Guidance on steps to protect your business against cyberattacks

Recent high-profile cybersecurity breaches have highlighted how vulnerable even the largest businesses are to disruption. But even the smallest of businesses face risks, says Ashleigh Krick.

“Organizations may think they are not at risk and do not have valuable information, but they should think again,” says Krick, an associate at Babst Calland. “It does not matter what information you have when a hacker just wants money. It’s not just about data; it’s also about shutting down your business to force you to pay a ransom.”

Smart Business spoke with Krick about steps every business can take to protect itself.

How have recent cyberattacks drawn attention to the vulnerability of businesses?

Recent cyberattacks on Colonial Pipeline and JBS Foods have demonstrated the cyber vulnerabilities of even our nation’s most critical industries. In May, Colonial Pipeline fell prey to a ransomware attack, forcing it to halt transportation of gasoline and other fuels on the largest refined products pipeline on the East Coast. The effect was felt by everyone along the East Coast, as disruption to gasoline supply caused consumer panic and gasoline prices to skyrocket.

Not a month later, JBS Foods, the world’s largest processor of fresh beef and pork, was attacked by ransomware, causing its plants to shut down and rendering the business incapable of processing meat. We are still seeing effects from that, which could disrupt the U.S. market and international markets.

In the aftermath of these attacks, the federal government became immediately involved in how businesses were responding to ransomware attacks and questioning whether mandatory cybersecurity standards in the most critical industries are needed.

What should businesses be thinking about cybersecurity?

Every business should be thinking about about cybersecurity. First, conduct risk and security vulnerability assessments to understand your cybersecurity practices, threats and vulnerabilities. If you are unable to do an assessment internally, a consulting organization can help.

Cybersecurity risk and security vulnerability assessments identify information assets that could be affected by a cyberattack and evaluate a business’s information security risks. The assessment should evaluate where your vulnerabilities lie and identify safeguards to address those. It should identify your most critical facilities, activities and information, and the potential pathways to gain access to your networks.

Also, businesses must assess where they are in terms of cybersecurity policies and practices. How do you describe those activities, and how are those practices protecting your information and systems? Are those policies sufficient, or do they need revisions?

What are the next steps?

After evaluating your risks, vulnerabilities and current practices, think about an incident response plan that maps out the response if your business were subjected to a cyberattack. Who would lead that response, and how would you coordinate with internal and external stakeholders?

Review incident response plans often to keep up to date with lessons learned from internal or external cyberattacks and to address new vulnerabilities or potential pathways for malicious actors to gain access to your systems.

It is also important that businesses designate an individual internally to act as a cybersecurity coordinator. This person is charged with establishing and updating procedures, ensuring compliance, reviewing data or security breaches, leading incident response and coordinating with relevant government entities or industry data-sharing organizations. It’s nice to have a plan, but if it is not followed, it’s worthless.

Finally, with the significant uptick in cybersecurity incidents, businesses need to stay aware of the pathways hackers can use to gain access to their systems. The federal government and states are getting involved in privacy and cybersecurity issues, including calling for changes to laws and regulations. Businesses must stay current on changing laws and regulations and how new obligations affect their operations.

History is likely to repeat itself, and there is the potential for severe consequences to both big industry and small businesses. It’s not a question of if, it’s a question of when. Businesses must be asking these questions now to prepare and protect against cyberattacks.

INSIGHTS Legal Affairs is brought to you by Babst Calland.

Protecting your innovations outside the United States

If you’re considering selling your innovative product or commercializing your novel processes in another country, protecting your innovations with a patent in that country may be key to your success. But trying to navigate the process alone can prove difficult.

“It’s surprising how complicated it can be, and there are a lot of places to get tripped up,” says Carl Ronald, shareholder at Babst Calland. “While you can try to do it on your own, hiring a patent attorney can make the process much smoother, ensuring you are including all relevant information and complying with all relevant deadlines to protect your invention in the most cost-effective way possible.”

Smart Business spoke with Ronald about when you might need international protection and how a patent attorney can help you navigate the complex process.

