Articles Posted in Corporate Spotlight

Published on:

Given that the name of this site is CommLawCenter, our focus is generally on communications law and regulation.  More accurately, however, our focus is on legal developments that affect the media and telecom industries, even when they emanate from entities other than Congress or the FCC.  This is particularly true where a change in non-communications laws could have an outsize impact on the communications industry.  For that reason, we have in the past written about changes involving a variety of employment matters, including who is entitled to overtime pay and when does an intern need to be paid?

Because of that industry focus, being a good communications lawyer often requires more subject matter versatility than most lawyers will ever need.  However, it is certainly helpful to also have access to the excellent group of employment lawyers at Pillsbury, which brings me to today’s topic–last week’s release by the Department of Labor of a new final rule replacing the prior test for determining whether a worker is an employee (entitled to overtime and other benefits) or an independent contractor under the Fair Labor Standards Act.

The new DOL rule restores the six-factor “economic realities” test used during the Obama administration, which generally makes it harder to classify a worker as an independent contractor by focusing on the degree to which the worker is economically dependent on the “employer.”  This replaces the two-factor test adopted by the DOL during the Trump administration, which focused principally on two factors–the employer’s degree of control over the work and the worker’s opportunity for profit and loss.

The six factors of the new test are:

  1. The opportunity for profit or loss depending on the worker’s managerial skill
  2. Investments by the worker and the potential employer in the work being produced
  3. The degree of permanence of the work relationship
  4. The nature and degree of the worker’s control over the work
  5. The extent to which the work performed is an integral part of the potential employer’s business
  6. Whether the work performed requires special skills or initiative

A far more detailed description of the new test and how each of these factors enters into the determination (and may interact with a state’s own employment laws) can be found in a pithy advisory from Pillsbury’s employment team on the subject: Employers Face Greater Misclassification Risk Under Resurrected Federal Independent Contractor Rule, Opening Door to Substantial Liability.  It is well worth the read, particularly given the substantial costs and penalties faced by businesses found to have misclassified employees as independent contractors.  It is also time to review your prior classifications of workers as independent contractors to make sure they still hold up under the new rule.

 

Published on:

The FCC announced this afternoon that “effective immediately, [we] will no longer allow visitors into our facilities, absent special permission from the Office of Managing Director.”  However, that announcement, strange as it would be under normal circumstances, was of no particular importance.  That’s because the same document noted that, starting tomorrow, the FCC is asking its staff to telework.  Whether you get through the front door isn’t too important when there is no one inside the building to meet.

Broadcasters are also moving quickly to adapt to a world where no matter how strange your day was, tomorrow’s developments will make it seem unremarkable.  For example, noncommercial college radio stations whose campuses have suddenly shut down are learning about Section 73.561(a) of the FCC’s Rules, which eliminates the requirement that such stations maintain a minimum operating schedule “during those days designated on the official school calendar as vacation or recess periods.”

Meanwhile, NAB, among many, many others, is looking to mitigate the damage resulting from cancelled or postponed events.  If you are a broadcaster that was sponsoring a concert or other event that now isn’t going to happen, you might want to check out the Advisory from Pillsbury’s Insurance Practice regarding the scope of Event Cancellation Insurance policies (and kudos to that group for presciently publishing an Advisory over a month ago titled Insuring Against the Business Risks of Coronavirus).

But what about broadcasters just doing their best to go forward with their day to day business?  Well, some may go into a pool reporting model with other local stations to minimize the number of reporters being crammed into rooms with newsmakers while keeping the public informed.  Others are putting together contingency plans for when a staffer starts coughing, returns from an international trip, or is bragging about how much they enjoyed their recent cruise ship vacation.

Such planning is, however, quite complicated, as employment laws won’t necessarily let you send someone home for two unpaid weeks just because they coughed.  For those doing such planning, you might want to take a look at this recent Advisory, which discusses effective steps you can take in the workplace without simultaneously putting your station in violation of labor laws.

Hopefully by now you’ve begun to pick up a theme, which is simply that dealing with the fallout of coronavirus is a complex and diverse endeavor for all businesses, but particularly so for broadcasters.  Those with significant news operations don’t have the option of sending everyone to work from home for a couple of weeks.  That makes the task of keeping your employees safe, your audience informed, and your station solvent all the more challenging.  The FCC may be able to telework efficiently, but for those that can’t, the days ahead will be difficult, and more so for those that aren’t planning ahead now.

