Online Advertisers Beware

By Zachary Levy, Esq.

A lawsuit was filed in federal court earlier this month by an online advertising agency alleging a prevalent, yet seldom litigated form of e-commerce fraud, referred to in the industry as “click fraud.” Click fraud causes online advertisers to overpay for their ads in two main ways. First, the cost of placing an advertisement on a particular website is largely based on the amount of users who visit that website each day (the amount of “web traffic.”). The higher the web traffic on a particular website, the more they are able to charge to place an advertisement because there are more potential consumers. Second, rather than paying a flat-fee to place an advertisement on a website, other contracts may require that the advertiser pay a nominal amount each time their advertisement is clicked on. Clearly, it would be problematic for an advertiser to be paying for clicks even though those clicks are being generated by fraudulent users, or “bots.”

In the lawsuit, Congoo (a.k.a. Adiant), an online news and networking company, is alleging fraud with regard to a one-year advertising contract it signed with Sell It Social, who operates an e-commerce website known as Rebel Circus. Congoo agreed to pay $300,000 in fees to advertise on Rebel Circus based on the purported volume of web traffic on the website. Further analysis conducted by Congoo revealed, however, that a substantial amount of the web traffic on Rebel Circus is generated by “click farms,” or bots, which are programed to visit specific websites and create the illusion that several more human users are visiting the website than there actually are. According to the Complaint, Congoo suspected a high presence of artificially generated web traffic based on two different analyses. First, an empty advertisement placed on Rebel Circus, containing no content whatsoever, was still being clicked on several times by purported users. Second, the purchase rate stemming from clicks from Congoo’s advertisement on Rebel Circus was much lower than the statistical average, therefore evidencing the presence of bots, which obviously would not be purchasing anything. Congoo is seeking to rescind its contract with Sell It Social as a result of the suspected high amount of fraudulent web traffic.

While obtaining evidence of click fraud can be difficult, it is not impossible, and online advertisers should take steps to minimize their risk of being taken advantage of. First, advertisers can simply conduct online research to learn whether a website they are considering placing an ad on is known to have a high presence of bots or fraudulent users that inflate web traffic figures. Additionally, there is software available which gathers data from websites and advertisements and uses that information to monitor for signs of click fraud. For example, if an advertisement on Website A is generally clicked on by only 0.25% of visitors, but Advertiser X’s advertisement is clicked on by 2.5% of visitors, ten-times the statistical average, would likely be indicative of click fraud. One more way an online advertiser can protect themselves is to always include language in the advertising contract which provides for relief in the event click fraud is detected.

EEOC Declares that Discrimination on the Basis of Sexual Orientation is Prohibited under Title VII

By Eleanor J. Lipsky, Esq.

Recently, the United States Equal Employment Opportunity Commission (“EEOC”) officially held that Title VII’s protections against sexual discrimination also encompass discrimination on the basis of sexual orientation. [1]  This ruling is an important update because it significantly expands the scope of a 2012 decision, where the EEOC held that discrimination against a transgender individual was discrimination because of sex and was therefore prohibited under Title VII.[2]    The EEOC now takes the broader position that discrimination against an individual because of that person’s sexual orientation is a violation of Title VII as well.   The Commission will accept and investigate charges alleging sexual orientation discrimination in employment.   The EEOC has listed protection of LGBT employees as one of its target priorities for 2013 through 2016.

In Baldwin v. Foxx, the EEOC stated that sexual orientation discrimination is inseparable from sexual discrimination because it is premised on “sex-based preferences, assumptions, expectations, stereotypes, or norms.”  Further, sexual orientation, as a concept, “cannot be defined or understood without reference to sex.”   The EEOC reasoned that, “[i]t follows, then, that sexual orientation is inseparable from and inescapably linked to sex and, therefore, that allegations of sexual orientation discrimination involve sex-based considerations.”

Although this decision is not binding precedent in federal courts and it is not certain whether courts will ultimately agree with the EEOC’s position, it is likely to be considered persuasive authority.   In addition, congressional action is not required to implement the EEOC’s decision because the holding is based on extending an already existing protected Title VII class.  Litigation relying on this EEOC decision will certainly take place in the future.  In light of these legal developments, employers are advised to consider their internal anti-discrimination policies with respect to gender identity and sexual orientation discrimination.

[1] See Baldwin v. Foxx, EEOC Appeal No. 0120133080 (July 15, 2015), at for the full EEOC decision.

[2] See Macy v. Department of Justice, EEOC Appeal No. 0120120821 (April 20, 2012).

Are Your “Independent Contractors” Entitled to Overtime?

By James W. Boyan III, Esq.

The United States Department of Labor recently proclaimed that “most workers are employees under the FLSA.”  On July 15, 2015, the DOL issued new guidance concerning the standard for determining whether an employee has been misclassified as independent contractor under the Fair Labor Standards Act’s (“FLSA”).   The FLSA, which was originally enacted 1938, is a federal law that requires employers to pay all covered employees overtime for all hours worked in excess of 40 hours per week.   Under the law, an individual is considered to be an “employee” of a person or entity that “suffer[s] or permit[s]” him or her to work.  Although the FLSA’s broad definition of the term “employ” has been around for over 75 years, courts have interpreted the standard in a variety of ways.