When should a company consider applying for a patent outside the U.S.?

A U.S. patent only provides a protectable interest here in the U.S.; you can’t stop someone from using what your patent teaches to compete with you in other countries unless you’ve timely filed in those countries, as well. If you have an international customer base that is purchasing products or services that, in the future, may be produced with, employ, or contain your patented process or device, you should seek protection, at a bare minimum, in those countries where your anticipated market is largest.

Keep in mind the importance of secrecy before filing your application. In the U.S., you have one year to file a patent application covering your invention after you disclose it publicly. Other nations are not so lenient and, in many countries, any disclosure of your invention to someone who does not have an obligation of confidentiality will destroy novelty and likely preclude you from ever obtaining a patent in that country.

What is the process for filing in a foreign country?

In general, the first step for most U.S.-based applicants is to file either a provisional or a nonprovisional patent application (your “priority filing”) in the USPTO. Once the application has been reviewed for national security issues that would prohibit you from filing outside the country, a foreign filing license grants permission to file in other countries.

If you want to practice your invention in just one or two other countries, your patent attorney can file directly with those countries, so long as the foreign filing license has been granted and it’s less than a year since your original U.S. filing.

However, if you’re seeking patents in more than one or two countries, it’s likely more cost-effective to file an international application through the Patent Cooperation Treaty (PCT). The PCT provides a unified procedure for filing a single patent application that will preserve your ability to ultimately seek protection for your invention with each of its participating members, which includes nearly all industrialized countries.

Deadlines are important; you must file a PCT application within one year of the filing date of your priority filing. After your PCT is filed, you have up to an additional 18 months in most countries before you are required to file your application directly in each country where you’d like to have protection.

How can a business determine if it should apply for a patent outside the U.S.?

Every business has competition in the marketplace and seeks an edge — something to differentiate it from its competitors. One of the ways to compete is to maximize the value of its products and processes and to ensure others are not unfairly competing with it.

If a particular innovation satisfies a need in the marketplace and obtaining a patent will provide a competitive advantage, patent protection should be strongly considered for any country where the innovation is sold.

Insights Legal Affairs is brought to you by Babst Calland

Aggressive goals aim to decrease emissions — but challenges await

To remain competitive, businesses should stay on top of evolving state and federal policies on renewable energy. These changes present both opportunities and challenges, according to James Curry, managing shareholder in Babst Calland’s Washington, D.C. office, and Ashleigh Krick, an associate at Babst Calland. Commercial and industrial power consumers may be able to obtain benefits from sourcing renewable power, both financially and to answer growing shareholder and lender scrutiny.

At the same time, the increasing level of renewables coming online presents challenges related to grid reliability, underscoring the continued relevance for other more stable sources of electricity.

Smart Business spoke with Curry and Krick about the increase in state-level carbon reduction targets, the challenges associated with increased use of renewable energy and the role of traditional generation sources to maintain reliability.

What is the current state of affairs for renewables?

In Pennsylvania, bipartisan legislation has been introduced to increase the state’s Alternative Energy Portfolio Standards (AEPS), enacted in 2004 with the goal of increasing the state’s share of power from renewables. The AEPS requires that electric distribution companies and electric generation suppliers supply 18 percent of their electricity from certain alternative energy sources, such as solar, hydropower, geothermal, waste coal and distributed generation. The proposed legislation would increase that requirement by 10 percent.

Although an early adopter of a renewable portfolio standard, neighboring states have jumped ahead of Pennsylvania in recent years. New Jersey and Maryland have set renewable energy targets of 50 percent by 2030, while New York has a goal of 70 percent. And, in April 2020, Virginia passed legislation requiring the state’s largest utility to provide 100 percent of its electricity from renewables by 2045.

Pennsylvania Gov. Tom Wolf recently committed state government to purchasing 50 percent of its electricity needs from solar energy, the largest commitment of its kind in the U.S. The project will involve seven new solar facilities totaling 191 megawatts around the state and is slated to begin operation in 2023.

