The President’s Minimum Wage Announcement Ignores Current Rates

President Obama recently announced his intent to sign an Executive Order which would unilaterally increase the minimum wage for certain workers on federal projects. The current federal minimum wage rate is $7.25 an hour, and President Obama is looking to raise it to $10.10 per hour. At first glance, one may think that such an increase will have a widespread impact on the Washington, DC metro area, given its large concentration of federal contractors.

This will not be the case. Such a change would only apply to new or revised federal contracts, and not to current federal contracts. More significantly, the majority of federal contractors are already being paid wages that are over the proposed minimum $10.10 rate, depending on their wage classification.

For example, a bulldozer operator on a federal project in Fairfax County can make a minimum rate of $20.40 per hour, and a court security officer in Washington, D.C. can make a minimum rate of $24.72 per hour. These rates are controlled by the Department of Labor through the Davis-Bacon Act and the Service Contract Act. Additionally, many federal contractors are union members, meaning that their wage rates and benefits are controlled by collective bargaining agreements. As a result, the President is targeting an issue that is already largely covered by federal law, wage determinations and collective bargaining.

President Obama plans to highlight his Executive Order in tonight’s State of the Union address. While the potential increase may derive from good intentions, it imposes a requirement on an already heavily-regulated industry, and many business owners know that they are already in compliance with the increase.

Katie Lipp is an attorney with the Washington, DC regional business law firm Berenzweig Leonard, LLP. Katie can be reached at klipp@berenzweiglaw.com.

Is It Time to Pop the Hood and Update Your Social Media Policy?

You've sat down with your lawyer, put together a stellar social media policy for your business, and made sure that all your employees are aware of the rules. At this point, you might think that you've reached a safe harbor and can put the issue of social media to bed for the next few years. In reality, though, because people are continuing to find new and unexpected ways to make use of social media outlets, the law is constantly shifting and changing in response. If business owners and managers are not vigilant, they may find themselves with social media policies that are not only outdated, but ineffective and even dangerous.

Social media content can translate into serious value. The size of a company’s Twitter following or number of Facebook likes are considered to be markers of prestige as well as practical means for marketing companies’ products and services. Recent court decisions, however, are beginning to suggest that traditional social media policies may permit disgruntled former employees to walk away with all or part of the online capital that they have generated for their former employers. There is also a growing trend in content generator attempts to enforce their intellectual property rights against social media users. Employees’ innocent yet infringing posts could lead to demand letters or even the shutdown of a company’s social media accounts in the event of multiple infractions. And, as we have noted before on this blog, the federal government’s recent characterization of social media as the “digital water cooler” means that social media policies that were considered acceptable just a few years ago may no longer be enforceable.

To ensure that your company stays on the right side of the cutting edge, IT guru Todd Thibodeaux recommends that companies revisit their social media policies one or two times each year. “Waiting too long between policy evaluations can put your business at risk of missing a new trend, use, or vulnerability within the fast-paced social media world,” Thibodeaux cautions. “You might not make sweeping changes (or any at all) at each checkpoint. Nevertheless, it’s smart to make regular assessments a habit.” Considering periodic review of your companies’ social media policy is a sound idea.

Ryen Rasmus is an associate attorney for the Washington, DC regional business law firm Berenzweig Leonard, LLP. He can be reached at RRasmus@BerenzweigLaw.com.

Companies Can Now Fight Back Against Anonymous Online Criticism

It is every company’s worst nightmare: An anonymous poster goes online and makes negative and disparaging statements about the company.  In the social media age we are in, this unfortunate scenario has played out countless times on such sites as Yelp, Rip-Off Report, and other online review sites.  Companies faced with this situation have largely felt powerless to counteract anonymous posters or even find out who the posters are.  But a recent decision by the Virginia Court of Appeals will now give companies some much needed leverage to fight back.

Yelp was forced this week by the Virginia Court of Appeals to “unmask” anonymous posters who posted negative, and possibly false, reviews about a local Virginia carpet cleaning company, Hadeed Carpet Cleaning. Hadeed believed that seven negative Yelp reviews of its services were false, and so it filed a defamation lawsuit against the anonymous posters, naming them as “John Does.” In order to unmask the anonymous posters, Hadeed then sent a subpoena for documents to Yelp, which Yelp objected to on First Amendment grounds.

The Virginia Court of Appeals ruled that Yelp had to comply with the subpoena and provide information about the identities of the online posters.  The Court balanced the First Amendment rights of the anonymous posters versus the rights of companies to protect their reputations, and stated that false statements are not protected by the First Amendment. Yelp argued that Hadeed Carpet Cleaning had to prove its defamation case before Yelp could be forced to unmask its posters – even though Virginia law does not require companies to meet that burden. The Court clarified that Virginia’s unmasking procedure only requires a company to have a legitimate good faith basis to contend that it has been a victim of defamation. Yelp now has to produce the records and disclose the people who posted the negative reviews.

