Protecting Clients from Hackers and Data Breaches

By Andrew Malia

Attorneys are understandably concerned about the security of their clients’ data and their liability if they suffer a data breach. The need for law firm data security is more important than ever. With data breaches becoming a common occurrence, modern lawyers must consider the threat of having their information stolen or compromised. The American Bar Association’s Model Rule 1.6(c) states,

“A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.”

The definition of “reasonable efforts” is left vague, so it’s up to each attorney to make sure they are doing all they can. Hackers are getting smarter all the time. Preventing data breaches and other unauthorized access to client information can be difficult. There are some simple steps you can take, however, to reduce your chances of being affected.

Document Security

You can make sure your data is protected by securing the files you send to clients. Sending sensitive data over email is risky because hackers have the potential to obtain information about your clients or your business. A phishing attack is when a hacker tricks you into entering your email password on a website they own. Accidentally giving your password to a hacker can be devastating if you are not prepared. When every file you have sent to your clients is stored in your email, a hacker has complete control if they obtain your email password. With access to this sensitive information, they can use it against you, your staff, your law firm, or your clients. They can also use your email contact list to spread their malware to your clients and coworkers.

Email impersonation is on the rise, especially for law firms. In this type of fraud, a hacker will buy a domain name that nearly matches your firm name and send documents to clients or ask them to transfer payment to a bank account. An unsuspecting client might send personal information to these hackers without realizing the scam.

An alternative to sending files through email would be to use a secure document portal. There are many types of systems to manage your documents, with the most popular options being Google Drive and Dropbox. There are also systems designed specifically for lawyers that integrate with your chosen practice management software. These portals are more secure than email, and you can grant or revoke access to files at any time. In addition, your clients will know that any documents coming from you will be accessible only on your portal and will be suspicious of any emailed documents sent by impersonators. Make sure your chosen document portal meets American Bar Association law firm data security standards.

Data Storage

One of the worst-case scenarios for your law firm would be to lose access to all your case and client data. This situation is always a possibility when you store everything on physical servers or hard drives in your office. Among the worst-case scenarios, fire or flood in your office can wipe out your physical servers, and you can lose all your firm’s data. If you do decide to use physical servers, an off-site backup is essential.

Ransomware is a relatively new threat, but it’s no less dangerous for your firm. In ransomware attacks, a hacker accesses sensitive data on your server (such as client financial information) and threatens to release or sell it until you pay a cryptocurrency ransom. Another method is for the hacker to lock your servers, holding your information hostage, and preventing work from being done until you make a payment. If you decide to use a physical server, you must maintain a talented and experienced IT professional or team who can prevent ransomware attacks.

Cloud Server

Rather than paying for expensive servers, backups, and IT staff, there is a more straightforward solution to keeping your firm’s data secure. Storing your data on the cloud can provide bank-level law firm data security without the extraordinary price tag. Small firms and solo practitioners often cannot afford to pay for top-of-the-line data management and security for physical servers. Storing data in the cloud can give attorneys the same level of protection for a fraction of the price.

Amazon Web Services is one of the top cloud computing companies. When you store data with Amazon, you’ll be getting the best combination of security and reliability available. Best of all, you don’t have to break the bank to have your data protected by the same company that manages the data of Fortune 500 companies and government agencies. Moving data to the cloud is becoming more common every year. It could be the perfect time to make that switch and protect your practice from the many risks of a physical server.

Cloud servers, however, are not without their disadvantages. Since they are accessed via the internet, you could suffer downtime if your internet connection is slow or spotty. Cloud servers also might not provide the same flexibility and control as a physical server. Your IT professional may be more comfortable working with a physical server. As with everything, do your research and make the best decision for your firm. When shopping for cloud practice management systems, ask the company for details about their cloud providers, including server location, average uptime, and data security.

Whether it’s hackers, ransomware, or physical dangers like fire and flood, the threats to law firms are more severe than ever. Cloud document and data storage can be a solution for law firms looking to provide their clients with more security. If you’re working with a reputable cloud company, cloud servers will be more secure, more reliable, and more trustworthy.

Andrew Malia is a content specialist at LEAP Legal Software. LEAP is the all-in-one practice management software for law firms in Massachusetts. LEAP’s cloud-based solution gives lawyers everything they need to make more money, including automated Massachusetts legal forms, cloud storage, document management, trust accounting, billing, reporting, and a mobile app. Find out more about LEAP at www.leap.us.

Department of Labor Updates Overtime Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees

Doug Troyer

The U.S. Department of Labor announced on September 24, 2019 its final rule that will make over a million new American workers eligible for overtime pay for the first time in over 15 years.

