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EEOC Settles its First Transgender Suit Filed Under Title VII

As we previously reported, the EEOC has decided to pursue protections for transgender workers under Title VII’s prohibition against sex discrimination and harassment as part of its strategic mission, even though no federal statute, including Title VII, explicitly prohibits employment discrimination based on gender identity or expression.

To this end, the EEOC filed two lawsuits on Sept. 25, 2014 on behalf of transgender workers –EEOC v. Lakeland Eye Clinic, P.A. (Middle District of Florida, Tampa Division) and EEOC v. R.G. & G.R. Harris Funeral Homes Inc. (Eastern District of Michigan, Southern Division) — on behalf of transgender workers.

On April 9, Judge Mary S. Scriven of the U.S. District Court for the Middle District of Florida approved a consent decree entered into between the EEOC and Lakeland Eye Clinic, P.A. settling one of the two lawsuits. The terms of the Consent Decree, including the nature of the programmatic relief required by the EEOC make it crystal clear that this is an area that the EEOC will continue to pursue in 2015 and beyond.

Case Background

In EEOC v. Lakeland Eye Clinic P.A., the EEOC claimed that an organization of healthcare professionals fired an employee because she is transgender, because she was transitioning from male to female, and/or because she did not conform to the employer’s gender-based expectations, preferences, or stereotypes. The complaint alleged that even though the claimant had been performing her duties satisfactorily, she was terminated soon after she began presenting as a woman and informed her employer that she was transgender.

Terms of the Consent Decree

The EEOC and Lakeland Eye Clinic, P.A. reached a settlement during the course of discovery. In full and complete settlement of the claims raised by the EEOC, the parties entered into a Consent Decree which Judge Scriven approved on April 9. The following are highlights of the terms of the Consent Decree:

  • Total payment of $150,000 to the aggrieved employee as well as a neutral letter of reference
  • Revised employer discrimination and harassment policies stating that no employee will be terminated (or harassed) “based on an employee’s status as transgender, because of an employee’s transition from one gender to another, and/or because the employee does not conform to the Defendant’s sex or gender-based preferences, expectations or stereotypes”
  • Managerial and employee training including “an explanation of the prohibition against transgender/gender stereotype discrimination under Title VII” and “guidance on handling transgender/gender-stereotype complaints made by applicants, employees and customers.”
  • Monthly reports to the EEOC every six months certifying compliance with the terms of the Consent Decree
  • Two years of monitoring by the EEOC, including the right to conduct workplace inspections with 24 hours’ notice

Implications for Employers

The theories of liability articulated by the EEOC in this case closely follow the EEOC’s prior landmark administrative ruling titled Macy v. Bureau of Alcohol, Tobacco, Firearms and Explosives, EEOC Appeal No. 0120120821 (April 23, 2012) (previously discussed here) in which it held that transgender individuals may state a claim for sex discrimination under Title VII.

We expect that EEOC-initiated ligation on behalf of transgendered individuals will continue to increase given the Commission’s enforcement strategy and desire to “push the envelope” in this area. As we previously advised, employers must be mindful of issues related to gender identity and/or expression that might arise during interviewing, hiring, discipline, promotion and termination decisions. Employers should be particularly vigilant when an employee identifies as transgender, or announces a plan to undergo a gender transition. Stay tuned!

This blog was previously posted on the Seyfarth Shaw website here.

D.C. Improves its Captive Law

Since the passage of the first captive law in the District of Columbia in 2000, D.C. has become one of the premier captive domiciles in the United States. In 2006, the captive law was significantly enhanced by the enactment of protected cell legislation. D.C. was the first domicile in the nation to have an incorporated cell capability, which has proven to be very popular. The D.C. Council recently passed the Captive Insurance Company Amendment Act of 2014 (2014 Amendments), which was designed to streamline the chartering, licensing and operation of D.C. captives.

One of the most attractive aspects of the D.C. law is its protected cell regime. However, the minimum capitalization requirements have proven to be an unnecessary burden. The 2014 Amendments grant the commissioner the authority to reduce or eliminate the minimum capital requirement for both the cells and the “core” (the cell representing the protected cell company), as long as the capital is adequate for the “type, volume and nature of insurance that is transacted.…” This decision is placed entirely within the discretion of the commissioner and means that, going forward, no cell will be required to have excess capital.

A second problem addressed by the 2014 Amendments is the concern about the accessibility of captive information to the public under the D.C. Freedom of Information Act (D.C. FOIA).  The new law provides an express exception from D.C. FOIA for business information, financial pro formas, contracts and other captive documents. This information will not be subject to discovery or subpoena in a civil suit. However, it can be shared with other regulators and the National Association of Insurance Commissioners (NAIC) as long as those authorities are willing to maintain the confidentiality of the information.

The third significant improvement to the law is that the commissioner will have the discretionary authority to waive the requirement that a captive be examined at least once every five years under the following conditions:

• The captive has filed unqualified audited financial statements since its last examination.

