Oregon Supreme Court Affirms Vacating of $100 Million Punitive Damages Award in Philip Morris USA Case

On June 24, 2010, the Oregon Supreme Court unanimously affirmed the Oregon Court of Appeals in setting aside a $100 million punitive damages award imposed against Philip Morris USA. At the time of the original verdict, it was the largest punitive damages award in an individual smoker case in the country, Schwarz v. Philip Morris USA. Philip Morris USA was represented in the appellate courts by Bill Gary, Sharon Rudnick, and Susan Marmaduke.

The Oregon Supreme Court held that, as a result of improper jury instructions, the trial court violated the U.S. Constitution by allowing the jury to impose punitive damages to punish for harm to people who were not parties to the litigation. In Williams v. Philip Morris USA, the United States Supreme Court ruled that the Constitution forbids imposing punitive damages on such a basis. Bill Gary, Sharon Rudnick, and Susan Marmaduke represented Philip Morris before the Oregon appellate courts and the United State Supreme Court in the Williams case.

Bob Steringer Speaks to OPB regarding “Open Courts” and Its Application to the Boy Scouts of America Case

HLGR shareholder Bob Steringer was quoted in a news story that ran June 14, 2010, on Oregon Public Broadcasting’s local report during NPR’s Morning Edition. Bob spoke on the “open courts” provision of the Oregon Constitution and its application to a case brought against the Boy Scouts of America by an alleged victim of sexual abuse. A link to the story is here. Click the “listen” button to hear the audio version of the report.

Employment Law Alert: Recent Developments Regarding Workplace Privacy Rights

Recent Developments Regarding Workplace Privacy Rights

New Jersey Supreme Court Upholds Privacy of Employee Personal
Emails Accessed on Work Computer

On March 30, 2010, the New Jersey Supreme Court issued a
decision in Stengart v. Loving Care Agency, Inc., 201 N.J. 300,
990 A.2d 650 (2010), holding that an employee had a reasonable
expectation of privacy in email communications she had with her
attorney through her personal, password-protected, web-based
email account using her employer’s laptop computer. Before the
employee resigned from her position with employer, the employee
used her work-issued computer to access her personal email
account on Yahoo’s website, through which she communicated
with her attorney about her situation at work. After the employee
resigned, she filed an employment discrimination lawsuit against
her former employer.

During discovery, the employer accessed the hard drive of the
employee’s company issued laptop, which included the contents
of the email communications the employee had exchanged with
her lawyer via her Yahoo account. When it was revealed that the
employer had accessed this information, the employee’s attorney
argued that the emails were protected by the attorney-client
privilege.

The trial court held that the emails were not protected because the
employee had no reasonable expectation of privacy in the emails
due to the language of the employer’s personnel policy regarding
electronic communications. The employer’s policy permitted
employees occasional personal use of its electronic systems, but
provided that the employer could at any time access and review all
information on its electronic systems. The policy also stated that
all emails and Internet communications “are not to be considered
private or personal” to employees. The trial court found that this
language was sufficient to put the employee on notice that all data
stored on the employer’s computer systems (including emails sent
from an employee’s personal account) was the employer’s property
which the employer had the right to access.

The New Jersey Appellate Division reversed the trial court, finding
that the employee had a reasonable expectation of privacy in the
emails with her attorney, in part because the employer’s policy was
ambiguous as to whether the employer had the right to retrieve the
emails and data from the employee’s personal email account.

In a unanimous ruling, the New Jersey Supreme Court agreed
with the Appellate Division in holding that under the circumstances,
the employee could reasonably expect that her email communications
with her lawyer through her personal, web-based email account
would remain private, and that sending and receiving the emails
using a company laptop did not waive or negate the attorney-client
privilege.

The court noted that the ambiguous language of the employer’s
personnel policy regarding electronic communications was insufficient
to put the employee on notice that she did not have a reasonable
expectation of privacy in the emails. Specifically, the court
found that the employer’s policy failed to “give express notice to
employees that messages exchanged on a personal, password-protected,
web-based email account are subject to monitoring if company
equipment is used,” and “failed to warn employees that the contents
of personal, web-based emails are stored on a hard drive and can be
forensically retrieved and read.”