 

Published on:

Back in 2015, I wrote a post on CommLawCenter discussing the prevalence of interns in the communications industry, and the Department of Labor’s crackdown on businesses illegally failing to pay their interns.  That crackdown began in 2010, with the DOL applying a rigid six-part test to determine whether an intern must be paid at least minimum wage for time spent working.  This caused a lot of consternation in media companies, with many electing to just drop internship programs rather than risk a violation of the Fair Labor Standards Act.  For those media companies, and the students that faced a suddenly diminished number of available internships, an announcement this past week from the Department of Labor will be welcome news.

When the Department of Labor stepped up enforcement against for-profit businesses illegally using unpaid interns, it released a Fact Sheet on whether an individual could be classified as a trainee or intern exempt from the Fair Labor Standard Act’s requirement that employees be paid at least the federal minimum wage and receive overtime pay. The Fact Sheet laid out the six-part test that the DOL adopted in the 1960s, noting that “[i]nternships in the ‘for-profit’ private sector will most often be viewed as employment” unless all six of the criteria are met. The six criteria were:

  • the internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  • the internship experience is for the benefit of the intern;
  • the intern does not displace regular employees, but works under close supervision of existing staff;
  • the employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  • the intern is not necessarily entitled to a job at the conclusion of the internship; and
  • the employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

From the DOL’s perspective, if an employer couldn’t demonstrate that all six factors were met, the intern was an employee, and the employer would be liable for paying the intern wages and overtime.

The reason I wrote about the crackdown in 2015, however, was because of a then-recent ruling by the U.S. Court of Appeals for the Second Circuit which found the Department of Labor’s test too rigid, and instead applied a more flexible standard that assessed whether the business or the intern was the “primary beneficiary” of the arrangement.  Specifically, the court examined whether the internship was primarily for the economic benefit of the employer or primarily for the educational benefit of the intern.

As I noted at the time, that was good news for businesses in New York, Connecticut, and Vermont, which are within the Second Circuit’s jurisdiction, and potentially for businesses elsewhere, as the U.S. Court of Appeals for the Second Circuit is influential.  The logic of its ruling might well persuade courts in other circuits to follow suit.

That did in fact happen, with the California-based Ninth Circuit court recently becoming the fourth circuit to adopt the “Primary Beneficiary” test.  Recognizing this judicial tide, the Department of Labor announced on January 5, 2018 that it is also adopting the Primary Beneficiary test.  It indicated it was doing so both to comply with these court rulings and to eliminate the confusion of dueling tests that depend on what part of the country a business is located.

While I have had to learn a lot about employment law in handling mergers, sales, and other media transactions, I am not an employment lawyer, have not played one on TV, and did not stay at a Holiday Inn Express last night.  I would therefore encourage those interested in getting the full details of the DOL’s announcement to take a look at a new Employment Advisory on the subject by Pillsbury’s own Julia Judish and Andrew Lauria.  In particular, you should note their admonition that this only changes the federal standard, and if your state has a more restrictive standard, you will need to take that into consideration.

Among other things you will learn is that the DOL, in classic government fashion, replaced the rigid six-factor test with a seven-factor test.  The big difference, however, is that the old test required every factor to be met, whereas the new test has seven factors for consideration (along with any other factors that might be relevant to a particular intern), with no single factor being determinative of the outcome.  For example, if your internship program met five of the six old factors, but you couldn’t prove that the internship yielded no “immediate advantage” to the business and that the intern might actually impede your operations, the new test may be more to your liking.

So if you discontinued your internship program because you couldn’t show all six factors favored a finding that the position was correctly categorized as an unpaid internship or, as was often the case, you just didn’t want to risk having to defend yourself against a lawsuit for unpaid wages, you may want to revisit that decision.  If an objective review would find that the business is the primary beneficiary of the internship, you’ll still need to pay wages and overtime to your interns.  But if you are comfortable (after checking with counsel of course) that the primary beneficiary is the intern, then it is time to relaunch your internship program and introduce a whole new generation to the wonders of the media workplace.  Maybe, just maybe, they will then become your ambassadors to a new generation that doesn’t really know what to make of any media that doesn’t have the word “social” in front of it.

Published on:

Under a new federal law, businesses are forbidden from restricting, prohibiting or penalizing consumer-posted reviews of the business or its goods and services. The Consumer Review Fairness Act of 2016 goes into effect tomorrow, March 14, 2017, and declares unlawful any “form contract” that prohibits or restricts the ability of an individual to engage in a “covered communication,” which is broadly defined to include any review, performance assessment, or other similar analysis of the company’s goods, services, or conduct.  Our Pillsbury colleagues Michael Heuga, Amy L. Pierce and  Catherine Meyer discuss the details of the new law in a recent Pillsbury Client Alert.

