Who Gives a Tweet About Who Owns a Tweet?
January 26th, 2012
You’re a businessman, not a Kardashian. You’ve never tweeted in your life, even if that is all your teenager does. But now the resident young wise@$$ in your office has started tweeting about your business – and shockingly (to you), new clients are contacting you because of it. You don’t care – you’re just happy that the goofball is finally productive. But you may lose your good luck if your business doesn’t protect it.
The New York Times reports that this is just what is happening in the Northern California District Court, as a company seeks to recover the 17,000 followers of a twitter account originally called “@phonedog_noah.” PhoneDog “ is a highly interactive mobile news and reviews resource that attracts a community of more than 2.5 million unique visitors each month. . . . [I]t offers up serious editorial content and video reviews that users rely on to make important decisions about their next mobile purchases.” The South Carolina company features up-to-the-minute news about almost all mobile platforms in the US. PhoneDog hired current Oakland resident Noah Kravitz to be a freelancer in the mobile industry; he soon began appearing on behalf of PhoneDog in various media outlets discussing mobile phones, and operated a free Twitter account called “@PhoneDog_Noah.” The Twitter account soon had 17,000 followers. Kravitz left in October 2010, and soon demanded back pay and a percentage of PhoneDog’s revenue. He renamed the Twitter account “@noahkravitz” and excluded PhoneDog from possession of the account.
[Phone]Dog Bites Man. PhoneDog has attacked with a federal court complaint, claiming that Kravitz took PhoneDog’s secrets – apparently, the Twitter followers – and interfered with PhoneDog’s prospective economic advantage. PhoneDog alleges that there “are many details of PhoneDog’s relationships with . . . its Twitter followers . . . that are not generally known or readily accessible to the public or PhoneDog’s competitors.” (First Amended Complaint, ¶ 13). Kravitz has yet to present his side of the story in court, but one likely avenue of attack regarding the Twitter followers is that they are publicly known; as of the writing of this sentence, 24,382 people follow “@noahkravitz,” along with 969 lists.
If the identity of the followers is not a secret, can PhoneDog lay claim to the list itself, when the “list” is in the possession of Twitter and viewable by anyone? The simplest way of resolving this question is by including in the employee handbook a clear statement that all media created during the employment belongs to the employer – and that includes information like lists, followers, statements, videos, and any other media presentation. The First Amended Complaint, above, does not allege any such statement. PhoneDog can still allege that Kravitz “converted,” i.e., stole, the followers, because they were enticed to follow “@PhoneDog_Noah” with content that PhoneDog paid Kravitz to create, and such intellectual property is a work-for-hire that belongs to the company that paid for it.
How Much Are You Worth, Tweetee? PhoneDog’s complaint (¶ 19) values each Twitter follower at $2.50 a month – for 17,000 followers, that means they are worth $42,500 a month, more than $500,000 a year. PhoneDog cites “industry standards” for the valuation, but does not provide any further details of the value of the followers of a free service. A critical look at how to value social media can be found here. The media revolution of the last 20 years will continue well into the future, and new issues will arise that few will think about in advance. Small businesses can save themselves huge expenses in protecting their media outlets by updating their employee manuals so that it is clear from the outset of employment that these new media channels belong to the employer, not to the employee.
The litigation is still only in the earliest pleading stage, but PhoneDog must realize by now that by not closing the door (with explicit statements in a contract or in its employee manual), PhoneDog cost itself a lot of money. This case is likely one hound that won’t hunt.
Benefit Corporations
January 18th, 2012
by: Laura Koch
California has entered the new year with a new class of corporation—the ‟Benefit Corporation,” or ‟B Corporation.” Governor Brown signed AB361 in October 2011, making California the seventh state to allow corporations to elect an organizational structure that benefits both society and shareholders.
B Corporations are required to pursue the creation of positive impacts and simultaneously meet higher standards of accountability and transparency. Several corporations, including Patagonia, maker of outdoor gear, have already registered as B Corporations in California since the law went into effect on January 1.
Proponents claim that the new corporate structure creates critical changes in two areas. First, traditional corporations are required to operate in a way that maximizes profits for shareholders above all else, which discourages socially responsible decision making. In contrast, B Corporations are required to consider the impacts of their operational decisions on employees, the community, and the environment. Electing B Corporation status allows a company to operate in a socially responsible way, even if doing so is less profitable.
