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By Christine Malafi

Almost daily, the headlines report new cybersecurity attacks, each more brazen and far-reaching than the last. Businesses may think their general commercial liability policy will cover their losses in the event of a cybersecurity attack, but often learn the hard way that insurance companies frequently deny coverage for these losses. Electronic data is not considered to be “tangible property” by most traditional policy terms, and because data breaches don’t typically involve loss or damage to physical property, general liability policies often do not cover the resulting expenses and damages. Whether your business is protected depends on the specific language of your policy and the circumstances of the loss. Here’s a look at how that played out in two recent examples – and some guidance on how to protect your company.

In one recent case, an employee received a fake email from the address of the company’s president, who had been hacked.[1] The employee believed the company president was directing him to make a transfer of money. Because the employee had essentially been tricked into causing the loss, in this instance the insurance company was obligated to pay on the claim because the hacking was a form of unauthorized use covered by the insurer.[2]

A restaurant that suffered a data breach under different circumstances, however, was not as lucky. In that case, cyber criminals hacked into a fast food restaurant’s network, then obtained and fraudulently charged the credit cards of several customers.[3]  A credit card company forced to reimburse its customers for the fraudulent charges filed suit against the restaurant for failure to keep the information safe.  The restaurant sought coverage from its insurance company, but its insurer denied coverage, asserting that no coverage existed for third-party claims arising out of the loss of electronic data.[4]  Ultimately, the Court agreed with the insurer, finding that the policy language clearly provided coverage only in the event of property damage.[5] “Property damage” was defined in the policy as “[p]hysical injury to tangible property… or … [l]oss of use of tangible property that is not physically injured.”[6]  The policy went further and stated that electronic data was not considered tangible for the purposes of insurance coverage.[7]  Therefore, the restaurant had no insurance coverage for the loss.[8]

If it seems that your coverage depends on your specific policy terms and the right set of circumstances, you’re right.  In today’s data-driven world, many insurance companies offer policies that cover electronic data claims, but exclusions from coverage and definitions can severely limit coverage. Some questions to consider:

• What minimum cybersecurity measures must your company implement for the policy to take effect?
• What types of cyber events trigger coverage and when does coverage commence?
• What aspects of your company’s technology infrastructure are covered?
• Against what type of legal actions is your company insured, and how much control will your company have to respond to those actions?
• Does the perpetrator or motivation of the cyberattack matter?

(More information on these questions here.)
Please call us to review your policy language and help you decide if the policy offers the protection you need.
 
[1] See Medidata Sols., Inc., 268 F. Supp. 3d 471, 476 (S.D.N.Y. 2017), aff’d, (2d Cir. 2018).
[2] Id.
[3] See RSVT Holdings, LLC v. Main Street America Assur. Co., 136 A.D.3d 1196 (3d Dep’t 2016).
[4] Id.
[5] Id. at 1198.
[6] Id.
[7] Id.
[8] Id.

Another year has come and gone. As we usher in 2019, business owners should know that New York State has also ushered in changes to the minimum wage and the overtime exempt salary threshold effective December 31, 2018.

Minimum Wage Increase
Employers generally must pay nonexempt employees at least the minimum wage.  Minimum wage throughout New York may vary based on the employer’s size, geographic location, or industry.  With some exceptions for the hospitality industry (please contact us for any questions you may have), the table below outlines New York’s 2019 minimum wage:

Geographic Location	2019 Rate	2019 Tipped Rate
NYC (11 or more employees)	$15.00 per hour	$10.00 per hour
NYC (10 or fewer employees)	$13.50 per hour	$10.00 per hour
Nassau, Suffolk, and Westchester counties	$12.00 per hour	$8.65 per hour
Remainder of NY	$11.10 per hour	$7.85 per hour

The minimum wage is expected to increase annually until it reaches $15.00 per hour by the end of 2021 for all of New York State.

Increased Salary Threshold for Overtime Exemption
Both federal law (Fair Labor Standards Act (FLSA)) and state law (New York Minimum Wage Act and applicable regulations) generally require the payment of overtime wages for work performed after 40 hours per week.  However, there are exemptions for certain salaried employees from federal and state minimum wage and overtime pay requirements.  In addition to New York’s minimum wage increase, the minimum salary that must be paid to workers classified as exempt under New York State Labor Law’s administrative and executive exemptions increased as of December 31, 2018. As with minimum wage, the salary thresholds vary depending on the employer’s location and the number of employees.  The table below outlines the revised thresholds in New York State:

Geographic Location	2019 Salary Threshold*
NYC (11 or more employees)	$1,125.00 per week ($58,500.00 annually)
NYC (10 or fewer employees)	$1,012.50 per week ($52,650.00 annually)
Nassau, Suffolk, and Westchester counties	$900.00 per week ($46,800.00 annually)
Remainder of NY	$832.00 per week ($43,264.00 annually)

*Numbers provided are pursuant to New York State law and are higher than the federal FLSA thresholds.
Employers should review their wage and hour practices annually to ensure that their employees are properly classified as exempt or non-exempt and that current minimum wage and overtime rates are being paid to qualified workers.  Take advantage of the new year to give your practices a fresh look.
If you have questions about minimum wage, overtime, or wage and hour exemptions, please contact us.

To view 2020 minimum wage requirements, click here.

Suffolk County employers, take note: effective June 30, 2019, employers in the county will be barred from asking about a job applicant’s salary history during the hiring process or relying on any such information to determine compensation.

The change is the result of the recently passed Restricting Information on Salaries and Earnings (“RISE”) Act, which applies to employers with four or more employees. Under the new legislation, inquiring about a candidate’s salary history (including compensation and benefits), whether orally, in writing, on an application, or otherwise, or conducting research into the candidate’s salary history, is prohibited. The law also bars employers from relying on a candidate’s salary history in determining his or her compensation at the new company at any stage of the hiring process – including at the offer or contract stage.

Penalties for violating this law will include compensatory damages to the individual as well as payments to Suffolk County, up to $50,000. Fines could reach $100,000 if the violation is found to be willful, wanton, or malicious.

The intended purpose of the legislation is to help eliminate the gender wage gap, as well as wage inequity for employees from minority groups. In other words, the law is intended to give employees coming from lower paying jobs an opportunity to not be weighed down at their new positions.  The belief is that employers will focus more on the local job market to determine the appropriate wages.

While a salary history ban has not been implemented statewide, Suffolk County joins a number of areas in the state, including Westchester County, Albany, and New York City, that have already passed such legislation. (Please contact us for additional guidance if your business operates in any of these regions.) A statewide bill may go to the State Senate for a vote in 2019.

In advance of the June 2019 effective date, employers should take the opportunity to update their employment practices to comply with the new law. Removing any references to salary history on your application forms is a critical first step. All employees who conduct interviews and participate in the hiring process should also be trained in compliance with the new policy.

This law comes on the heels of the new sexual harassment laws passed in New York State. Passed in April, that legislation requires employers to have both a sexual harassment prevention policy as well as training for their employees.

If you have questions about the RISE Act, or about your sexual harassment policy, please contact us.