Today’s BIPA Ruling is Brought to You By the Letter I

Important Developments in lL Biometric Information Privacy Act

Some judges have an extraordinary ability to explain their decisions in an easily understood and relatable manner. Such was the case in a very recent decision involving whether an employer’s commercial general liability insurance policy (“CGL”) covered an employee’s claims under the Illinois Biometric Information Privacy Act (“BIPA”). In State Automobile Mutual Insurance Company v. Tony’s Finer Foods, No. 20-cv-6199, Judge Steven Seeger of the United States District Court for the Northern District of Illinois was tasked with deciding whether a standard exclusion in a CGL policy relieved the insurer of its duty to defend a BIPA claim. BIPA is an Illinois statute that, among other things, requires private entities that obtain biometric information from an individual to first inform the individual that the information was being collected and stored and obtain a release from the subject. In the employment context, oftentimes employers collect biometric information (such as fingerprints) for time keeping purposes. In the last seven years, litigation over alleged BIPA violations have exploded and employers often look to their insurance companies to assist in the defense. Judger Seeger ultimately held that the “employment-related practices” exclusion did not preclude insurance coverage, undoubtedly good news for employers.

An “Employment-Related Practices” exclusion is common in CGL policies. Essentially, the exclusion precludes coverage for certain employment-related claims made by employees against their employers. In the policy at issue in the State Automobile case, coverage was specifically excluded for “personal or advertising injury” to “any person” arising out of  “(a) refusal to employ that person; (b) termination of that person’s employment; or (c) employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, or discrimination…”  The court recognized that subparts (a) and (b) were not at issue and the only question was whether the underlying lawsuit was about an injury to the employee arising out of “employment-related practices.”  The insurance company argued that the exclusion applied because the case arose out of the manner in which employees clock in and out of work.  While the argument was “an appealing one,” the court took a closer look at the exclusion and determined that it did not apply. First, the court recognized that the exclusion was the “third part of a trilogy” with the first two parts covering hiring and firing. The judge reasoned that the third subpart, “arising out of employment related practices,” read with parts one and two appears to apply specifically to adverse employment action “and not any and all claims about something that happens at work.”  The judge further stated that even though clocking in or out is an employment practice or policy, the fact that the text then contains a “laundry list” of targeted disciplinary practices, “using one’s finger to clock-in and clock-out is an awkward fit in that string, at best.”  In determining that the third clause, when read in tandem with the first two clauses, could not be interpreted as generally excluding all claims arising out of employment, Judge Seeger cited to the well-known and respected Sesame Street doctrine of “one of these things is not like the others – one of these things just doesn’t belong.”  After recognizing that other courts have come to differing conclusions, the court nonetheless ruled in favor of the employer and denied the insurer’s motion for summary judgment on whether it had a duty to defend the BIPA claim.

If you would like to discuss these or similar issues in more detail, please contact Howard L. Teplinsky at (312) 368-0100 or hteplinsky@lgattorneys.com.

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No More Surprise Medical Bills

NO Surprises Act 2022 | TeamstersCare 25

The No Surprises Act (“Act”) for healthcare went into effect on January 1, 2022.  There are several key provisions.

Most significantly, the “Self-Pay Rule” under the Act generally requires healthcare facilities and providers to:

  1. Post required notices concerning an “uninsured (self-pay)” patient’s right to obtain a good faith estimate at the provider’s offices and on its website.
  2. When a person seeks care, determine whether the patient is a self-pay patient.
  3. Inform self-pay patients orally and in writing that they have the right to obtain a good faith estimate of charges upon request or upon scheduling an appointment.
  4. Provide the required written good faith estimate to the self-pay patient within the time required, as follows:
  • If the service is scheduled at least 3 business days in advance: not later than one 1 business day after the date of scheduling;
  • If the service is scheduled at least 10 business days in advance: not later than 3 business days after the date of scheduling; or
  • If a good faith estimate is requested by a self-pay patient, or if a patient inquires about the cost of care: not later than 3 business days after the date of the request.