Second, the transparency required of B Corporations helps the public and investors to differentiate between companies with good social practices and those with slick marketing. California B Corporations must undergo yearly assessments using a third-party standard and publish an annual benefit report. The report, which is to be readily available on the company’s website, must describe its efforts to benefit the public and the extent of its success.
B Corporation status allows a company to stand out from those claiming an unsubstantiated commitment to increasing the public good. This is increasingly important to consumers, as well as a growing number of investors who are seeking socially responsible companies for their portfolios. B Lab, a nonprofit organization dedicated to using the power of business to solve social and environmental problems, has certified over 500 B Corporations nationwide. The fact that California, the state with the nation’s largest economy, now allows corporations to elect B Corporation as a legal status is a great way to start 2012.
If you are interested in setting up a new Benefit Corporation or converting an existing entity, contact Bay Oak Law.
A New Ambush on At-Will Employment?
January 11th, 2012
Once again, the turn of the new year brings new laws into existence. The newspapers focus on cross-cultural clashes like the banning of new sources of shark fins or partial bans on checking job applicants’ and workers’ credit reports. California has also created new penalties if a company willfully misclassifies someone as an independent contractor. However, a new California law called the “Wage Theft Protection Act of 2011″ requires that employers give most new employees a form at the beginning of employment. The laudable intent is to give valuable transparency to employees about their wages and about worker’s compensation. However, the form released by the Labor Commissioner has a provision that is not required by the Labor Code and could lay the groundwork for lawsuits attacking at-will employment.
The Wage Theft Protection Act of 2011 is modeled after a similar bill in New York State. Governor Jerry Brown signed the bill into law on October 9, 2011, and it became effective on January 1, 2012. New California Labor Code § 2810.5 requires a non-governmental employer to provide a form to every new employee subject to the overtime rules, in the language commonly used at work, with the following information:
1. Rates of pay (whether by hour, shift, day, week, etc.), including overtime rates;
2. Any allowances claimed as part of the minimum wage;
3. The employer’s regular designated payday;
4. The employer’s name (including dba’s);
5. The employer’s physical address for the main office or principal place of business, including any mailing address;
6. The employer’s telephone number; and
7. Information about the employer’s worker’s compensation insurance carrier.
The Legislature directed the Labor Commissioner to “prepare a template that complies” with the above requirements, and the Labor Commissioner did so. However, the form includes a provision that the Legislature did not require, requesting that the employer identify the “agreement” as being written or oral.
At-Will Employment. Few employees subject to the overtime rules have written contracts – but that does not mean that their agreements are “oral.” Rather, the employment is “at-will” – either the employer or the employee can end the employment without notice or cause; see Cal. Lab. Code § 2922: ”An employment, having no specified term, may be terminated at the will of either party on notice to the other. Employment for a specified term means an employment for a period greater than one month.”
The trouble with marking the box for an “oral” agreement is that then there is the question of what the terms of the oral agreement are – and those terms could include no termination unless for good cause. See, e.g., Foley v Interactive Data Corp., 47 Cal. 3d 654, 677 (1988): “Labor Code section 2922 establishes a presumption of at-will employment if the parties have made no express oral or written agreement specifying the length of employment or the grounds for termination. This presumption may, however, be overcome by evidence that. . . the parties agreed that the employer’s power to terminate would be limited in some way, e.g., by a requirement that termination be based only on ‘good cause.’”
The possibility of oral limits on at-will employment eviscerates employers’ diligent attempts to keep employment at-will. At the very least, the employer is opening itself to the threat of litigation in the event of a termination that requires an expensive severance; the employer could also end up on the losing end of a lawsuit.
The Legislature did not require this information, and it is unclear why the Labor Commissioner added it. The form needs to be modified to make it clear that the employment is at-will – not oral, not written. The “Wage Theft Protection Act” should not be allowed to be used to destroy the presumption of “at-will”" employment; otherwise, a better title would be the “Wage Theft Guarantee Act.”
This Psychic Didn’t See It Coming
December 29th, 2011
One of the things that good lawyers do is plan for future possibilities – even when the client, a psychic and astrologer, can (supposedly) see the future. My mentor, Dan Minutillo, repeatedly drilled into me the need to “double-think” – to ask the “what if” questions, even if the client assures us that everything will be hunky-dory forever.
Walter Mercado “was” a psychic and astrologer in Puerto Rico. (Don’t worry; Mercado is still around; see the last paragraph for why the past tense is used.)