What are the challenges with renewables?

Renewables such as solar and wind are intermittent resources and do not provide continuous output. As more renewables come online, it becomes more difficult for grid operators and utilities to ensure system reliability. As renewables grow, the additional renewables that must be added to maintain reliability dramatically increase, as does the cost.

In some areas, market participants have looked to utility-scale battery energy storage to fill part of this reliability need. While storage can be a complement to renewables and gas-fired generation, storage faces some of the same reliability issues. As states advance decarbonization targets, traditional, baseload electric generation sources will continue to play a vital role in reliability.

In addition, there is no one-size-fits-all approach for renewables projects. Timelines and success may depend on state, county and local permitting and other requirements. Land acquisition can be challenging and in many states, including Pennsylvania, local municipalities exert substantial control over project-related zoning and land use issues.

Despite the challenges, many utilities and businesses are pursuing renewables projects to meet state targets or mandates.

What does the future hold for renewables?

The cost of renewables is likely to continue to fall, and technologies will continue to improve. Battery electric storage and other storage technologies are expected to become more cost-competitive, with demand for electricity increasing significantly in the coming decades as trends toward the electrification of the transportation and industrial sectors continue.

These factors call for practical, common-sense solutions to our growing energy needs, environmental challenges and continued demand for a reliable grid. While state-level incentives and mandates have been a driving force behind renewables development, we anticipate new federal policies such as tax credits, carbon capture incentives and possibly a federal clean energy standard.

Insights Legal Affairs is brought to you by Babst Calland

What you need to know about the Corporate Transparency Act

On January 1, 2021, Congress passed the Corporate Transparency Act (CTA) with the purpose of combating “money laundering, the financing of terrorism, proliferation financing, serious tax fraud, human and drug trafficking, counterfeiting, piracy, securities fraud, financial fraud, and acts of foreign corruption.” The CTA requires companies — many of which have been historically unregulated — to file reports identifying its beneficial owners with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

The CTA’s effective date is slated around January 2022. The Secretary of the Treasury will issue procedures and standards to implement the provisions of the CTA. Until the Secretary’s regulations are issued, Reporting Companies (defined below) are not required to submit the required information.

Smart Business spoke with Charles W. Ormsby, Jr., managing member of Semanoff Ormsby Greenberg & Torchia, LLC, to get a summary of the CTA’s reporting requirements.

What is a “reporting company” and which organizations fit that definition?

Every corporation or limited liability company that’s registered to do business in the United States must file a report with FinCEN containing a list of their beneficial owners. Although the vast majority of businesses fit this definition of a reporting company, the CTA includes a long list of exempt entities. Most notably, the following entities are exempt:

  • Corporations or LLCs with twenty or more full time employees, sales over $5 million, and an operating presence at a physical United States office;
  • Public utility companies;
  • Banks and credit unions;
  • Government entities; and
  • Nonprofits.

If a company is considered an exempt entity, it need not provide information on its beneficial owners, but it will have to submit a written certification that states it qualifies as an exempt entity under the CTA.

What information are reporting companies required to provide?

A reporting company is required to identify all its beneficial owners. A beneficial owner is defined as an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, exercises substantial control over the entity or owns or controls not less than 25 percent of the ownership interests of the entity. A beneficial owner does not include a minor child; an individual acting as a nominee, intermediary, custodian or agent of another individual; an employee whose economic benefits derive solely from being an employee of the company; an individual whose ownership was gained through right of inheritance; or the entity’s creditor.

A reporting company must provide the following information of each beneficial owner of the company:

  • Full name;
  • Date of birth;
  • Current residential or business street address; and
  • A form of identification such as passport, driver’s license, or personal identification card.

When is the deadline to submit required information?

Existing reporting companies will have two years from the effective date to submit reports to FinCEN. After the effective date, newly formed or registered reporting companies must submit their reports to FinCEN at the time they are formed or registered. Reporting companies will be required to update their beneficial owner information annually.

What are the penalties for violating the CTA?