The final rule focuses on updating the requirements for an

employee to be exempt from overtime pay under the FLSA for so-called “white-collar” employees a/k/a as EAP employees (i.e. executive, administrative, professional, outside sales, and computer employees).

Covered employers under the Federal Labor Standards Act (“FLSA”) are required to pay employees a minimum wage ($12.00 per hour as of January 1, 2019 in Massachusetts) and pay overtime premium pay at the rate of 1.5 times the regular rate of pay of the employee who works more than 40 hours in a workweek (defined as any 7 consecutive work days by the FLSA). In Massachusetts, the overtime minimum wage is $18.00 per hour and while Massachusetts overtime rules do not require overtime after 8 hours in a day, overtime pay does kick in after a non-exempt employee works more than 40 hours in a given work week.

The final rule focuses on updating the requirements for an employee to be exempt from overtime pay under the FLSA for so-called “white-collar” employees a/k/a as EAP employees (i.e. executive, administrative, professional, outside sales, and computer employees). As provided for in the executive summary of the final rule:

“Since 1940, the regulations implementing the exemption have generally required each of the following three tests to be met : (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the “salary basis test”); (2) the amount of salary paid must meet a minimum specified amount (the “salary level test”); and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (the “duties test”) The Department of Labor … has long used the salary level test as a tool to help define the white collar exemption on the basis that employees paid less than the salary level are unlikely to be bona fide executive, administrative, or professional employees, and, conversely, that nearly all bona fide executive, administrative, and professional employees are paid at least that much. The salary level test provides certainty for employers and employees, as well as efficiency for government enforcement agencies. The salary level test’s usefulness, however, diminishes as the wages of employees entitled to overtime increase and inflation reduces the real value of the salary threshold.”

Executive Summary in the Final Rule

While the final rule does not change the “duties test”, it does level the playing field by increasing the salary level thresholds necessary under the “salary level test” so that employees who are protected by the FLSA’s minimum wage and overtime provisions are effectively distinguished from EAP employees exempted from such requirements due to the fact that inflation has reduced the real value of the wages of employees who should have been entitled to overtime wages over the past 15 years.

The final rule updates the earning thresholds necessary to exempt EAP employees by raising the standard weekly salary level from the currently enforced level of $455 per week to $684 per week (the equivalent to $35,568 per year for a full-year employee). This is a substantial increase from the current $23,660 annual salary that was last updated during the George W. Bush administration in 2004. The final rule further raises the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year which equals the 80th percentile of earnings of full-time salaried workers nationally. Additionally, the final rule allows employers to now count nondiscretionary bonuses and incentives payments (including commissions) toward satisfying up to 10% of the standard salary level paid annually to the employee – a reflection of pay practices now becoming more common in the workplace.

It is estimated that after the final rule goes into effect in 2020 that over a million currently exempt employees will, without some intervening action by their employers, gain overtime eligibility and that approximately 2 million white collar workers who are currently nonexempt because they do not satisfy the EAP duties tests but satisfy the salary level test will have their overtime-eligible status strengthened in 2020.

The Department of Labor further identified its commitment to update the standard salary level and the “highly compensated employees” total compensation levels every 4 years so to avoid having another 15 years go by without taking inflation and rises in salary into consideration.

Co-chair of REBA’s legislation section, Doug Troyer is a founding member of the Boston and Braintree firm of Moriarty, Troyer & Malloy, LLC and focuses his practice on condominium and real estate litigation, real estate development and permitting, land use litigation and employment law. He has successfully tried numerous cases before state and federal courts at both the trial and appellate levels and has represented clients in a variety of administrative proceedings and private dispute resolution forums. Doug can be contacted at troyer@lawmtm.com.

If you have an employment related question you can e-mail Douglas at dtroyer@lawmtm.com.

Amendments to Condominium Bylaws Must Be Reasonable

Thom Aylesworth

Prior articles from this office have addressed the importance of the preparation and organization needed for a condominium trust or association to amend its condominium documents—i.e., the master

deed and declaration of trust (or the bylaws that typically are included in the declaration of trust). But what happens when a carefully crafted amendment is approved by the required vote of unit owners and then is challenged in court by a dissenting unit owner? Under Massachusetts law, it is not enough that the condominium board strictly follow the amendment procedures set forth in the condominium documents. To survive a court challenge, the amendment must also satisfy the standard imposed by the courts when an amendment is challenged. That standard is “equitable reasonableness.”

Under Massachusetts law, it is not enough that the condominium board strictly follow the amendment procedures set forth in the condominium documents. To survive a court challenge, the amendment must also satisfy the standard imposed by the courts when an amendment is challenged. That standard is “equitable reasonableness.”