On August 4, 1995, Mercado and Bart [Enterprises] signed the Agreement, under which Bart would develop and distribute materials and products related to Mercado’s psychic and astrological services. As part of the Agreement, Mercado granted Bart several rights “during the Term and throughout the Territory” of the Agreement. The Agreement defines “Territory” as the universe. . . . . It defines “Term” to mean “in perpetuity,” subject to a termination provision which, inter alia, allows Mercado to terminate the Agreement after fifteen days’ written notice if Bart fails to pay Mercado any agreed compensation within sixty days of the due date.
Mercado-Salinas v. Bart Enters. Int’l Ltd., (1st Cir. 12/20/2011, free subscription required).
Mercado gave Bart an irrevocable assignment in copyrights to certain preexisting materials, and to develop new materials using Mercado’s name. Mercado also irrevocably assigned all rights to the common law trademark “Walter Mercado” to Bart – meaning someone else permanently took over – the rights to his name. For all this, Mercado received $25,000 a month in base salary, along with $5,000 a month in clothing allowance, and $2,000 a month for up to 25 three-minute segments per month.
“Finally, the Agreement provides that ‘all grants granted or assigned by this agreement shall be irrevocable under all or any circumstances, and shall not be subject to rescission, termination or injunction. In the case of breach of this agreement by Bart, Mercado’s sole remedy shall be limited to an action at law for damages.’”
Id.
Mercado even helped Bart register the “Walter Mercado” trademark by filing affidavits authorizing Bart to use and register the trademarks, both in the United States and in Mexico.
All went well for the first decade of the agreement, but beginning in 2006, Mercado stopped providing new material or appearing at scheduled appearances. In turn, Bart stopped compensating him. Despite the irrevocability of his agreement with Bart, Mercado tried to terminate the agreement, and the courthouse fight soon commenced, both in Florida, and later in Puerto Rico. Mercado was enjoined from using the “Walter Mercado” trademark, id. at 279, and could not terminate the agreement, because his own breach caused Bart to withhold payment. The 1st Circuit Court of Appeal upheld the injunction, finding that by failing to meet his own contractual obligations, Mercado was barred from asserting that Bart breached the Agreement between them: a “party’s breach effectively suspends the nonbreaching party’s duty to tender performance.”
Where Mercado’s psychic powers and his counsel failed him is in not recognizing that in the future he might not want to be obligated under the Agreement anymore, and he might want to control his own identity. While the $25,000 a month stipend (and $5,000 clothing allowance!) was no doubt tempting, surrendering control over your name as a trademark to someone else is ripe for disaster. Some more doublethinking should have been done.
The amazing Mercado managed to bounce back quickly. A mere six days after the district court enjoined him from using his name, he transformed into Shanti Ananda. Betcha saw that one coming.
The End of the Internet as We Know It?
December 22nd, 2011
By Kim Kennedy
The Stop Online Piracy Act (“SOPA”) is a bill that Rep. Lamar Smith of Texas introduced in the United States House of Representatives in October, 2011. The bill is intended to help law enforcement agencies in the United States fight the distribution and sale of copyrighted intellectual property, like music, movies, and software and also of counterfeit goods. While that sounds good, the negative side effects of these expanded government powers far outweigh any good that might come of the bill’s passage.
SOPA would allow the US Department of Justice (“DOJ”) to obtain court orders against any website, whether domestic or foreign-based, if that website is accused of enabling, or facilitating copyright infringement. The DOJ then would have several tools to take action against that website, such as requiring advertisers like Google and payment services like Paypal to cease doing business with the site, or even requiring Internet Service Providers (“ISPs”) to block internet users in the United States from being able to access that site. Additionally, the bill would make unauthorized streaming of copyrighted content a felony.
How would this work? Well, if a copyright holder decides a website is infringing or harming their intellectual property rights in some way, they can send a notice to the services and advertisers that site relies on, such as Google, Visa, Paypal, etc. The services have 5 days to cut off that website or they risk being held liable as well. The website has only 5 days to file an appeal, which might be difficult given the complex legal questions inherent in web content and also because their revenue stream has been cut off. This applies to the entire website, not just the infringing page or pages. Keep in mind that no judge or jury has found the website guilty of anything. In fact, no charges have even been filed in a court of law. Service providers and advertisers would be forced to become the judge and jury, with the threat of liability themselves if a court disagrees with their conclusion.