The Self-Pay Rule requirements seem to apply only to self-pay patients who schedule their appointment at least 3 days in advance, and possibly to those who request an estimate in advance.  However, in the case of a patient who schedules an appointment less than 3 business days in advance, the rules require the provider to provide the good faith estimate not later than 1 business day after the date of such scheduling.  The rules also acknowledge that in the case of emergency care, a good faith estimate may not be required.

The main consequence for billing an amount in excess of the good faith estimate is that a patient may initiate a Selected Dispute Resolution process and likely avoid paying his or her full bill if the actual charges are more than $400 over the estimated charges. In addition to the Selected Dispute Resolution consequences, failure to comply with the No Surprises Act may subject the provider to additional adverse action by state or federal agencies. States have the primary responsibility for enforcing the No Surprises Act and related regulations; however, if a state fails to substantially enforce the requirements, the U.S. Department of Health and Human Services can impose a corrective action plan and/or monetary penalties of up to $10,000 per violation.

If you would like to discuss these or similar issues in more detail, please contact Jonathan M. Weis at (312) 368-0100 or jweis@lgattorneys.com.

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The Great Resignation – Employers Beware

Resignation Letter" Images – Browse 1,242 Stock Photos, Vectors, and Video | Adobe Stock

The job market continues to be volatile, and businesses are willing to take more risks to hire proven talent. That means taking the best people from their competition. Business owners therefore need to start preparing for when (not if) a key employee leaves to join a competitor.

Below are some ideas to help you prepare for a key employee’s potentially sensitive exit to a competitor and ensure your business is protected: begin preparing and setting up a plan of action so you are prepared to handle.

• Review current restrictive covenant and confidentiality agreements. This is particularly important right now because non-compete laws are changing in Illinois and in other states in the US.
• Update confidentiality agreements to require employees to submit information about their digital footprint on their personal devices, including making those devices available for a forensic review upon the employee’s exit.
• Consider implementing phantom equity programs or bonus plans.
• Evaluate your hybrid-work environment and focus on flexibility.
• Audit your IT protocols and ensure your most important data is being monitored and its confidentiality maintained.
• Limit which employees get access to sensitive information – gone are the days that every employee gets access to all your information.

When an employee leaves to join a competitor, employers should immediately take certain preliminary steps to identify possible wrongdoing:

• Preserve the employee’s email and activity logs. This data is often auto deleted unless you place a hold on the information.
• Review emails sent to personal email addresses.
• Review all emails sent with attachments.
• Review activity logs.
• Preserve any devices used by the employee.
• Conduct an internal investigation to determine if there has been any other unusual activity.
• Retain a computer forensic expert.

Once these preliminary steps are completed, consider sending a cease-and-desist letter to the former employee and the new employer to ensure any damage is contained. Depending on the circumstances, filing a lawsuit (including seeking immediate injunctive relief) may offer the best protection for your business.

The attorneys at Levin Ginsburg can help businesses prepare for and react to the departure of key employees so that any impact is mitigated. For additional help navigating these issues, feel free to contact Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg, at wlawrence@lgattorneys.com, or (312) 368-0100.

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Licensing Your Product

What is Product Licensing and How to Use it with Your Invention

You have spent years — maybe even decades — developing and creating your product. Finally, your product is ready to be put to market, and you plan on licensing it to other companies or individuals. But how do you protect yourself and your rights in the product while allowing another person or entity to use it?

The first step is knowing that nobody understands your product better than you. You should learn the reasons why the licensee plans to use your product and what other entities or individuals will have access to it (e.g., third parties working with the licensee). Next, consider whether you want to continue developing the product while licensing it, or if the product is in “final” form. This should spark other considerations, including:

• Ownership rights in your product – the licensee must realize that, unlike full ownership, the license is merely a group of specific rights that the licensee obtains while product ownership remains with you.
• How long and for what price should the license be granted – this will be dictated by the market, but research should be done to ensure profitability.
• Any required maintenance on the product while it is being licensed and what that process will entail – will there be maintenance fees associated with the licensing?
• Audit rights – determine the number of users of your product and ensure you are being compensated appropriately.
• Should specific restrictions or permissions be in place to alter or improve the product? Who owns any alteration or improvement made during the licensing period?
• Indemnification – will licensee defend you against claims made by third parties? Determine which claims the licensee is responsible for and which claims you are responsible for.
• Taxes – Be specific about the allocation of tax liability. Certain states have laws that restrict the ability to allocate.
• Limitation of liability – if the product malfunctions or is defective, you may be on the hook for things such as the lost profits of the company to whom you licensed the product unless your license agreement states otherwise. Additionally, you likely want licensee to provide proof of insurance before licensing.

