from employment for being perceived as a lesbian. The court again addressed several other arguments and then moved on to associational discrimination concepts.

The court noted that it was well established that associational discrimination is prohibited under Title VII. It relied on a number of race discrimination cases to illustrate and that the same rationale applies to sexual orientation. The court further noted that the notion of associational discrimination applying to sex should not be controversial. As an example, it noted that no one should question the notion that a woman could state a claim for sex discrimination if she is terminated from employment for having close friendships with male friends. To this end, the court concluded it makes no sense to “carve out” an exception to this concept for sexual orientation and not recognize a claim when an employee “associates” romantically with individuals of the same sex.

For these reasons, and many others described in the lengthy opinion, the Second Circuit held that Title VII does prohibit discrimination on the basis of sexual orientation.

The Second Circuit’s decision in Zarda is significant because the Second Circuit becomes just the second federal appellate court to recognize sexual orientation discrimination constitutes sex discrimination in violation of Title VII. Although many state and local statutes prohibit discrimination on the basis of sexual orientation, it is not universal, and companies should continue to monitor developments in this regard, as courts remain split at the federal level.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585 or Amitis Darabnia at adarabnia@hwlaw.com or (410) 260-6592.

DISCLAIMER: This Blog/Website is for educational purposes and to provide readers with general information about developments in the law. This Blog/Website is not intended and should not be relied on for legal advice. This Blog/Website does not constitute an advertisement for legal services and it does not endorse, promote, or recommend the products, services, or websites of any third party. Reading, reviewing, or any other use of this Blog/Website does not create an attorney-client relationship between the reader and the firm or any attorney at the firm.

Maryland Enacts Paid Sick Leave Law

The Maryland Healthy Working Families Act took effect February 11, 2018. Pursuant to the Act, Maryland employers with 15 or more employees must provide employees with paid leave called “earned sick and safe leave.” The statute has many detailed requirements, as well as exceptions and carve-outs.

Under the statute, employees shall accrue earned sick and safe leave of at least one hour for every 30 hours worked, but an employer is not required to allow an employee to accrue more than 40 hours of earned sick and safe leave in a year. An employer also may not be required to allow an employee to use more than 64 hours of earned sick and safe leave in a year or accrue more than 64 hours of earned sick and safe leave at any time. At the end of a year, employees may carry forward the balance of earned sick and safe leave to the following year, but the employer may prohibit employees from carrying forward more than 40 hours. There are a number of other provisions related to the accrual of leave. For example, after an employee terminates employment, there are circumstances where leave may be reinstated. In addition, hours may not be accrued if an employee works less than a certain number of hours during a pay period. Also by way of example, the total amount of leave may be granted in a lump sum at the beginning of the year.

“Earned sick and safe leave” takes on a broader meaning than several other leave statutes. For example, leave may be used to obtain services related to addressing domestic violence, sexual assault, or stalking, not only for the employee, but the employee’s family member. It also covers mental and physical illnesses, injuries, or conditions, both for the employee and the employee’s family member.

For employers with less than 15 employees, they must provide the “earned sick and safe leave,” but the leave can be unpaid. In addition, employees who are under the age of 18 before the beginning of the year are not considered “employees” under the statute. There are a number of job title and industry exceptions as well.

Employees are required to provide employers with “reasonable advance notice” of the need for leave, but employers cannot require more than seven days advance notice before the leave is to begin. If the need for leave is not foreseeable, employees are required to provide notice “as soon as practicable” and generally comply with the employer’s notice or procedural requirements for requesting other forms of leave. The employer may deny the request for leave if the employee fails to comply with the notice requirements or the employee’s absence will “cause a disruption to the employer.” There are other exceptions where employers may deny the request for leave if they provide services to developmentally disabled or mentally ill individuals.

The statute permits employers not to modify existing leave policies if they allow employees to accrue and use leave under terms and conditions that are “at least equivalent to the earned sick and safe leave provided for under” the statute or if the employer’s paid leave policy does not reduce employee compensation for an absence due to sick or safe leave. Employers are required to provide notice to employees that they are eligible for earned sick and safe leave. A sample notice is available on the Maryland Department of Labor, Licensing, and Regulation (“DLLR”) website. Other guidance also has been provided by DLLR on its website.

If an employee believes a violation has occurred, the employee can file a complaint with DLLR. DLLR has the authority to issue orders of compliance and order monetary relief, as well as assess a civil penalty of up to $1,000 for each employee for whom the employer is not in compliance. In civil actions filed in court, employees may be awarded three times the value of the employee’s unpaid earned sick and safe leave, punitive damages, reasonable attorneys’ fees and costs, and injunctive relief, among other relief the court deems appropriate. The statute also includes an anti-retaliation provision.

This new statute is important for employers who have employees in Maryland. There are a number of detailed provisions that extend beyond the scope of what is described in this post. And, although guidance has been provided by DLLR, a number of questions remain regarding the interpretation and application of the statute. Businesses with employees in Maryland should be coordinating with their counsel regarding implementation of the statute.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585 or Amitis Darabnia at adarabnia@hwlaw.com or (410) 260-6592.

DISCLAIMER: This Blog/Website is for educational purposes and to provide readers with general information about developments in the law. This Blog/Website is not intended and should not be relied on for legal advice. This Blog/Website does not constitute an advertisement for legal services and it does not endorse, promote, or recommend the products, services, or websites of any third party. Reading, reviewing, or any other use of this Blog/Website does not create an attorney-client relationship between the reader and the firm or any attorney at the firm.