SOPA is not the first or only tool the judicial system has to deal with online piracy. The Digital Millenium Copyright Act (“DMCA”) was passed in 1998 by a unanimous vote in the senate, and brought the US in line with the World Intellectual Property Organization, (“WIPO”) which is an international body tasked with developing international intellectual property laws and standards. It also provides immunity to ISPs who comply with court-ordered subpoenas for their user’s identity, and for complying with court-ordered takedown notices for infringing work.
The House Judiciary Committee will continue its debate on SOPA when Congress returns form its winter recess. Opponents of the bill including Google, Yahoo!, Facebook, Twitter, AOL, LinkedIn, eBay, Mozilla, Tumblr, the Brookings Institute, the Wikimedia Foundation, The Library Copyright Alliance (including the American Library Association) and human rights organizations such as Reporters Without Borders, the Electronic Frontier Foundation, the ACLU, and Human Rights Watch have already spoken out against it.
Want to get involved? Here is a good website to get more information on the bill, and how you can make your voice heard: http://americancensorship.org/.
Kim Kennedy is a paralegal with Bay Oak Law in Oakland, CA.
Willfully Misclassified: New Perils in Misclassifying Workers as Independent Contractors
December 22nd, 2011
By Andrew K. Jacobson
In an era of ultra-tight budgets, getting something for less is appealing. One such temptation is hiring someone to be an independent contractor, instead of as an employee. The Legislature and Governor Brown, however, have added to the downside of that calculation.
Hiring someone as an independent contractor instead of as an employee has its advantages: the employer doesn’t have to withhold taxes, and doesn’t have to pay the employer’s portion for medicare (1.45% of a paycheck) or social security (6.2% of a paycheck, up to $108,600 annually). They are also less subject to labor regulations, like minimum wage, twice-monthly paychecks, overtime and the like. The California government discourages independent contracting, because independent contractors are far less reliable in paying taxes, while being far more vulnerable to employer abuses.
The California Labor Commission frequently upholds claims of independent contractors who contend that they should have been classified as employees. This results in back taxes paid by the employer, plus penalties. Businesses required to pay thousands of dollars in back taxes and penalties for each worker are frequently crippled, in some cases, permanently. However, the Legislature and the Governor felt that a heavier penalties were needed, and passed new Labor Code sections 226.8, and 2753, effective January 1, 2012.
Willful Misclassification Prohibited. Cal. Labor Code § 226.8 prohibits an employer from willfully misclassifying someone as an independent contractor, charging civil penalties of $5,000 to $15,000 per violation, and those with a pattern of violating the independent contracting rules can be subject to civil penalties of $10-25,000 each. Further, the Contractors’ State License Board can initiate disciplinary actions, up to disbarment, against general contractors who have been found to have willfully misclassified workers as independent contractors. Cal. Labor Code § 2753 provides that non-attorneys who conspire with an employer to misclassify workers as independent contractors can be jointly and severally liable for these penalties.
What is an Independent Contractor? California common law defines an independent contractor as someone who is responsible to the employer only for the results of the work, and not how the work is done. When Bay Oak Law needs plumbing services, we leap to the phone to call our favorite plumber and let them to the work. We don’t stand over them, telling them what wrench to use, or how deep a hole to dig: we trust their expertise. That is a true independent contractor: temporary assignment, using the contractor’s own tools, doing something that is not the regular business of the employer, but is the specialty of the independent contractor.
Using a set of tests from a case called S.G. Borello & Sons v. Dep’t of Industrial Relations, 48 Cal. 3d 341 (1989), an employer can guess whether a worker would qualify as an independent contractor:
- Is the worker engaged in an occupation or business different from that of the employer?
- Is the work different from the regular business of the employer?
- Does the worker supply the tools, and the place where the work is done?
- Does the worker have an investment in the equipment or materials required?
- Are there special skills required in the worker’s occupation?
- Is the work usually done by a specialist without an employer’s supervision?
- Can the worker profit depending on his or her managerial skill?
- Is the work limited in time?
- Is the method of payment per job, or a part of the job?
- Do the employer and the worker believe they are not creating an employer-employee relationship?
An answer of “no” to one or two of these questions is not likely to result in a finding that the worker is an employee; plumbers, for example, usually work where the plumbing is, but they are still usually classified as independent contractors. California law recognizes that “individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations.” Borello, 48 Cal. 3d at 351. However, the more negative answers to the checklist above, the more likely the worker is to be found to be an independent contractor.
A useful rule-of-thumb for California employers is that independent contractors should be the exception, not the rule. The costs of a mistake are much higher come January 2012, as the California government’s addition of penalties of willful misclassification has raised the stakes.