These are just some of the things you should consider before licensing your product. Along with other contractual terms and conditions, these items should be included in a written license agreement signed by both parties. It is better to work with your legal, technical, and finance teams before finalizing a written license agreement to ensure profitability and the full protection of rights in your product. Levin Ginsburg regularly deals in the licensing of products to help grow businesses. If you are considering licensing your product and would like to discuss these, or any other related issues, please contact Joseph A. LaPlaca at jlaplaca@lgattorneys.com or (312) 368-0100.

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What Does your Insurance Policy Actually Cover?

New York Ends the Year with Onerous New Insurance Coverage Disclosure Rules for Defendants in Product Liability Litigation | Product Liability Advocate

Insurance is a key part of managing risk and protecting against unexpected financial losses. Individuals and businesses alike can benefit from the right coverage, whether it be your personal auto policy, commercial general liability policy, or property damage coverage. But don’t assume that just because you have a policy you are fully covered. Insurance policies are often full of exclusions and fine print. Even with the most reputable insurers, policies are rarely “one size fits all.”

A recent Illinois appellate court decision is a prime example. In Farmers Insurance Exchange v. Cheekati, et al., 2022 IL App (4th) 210023, the insureds were homeowners who, while unable to sell their property, rented it to a tenant. That tenant was injured when a defective staircase at the home collapsed. The insureds made a claim under their homeowner’s policy with Farmers, undoubtedly expecting they would be covered for the injury occurring in their home. They were not—Farmers denied coverage based on two policy exclusions: the first preluded coverage for bodily injury to any insured or any “resident of the residence premises;” the second precluded coverage for bodily injury “in connection with the rental or holding for rental” of the premises. Based on those exclusions, the appellate court affirmed the trial court’s judgment in favor of Farmers, declaring that it had no duty to defend or provide coverage to its insureds.

The lesson here: review your policy documents carefully and make sure you are getting the coverage you think you are paying for. For more information regarding these or similar issues, please contact Mark L. Evans at mevans@lgattorneys.com or (312) 368-0100.

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Important Change to the Illinois Equal Pay Act

California Fair Pay Act vs Equal Pay Act, What's the Difference?

An amendment to the Illinois Equal Pay Act (“Illinois EPA”) that took effect January 1, 2022 clarified that the Illinois EPA does not prohibit employers from discussing with job applicants the unvested equity or deferred compensation that the applicant would forfeit upon resigning from the applicant’s current employer.

While the Illinois EPA continues to restrict employers’ ability to ask applicants questions about their compensation, the amendment clarifies that employers may discuss unvested equity and deferred compensation, only if an applicant for employment voluntarily discloses that the applicant would forfeit unvested equity and/or deferred compensation by resigning from their current employer. If an applicant voluntarily discloses that they will forfeit unvested equity or deferred compensation, employers may request that the applicant verify the aggregate amount of such compensation.

Employers and employment recruiters should be cognizant of this important change to the Illinois EPA, particularly given the current labor market. Further, employers and employment recruiters should be careful to not violate the Illinois EPA if the applicant does not voluntarily disclose compensation from his or her prior employer.

Having an experienced employment attorney evaluate your employment issues is critical to avoiding problems resulting from failing to comply with state and federal law. For more information regarding these or similar issues, please contact Mitchell S. Chaban at mchaban@lgattorneys.com or (312) 368-0100.

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How Do You Know If Your Insurer Has Acted in Bad Faith?

Insurance Bad Faith Litigation - The Patterson Law Firm, LLC

Individuals and businesses procure insurance to protect against a variety of potential losses. For example, individuals insure their homes in case of property damage, and businesses insure for certain potential economic losses. When a loss occurs, often times the claim process seems simple: the insured submits a claim and the insurer pays the claim. However, things are not always so simple. The insurer may take the position that it is only required to pay some of the loss, or it may deny the claim altogether by contesting either the existence or the scope of coverage.