A person who knowingly provides false or fraudulent information, willfully fails to provide complete or updated beneficial information, or knowingly discloses the existence of a subpoena or other request for beneficial ownership information is in violation of the CTA. Any person who violates the CTA is liable for a civil penalty not to exceed $10,000 and may be imprisoned for not more than three years.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia LLC

How alternative legal service providers can add efficiencies, create value

With companies consistently scoring law firms an average of just 2 to 3 (on a scale of 10) on the value they receive for legal services, businesses and firms alike are increasingly employing the value-added services of alternative legal service providers (ALSPs).

“Alternative legal service providers are a legitimate avenue to unlock enhanced value and services for clients, and the use of this model is increasing,” says Christian Farmakis, shareholder and chairman of the board at Babst Calland, and president of its affiliated ALSP, Solvaire. “The intersection of the rise in ALSPs, coupled with the use of technology, allows ALSPs to increase efficiencies and reduce legal costs.”

Smart Business spoke with Farmakis about how ALSPs can help businesses get more value from their legal providers.

Why is the use of ALSPs on the rise?

Businesses are continuing to face unprecedented financial and legal challenges. As a result, companies are placing constant demands and pressure on all vendors, including their legal firms, to deliver more value. Well-run ALSPs allow in-house counsel and law firms to work more efficiently and focus on higher-priority work.

The traditional law firm model is based on billable hours. And while businesses generally like the quality of service they receive, they don’t believe they are always getting value based on the type of legal work being performed. While it makes sense to assign complex and specialized legal work to seasoned associates or law firm partners, other services, such as discovery, diligence and technology-enabled tasks should be delegated to others with specific skills and defined pricing models. This is where ALSPs come in. Both clients and their law firms see the value proposition in ALSPs, which are increasingly gaining traction, moving beyond ‘just’ a cost-savings measure to becoming a true industry service partner.

How do ALSPs function?

ALSPs can be independent of a law firm, owned by it, or have an affiliation with a firm, such as Babst Calland and its ALSP, Solvaire. Services include those traditionally performed by law firm associates, such as due diligence, document management and discovery, but at a lower rate structure — not necessarily driven by the billable hour — and a service-oriented delivery service model. Usually there are licensed attorneys overseeing the work.

Clients don’t care how a project gets done. They are looking for fast, efficient, accurate service, with budget certainty. They are demanding this service, and law firms that associate with ALSPs will be the winners.

How is technology helping ALSPs increase the value they provide?

Legal technology used by ALSPs brings efficiencies, and artificial intelligence (natural language processing and machine learning) can help identify relevant information within documents more quickly than a full manual review. Compared to an attorney doing a full manual review of documents in a diligence context, using ‘legal tech’ can decrease the review time by as much as 40 to 60 percent. As such, ALSPs can often cover more information and provide a more complete diligence work product.

Anyone can license legal technology, but you need to know how to properly use it to maximize its benefits. Project management skills, critical to the success of any legal technology services project, are typically not germane to a lawyer’s core competence. Those that can harness the legal technology and provide sound project management skills will excel in this new marketplace.

How can business owners approach their legal provider about engaging with an ALSP?

Ask if the law firm offers alternative legal services, what kind of legal technology they use, and how. Get testimonials from others who have engaged with ALSPs who can speak to the value and quality.

If the firm uses an ALSP, ask if they met deadlines, and if they were happy with the quality, reporting and security. Finally, ask if the ALSP worked seamlessly with the lead law firm managing the overall legal project.

Clients are expecting a higher quality of service for the price they pay. ALSPs are not competitors of law firms; they are partners that can add value through the services they provide.

INSIGHTS Legal Affairs is brought to you by Babst Calland.

“Title theft” myth persists, but mongers of “protection” against it have slightly improved their mislabeled product

Two years ago, William Maffucci, a real-estate lawyer with Semanoff Ormsby Greenberg & Torchia, LLC, exposed on these pages the myth of “title theft” — i.e., the concept that a criminal could “steal” a house by simply forging the owner’s name on a deed, then “drain the equity” in the house by defrauding a mortgage lender into loaning money against the house, and thus force the actual owner to repay the loan or lose the home through foreclosure [Read the original article here].