Impact on Oregon Employers
The Stengart decision is part of a recent line of court decisions
addressing privacy and confidentiality issues that can arise
from an employee’s personal use of an employer’s electronic systems.
While this New Jersey decision is not binding on courts in Oregon,
the Stengart decision provides guidance regarding what employers
should do in order to avoid problems arising from this developing topic:

• Employers should consult with their legal counsel to ensure that their electronic systems personnel
policies clearly address what is permissible and non-permissible use of their computers, email, and other
electronic systems.

• The policies should contain explicit language outlining the employer’s right to access, monitor,
or review information or communications created, sent, received, or stored on the employer’s electronic
systems. The policies should expressly address the employer’s right to retrieve, access, or monitor the
content of both work and personal communications.

• Employers should consider adding express language to their electronic systems policies which
notify employees that the employer may access and monitor any information on the employer’s computers,
including email messages exchanged on an employee’s personal, password-protected, web based
email account, if company equipment is used by the employee to access those accounts.

• If an employer permits personal use of the employer’s electronic systems, the employer should
clearly define what constitutes “personal use” and the circumstances under which the employer may
retrieve, access, or monitor an employee’s personal or non-work communications.
With the increased and expanding use of email, text messaging and social networking sites, it is
important for employers to implement policies to define and address what is appropriate use and what is
inappropriate use by employees of employer computers, email and other electronic systems.
Employers with questions about whether their current electronic systems personnel polices are structured
to provide the best protections against employee privacy complaints should contact their legal counsel.

Portland
1001 SW Fifth Avenue
16th Floor
Portland, OR 97204-1116
Phone: (503) 242-0000
(800) 315-4172
Fax: (503) 241-1458

Eugene
360 E. 10th Avenue
Suite 300
Eugene, OR 97401-3273
Phone: (541) 485-0220
(800) 315-4172
Fax: (541) 686-6564

Salem
333 High Street, N.E.
Suite 200
Salem, OR 97301-3614
Phone: (503) 371-3330
(800) 315-4172
Fax: (503) 371-5336

Nothing in this communication creates or is intended to create an attorney-client relationship with you, constitutes the provision of legal advice, or creates any legal duty to you. If you are seeking legal advice, you should first contact a member of the Labor and Employment Team with the understanding that any attorney-client relationship would be subsequently established by a specific written agreement with Harrang Long Gary Rudnick P.C. To maintain confidentiality, you should not forward any unsolicited information you deem to be confidential until after an attorney-client relationship has been
established.

If you are not receiving our Client Alerts via email but would prefer such method of delivery, or you would like to have your name removed from our mailing list, please contact Jenni Ashcroft at: [email protected]

Employment Law Alert: Medical Marijuana Update / New Health Care Reform Law Provides Break Time for Nursing Mothers

Medical Marijuana Update/New health care reform law provides break time for nursing mothers

Employers Need Not Accommodate Medical Marijuana Users

Oregon State Supreme Court rules federal Controlled Substances
Act preempts state law

On April 15, 2010, the Oregon Supreme Court issued a decision in
Emerald Steel Fabricators v. Oregon Bureau of Labor & Industries,
346 Or 157 (2010), declaring that employers are not required
to accommodate an employee’s use of medical marijuana. In
Emerald, the employer discharged an employee for non-work use
of marijuana prescribed by a physician under the Oregon Medical
Marijuana Act. BOLI issued an order that the termination violated
the State of Oregon disability discrimination statute, ORS 659A.112,
because the employer failed to engage in the “interactive process”
to determine a reasonable accommodation for the employee’s
disability.

The Court reversed BOLI’s order, and held that the federal
Controlled Substances Act, which prohibits the manufacture,
distribution, dispensation, or possession of marijuana, even when
state law authorizes its use to treat medical conditions, trumped
the voter-enacted Oregon Medical Marijuana Act, which allows
medical marijuana users a defense against state criminal charges.
Under the Supremacy Clause of the US Constitution, federal laws
enacted by Congress supersede state law when state law confl icts
with federal statutes.