What does the term “equitable reasonableness” mean? The explanation from the courts does not give much guidance. According to the Massachusetts Supreme Judicial Court (borrowing the definition used by Florida courts), it means “[i]f a rule is reasonable the association can adopt it; if not, it cannot.” Noble v. Murphy, 34 Mass. App. Ct. 452, 457 (1993) (citation omitted). The Court further explained, again borrowing from Florida law, that amendments imposing restrictions on unit owners are reasonable only when they are “reasonably related to the promotion of the health, happiness and peace of mind of the unit owners.” Id. (citation omitted). Furthermore, the amendment is invalid if it “violate[s] a right guaranteed by any fundamental public policy or constitutional provision.” Board of Managers of Old Colony Village Condo v. Preu, 80 Mass. App. Ct. 728, 730 (2011). Presumably, a condominium board that proposes a bylaw or other amendment believes it to be reasonable. The key point, however, is that in a court challenge, the person who decides whether an amendment is reasonable is the judge.

An interesting decision about a condominium bylaw amendment was recently issued by the Massachusetts Superior Court in the matter of JAH Realty, LLC v. Trustees of The 25 Channel Center Condominium Trust. At issue was a bylaw amendment that applied only to the condominium’s sole commercial use unit. After purchasing the commercial unit, the owner leased it to a child daycare business. Upon learning of this new commercial use, the insurance carrier for the condominium trust indicated it would not renew the condominium’s insurance policy without an indemnification agreement from the commercial unit owner. The condominium board was unable to reach an agreement with the commercial unit owner and instead proposed an amendment to the condominium bylaws that, among other things, required the commercial unit owner to indemnify the condominium trust against liability arising from the use of the commercial unit. The amendment was properly ratified by the unit owners.

The commercial unit owner filed a lawsuit, seeking to annul the bylaws amendment. The judge ruled in the board’s favor, finding that such an amendment satisfied the reasonableness test. The judge reasoned that commercial businesses, and particularly daycare operations, create legitimate liability concerns that do not exist with residential units, and therefore the indemnification amendment was valid. The judge was not swayed by the commercial unit owner’s argument that the indemnification obligation was imposed only after it had invested hundreds of thousands of dollars to remodel the unit to accommodate the daycare business. The judge concluded that the new daycare business use created the need for indemnification, and therefore it was not unreasonable for the condominium to adopt the amendment imposing the new obligation. Likewise, the judge was not persuaded by the fact that the commercial unit owner carried substantial insurance for the benefit of the condominium and board of trustees. The judge determined that, absent the indemnification amendment, the condominium would be at risk of losing its own insurance, and that consideration outweighed the large insurance benefits offered by the commercial unit owner. Last, the judge agreed with the board that the commercial unit owner’s concern as to a negative impact on the market value of its unit was outweighed by that owner’s knowledge, when purchasing its unit, that the board was obligated to maintain insurance for the condominium, and that it was reasonable for the board to “fulfill its mandate and protect the residential unit owners” by obtaining the amendment to avoid losing the condominium’s insurance policy.

But it was not a complete victory for the condominium board. The judge ruled in favor of the commercial unit owner and struck down certain provisions of the bylaws amendment, including a provision that gave the trustees sole discretion to charge the commercial unit owner for any increase in insurance premiums incurred by the trust in providing adequate insurance for the condominium. The judge suggested, however, it would be reasonable to adopt an amendment limiting such obligation to increased costs incurred by the trust as a direct consequence of the daycare facility use in the commercial unit.

When faced with the task of amending any of the governing documents of a condominium, it is critically important to follow the procedures as laid out in the documents. It is equally important to consider whether the proposed amendment will pass the reasonableness test if it is challenged in court. The analysis involves a broad spectrum of factors, and condominium boards considering an amendment are well advised to seek the advice of an attorney to learn more about whether the proposed amendment might survive such a challenge.

A copy of the court decision in JAH Realty LLC v. Trustees of The 25 Channel Center Condominium Trust may be found here at this link.

Originally posted August 17, 2019on tlawmtm.com.

https://www.lawmtm.com/amendments-condominium-bylaws.html

Associated with the Braintree firm of Moriarty, Troyer & Malloy, Thom Aylesworth has over twenty years of practice experience in Massachusetts and New Hampshire. He represents condominiums, corporations, and individuals in a wide range of matters with a primary focus on complex real estate litigation. His specific areas of practice include construction defects, condominium enforcement, zoning and land use litigation, beach rights, and other property disputes.  His email address is taylesworth@lawmtm.com