Since then, other commentators have joined Maffucci in debunking the myth of “title theft.”

Smart Business spoke with Maffucci to find out how — if at all — the providers of “title lock” protection have reacted.

Do services providing “title lock” protection still claim that “title theft” is real?

Yes. The industry has grown over the past two years, and the false advertising seems to have intensified. This is baffling, because the legal principles are not in dispute. Surely companies with multi-million-dollar yearly advertising budgets can afford lawyers to screen out the misrepresentations with which advertisements about “title theft” are replete.

Although the advertisements are as bad as ever, the chorus of complaints about them has resulted in a subtle but important change. It’s not reflected in the video or radio ads, but you can sometimes spot it in the written advertisements: Under some circumstances, the ‘title lock’ services will pay for the legal fees necessary to clear title if, after purchasing a subscription, the subscriber’s title is forged.

Two years ago the leading provider of ‘title lock’ services did not cover the legal fees necessary to clear title of a forgery that occurred to a subscriber. The service would record a statement to warn third parties about relying upon the forged title, and it would take a few other actions to try to prevent the forger from compounding the owner’s problems. But the subscriber would still have to find and pay for a lawyer to clean up the title. Now, it seems, all of the ‘title lock’ providers will cover a subscriber’s legal fees — at least if the subscriber purchases a long-term plan.

If “title theft” is a myth, how difficult could it be for a lawyer to clear the title?

Sometimes very difficult. And often prohibitively expensive. The lawyer must first locate and confirm the identity of the forger, who may or may not be the named grantee. After drafting the complaint, the lawyer must find a way to serve the defendant(s). Forgers and their accomplices have many ways to frustrate those steps, so a lawyer must often seek court permission to accomplish them through alternative procedures. And proving that a signature has been forged isn’t easy. It usually requires retaining a forensic handwriting analyst.

Does the possibility of having legal fees covered warrant the expense of a “title lock” subscription?

Legal-fee coverage would certainly change the cost-benefit calculus. Without it, the service is little more than a glorified title-monitoring service. But note: Some homeowners already have insurance against title forgery, and most of them don’t even know it.

This highlights yet another misrepresentation in the ‘title lock’ advertisements: that traditional title insurance — i.e., the insurance that homeowners obtain by paying a one-time premium when they buy their homes — never protects them from subsequent forgeries. That statement was true historically, because for most of its history title insurance covered only title defects that were in place as of the time of the closing. And it’s still true for owners who acquire the traditional, basic form of title insurance. Now, however, in most states, homeowners have the option of buying an ‘enhanced’ policy of homeowners’ insurance that protects them from many specified post-closing events. Forgery is one of them. And the coverage would include the expense of the insured’s legal coverage.

Although the ‘enhanced’ homeowners’ policy is more expensive, it’s part of the one-time, up-front premium. And it largely precludes the need for the services that ‘title lock’ advertisers provide.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia LLC

EPA heightens aftermarket defeat device enforcement

As vehicle emissions continue to represent the largest contributor to air pollution, the Environmental Protection Agency is becoming more vigilant about prosecuting manufacturers of the parts designed to decrease the effectiveness of emissions controls, and those who use them. And if your business has these parts installed on your vehicles or other equipment, you could be at risk of fines, or jail time — even if you’re not aware that tampering has occurred.

“The EPA has been, and will continue to, look seriously at tampering with vehicle emissions controls and has issued guidance to clarify its approach and requirements,” says Julie Domike, shareholder at Babst Calland. “The transportation sector is a huge source of emissions, and the EPA is signaling it is working with the states to step up enforcement, taking a closer look at vehicles that have been tampered with for the purpose of increasing fuel economy and decreasing down time.”

Smart Business spoke with Domike and Gina Falaschi, an associate at Babst Calland, about the crackdown on the use of aftermarket defeat devices and how businesses can ensure they remain in compliance with the Clean Air Act.