The DOL’s new guidance, entitled “Administrator’s Interpretation No. 2015-1,” makes it clear that the agency intends to interpret that definition in the broadest way possible.  To that end, the agency has concluded that the liberal “economic realities test” should be used to determine whether a worker is an employee or an independent contractor under the FLSA.  This test focuses on whether the worker is economically dependent on an employer or in business for him or herself.  If the worker is economically dependent on the employer, then he or she is deemed to be an employee who is potentially eligible for the protections of the FLSA.  Based on this expansive interpretation, the DOL has boldly asserted that “most workers are employees under the FLSA.”

The DOL’s economic realities test contains six factors:

  • the extent to which the work performed is an integral part of the employer’s business;
  • the worker’s opportunity for profit or loss depending on his or her managerial skill;
  • the extent of the relative investments of the employer and the worker;
  • whether the work performed requires special skills and initiative;
  • the permanency of the relationship; and
  • the degree of control exercised or retained by the employer.

The DOL has explained that each factor in the test must be “examined and analyzed in relation to one another, and no single factor is determinative.”  The agency has also emphasized that the “control” factor should not be given undue weight.  Finally, the DOL has stated that: “[t]he application of the economic realities factors is guided by the overarching principle that the FLSA should be liberally construed to provide broad coverage for workers.”

Companies that engage workers on a contract basis should carefully review the DOL’s recent guidance.  Employers who fail do so could be liable for back overtime wages, liquidated damages and attorneys’ fees under the FLSA.

Bergen County Clerk Goes Electronic for Land Use Records

By Scott R. Lippert, Esq.

Digital technology is having profound effects upon all areas of the law.  Real estate practice is no exception.

As of this past May, the Bergen County Clerk’s office permits individuals, attorneys and title companies to file and record land transaction records electronically. The electronic recording system functions through the website:  Land transaction records were required to be mailed or hand delivered to the Bergen County Clerk’s office prior to the implementation of the electronic recording system. While the Bergen County Clerk’s office will still accept hard copies of land transaction records, there is now an alternative method. Electronic recording, or e-recording, will be conducted through the use of Corporation Service Company, a third party vendor.

In addition to the ability to file and record land transaction records electronically, Bergen County now offers users the ability to search land transaction records online.  Users can go to the website, and access an online database that contains images of deeds dating back to 2004 and images of mortgages dating back to 2007. The Bergen County Clerk’s office is in the process of uploading more images from earlier years to enhance the depth of the database.

These new electronic functions will enable documents to be processed faster than the Bergen County Clerk’s office was previously capable of, and will hopefully provide for fewer errors in documentation filed with the land transaction department. Additionally, it will now be easier to locate land transaction records, and will save time and money typically associated with attempting to locate such documents in the actual books in which they were originally recorded.

This new practice is in the process of being adopted throughout New Jersey.  Eventually, all recording and searching will be done electronically, which will be a great convenience for all real property transactions.


Protecting Your Business from a Data Breach

By Ryan J. Cooper, Esq.

Previously printed in the Meadowlands USA Blog

A three-step process to prevent your business from a data breach

On an almost daily basis, news reports announce another breach of corporate websites and point-of-sale systems. Data breaches at some of the country’s largest retailers attract national press attention, but numerous studies confirm that the majority of data breaches are occurring at small to mid-sized business. Many are unaware that they have been compromised. These businesses are at significant risk for costly, and potentially catastrophic, losses including liability to customers and payment card issuers, and a loss of reputation and good will.

Your business’s exposure to losses due to a data breach can be mitigated by taking relatively simple steps to identify and address your security vulnerabilities. Every business should, at least annually, conduct a risk assessment of their information systems, including retail point-of-sale systems, update those systems and address any identified vulnerabilities and review their insurance program to increase the likelihood that they will have coverage when the inevitable happens.

Most businesses believe their information systems are up-to-date and compliant with the necessary security standards—and at one time they likely were. But security standards are changing regularly, and many businesses are not regularly reviewing and updating their information and point-of-sale systems.

The first step is to assess your risk with an evaluation of your information management. Namely, what information is your business collecting? How is it being used? How is it being stored?

Any business with a website or e-commerce system should identify any digital information they are processing, including whether payments are processed directly on your website or through a third-party service such as PayPal or Google Wallet.

This kind of assessment should be done regularly. As technology and business methods evolve, the answers to these questions change. Many businesses now have the ability to collect, use and store new forms of information that they previously could not collect or use effectively. Now is a good time to reevaluate what customer information your business has and how it is handling that information.

Once you have assessed your information management processes, evaluate and mitigate your exposure if something goes wrong. For most retail businesses, a significant source of exposure is the point-of-sale system, whether in-person, at the cash register or online. The payment card industry has promulgated the Payment Card Industry–Data Security Standard (or PCI-DSS). Compliance generally requires every merchant, regardless of size, to meet 12 requirements in six separate categories. If a breach occurs and your business is not PCI-DSS compliant, your business may be liable not only to your customers but also to the banks and financial institutions that issued the credit and debit cards your customers use. Today, liability to card issuers may be much greater than the liability to consumers directly.