The immediate impact of the Supreme Court’s decision is to
remove the employment protection that medical marijuana users
arguably had previously under Oregon’s disability law. Under the
Emerald decision, Oregon employers now have no obligation to
accommodate an employee’s disability through the use of medical
marijuana and BOLI will no longer be able to enforce employment
protection under State of Oregon disability law for medical marijuana
users.

The Emerald decision supports an employer’s right to establish drugfree
workplaces, administer drug tests, and to make employment decisions (such as
hiring, discipline and discharge decisions) due an employee’s medical marijuana
use without violating the State of Oregon’s disability discrimination laws.
However, employers should be mindful of other discrimination laws that may
apply, including state and federal laws which provide employment protections
for those individuals who are in recovery from substance abuse, which could
include recovery from marijuana substance abuse.

Health Care Reform Law Requires Employers to Provide
Nursing Mothers With Extra Break Time and a Location to Express Milk

Section 4207 of the Patient Protection and Affordable Care Act (“the Act”),
signed by President Obama on March 23, 2010, amends the Fair Labor Standards
Act (“FLSA”) to add a new section requiring employers to provide “reasonable”
break time for employees who are nursing mothers to express milk. The new law
is effective as of March 23, 2010.

“Reasonable Unpaid Breaks” Requirement
Employers can determine what constitutes a “reasonable” amount of time
to express milk, but the frequency of required breaks is subjective and based
on the employee’s “need” to express milk. The U.S. Department of Labor (“DOL”)
has the authority to draft regulations offering guidance in this area. Until the
DOL implements such regulations “reasonable break time” remains undefi ned. The
length and frequency of each employee’s lactation breaks could vary based on the
needs of each individual employee and the location and logistics of the space provided.

The Act states that employers are not required to compensate employees
for “reasonable break time” for purposes of lactation under the federal law.
Note that under Oregon law, however, employees must receive a paid rest
period of 10 minutes for every four hours work. Thus, if an employee takes a
30-minute break to express breast milk (assuming she hasn’t already used all
regular paid rest periods during her shift), 10 minutes would be paid time and
20 minutes would be unpaid time. Employers should consult employment counsel
for further advice on how to address a particular employee’s situation.
A nursing mother is eligible for the break time for up to one year after her
child’s birth and may take advantage of the breaks anytime she has the need to do so.

Lactation Room Requirement
In addition to the break time requirements, under the new law, employers must
provide a private place, other than a bathroom, for the employee to use for
expressing breast milk. The room must be shielded from view and free from
intrusion by coworkers and the public. The definition of “intrusion” is not defined
at this point. For example, it is unclear whether multiple nursing mothers
can use the same location to express milk at the same time, and whether an
employee’s current office can be designated in lieu of some other location.
Providing access to a nearby safe water source for washing hands and rinsing out
breast-pump equipment and refrigerator storage are not required, but employers
may want to consider providing access to these things.

Who must comply with this law?
The new rules apply to all employers with one exception. An employer with
fewer than 50 employees may be exempt from the Act’s requirements regarding
break time for nursing mothers, but only if the employer can demonstrate
that complying with the requirements would impose “an undue hardship by
causing the employer signifi cant diffi culty or expense when considered
in relation to the size, financial resources, nature, or structure of the
employer’s business.” This means that each employer with less than 50 employees
still must make an individualized determination as to whether an undue hardship
exception applies.

The DOL will likely issue regulations regarding what constitutes an “undue hardship.” Until then, the
Americans with Disabilities Act’s undue hardship exception, 42 U.S.C. § 12111, and its regulations, 29
C.F.R. § 1630.2, provide guidance for employers. The determination of whether there is a qualifying
undue hardship is highly fact-specific. It is generally insufficient to only show that the employer will bear some additional cost, expense or inconvenience.

The new requirements do not apply to exempt employees. Keep in mind, however, that exempt employees
cannot have their pay reduced for taking breaks to express milk.