Why is the EPA increasing its enforcement of tampering and the use of defeat devices?

The EPA reports that more than 550,000 diesel trucks have had emissions controls tampered within the last 10 years, increasing emissions equating to having 9 million additional diesel vehicles on the road. With a goal of reducing emissions, pursuing illegal tampering is much more palatable to states than limiting the use of vehicles. While the EPA has arguably the most robust enforcement authority for new vehicles and engines, it is looking to states and associations that deal with air quality issues to take on cases involving tampering with vehicles once they are in use.

The new EPA memo doesn’t come in a vacuum — the agency has been stepping up enforcement the past few years. The last guidance document was issued in 1974, when onboard diagnostics and sophisticated control equipment didn’t exist. Today, there are more ways of tampering with vehicles, including shutting down software in addition to physically changing the hardware.

The agency isn’t just pursuing businesses and individuals who drive vehicles that have been tampered with. It is also going after manufacturers of the devices people put on vehicles, looking at online forums and trade magazines to identify who is selling and who is purchasing. Many of these sellers are advertising things that are clearly illegal, but may be unaware of just how illegal they are.

How can businesses protect themselves?

Make it clear in a written policy that tampering is not acceptable and that compliance with the Clean Air Act is a stated goal in the maintenance and operation of vehicles. Ensure employees are trained on the Clean Air Act and that mechanics are aware that tampering is prohibited.

However, even establishing a consistent, reasonable basis that you are actively trying to prevent tampering, no matter how well executed, may not be enough if the EPA or the state comes calling. To ensure compliance, buy only aftermarket parts stamped with a California Executive Order number. The state has its own program to certify aftermarket parts sold and installed won’t affect emissions. EPA’s guidance recognizes that program and accepts an Executive Order as a reasonable basis to believe those parts will not impact emissions.

What other steps can businesses take to ensure their vehicles and other equipment are compliant?

Have an independent inspector audit your vehicles to ensure no tampering has occurred. And for businesses that buy used vehicles or other equipment, it’s critical to have them inspected before taking possession, because ignorance is not a defense. For example, an auction house was found liable for selling tampered vehicles, and the state also pursued the dealerships that bought those vehicles.

Failure to ensure your vehicles and equipment are in compliance to save a few thousand dollars a year is penny wise and pound foolish. The cost of defending a case and the resulting hefty fines will cost far more than you save and can put you out of business — and even land you in jail.

Insights Legal Affairs is brought to you by Babst Calland

Determining when venture debt is the right path for your business

For startup companies lacking the cash flow or liquid assets to obtain a traditional bank loan, venture debt could be the answer to help elevate them to the next level.

“Startups often lack many of the characteristics that would give traditional lenders comfort that a regular commercial loan would be a good deal for them,” says Michael Fink, attorney at Babst Calland. “Venture debt can be an alternative to help bridge the gap to a company’s next valuation.”

Smart Business spoke with Michael about how taking on venture debt can keep a business moving forward without decreasing its valuation.

What is venture debt, and how is it structured?

At its core, venture debt looks similar to other commercial debt a company may incur; it may be structured as a term loan or line of credit, or an option to draw on either. The startup generally may choose the facility it feels best fits its needs.

However, because it’s a riskier loan for lenders, venture debt terms are generally more favorable to the lender than those of traditional loans. Borrowers can expect an interest rate higher than the prime rate (5 to 15 percent being common), more lender control rights and expanded negative covenants, prohibiting, for example, making large purchases or divesting a line of business without the lender’s consent.

Venture debt’s availability is based primarily on a company’s ability to raise future equity rounds, so venture debt lenders often require a small equity component in exchange for the higher risk the lender is taking on. For example, the lender may receive a warrant to purchase either common equity or the preferred equity to be issued in the next fundraising round, typically at a discount.

When should a company consider pursuing venture debt?