Supreme Court Gives Clarity as to Who is a Whistleblower Under The Anti-Retaliation Provision of the Dodd-Frank Act

In Digital Realty Trust, Inc. v. Somers , 138 S. Ct. 767 (2018), the United States Supreme Court was asked to decide whether the anti-retaliation provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or “Dodd-Frank Act”) extends to an individual who has not reported a violation of the securities laws to the Securities and Exchange Commission (“SEC” or “Commission”). The Supreme Court held Dodd-Frank does not protect such a person; to be protected a person must “provid[e] . . . information relating to a violation of the securities laws to the Commission.”

In the wake of the financial crisis of 2008, Congress enacted the Dodd-Frank Act, in part to assist the SEC “in identifying securities law violations.” To assist with this process, the Dodd-Frank Act included a whistleblower protection provision. The statute defines a whistleblower as “any individual who provides . . . information relating to a violation of the securities laws to the Commission , in a manner established, by rule or regulation, by the Commission.” (emphasis added by the Court). The statute also created an award program for “whistleblowers who voluntarily provid[e] original information to the Commission that le[ads] to the successful enforcement of [a] covered judicial or administrative action.” The award ranges from 10% to 30% of the monetary sanctions the SEC collects in the enforcement action. The statute further provides that an employer may not take adverse employment action against a “whistleblower” “because of any lawful act done by the whistleblower” (1) “in providing information to the Commission in accordance with [15 U.S.C. § 78u-6];” (2) “in initiating, testifying in, or assisting in any investigation or . . . action of the Commission based upon” information provided to the SEC in accordance with § 78u-6; or (3) “in making disclosures that are required or protected under” either the Sarbanes-Oxley Act (“SOX”), the Securities Exchange Act of 1934, the criminal anti-retaliation provision of 18 U.S.C. § 1513(e), or “any other law, rule, or regulation subject to the jurisdiction of the Commission.”

When implementing the Dodd-Frank Act, the SEC promulgated certain regulations. Rule 21F-2 included two discrete definitions of a “whistleblower.” To obtain the monetary award available under the statute, a “whistleblower” is a person who must “ provide the Commission with information . . . relat[ing] to a possible violation of the Federal securities laws.” (emphasis added by the Court). For purposes of the anti-retaliation provision, however, the SEC defined a “whistleblower” as a person who “possess[es] a reasonable belief that the information you are providing relates to a possible securities law violation” and who “provide[s] that information in a manner described in” clauses (i) through (iii) of § 78u-6(h)(1)(A). The SEC’s regulations further provide that the “anti-retaliation protections apply whether or not you [the whistleblower] satisfy the requirements, procedures and conditions to qualify for an award.” In other words, under Rule 21F-2, an individual may obtain “whistleblower” protection without providing information to the SEC, provided that “he or she provides information in a manner shielded by one of the anti-retaliation provision’s three clauses.”

Paul Somers was a Vice President of Digital Realty Trust, Inc., from 2010 to 2014. He alleged that the company terminated his employment shortly after he reported to senior management what he believed were securities laws violations by the company. He did not report his concerns to the SEC, however, and he did not file an administrative complaint for protection under the Sarbanes-Oxley Act (“SOX”). The federal district court denied Digital Realty’s motion to dismiss and, on interlocutory appeal, the United States Court of Appeals for the Ninth Circuit affirmed. The Supreme Court, however, reversed those decisions.

The Supreme Court started its analysis by explaining that the definition of “whistleblower” operates in conjunction with the three clauses of § 78u-6(h)(1)(A) to establish the scope of protection afforded to a “whistleblower.” To this end, the Court explained that the definition of “whistleblower” describes who is eligible for protection – a person who provides pertinent information “to the Commission.” The Court then explained that the three clauses of § 78u-6(h)(1)(A) describe what conduct is protected from retaliation. The Court concluded that only an individual who satisfies both requirements may seek protection under Dodd-Frank’s anti-retaliation provision.

To further support this conclusion, the Court noted that another whistleblower provision of the Dodd-Frank Act (that concerning the Consumer Financial Protection Bureau) did not impose any requirement that information must be conveyed to a government agency. By noting this provision, the Supreme Court relied on the rule of statutory construction that provides “[w]hen Congress includes particular language in one section of a statute but omits it in another[,] . . . th[e] Court presumes that Congress intended a difference in meaning.” By placing the government reporting requirement in § 78u-6(h), but not elsewhere in the statute, the Court determined it was “not at liberty to dispense with the condition – tell the SEC – Congress imposed.” By holding that the Dodd-Frank whistleblower protections require reporting information to the SEC, the Court determined that Somers necessarily failed to state a claim.

The Supreme Court’s decision in Digital Realty is significant because it narrows the scope of who is a “whistleblower” under the Dodd-Frank Act. While this narrower definition creates a more limited universe of potential whistleblowers, the Court determined that this narrower definition is consistent with the statute’s text and purpose. With that said, part of the Court’s analysis (not included in this post) included a comparison to the whistleblower protection provisions of SOX, which the Court noted are broader. Thus, whistleblowers of potential securities violations are not without protections, including under the Dodd-Frank Act.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585 or Amitis Darabnia at adarabnia@hwlaw.com or (410) 260-6592.

DISCLAIMER: This Blog/Website is for educational purposes and to provide readers with general information about developments in the law. This Blog/Website is not intended and should not be relied on for legal advice. This Blog/Website does not constitute an advertisement for legal services and it does not endorse, promote, or recommend the products, services, or websites of any third party. Reading, reviewing, or any other use of this Blog/Website does not create an attorney-client relationship between the reader and the firm or any attorney at the firm.