Oregon Law
Oregon law already provides break time for nursing mothers. Effective January 1, 2007, ORS 653.077
requires employers to provide nursing mothers a 30-minute break for every four hours worked to express
milk. Oregon’s law is substantially similar to the new federal law.
However, unlike the new federal law, Oregon’s statute only applies to employers with 25 or more employees
and only requires employers to make “reasonable efforts” to provide a location other than a restroom or
toilet stall for expressing milk. Under the new federal law, all employers, absent a showing of undue
hardship, must provide reasonable breaks, and must provide a location for expressing milk.
If you would like further information regarding this new law, or how the law may apply to you, please
do not hesitate to contact one of our labor and employment attorneys.

Please visit our new website at
www.harrang.com

Portland
1001 SW Fifth Avenue
16th Floor
Portland, OR 97204-1116
Phone: (503) 242-0000
(800) 315-4172
Fax: (503) 241-1458

Eugene
360 E. 10th Avenue
Suite 300
Eugene, OR 97401-3273
Phone: (541) 485-0220
(800) 315-4172
Fax: (541) 686-6564

Salem
333 High Street, N.E.
Suite 200
Salem, OR 97301-3614
Phone: (503) 371-3330
(800) 315-4172
Fax: (503) 371-5336

Nothing in this communication creates or is intended to create an attorney-client
relationship with you, constitutes the provision of legal advice, or creates
any legal duty to you. If you are seeking legal advice, you should first contact a member
of the Labor and Employment Team with the understanding that any attorney-client
relationship would be subsequently established by a specifi c written agreement
with Harrang Long Gary Rudnick P.C. To maintain confidentiality, you should
not forward any unsolicited information you deem to be confidential until after
an attorney-client relationship has been established.

If you are not receiving our Client Alerts via email but would prefer such
method of delivery, or you would like to have your name removed from our
mailing list, please contact Jenni Ashcroft at: [email protected]

Shareholder Disputes: A Statutory Escape Route

In this month’s Oregon State Bar Bulletin, Susan Marmaduke discusses a fairly new Oregon statute that provides for a court-ordered “divorce” for warring shareholders, allowing both sides to move on toward a more productive future. Click on the following link to read the article: Shareholder Disputes: A Statutory Escape Route.

Health Law Alert

Health Law Alert
Following the March 23 signing of the Patient Protection and Affordable Care Act, and the
related amendments under the Health Care and Education Reconciliation Act, on March 30, the
enormous effort of implementing comprehensive health reform has begun. The new law affects
many businesses, not just healthcare providers and payers. Because of its complexity, the lack
of implementing regulations or interpretive guidance, and it’s gradual implementation, the
implications of the law are not all completely apparent. Harrang Long Gary Rudnick P.C. is
following this process, and will provide analysis in a series of Health Care Alerts to our clients
and friends. Please feel free to contact our health care group if you have questions about how
these Acts may affect you and your business.

Harrang Long Gary Rudnick P.C.
For further information, please contact:

Our firm’s Health Law Alerts are intended to provide general information regarding recent changes and developments in the health law area. These publications do not constitute legal advice, and the reader should consult legal counsel to determine how this information may apply to any specific situation.

Employment Law Alert: New Workplace Credit Check Ban Enacted By Oregon Legislature

NEW WORKPLACE CREDIT CHECK BAN ENACTED BY OREGON LEGISLATURE
Senate Bill 1045, adopted by the Oregon Legislature during the
February 2010 special legislative session, will prohibit, with limited
exceptions, the use of credit histories by employers in making
employment-related decisions. Once the law becomes effective,
Oregon will be one of three states (along with Washington and
Hawaii) that ban work-related credit inquiries.

The new law becomes effective July 1, 2010, and makes it “an
unlawful employment practice for an employer to obtain or use
for employment purposes information contained in the credit
history of an applicant for employment or an employee, or to
refuse to hire, discharge, demote, suspend, retaliate or otherwise
discriminate against an applicant or an employee with regard to
promotion, compensation or the terms, conditions or privileges
of employment based on information in the credit history.”

Importantly, employers may still conduct criminal background
checks and investigate a job applicant’s employment history.

In a significant departure from the Fair Credit Reporting Act
(FCRA), which allows an employer to make employment-related
decisions based on credit history (provided proper notice,
disclosures, consent and other requirements are met), the new
Oregon law will establish an outright ban on the use of credit
history in employment-related decisions.