Venture debt typically isn’t available until a company has had a priced equity fundraising round that includes a valuation for the lender to work from. Once available, companies find venture debt useful for many capital expenditures or operational needs, or possibly even acquisitions, all without further dilution to the current stockholders.

It’s common for startups to seek out venture debt after an equity round to bridge the gap to the next round. This could extend the cash runway to a new equity round and is generally cheaper to current stockholders than a whole new equity investment.

Finally, venture debt allows companies to avoid ‘down rounds,’ where a company sells shares at a lower price than in the previous round. A down round dilutes investors, can impact conversion and related capitalization calculations, may violate contracts, and signals to the public that the company may be troubled. Venture debt can help by providing a path to avoid this decreased valuation.

How can a business determine if venture debt is the right path?

Just because you can go out and get money doesn’t mean you should. There should be a solid reason for taking on venture debt or any other investment.

It’s really dependent on the circumstances of the business. As with any financing deal, venture debt can get complicated very quickly, and an experienced attorney can help evaluate where a company stands. Additionally, venture debt can be obtained from a number of sources, and an expert adviser can help navigate those options.

Although the process could be completed quickly in some circumstances (generally resulting in less favorable terms to the company), having a clear vision of your cash needs three to six months ahead can allow you to secure the most favorable terms and position your company for success. If you have six months of funding left and you’re not currently planning another equity round, it may make sense to start investigating your venture debt options now.

Venture debt can play a crucial role in helping companies grow. To determine whether taking it on makes sense for your business, speak with an expert adviser to help you work through the issues and come to the best decision.

Insights Legal Affairs is brought to you by Babst Calland

How employment laws differ in New Jersey and Pennsylvania

Although the states of Pennsylvania and New Jersey are separated only by a river, in some cases there is an ocean of difference between the employment laws in each state.

Smart Business spoke with Frank P. Spada Jr., an attorney at Semanoff Ormsby Greenberg & Torchia, LLC, about those differences.

How do family leave laws differ?

Under the New Jersey Family Leave Act (NJFLA), employers with 30 or more employees worldwide who have been employed for at least one year and have worked 1,000 hours in the past 12 months can generally take up to 12 weeks of job-protected leave during any 24-month period to bond with a child, and care for a family member or the equivalent of a family member with a serious health condition. That includes a diagnosis of or suspected exposure to COVID-19. This also includes required care or treatment of a child during that state of emergency if their school or place of care is closed. Further, the NJFLA does not provide leave for an employee’s own serious medical condition, as the federal Family and Medical Leave Act does.

Pennsylvania does not have a specific family leave law, so employees in Pennsylvania must rely on the FMLA.

What about earned sick leave?

In New Jersey, under the Earned Sick Leave Law, an employee can accrue one hour of earned sick leave for every 30 hours worked up to a maximum of 40 hours of leave per benefit year.

Although Pennsylvania does not have a similar law, certain municipalities may. For example, Philadelphia has an ordinance requiring employers with 10 or more employees that are within the city to provide one hour of sick time for every 40 hours worked in Philadelphia, for a total of no more than 40 hours of sick time in a calendar year. This time can be used for a variety of reasons, including to care for a family member. It also includes any absences necessary due to domestic abuse, sexual assault or stalking for an employee or family member, to allow for mental and physical recovery, and has been extended to include COVID-19 issues.

Do discrimination laws differ?

In Pennsylvania, the Pennsylvania Human Relations Act (PHRA) protects employees from discrimination, while in New Jersey it’s the New Jersey Law Against Discrimination (NJLAD).

The NJLAD is very broad and includes a number of protected classes and activities, like gender identity and expression, that are not covered by the Pennsylvania statute. For those employees working in Philadelphia, the Philadelphia Fair Practices Ordinance provides more protections then the PHRA.

The NJLAD permits the recovery of punitive damages as well as the right to a trial by jury, while the PHRA does not. The NJLAD also permits the option for an employee to file a complaint with the New Jersey Division on Civil Rights or go directly to the New Jersey Superior Court system for relief. In Pennsylvania, an employee must file with the Pennsylvania Human Relations Commission (PHRC) initially and, if the case has been dismissed or has failed to be resolved within a year, the employee could seek redress in the Court of Common Pleas.