Some businesses have outsourced payment card processing to a vendor. Even then, businesses should evaluate their exposure in the event their vendor is breached, including the vendor’s obligation to notify and indemnify them in the event of a breach.

For other types of information, evaluate whether the information constitutes “personal information” under the applicable state laws. Notably, many states have extended their laws to any business with personal information about a resident of that state. So, New Jersey businesses with personal information of California and Massachusetts residents, for example, may be subject to the data breach notification laws of California and Massachusetts.

Finally, every business should review their insurance policies for adequate coverage for when the unexpected happens. This requires more than confirming that your comprehensive general liability or CGL policy is up to date. Today, most policies, particularly CGL policies, will contain terms that limit or exclude coverage for cyber, privacy and other information related losses. Every business should carefully review the terms of their policies against the specific exposures that their business may be facing.

Today, the information economy presents numerous opportunities for businesses to gain a competitive edge through the use of technology and information processing. But these new opportunities carry new risks. Taking a few steps now to review and evaluate your exposure can go a long way in preparing and mitigating these risks—and protecting your business from future losses.

New NYC Law Bans Use of Credit Histories in Employment Decisions

By Eleanor J. Lipsky, Esq.

Last month, New York City’s Mayor Bill de Blasio signed into legislation Intro. 261-A, or the Stop Credit Discrimination in Employment Act, which amends the New York City Human Rights Law.  The Act makes it unlawful for New York City employers to use an individual’s consumer credit history in making hiring and employment decisions.  The law goes into effect on September 3, 2015.

Proponents of the law argue that reliance on credit checks discriminates against minorities and low-income job applicants with poor credit histories and limits their ability to improve their credit status.  The New York City Council found that employers often use consumer credit information to make hiring decisions, despite the fact that there is little evidence linking an employee’s credit score or credit worthiness to job performance.  Credit checks may adversely affect those who have fallen behind on student loan payments or medical bills and can also have a disparate impact on women and victims of domestic violence, for instance.

The law defines “consumer credit history” as “an individual’s credit worthiness, credit standing, credit  capacity, or payment history, as indicated by: (a) a consumer credit report; (b) credit score; or (c) information an employer obtains directly from the individual…”.   The law makes it unlawful to both use an applicant’s credit history and to request a credit history for employment purposes, unless one of the exceptions to the law is met, as discussed below.

Note that New York City’s law is considered broader than most other jurisdictions that have adapted similar measures.   Other jurisdictions often provide exceptions for managerial positions, financial institutions, or positions were a credit report is substantially related to the position.   However, New York City’s law contains only a few limited exceptions that allow for the use of credit checks when necessary.  The exceptions include positions that require an employee to be bonded by the City, state or federal law; positions requiring security clearance under federal or state law; non-clerical positions with regular access to trade secrets; and positions allowing modification of digital security systems that protect employer or client networks or databases, among several others. [1]  Also note that the term “trade secrets” here does not include access to general proprietary company information and “regular access to trade secrets” does not mean access to client or customer lists.

This law applies to New York City employers of four or more individuals and is enforceable through the City Commission on Human Rights or by a civil action.  It is recommended that New York City employers therefore reassess their employment practices with respect to use of credit histories and ensure that the positions included in the carved-out exceptions to the law are distinguished from all other positions.

[1] See for the legislation’s full text.

New ABLE Act Helps Save on Behalf of the Disabled

By Louis Pashman, Esq.

A little more than a year ago, our blog posted an article about special needs trusts.  There is now another avenue available for saving on behalf of individuals with disabilities.

In December 2014, the President signed the Achieving a Better Life Experience (ABLE) Act.  The purpose of the legislation is to assist families in saving private funds for disability-related expenses to supplement (not replace) private insurance, Medicaid, SSI or other sources.  Of course, there are restrictions.

The account may not exceed $100,000 for purposes of SSI (the consequence is that SSI payments are suspended, not terminated, until the account is below $100,000) and the account cannot exceed the limitations placed on qualified tuition plans (529 accounts).  The annual contribution from all sources cannot exceed the annual gift tax exclusion amount, currently $14,000, and must be in cash.  Contributions are not tax deductible but accumulate tax-deferred.  Withdrawals are taxed to the beneficiary but only to the extent they exceed qualified disability expenses.  The disability must have occurred before age 26.

Accounts are deemed owned by the beneficiary.  Therefore, on the death of the beneficiary any amounts remaining after payment of outstanding disability-related expenses can be claimed by the state to reimburse for the amount of medical assistance provided after establishment of the ABLE account.  This is a major difference from special needs trusts.  On the death of the beneficiary of a special needs trust any remaining funds pass in accordance with the trust instrument.  On the other side, there is no income tax benefit for special needs trusts.  In addition to the federal income tax benefit of ABLE accounts, states may permit state tax benefits as well (Massachusetts has already done so).

There is much more detail to be worked out, but ABLE does seem to offer an alternative to special needs trusts in appropriate circumstances.