Published on:

What a difference a day makes.

As previously discussed in CommLawCenter, the Department of Labor announced in May a change to its overtime regulations.  That change would more than double the minimum salary needed to qualify an employee as exempt from overtime pay, and was scheduled to go into effect on December 1, 2016.  Because the change in the overtime-exempt minimum salary was so dramatic (moving from  $23,660 to $47,476 annually) the business community has been seeking to block it or at least mitigate its impact.  As part of that effort, Senator Lamar Alexander of Tennessee recently introduced S.3464 in the Senate, which would phase in the higher salary threshold over several years, and offer some relief to nonprofits, colleges and universities, certain health care providers, and state and local governments.

As we noted a few weeks ago, however, the likelihood of that legislation becoming law before December 1 is slim, particularly given that President Obama is likely to veto any bill that threatens to undercut the goal of using more overtime pay to help rebuild the middle class.  Taking a different tack, the State of Nevada and twenty other states brought suit against the Department of Labor’s new regulations in the U.S. District Court for the Eastern District of Texas.  A similar suit brought in that court by the Plano Chamber of Congress and over fifty other business organizations was recently consolidated with the 21 States’ suit.

In response to a motion filed by the 21 States, the District Court today granted a nationwide preliminary injunction, preventing the new salary threshold (and scheduled increases to it in future years) from going into effect until the court has had an opportunity to rule on the legality of the rule change.  In doing so, the court made clear that the Department of Labor will have a hard time defending it.  Under the Fair Labor Standards Act (FLSA), Congress exempted from overtime pay those employees who are employed in a “bona fide executive, administrative, or professional capacity”, and authorized the Department of Labor to adopt, and from time to time update, regulations defining which employees fall into those categories.

In granting the preliminary injunction, the court found that the Department of Labor had exceeded that authorization by including a salary component in addition to the “duties” test embedded in the statute:

After reading the plain meanings together with the statute, it is clear Congress intended the EAP exemption to apply to employees doing actual executive, administrative, and professional duties. In other words, Congress defined the EAP exemption with regard to duties, which does not include a minimum salary level.

***

[The FLSA] authorizes the Department to define and delimit these classifications because an employee’s duties can change over time….  While this explicit delegation would give the Department significant leeway to establish the types of duties that might qualify an employee for the exemption, nothing in the EAP exemption indicates that Congress intended the Department to define and delimit with respect to a minimum salary level. Thus, the Department’s delegation is limited by the plain meaning of the statute and Congress’s intent. Directly in conflict with Congress’s intent, the Final Rule states that “[w]hite collar employees subject to the salary level test earning less than $913 per week will not qualify for the EAP exemption, and therefore will be eligible for overtime, irrespective of their job duties and responsibilities.”  With the Final Rule, the Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test.

Further buttressing his preliminary findings, the judge added that:

The Department has admitted that it cannot create an evaluation “based on salary alone.”  But this significant increase to the salary level creates essentially a de facto salary-only test. For instance, the Department estimates 4.2 million workers currently ineligible for overtime, and who fall below the minimum salary level, will automatically become eligible under the Final Rule without a change to their duties.  Congress did not intend salary to categorically exclude an employee with EAP duties from the exemption.  [Cites omitted for clarity.]

It seems likely the Department of Labor will seek an immediate appeal of the preliminary injunction for two reasons.  First, of course, is the fact that the federal government hoped that once the rule change went into effect on December 1, it would be politically impossible to reduce the salary threshold without incurring the ire of millions of employees now receiving overtime pay.  Second, and a more recent development, is that if the preliminary injunction holds, and the court case continues beyond January 20 (as it will), a Department of Labor within the Trump administration might no longer be interested in defending the rule change, effectively letting the preliminary injunction become permanent.

On top of that, if the final result of the court case is a ruling that any increase over the existing $23,660 annual salary requirement is impermissible without a statutory change, then the drastic increase in the salary threshold attempted by the Department of Labor will have backfired.  Any effort to adopt a more moderate increase in the salary threshold would run headlong into the court’s decision here.  And the law of unintended consequences strikes again.