Contesting the scope of coverage or denying coverage outright is not necessarily bad faith. Bad faith is defined under Illinois law as conduct by an insurer that is “vexatious and unreasonable.” In an insurer is found to have committed bad faith, Section 155 of the Insurance Code allows the prevailing insured to recover reasonable attorneys’ fees, costs, and significant penalties.

Section 154.6 of the Illinois Insurance Code delineates certain improper claims practices that could constitute bad faith depending on the circumstances. Some examples include:

• Knowingly misrepresenting to claimants and insureds relevant facts or policy provisions relating to coverages at issue.
• Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under the insurer’s policies.
• Failing to adopt and implement reasonable standards for the prompt investigations and settlement of claims arising under its policies.
• Compelling policyholders to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them.
• Refusing to pay claims without conducting a reasonable investigation based on all available information.
• Failing to affirm or deny coverage of claims within a reasonable time after poof of loss statements have been completed.

While an insurance company who commits an improper claims practice under Section 154.6 of the Insurance Code is not per se engaged in bad faith, courts will review the totality of the circumstances in determining whether the insurer’s conduct was “vexatious and unreasonable” under Section 155. Such a finding would entitle the insured to recover fees and penalties.

Having an experienced attorney evaluate your individual or business insurance claims is critical for swift and effective resolution. For more information regarding these or similar issues, please contact Roenan Patt at rpatt@lgattorneys.com or (312) 368-0100.

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Is Your Insured Business Entitled to a Defense of a Lawsuit Filed Against It?

Buying Business Liability Insurance | Allstate

Assume that your business is sued for multiple claims including negligence, defamation, and fraud arising out of the same event. Most likely, your business has a commercial general liability policy of insurance that provides coverage for negligence claims, but not intentional torts. What protections does that policy actually provide?

Although intentional acts are typically excluded from insurance policies, your business’s insurer would have a “duty to defend” your business from the negligent and intentional acts in this hypothetical. This means that the insurance company must appoint an attorney for your business at the insurer’s expense (less any applicable deductible) to defend the suit. Although a duty to defend may exist, the insurer ultimately might not be required to pay (indemnify) your business if the plaintiff were to recover a money judgment against the business for those claims based on the intentional acts. This is because Illinois law is clear that an insurer’s duty to defend its insured is broader than the duty to indemnify the insured.

As for the duty to defend, if the facts alleged in the underlying complaint fall within, or potentially within, the policy’s coverage, the insurer’s duty to defend is triggered. The insurer’s duty to defend is triggered even if the allegations in the complaint are groundless, false, or fraudulent, and even if only one of several of the plaintiff’s theories is within the potential coverage of the policy. In the hypothetical lawsuit, even if some of the claims alleged against your business ultimately are not covered, the insurer likely has a duty to defend against both the covered and uncovered claims. However, the duty to indemnify only arises if the insured has a judgment against it on an underlying claim and that the insured’s activity is covered by the policy. Thus, if judgment is entered against the business on an uncovered claim, the insurer will not have a duty to pay that judgment entered against your business even though its appointed attorney defended the claim.

Having an experienced attorney evaluate your business’s insurance policy for coverage is critical. For more information regarding these or similar issues, please contact Roenan Patt at rpatt@lgattorneys.com or (312) 368-0100.

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The Expanded Illinois Secure Choice Retirement Savings Program Will Soon Cover Small Employers

Illinois Secure Choice - Ascensus

The Illinois Secure Choice Retirement Savings Program (“SCRSP”) is a retirement savings instrument for private sector workers in Illinois who do not have access to an employer-sponsored plan. Recent legislation expands the SCRSP to cover employers with five or more employees. Previously, the SCRSP applied only to employers with 25 or more employees that had been operating in Illinois for at least two years and did not offer a qualified retirement plan.

The SCRSP requires covered employers to distribute information provided by the SCRSP, facilitate employee enrollment in the SCRSP, and remit contributions to the SCRSP via employee payroll deductions. The new legislation also includes annual automatic contribution increases up to 10% of wages (employees have the right to opt-out).

