I just attended the ABA Business Law Section annual conference in San Diego last week, and here are the three hottest topics I gleaned from various committee meetings and continuing education courses.
- Evolving Issues in Non-Compete Agreements
Last year was a monumental year for non-compete agreements. Led by California, non-compete clauses are now unenforceable under California Business Code Section 16600. The one exception is for non-competes in the context of the sale of a business. To add more drama, California Senate Bill 699 amends the law further to make the invalidation of non-competes retroactive and applicable to any non-compete clause irrespective of the jurisdiction where it was created. And, Assembly Bill 1076 made it mandatory to notify employees by February 14, 2024 that non-competes are now void, and notices must be sent to the last known email address for the employee.
In terms of next steps, organizations need to revise all agreements to remove non-compete clauses. This applies to non-solicitation clauses, including employee solicitation.
II. My Health, My Data in Washington
Another big topic this year involves the state of Washington’s My Heath My Data Act (“MHMDA”), which became effective in March of 2024. The Act was created in response to the overturning of Roe v. Wade, and various state attempts to impede abortion procedures in other states. MHMDA defines “consumer health data” as personal information reasonably associated with a consumer’s past, present, or future physical or mental health status, including information regarding health conditions, treatment, diagnosis, reproductive or sexual health, gender affirming care, genetic data and location data that could reasonably indicate a consumer’s attempt to acquire health services or supplies. The definition also includes data derived “from nonhealth information” that can be used to infer consumer health data, such as inferring health conditions or services based on a person’s purchases or location.
The law applies to any legal entity that does business in Washington or produces or provides products or services targeted to consumers in Washington, regardless of size. Nonprofits are not exempted. The breadth of the law may extend beyond entities with direct business contacts in Washington (e.g., businesses with data centers/servers in Washington). It imposes obligations that impact health data privacy policies, data collection, data sharing, data selling, and geofencing. As to the latter, The MHMDA prohibits using a geofence around an entity providing in-person “health care services” to identify, track or target consumers or collect their health data.
Washington’s attorney general and individual consumers (including individuals outside of Washington) may file a lawsuit alleging MHMDA violations under the state’s Consumer Protection Act. Unlike other state privacy laws, MHMDA does not explicitly carve out consumer class actions from this private right of action.
III. Impact of AI on the Attorney-Client Privilege
With the increased usage of artificial intelligence (“AI”) and large language models, lawyers are also wondering what impact AI will have on attorney-client communications and privilege. Various agencies have already ruled that the privilege does not apply to usage of the AI tool. This means that attorneys are the ones that will be accountable for AI usage. The ethics rules impacted include:
Rule 1.1 – Competency
In this regard, lawyers must not only be competent in using these tools, but more importantly they are held accountable. A lawyer must understand the capabilities and limitations of these tools.
Rule 1.6 – Confidentiality
When it comes to prompts and searches, Gartner recommends a presumption that any prompt is likely to become public information. Thus, lawyers need informed consent to proceed with usage of AI tools in order to best ensure against ethical violations in using AI tools.
Rule 5.1 – Supervision of Lawyers
This rule simply requires law firms to make all lawyers within the firm accountable for usage of AI tools, which includes the creation of rules of conduct.
Rule 5.3 – Supervision of Non-Lawyers
The rules applied to lawyers also need to be applied to all non-lawyer staff of the firm. To that end, usage of AI tools could be considered non-lawyer assistance, which would require additional guardrails around protection of the privilege and resulting client communications, governed by Rule 1.4.
Thank you for sharing!