Published on:

But there are treatments available. When the Department of Labor announced in May that it would more than double the minimum salary needed to qualify an employee as exempt from overtime pay on December 1, 2016, you could hear the collective gasp from businesses nationwide. That sound echoed even more loudly in broadcast studios across the country, as the “round the clock/breaking news” nature of running a broadcast station places a high premium on employees that aren’t locked into a 9 to 5 existence. By increasing the minimum salary needed for an employee to qualify as overtime-exempt (from $23,660 annually to $47,476 annually), the rule change may price many broadcast employees out of their jobs.

Continue reading →

Published on:

Interns are a perennial part of the media landscape, and you have probably heard a lot over the last few years on the subject of unpaid interns. Specifically, that unless they qualify as genuine interns under a six-part Department of Labor (DOL) test, businesses are required to treat them (and therefore pay them) as employees.

The resurgence in interest in the subject came in early 2010 when the Department of Labor began stepping up enforcement against for-profit businesses illegally using unpaid interns. In April of 2010, the DOL’s Wage and Hour Division released a Fact Sheet providing guidance on when an individual can be classified as a trainee or intern exempt from the Fair Labor Standard Act’s requirement that employees be paid at least the federal minimum wage and receive overtime pay. The Fact Sheet dutifully laid out the six-part test that the DOL adopted in the 1960s, noting that “[i]nternships in the ‘for-profit’ private sector will most often be viewed as employment” unless all six of the criteria are met. The six criteria are:

  • the internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  • the internship experience is for the benefit of the intern;
  • the intern does not displace regular employees, but works under close supervision of existing staff;
  • the employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  • the intern is not necessarily entitled to a job at the conclusion of the internship; and
  • the employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

From the DOL’s perspective, if an employer can’t demonstrate that all six factors are met, that intern is an employee, and the employer is liable for unpaid wages.

However, if you operate in New York, Connecticut, or Vermont, the rules have now changed, and if you operate in one of the other 47 states, change may be on the way. In a case launched by unpaid interns that worked on the film Black Swan, the influential U.S. Court of Appeals for the Second Circuit last week rejected the DOL’s test as too rigid. In doing so, the Second Circuit overturned a lower court’s certification of class actions on behalf of the unpaid interns, finding that the question of employment status is a “highly individualized inquiry” poorly suited to a class or collective action.

As discussed in much more detail in a Pillsbury Client Alert from our own Julia Judish and Osama Hamdy, the Second Circuit chose instead to adopt a “Primary Beneficiary” test, which “focuses on what the intern receives in exchange for his work” and “also accords courts the flexibility to examine the economic reality as it exists between the intern and the employer.” Simple, right?

Business owners might justifiably complain that the court replaced a complicated six-part subjective test with a simpler but even more subjective test. However, the Pillsbury Client Alert lays out a number of considerations suggested by the court for determining whether an intern is the primary beneficiary of the relationship with the employer, including an increased focus on the connection between the internship and the intern’s academic course of study.  The court wrote that

[b]y focusing on the educational aspects of the internship, our approach better reflects the role of internships in today’s economy than the DOL factors, which were derived from a 68‐year old Supreme Court decision that dealt with a single training course offered to prospective railroad brakemen.

While a number of the considerations suggested by the Second Circuit are similar to those in the DOL test, the difference is that the court’s test provides the flexibility to look at other factors that might be relevant to answering the question, and unlike the DOL test, does not consider the absence of any one factor to be determinative of an intern’s status under the Fair Labor Standards Act.

Rather than listing the court’s suggestions for factors that might (in addition to others) be considered, let me suggest you take a look at the Client Alert. It not only outlines those factors, but suggests a number of steps businesses can take to clarify their relationship with unpaid interns, whether they are subject to the DOL or the Second Circuit criteria.

The good news for employers is that the Second Circuit’s test (which for the moment only applies in the Second Circuit’s jurisdiction of NY, CT, and VT) allows a business to present any information relevant to demonstrating that the unpaid intern is not an employee. The bad news is that the unpaid intern has that same flexibility in seeking to prove he or she is really an employee that needs to be paid.  In addition, employers in these states face an increased risk of misclassification claims for internships not connected with an academic program.  Making sure your business has done all it can to end up on the right side of that analysis is your next challenge.

Published on:

While it has been around since 2009, Bitcoin has seen substantial media coverage in the past few months. Media outlets (as well as many other businesses) have been increasingly dabbling in the Bitcoin world, if for no other reason than to show they are up to date with the latest consumer fixations.