Four types of employers or job categories are exempt from the
new law:

1. Federally insured bank and credit unions;

2. Employers required by state and/or federal law to use
credit histories for employment purposes;

3. Public safety officer positions; and

4. Positions for which an employer can demonstrate that an applicant or
employee’s credit history is “substantially job-related.” To use this
exception, employers must provide written disclosure to the applicant/employee
of the reasons for the credit check.

The statute does not define what “substantially job-related” means, and the Oregon Bureau of Labor
and Industries (BOLI) has not yet adopted administrative rules to provide guidance on how this law
will be interpreted and applied.

Employers that want to continue using credit checks after July 1, 2010 should consult legal counsel
to determine whether they fi t into one of the statute’s exceptions. If it is clear that you will be unable

to meet one of the statute’s exceptions, you should develop and implement an alternate procedure
by July 1, 2010, to avoid civil liability and potential BOLI penalties.

As with other unlawful employment practices under ORS 659A, an aggrieved individual may fi le a
complaint with BOLI, as well as a civil lawsuit for injunctive relief, reinstatement or back pay, and
attorney’s fees.

Employer to-do list:

• Refrain from obtaining or using credit information for applicants and employees on or after
July 1, 2010 unless you clearly fi t within one of the exceptions listed above.

• Develop alternate policies for inquiries into employment history if you do not clearly fi t within
one of the exceptions and ensure that your human resources professionals are up to speed on the
new law prior to July 1, 2010.

• Consult with your legal advisor before concluding that use of credit information is “substantially
job-related.”

If you would like further information regarding this new law, or how the law may apply to you, please
do not hesitate to contact one of our labor and employment attorneys.

Locations

Portland
1001 SW Fifth Avenue
16th Floor
Portland, OR 97204-1116
Phone: (503) 242-0000
(800) 315-4172
Fax: (503) 241-1458

Eugene
360 E. 10th Avenue
Suite 300
Eugene, OR 97401-3273
Phone: (541) 485-0220
(800) 315-4172
Fax: (541) 686-6564

Salem
333 High Street, N.E.
Suite 200
Salem, OR 97301-3614
Phone: (503) 371-3330
(800) 315-4172
Fax: (503) 371-5336

Nothing in this communication creates or is intended to create an attorney-client relationship with you, constitutes the provision of legal advice, or creates any legal duty to you. If you are seeking legal advice, you should first contact a member of the Labor and Employment Team with the understanding that any attorney-client relationship would be subsequently established by a specific written agreement with Harrang Long Gary Rudnick P.C. To maintain confidentiality, you should not forward any unsolicited information you deem to be confidential until after an attorney-client relationship has been
established.

If you are not receiving our Client Alerts via email but would prefer such method of delivery, or you would like to have your name removed from our mailing list, please contact Jenni Ashcroft at: [email protected]

Easy Access to Records Poses Hard Questions

The Chair of the firm’s Government Law Department, Pete Shepherd, recently contributed an opinion piece about possible improvements to Oregon’s Public Records and Public Meetings Laws.

Suit Filed Against Life Insurance Company on Behalf of Widow

Long-time HLGR shareholder Bill Gary represents a Eugene widow who is suing her late husband’s insurer for denying benefits following his fatal household accident on the grounds of the policy’s intoxication exclusion. Click here to read the story by The Register-Guard.

DOJ Increases Budget to Investigate and Prosecute Healthcare Fraud Cases

DOJ Increases Budget to Investigate and Prosecute Healthcare Fraud Cases

The Department of Justice (DOJ) recently announced that the Obama administration has
requested $29.2 billion for the Justice Department’s national security and traditional law
enforcement missions. The Department has stated a renewed focus on economic crime and
financial fraud. The fiscal year (FY) 2011 budget request represents a 5.4 percent increase,
including an increase of 2,880 positions over the prior year. The roughly $2 billion increase will
enhance many existing programs including the Department’s “vigorous efforts to prevent,
investigate and prosecute” health care fraud.

Harrang Long Gary Rudnick P.C.

Our firm’s Health Law Alerts are intended to provide general information regarding recent changes and developments in the health law area. These publications do not constitute legal advice, and the reader should consult legal counsel to determine how this information may apply to any specific situation.