• The commissioner finds that the audited statements demonstrate that the captive has sufficient surplus to satisfy all obligations to its policyholders and creditors.

• The captive is in compliance with all applicable D.C. laws and regulations.

• The captive is not a risk retention group (RRG). This latter requirement is due to the multi-state nature of RRGs.

The value of an examination for a single parent captive, or really any captive that only covers first party risk, has long been subject to question when qualified auditors have already examined the captive each year and signed off on the bona fides of its financial activity. The cost of the examination of a single parent captive seemed unreasonable in this context.

The 2014 Amendments made a few other changes to improve efficiency, as well. The Unfair Claims Practices and Claims Settlements Act were made applicable to D.C. for domiciled RRGs. These RRGs will also be required to file quarterly statements (which had previously been required by the Department of Insurance Securities and Banking), and all references to “segregated accounts” were removed from the law to avoid confusion.

In sum, the D.C. captive law has been improved by addressing three problematic areas: minimum capitalization for cells, the protection of confidential information, and the burden of unnecessary and sometimes excessively expensive financial examinations. These are significant changes and should help D.C. maintain its position as one of the most efficient and responsive captive domiciles in the United States.

This article previously ran on the Morris, Manning & Martin, LLP website.

Malware Threats from Unlicensed Software: The Critical First Step for Cyberrisk Management

Waking up to find your company on the front page news and at the center of a data breach is every CEO’s worst nightmare—and for a number of businesses, it has become reality. Today, the threats from cybercrime are real and frightening, and the risks are extraordinary. Cybersecurity is an incredibly complex issue and business leaders are grappling with how to best protect their businesses, understand the new business vulnerabilities, and identify what steps they can take to protect themselves and their customers from becoming a victim of cybercrime.

There is a strong case for organizations to put protection from malware at the top of their risk agenda. In the past year, 43% of companies experienced a data breach. The average organization experiences a malware event every three minutes, and the costs of dealing with that malware can be astronomical. The International Data Corporation (IDC) estimates that enterprises spent $491 billion in 2014 as a result of malware associated with counterfeit and unlicensed software.

A threshold step to mitigating risk is gaining an understanding of your own network and if the software you are using is genuine and fully licensed. Unfortunately, many businesses are failing to take this basic and critical first step to protect themselves.

It has long been suspected that there is a connection between unlicensed software and cybersecurity threats. A new study commissioned by BSA | The Software Alliance and conducted by IDC confirms this as fact.

The study compared rates of unlicensed software installed on PCs with a measure of malware incidents on PCs across 81 countries. Given that 43% of the software installed on PCs globally in 2014 was unlicensed, it’s clear that many businesses are at risk. The findings were sobering. The correlation between the use of unlicensed software and malware is even higher than the correlations between education and income, or that between smoking and lung cancer. The implication for governments, enterprises and consumers is clear: assessing what is in your network and eliminating unlicensed software could help reduce the risk of cybersecurity incidents.

Fortunately there are proven best practices available to tackle the challenges around software licensing.  The world class standard for Software Asset Management is ISO/IEC 19770-1:2012.

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The importance of implementing internal controls for legal use of technology, including software, has become so critical that COSO now recommends it in its revised Internal Control – Integrated Framework.

While putting controls in place may sound simple, many businesses are missing this first step.

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Only 35% of companies have written policies requiring the use of properly licensed software. For CEOs, now is the time to start implementing best practices that will help mitigate security risks and avoid your business becoming tomorrow’s news headline. For more information on additional steps you can take, visit BSA’s website.

BSA Global Software Survey

Cyberattacks Targeting Big Companies Up 40%

Five out of six companies with more than 2,500 employees were targeted in cyberattacks in 2014, representing a 40% increase last year, according to Symantec’s annual Internet Security Threat Report. But by no means does that imply big businesses are the primary target: 60% of all targeted attacks struck small- and medium-sized organizations.

The spear-fishing and fraudulent email scams deployed in these hacks have also become more effective. Overall, 14% less email was used to infiltrate an organization’s network, yet 2014 saw a 13% increase in attackers as the cause of a data breach, and the total number of breaches rose from 253 in 2013 to 312 in 2014. This notable increase in precision is a clear indication that companies are not updating their defenses to match current threats.

Fortifying against cyberbreach continues to demand even more concerted effort as malicious actors grow more sophisticated, introducing more and better malware to their campaigns. “While advanced targeted attacks may grab the headlines, non-targeted attacks still make up a majority of malware, which increased by 26% in 2014,” Symantec reported. More than 317 million new pieces of malware were created last year, meaning almost a million new threats were released daily.

Changes in the top causes of data breach offer both good and bad news. While 13% more cyberbreaches were caused by attackers and breaches due to insider theft increased 3%, Symantec found that 15% fewer were due to accidental exposure, theft or loss.

Check out the infographics below for more of Symantec’s findings and insights on how hackers operate:

Symantec 2015 Internet Security Threat Report

Symantec Path of a Cyber Attacker