While numerous businesses have begun accepting Bitcoin transactions, the most likely place to find them in the media world is as contest prizes or as part of an advertiser promotion. Of course, one of the principal reasons for the novelty of Bitcoin is its goal of being an electronic currency unregulated by governments. As a result, how businesses have been treating their usage of bitcoins from an accounting and legal perspective is highly variable, since it is in many ways a new frontier.

That frontier changed significantly yesterday, when the IRS ruled that virtual currencies like Bitcoin are to be treated as property for federal tax purposes, with transactions using virtual currency subject to much the same tax treatment as those involving U.S. currency. Our own Jim Gatto, head of Pillsbury’s Social Media and Games Team, distributed a Pillsbury Client Alert discussing the ruling. In that Alert, Jim notes that the impact of the IRS ruling includes:

  • Wages paid to employees using virtual currency are taxable to the employee, must be reported by the employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
  • Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue IRS Form 1099.
  • The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
  • A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
  • For purposes of computing gross income, a taxpayer who receives virtual currency as payment for goods or services must include the fair market value of virtual currency received as measured in U.S. dollars, as of the date that the virtual currency was received.

The Client Alert provides additional detail, but if you are using bitcoins for any type of transaction, whether as contest prize, currency for purchases on your website, or payments to employees and vendors, the IRS has made clear that you will need to follow the same procedures (and pay taxes) as though the transaction had occurred in dollars.

While that is a big issue for businesses doing large Bitcoin transactions, businesses dabbling in small and occasional Bitcoin transactions will need to pay even closer attention than they would to a transaction using traditional currency. For example, if the prize in a station contest is one bitcoin, the station will need to assess whether awarding the prize triggers the need for issuing IRS Form 1099 to record the awarding of the prize. In a cash prize contest, that is straightforward, since the Form 1099 currently specifies a prize of $600 or more as the threshold for needing to issue the form. As I write this, however, the current Bitcoin exchange rate is roughly $582 U.S. dollars per bitcoin. That means a one bitcoin prize would not trigger the need for a Form 1099, but a two bitcoin prize would.

Similarly, yesterday’s IRS ruling seems to indicate that the bitcoin must be valued for tax purposes at the time it is received. As a result, the station holding the contest would need to check the value of a bitcoin on the day the prize is awarded to see if it is above or below the $600 threshold for tax purposes. Of course, given the volatility of the Bitcoin exchange rate, this raises other questions, such as how do you value the bitcoin for tax reporting if the exchange rate was below $600 for part of that day and above $600 for part of that day, or if the day the prize is “sent” is not the same day as the prize winner receives or “cashes” it.

Like so many things, Bitcoin appears to be another example of something meant to simplify life, but which is turning out to only make life more complicated. Look for life to get even more complicated as individual states formally adopt a similar approach in treating virtual currency transactions as taxable events.

Published on:

Being businesses built upon the value of information, and working constantly to create new business models aimed at monetizing that information, the communications industry tends to be very careful about letting any form of information leave the building. That, along with the highly competitive nature of the industry, means many industry players keep a very tight grip on all business-related information. As a result, the communications industry often ranks up there with defense contractors in imposing broad confidentiality restrictions on their employees, either by contract or through general corporate policy.

There are times, however, when the government has determined that public policy considerations outweigh the need of a business for secrecy. The most obvious exceptions come in the form of subpoenas and search warrants. However, there are also more subtle exceptions, one of which is addressed today in a Pillsbury Client Alert from our employment and litigation practices. The Client Alert addresses a number of decisions that have been coming out of the National Labor Relations Board, several of which found that the respective employer’s confidentiality policies violated the National Labor Relations Act because the policies could be read to prohibit employees from discussing wages, benefits, or other terms and conditions of employment with anyone else.

Under the National Labor Relations Act, such confidentiality restrictions are illegal, largely because they impede employees from engaging in collective bargaining or other employee protection activities. For those who are about to breath a sigh of relief after thinking to themselves “this doesn’t affect me since my business isn’t unionized,” hold that breath for a moment. As the Client Alert points out, while it is true that the National Labor Relations Act, and the National Labor Relations Board, are known mostly for their union-related jurisdiction, the National Labor Relations Act applies to all private employers that affect interstate commerce, not just union shops.

As the federal government’s regulation of much of the communications industry, particularly broadcasting, is based upon the interstate nature of those businesses (even where a station’s service area is entirely within a single state), it is safe to say there are few in the communications industry that are not subject to these recent rulings. In fact, while I won’t attempt to summarize the Client Alert here, as it is brief and well worth taking the time to read, I will note that one of the decisions discussed involves a player in the communications industry whose confidentiality policy was actually found to be acceptable.