People Don’t Really Go to Jail for Copyright Infringement, Right?
December 21st, 2011
Yes, they do go to jail. The law has very sharp claws.
The 2012 IRS Mileage Rates Are . . .
December 15th, 2011
pretty much the same as the present:
Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 55.5 cents per mile for business miles driven
- 23 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.
California Supreme Court to Determine Whether Employers Must Enforce the Taking of Meal Breaks
December 14th, 2011
By Laura Koch
Three years after granting review, the California Supreme Court finally held oral arguments last week in Brinker Restaurant Corp. v. Superior Court. I attended the oral arguments in San Francisco because of the importance of this decision to small business owners like our clients. Two important issues that have been awaiting resolution are whether under California law there is a duty to enforce the taking of meal breaks, and how breaks must be timed.
Fired for Working Through Lunch?
Eight years ago, employees of Brinker Restaurant Corporation, which operates Chili’s restaurants, sued the company for depriving them of required meal and rest breaks.
The main issue in Brinker is the interpretation of California Labor Code § 512, which requires an employer to provide a 30-minute meal break for a work period of more than five hours.
The employees, challenging a holding by the Fourth District Court of Appeal, take the position that the term ‟provide” imposes an affirmative duty on employers to ensure that employees take meal periods. During oral arguments on November 8, 2011, the plaintiffs’ attorney acknowledged under grilling by the justices that under the plaintiffs’ interpretation, an employee could be subject to an employer’s progressive discipline policy for not taking a required break. The plaintiffs’ attorney equated this situation with unauthorized overtime, where the employee gets paid but is also subject to discipline.
Several justices appeared dissatisfied, questioning whether the plaintiffs’ interpretation is the most protective of workers. Justice Joyce Kennard also challenged the practical ability of an employer with hundreds or thousands of employees to ensure that they are all taking required meal breaks. When the plaintiffs’ attorney responded that employers have many workable options for scheduling and ensuring the taking of meal breaks, Justice Goodwin Liu jumped in with a concern that this could be ‟kind of coercive.”
Pointing out that the hallmark of a meal period is the employer’s suspension of control over the employee, Justice Liu appeared troubled by the idea that a worker who chose to work through breaks because of loving his or her job could be subject to discipline, or even fired. Justices Carol Corrigan and Marvin Baxter expressed similar concerns. The attorney attempted to direct the justices to the textual support for the plaintiffs’ interpretation and to analogize to other situations where employers exercise control over hours worked; however, the justices were more focused on the pitfalls of enforcement of breaks.
According to the plaintiffs’ attorney, unless employers are held accountable for ensuring breaks, many of the most vulnerable workers in our state will not get meal periods, despite the importance of these breaks to the health and welfare of workers. Although the justices did not respond to this argument at the time, the written opinion needs to address this issue directly. Read the rest of this entry »
Stop That Text!
December 14th, 2011
By: Laura Koch
Think you’re not ‟driving” while sitting at a stoplight? Think again before sending that text message!
The National Transportation Safety Board has just called for a nationwide ban on the use of cell phones and text messaging devices while driving. If adopted by states, the recommendation would outlaw nonemergency phone calls and texting by operators of every vehicle on the road.
California law already prohibits using a wireless phone while driving, and a California Court of Appeal decision recently made it clear that drivers can’t expect to avoid a ticket just because they waited for a red light before grabbing the phone to tap out a text.
Carl Nelson got a ticket for using his phone while his car was stopped at a red light in Richmond. Nelson appealed his traffic court judgment on the ground that he wasn’t using the phone while ‟driving” because his car was stopped, but the court disagreed.
Nelson attempted to persuade the court that it would defy common sense to prohibit cell phone use in certain situations where drivers remain behind the wheel. What if you’re sitting still in a traffic jam for hours due to an accident? How about calling your child during a rainstorm to let her know you’re waiting in the passenger loading zone of her school? Unfortunately for Nelson, the court determined that the definition of ‟driving” under section 23123(a) of the California Vehicle Code includes sitting at a red light, and it was not compelled to address these scenarios.
Many of us reflexively grab our phone to check voice mail, send a text, or get updated on the news whenever we have a free moment; however, this case is a good reminder that stopping at a red light does not qualify as a ‟free moment.” The California Highway Patrol has already issued 150,000 tickets for distracted driving in 2011, so fight the temptation to multi-task until your car is safely off the road and in park.