This is a very significant decision in the social media arena, and provides some much-needed leverage for businesses seeking to protect their online reputations against false and often faceless posters. Businesses often need to protect themselves against online attacks by posters who post false reviews, and this recent decision clarifies the legal avenues available to companies in Virginia and potentially elsewhere to protect against malicious posters seeking to damage business reputations.

Seth Berenzweig is a managing partner at the DC regional business law firm, Berenzweig Leonard, LLP. Seth can be reached at sberenzweig@berenzweiglaw.com. Katie Lipp, an attorney with the firm, co-authored this post. Katie can be reached at klipp@berenzweiglaw.com.

Is Your Business’s E-mail Marketing Compliant?

In today’s economy, most businesses do a substantial part of their marketing on the Internet, and use e-mail marketing to advertise their products and services. In an attempt to stem the flow of unwanted, unsolicited junk e-mail ("spam"), Congress enacted the Controlling the Assault of Non-Solicited Pornography and Marketing Act, known as the "CAN-SPAM" Act, 15 U.S. Code Sec. 7701. Despite its name, the CAN-SPAM Act does not just apply to bulk e-mail. It covers all commercial messages, which the Act defines as “any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service,” including e-mail that promotes content on commercial websites. Thus, companies that do not think of themselves as “spammers” are in fact subject to the Act if they use e-mail in their direct marketing efforts. Notably, there is no exception for business-to-business e-mail so it is important that companies understand the law.

The Act imposes hefty penalties for violations, and in addition, allows private internet service providers (ISP’s) to sue businesses who use their facilities or servers to send spam that violates the Act and to recover statutory damages. As such, noncompliance can be costly, and before embarking upon an e-mail marketing campaign, businesses should take steps to ensure that any unsolicited e-mail to potential or existing customers is compliant with a number of very specific federal guidelines.

Among the Act’s the main requirements:

• Subject lines, e-mail headers, and domain names must be accurate and not misleading
• You must provide a way for recipients to opt-out or unsubscribe from your communications and clearly explain the process in your e-mails
• You must actually honor the requests to opt-out or unsubscribe within 10 business days
• You must include a valid postal address in your e-mail
• You must disclose if your message in an advertisement

Virginia, as well as many other states, also has a statutory framework governing commercial e-mail and spam. The CAN-SPAM Act generally preempts state anti-spam laws, but provides some exceptions to state law preemption and the exact scope of preemption has been the subject of litigation. Businesses that engage in direct e-mail marketing should review their marketing practices for legal compliance with the CAN-SPAM Act, as well as state law.

Sara Dajani is an Associate Attorney with the DC region business law firm of Berenzweig Leonard, LLP. Sara can be reached at sdajani@BerenzweigLaw.com.

Do you have an Enforceable Forum Selection Clause?

For companies that do business in multiple states, a forum selection clause can minimize the risks and expenses associated with being hailed into a distant and unfamiliar court. A forum selection clause in a contract allows the parties to agree that any litigation resulting from that contract will be initiated in a particular court in a certain state. Generally speaking, state and federal courts will consider a forum selection clause to be reasonable as long as any party to the contract has maintained offices or conducted activities in the chosen state, or the contract was executed or performed in that state. But what happens when a party to the contract then files suit in a court other than the one agreed to in a forum selection clause? This issue has created a circuit split among the United States courts of appeals as to the proper standard for enforcing such clauses.

The majority of federal courts, including the Fourth Circuit, which has appellate jurisdiction over the district courts in Virginia and Maryland, strictly enforce forum selection clauses without questioning convenience of the parties and witnesses. When a plaintiff files suit in a forum other than the one chosen by the forum selection clause, the forum is automatically improper and dismissal is appropriate under FRCP 12(b)(3). On the other hand, a minority of federal courts use the multi-factor balancing test under 28 U.S.C. § 1404(a), the federal venue transfer standard, that involves several private and public interest convenience factors, making the enforcement of a forum selection clause discretionary to the district court judge, and as a consequence, unpredictable. Under this approach, the existence of a forum selection clause is only one factor to consider in whether to transfer the case to the contractually selected forum, provided that the current venue is otherwise proper.

The U.S. Supreme Court granted review of In re Atlantic Marine Construction Co., 701 F.3d 736 (5th Cir. 2012), to resolve this circuit split. The Fifth Circuit Court of Appeals’ opinion involved a Texas construction project with a subcontract that required litigation to be brought in Virginia. Despite the fact that the subcontract’s forum selection clause was clear and otherwise enforceable, the Fifth Circuit affirmed the district court judge’s decision not to enforce it on convenience grounds, joining the minority of federal courts on how such clauses should be enforced.