Employers will receive notifications of their obligations and applicable deadlines under the expanded SCRSP. The initial enrollment deadline will apply to employers with more than 15 employees and fewer than 25 employees and will occur no earlier than September 1, 2022. The second enrollment deadline will apply to employers with at least five but not more than 15 employees and will occur no earlier than September 1, 2023.

Smaller employers that will fall under the auspices of the expanded SCRSP should consult with experienced counsel to assure compliance with the SCRSP.

If you have any questions regarding the SCRSP, please contact Mitchell Chaban at mchaban@lgattorneys or (312) 368-0100.

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Illinois Employers Should Think Twice Before Using Criminal Background Checks Going Forward

On March 23, 2021 Governor Pritzker signed into law Senate Bill 1480 which makes several meaningful changes to the Illinois Human Rights Act (“IHRA”). One significant change under the new law is that employers may not use criminal records when making employment decisions unless they consider specific factors and take certain steps before making a final employment decision. The law goes into effect immediately.

Employment Decisions Based on a Conviction Record Violate the IHRA

It is now a violation of the IHRA to “use a conviction record” as a basis for any employment-related decision, unless the employer can establish either:

  • there is a “substantial relationship” between the criminal conviction and the employee’s job; or
  • hiring or retaining the employee would create an “unreasonable risk” to a specific individual or the public.

To determine whether an “unreasonable risk” exists, employers must consider “whether the employment position offers the opportunity for the same or a similar offense to occur and whether the circumstances leading to the conduct for which the person was convicted will recur in the employment position.” Accordingly, in evaluating whether an “unreasonable risk” exists, employers must evaluate the following six factors:

  1. the length of time since the conviction;
  2. the number of convictions that appear on the conviction record;
  3. the nature and severity of the conviction and its relationship to the safety and security of others;
  4. The facts or circumstances surrounding the conviction;
  5. the age of the employee at the time of the conviction; and
  6. evidence of rehabilitation efforts.

Interactive Process

If an employer determines that one of the two exceptions applies, the employer must engage in an interactive process with the employee or applicant. The employer is required to notify the employee or applicant in writing of its preliminary decision that the employee’s conviction record disqualifies the employee. This notice must include:

  1. notice of the conviction or convictions that are the basis for the preliminary decision and the employer’s reasoning for the disqualification;
  2. a copy of the conviction history report, if any; and
  3. an explanation of the employee’s right to respond to the employer’s preliminary decision before it becomes final. This explanation must inform the employee that the response may include “submission of evidence challenging the accuracy of the conviction record that is the basis for the disqualification, or evidence in mitigation, such as rehabilitation.”

Upon receipt of the employer’s notice, the employee has up to five business days to provide a response before the employer makes a final determination.

Written Final Decision

Before making a final decision, the employer must consider any information submitted by the employee. If the employer determines that the employee or applicant is disqualified “solely or in part because of the employee’s conviction record,” the employer must provide another written notice to the employee. The second notice must include the following:

  1. notice of the conviction or conviction(s) that are the basis for the final decision and the reasoning for the disqualification;
  2. any existing procedures available to the employee to challenge the decision or request a reconsideration; and
  3. a statement that the employee has the right to file a charge with the Illinois Human Rights Department.

Practical Considerations

Illinois employers should reconsider how they will use criminal background checks in the future. While the law does not prohibit an employer from obtaining criminal background checks, it places a significant burden on employers if they want to use this information to make employment-related decisions.

Given the burdensome notice obligations, it may be more practical for employers to forego the use of criminal background checks altogether, unless there is a particularly compelling business reason for doing so. Due to the complexities of this decision, employers should discuss this matter with their employment lawyer. If an employer intends to continue using criminal background checks, it will need to implement appropriate procedures and policies to ensure compliance with the new law.

For additional help navigating these issues, feel free to contact Walker R. Lawrence, a partner in the employment law practice at Levin Ginsburg, at wlawrence@lgattorneys.com, or Joseph A. LaPlaca, an associate attorney at Levin Ginsburg, at jlaplaca@lgattorneys.com.

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