How about hiring laws?

According to the New Jersey Opportunity to Compete Act, employers may only inquire into an applicant’s criminal history after the employer has selected the applicant as the employer’s first choice to fill the position. The same restrictions apply to recruiters or job placement agencies.

In Pennsylvania, the Criminal History Record Information Act permits employers to only consider felony and misdemeanor convictions that relate specifically to the job applied for. But employers can seek information about an applicant’s criminal history before an offer is made. Municipalities, such as Philadelphia, however, have ordinances that prohibit an employer from inquiring about criminal convictions during the application and interview process.

In New Jersey, employers must comply with a ‘Ban the Box’ law that prohibits asking about a criminal record on an employment application. In Pennsylvania, the law applies only to public sector employers, although a number of municipalities, including Philadelphia, have their own versions.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia LLC

Has your business continuity plan changed for 2021?

A business continuity plan helps protect your business both today and into the future in a way consistent with your goals and culture. But it’s not just about planning for contingencies this time. The pandemic has changed the way businesses need to approach their plans, says Attorney Donald C. Bluedorn II, managing shareholder at Babst Calland.

“Things are much different than a year ago, and along with business and operational contingencies, companies should review their legal and regulatory risks and opportunities as well,” he says.

Smart Business spoke with Bluedorn about how to ensure your business continuity plan moves your business seamlessly forward.

What changes during the pandemic are now either beneficial or detrimental to Business operations?

Businesses need to reimagine how they operate and create a proactive mindset around challenges the business or industry is facing. Are there any advantages or savings in how you operated last year that are sustainable or should be adopted?

Concerns with significant legal and contractual commitments are likely to emerge. And as people re-enter the physical workplace, or not, there may be employment issues. In addition, new leadership at the federal level could pose legal challenges and create evolving tax issues. In the Western Pennsylvania region, this could result in changes to energy regulations, a risk for some but an opportunity for others. Environmental compliance and regulatory obligations are also likely changing, and trusted advisers can help you navigate these challenges and incorporate them in your plan.

It’s an opportune time to review your plan from a business risk or legal and regulatory perspective. Are vendors fulfilling their commitments and are you fulfilling your own contractual obligations? Look at your real estate needs going forward. Will you need as much space? Will it be configured the same way? If you need to change your footprint, begin reviewing your leases now.

Audit your environmental and regulatory obligations to see if you can reduce spending while maintaining the same level of compliance. It goes without saying that your inside or outside legal counsel is integral to this entire process. In addition, litigation has changed dramatically. With court closures, re-evaluate litigation to determine whether there is an opportunity to change your strategy with a more cost-effective, faster way to achieve your goals.

What should you be thinking about with your business continuity plan?

Think about the impacts on the business, as well as your employees, that were prompted by the challenges of the pandemic. Revisit and reanalyze your plans in light of the pandemic and its impact on achieving your business goals. Consider your challenges and opportunities, keeping one eye on protecting people and the other on positioning and maintaining and growing the business.

How should a business continuity plan address technology issues?

It should address whether you have enough licenses and sufficient infrastructure to have everyone work at the same time and whether you have protocols to address issues, making sure you have the capability to seamlessly transfer work and recover data.

The second concern is data and cybersecurity. The pandemic has created new risks for companies — and new opportunities for cyberhackers. Rethink and aggressively address security. Keep an eye on potential risks and continue assessing the need to make changes relevant to legal, regulatory and insurance matters that may have greater costs and risk to the business if they aren’t promptly addressed.

How should a plan incorporate the importance of people?

Be aware of your employees’ concerns and be sensitive to ways to protect them. Then think creatively about how to safely re-enter the workplace while achieving your business goals, incorporate what you will do if people get sick and be flexible on schedules.

Remember that, as uncertain, fearful and anxious as you may be about the future of your business, your people are just as fearful. If you can help them through it, you will emerge with a much better culture.

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