In light of these recent decisions, all businesses should take a look at their confidentiality policies to determine whether they can be read to prohibit, for example, employees from discussing their salaries, raises and bonuses with each other. If the confidentiality policy is written so broadly as to unintentionally prohibit such activities, a rewrite of that policy is in order. In contrast, if the very notion of employees discussing their salaries with each other gives you heartburn, and your confidentiality policy is specifically targeted at preventing such conversations, then you have a more extensive policy rewrite ahead of you, and a lot more heartburn coming.

Published on:

With the unprecedented popularity of social media, employees have increasingly used LinkedIn and other online forums to network for business and social purposes. When the line between personal and business use is blurred, litigation may ensue. A federal court recently ruled that an employer did not violate federal computer hacking laws by accessing and altering its recently departed CEO’s LinkedIn account, but that the former CEO could proceed to trial on her state law misappropriation claim. In addition, California, Illinois, and Massachusetts recently joined Maryland in enacting laws prohibiting the practice of requesting access to prospective employees’ password-protected social media accounts.

In Eagle v. Morgan, et al., Linda Eagle, former CEO of Edcomm, Inc. (“Edcomm”), filed a complaint in U.S. District Court in Pennsylvania alleging that Edcomm hijacked her LinkedIn social media account after she was terminated. While Eagle was CEO of Edcomm, she established a LinkedIn account that she used to promote Edcomm’s banking education services, to foster her reputation as a businesswoman, to reconnect with family, friends and colleagues, and to build social and professional relationships. Edcomm employees assisted Eagle in maintaining her LinkedIn account and had access to her password. Edcomm encouraged all employees to participate in LinkedIn and contended that when an employee left the company, Edcomm would effectively “own” the LinkedIn account and could “mine” the information and incoming traffic.

After Eagle was terminated, Edcomm, using Eagle’s LinkedIn password, accessed her account and changed the password so that Eagle could no longer access the account, and then changed the account profile to display Eagle’s successor’s name and photograph, although Eagle’s honors and awards, recommendations, and connections were not deleted. Eagle contended that Edcomm’s actions violated the federal Computer Fraud and Abuse Act (“CFAA”), Section 43(a) of the Lanham Act, and numerous state and common laws. In an October 4, 2012 ruling on the company’s summary judgment motion, U.S. District Judge Ronald L. Buckwalter dismissed Eagle’s CFAA and Lanham Act claims against Edcomm but held that Eagle had the right to a trial on whether Edcomm had violated state misappropriation law and other state laws.

The Eagle case is just one example of how the absence of a clear and carefully drafted social media policy can lead to protracted and expensive litigation. This area of law appears to be garnering increasing attention on the legislative front as well as the judicial front, as three more states recently enacted laws prohibiting employers from requiring, or in some cases even requesting, access to prospective employees’ social media accounts. The attached chart includes more detail about the California, Illinois, Massachusetts and Maryland laws and the provisions of similar legislation pending in the various states and in the U.S. Congress.

A common theme connects the Eagle case with the recent password access legislation: the importance of defining the lines of ownership and demarcating the boundary between the professional and the personal. If Edcomm, for example, had established a LinkedIn account for its CEO’s use and had asserted its property interest in the account at the outset of the employment relationship, Edcomm’s CEO would have had no reasonable expectation of ownership in it. Under that scenario, Edcomm likely would not be facing trial on a misappropriation claim. Similarly, the social media password legislation definitively declares that employers and prospective employers have no right to access the social media accounts that applicants and employees have established for their personal use.

In addition, as explained in our recent Client Alert on enforcement actions under the National Labor Relations Act in connection with employer discipline of employees for social media postings, employer responses to employee use of social media can also result in government agency action against employers. These developments all point to the same message: employers wishing to avoid legal risk should be proactive in implementing well-defined policies and procedures relating to the LinkedIn, Pinterest, Twitter, Facebook and other social networking and media accounts of prospective, current and former employees, including clearly identifying rights to those accounts when the employee leaves the company.

A PDF version of this article can be found here, which includes a chart summarizing State and Federal Social Media Bills.

To read prior Client Alerts related to this subject, click on the links below:

Client Alert, First NLRB Decisions on Social Media Give Employers Cause to Update Policies, Practices

Client Alert, Employ Me, Don’t Friend Me: Privacy in the Age of Facebook