The Supreme Court’s decision is expected to be issued sometime in 2014, and will hopefully provide guidance on how heavily businesses can rely on such clauses.  If the Court adopts the majority approach, businesses can be more confident that the forum selection clauses they insert in their contracts will be enforced and will help provide certainty to companies as they move their business forward.

Using Phantom Stock Plans to Retain Top Talent

Every successful business prioritizes the retention of its most valuable employees.  Many such businesses show their willingness to retain top talent through the use of one or another of a variety of employee incentive plans.  Whether it’s the stock option plan typically offered to corporate executives, or the annual cash bonus linked to individual performance that is commonly found in sales-oriented industries, many of these plans involve ceding equity interests or relying on complicated performance metrics that make them cumbersome, expensive, or impracticable.

One type of incentive plan that alleviates these concerns is the Phantom Stock Plan (or, in the case of an LLC or other non-corporate entity, the Phantom Unit Plan).  Under such a plan, an employee becomes incentivized to contribute to the growth and long-term profitability of the company in hopes of increasing the value of his or her shares.  Phantom Stock Plans are customizable to the needs of the company, require minimal paperwork, are not subject to the same reporting and disclosure requirements as plans involving a transfer of equity, and, if implemented correctly, may not result in tax consequences to either the employee or employer until payout later occurs.

A so-called “triggering event” under these plans is typically either the sale of the company, in which case phantom shares are bought out using proceeds from the sale, or an employee’s retirement from the company following a designated number of years of service.  By limiting the triggering event to those scenarios, a plan stays within the requirements of § 409A of the Internal Revenue Code and avoids incurring the additional 20% income tax on nonqualified deferred compensation plans.

Compared to alternative incentive schemes, Phantom Stock Plans are low-cost and low-hassle.  If a corporation already has regular valuation metrics in place to price its actual shares, its phantom shares can simply mirror that price without incurring any additional expenses or accruing capital gains along the way.  Flexibility, ease, and cost effectiveness continue to make Phantom Stock Plans exceedingly viable employee incentive plans that companies and executives may want to consider.

Frank Gulino joined Berenzweig Leonard in September 2013.  He can be reached at fgulino@berenzweiglaw.com.

How Can Employers Protect Their Intellectual Property?

In this technological age, intellectual property issues often arise in employment, including questions regarding the ownership of intellectual property developed or created by an employee and disputes with departing employees over trade secrets and other confidential business information. As a matter of general practice, and especially when the intellectual property created is essential to the long-term growth potential of the business, well-drafted employment agreements which fully address an employee’s rights and duties with respect to an employer’s intellectual property should be in place.

 Employers often mistakenly assume that because they pay their employees a salary, any intellectual property developed or created by their employees belongs to them and as a consequence, forgo written agreements that assign copyrights to the business. The Copyright Act’s “work for hire” provision does offer some protection. However, it is limited in its application and applies only to employees and not independent contractors who work for a business, unless a written agreement exists. According to the Act, an employer owns the copyrights in work created by employees in the course and scope of their employment. Disputes often arise as to the scope of employment, and even whether the relationship is one of employment and not of independent contract.

Employers must have certain policies in place if they want to make sure to retain ownership of this valuable property, including drafting employment manuals and policies that address this issue, and obtaining clear, timely, and written agreements that spell out the ownership of all copyrights, inventions, trade secrets, and ideas that an employee conceives of or develops during his or her employment. In most cases, a properly drafted agreement will control the parties’ rights and will be enforceable in federal and state court. Otherwise, without such an agreement, the parties’ rights will often be decided under the law of the state in which the employment relationship exists, which may or may not be favorable to the employer.

These agreements can take many forms, from an all-encompassing employment agreement to a series of agreements that are specific to intellectual property. Employers might be tempted to claim ownership of all inventions or ideas that an employee conceives of during his or her employment, whether it is related to his or her work for the employer, but a judge may be unwilling to enforce an agreement if it overreaches and is unreasonable. Thus, the scope of such invention assignment agreement should be limited to processes, inventions, works, and ideas that are related to the course and scope of employment.

In addition, businesses should ensure that employees do not misappropriate their intellectual property and include a discussion of their rights and duties concerning an employer's intellectual property in employment policies and manuals. Taking these steps can help secure a company's Intellectual Property.

Sara Dajani is an associate attorney with Washington, DC law firm Berenzweig Law. Sara can be reached at sdajani@berenzweiglaw.com.