31 posts categorized "August 2010"

Off-Duty Conduct Statutes Limit Prying into an Applicant’s Online Background

In the age of Facebook, Twitter and the vast array of other social networking sites, employers routinely vet job applicants (and even current employees) by seeking out their online profiles.

So what happens if you find unflattering or unprofessional posts or photos on those profiles? Can you decide not to hire an applicant because what you find leads you to believe they have poor judgment, won’t be a “good fit,” or will represent your brand poorly to the public?

Because Washington is an at-will employment state, the answer is probably “yes,” depending on the circumstances.

In some states, however, the answer may be “no,” unless you discover the applicant has engaged in illegal conduct.

California, Colorado, New York and North Dakota all have so called “off-duty conduct statutes,” prohibiting employers from taking adverse action against applicants or employees based on lawful off-duty conduct – like drinking at a bar or making comments on social media.

These statutes grew from efforts to prevent employers from discriminating against employees who used tobacco products. Indeed, several states have enacted “tobacco only” or “lawful products” statutes that prohibit employers from taking adverse action against employees for using tobacco or other lawful products under certain circumstances.

Off-duty conduct statutes take this protection a step further.

The California Labor Code, for instance, provides that no employee shall be discharged or otherwise discriminated against for lawful conduct occurring during nonworking hours away from the employer's premises. See Cal. Lab. Code §§ 96(k), 98.6. Colorado, New York and North Dakota have statutes imposing similar restrictions. See Colo. Rev. Stat. § 24-34-402.5; N.Y. Lab. Code § 201-d; N.D. Cent. Code § 14-02/4-03. These statutes do contain various exceptions, including, in some cases, for certain provisions in collective bargaining agreements, bona fide occupational requirements, activities that constitute conflicts of interest, and restrictions that are rationally and reasonably related to the employee’s particular responsibilities. In some cases, however, meeting these exceptions may prove difficult.

As concerns over employment privacy increase there may be additional state (or even federal) efforts to restrict employer use of online information.

In 2009, for instance, Representative Steve Cohen (D-TN) introduced a bill to amend the Fair Credit Reporting Act to prohibit employer use of certain consumer reports in the hiring process (HR 3149). Indeed, just this week, the German government undertook consideration of a law that would prohibit employers from examining certain social networking sites of applicants and employees altogether.

Although Washington employers don’t currently face such onerous restrictions, remember that you must still be careful when looking into an applicant’s or employee’s online background. Aside from the fact that such information can be unreliable and difficult to verify, you may also discover a lurking disability or non-obvious protected characteristic of the employee about which you would not otherwise be aware.

In addition, the National Labor Relations Act (which applies to union and non-union employers alike) prohibits employer surveillance of protected concerted activity.

Employers should also be careful in how they gain access to employee information. Pre-texting or other surreptitious access, for instance, can potentially land you in hot water under a number of laws including the Computer Fraud and Abuse Act, the Stored Communications Act, and the Electronic Communications Privacy Act.

Finally, you may have obligations under the Fair Credit Reporting Act to notify applicants that you will be investigating their online background and to provide applicants with appropriate notice should you decide to take adverse action based on what you find.

These are just a handful of pitfalls that an employer can encounter in the digital era. For additional information on these issues you should consult with your in-house or outside counsel.

Brian is an associate with Sebris Busto James, where he counsels and represents employers in labor and employment matters. Brian has a particular emphasis in employment privacy and the impact of new and emerging technologies in the workplace, including employee use of social media. Brian is a member of the ABA’s Committee on Technology in the Practice and the Workplace, and can be followed on Twitter @brianflock or on Facebook via his fan page. Brian can be reached at (425) 450-3380 or by email at bflock@sebrisbusto.com. © Sebris Busto James, 2010 (reprinted with permission on wac6.com). 

Money Can't Buy Paul Allen Love!

The early chatter on Paul Allen's patent infringement suit counts two strikes against him:

  1. The patents describe innovations that are obvious.
  2. The patents claim prior art.

If you assume that Allen must have at least as sober an assessment of the enforceability of his patents as anyone else, how can you suppose he would pick this fight?

Two alternatives:

  1. He knows something the rest of us don't.
  2. It's not about the money, it's about his place in history.

Allen's complaint is notice pleading at its most minimal, so the following, relatively colorful paragraphs really stand out:

16. In addition to the research that Interval Research conducted, it also provided funding and assistance for other projects. For example, Interval Research served as an outside collaborator to and provided research funding for Sergey Brin and Lawrence Page’s research that resulted in Google. Indeed, a Google screenshot dated September 27, 1998 entitled “About Google!” identifies Interval Research in the “Credits” section as one of two “Outside Collaborators” and one of four sources of “Research Funding” for Google. See Sept. 27, 1998 Website “About Google!” attached as Exhibit 1.

17. Mr. Brin and Mr. Page also recognized Interval Research’s funding in the “Acknowledgements” section of their 1998 research article entitled “Anatomy of a Large-Scale Hypertextual Web Search Engine” in which they “present Google.”

If the patents really aren't enforceable, then maybe Allen is really seeking recognition. Maybe it's important to him that the world know he helped shape, not just the PC revolution, but the birth of the Web as well.

Fig 6 from US Patent 7348935

Over-reading? Maybe. But the desire to be understood and given the credit you think you are due, that can make you do things without regard for cost.

Image: FIG 6 from US Patent No. 7,348,935.

Taxes & the Patriotic Mantle

Bill asked me for some thoughts on his post of yesterday.

I think that today's tea partiers, at least the more informed among them, would say that Washington has become as distant and unresponsive as London was in the 1760s, and that's the real problem. (Certainly by the 1770s there were plenty of colonists who would not have accepted actual representation in Parliament, because they considered it an institution so corrupt that some token American representation would not affect its policies.)

Boston_tea_party(Boston Tea Party, image of lithograph by Sarony & Major, 1846. Source: National Archives, via Wikimedia Commons.)

My take is that these people do not understand something basic about our system, i.e., that it is about process, not results. The colonists were attacking an unfair process--though no doubt they also did not like the result. Though the tea partiers have adopted the Revolution’s rhetoric of process (“No taxation without representation!”), their anger today is due to not getting its way (no taxation), not about how we got there (representation).

The really complicated debate before the Revolution was over what "representation" meant. For Americans, it was easy--if I don't get to vote for the member of Parliament, I'm not represented (actual, or direct, representation). For the British, to accept that premise would mean that the vast majority of British subjects were not represented either, because only a few percent had a vote. But the British government argued that everyone was "virtually" represented, in that every MP had the responsibility to think of the good of the whole when making policy. So the poor, propertyless men, the women and the colonists were all "represented" even though none of them had a vote (virtual or indirect representation).

Also, keep in mind that because land was easily obtainable in the colonies and almost impossible to obtain in Britain, most American adult white males were property owners--but had no political power to protect their property from taxation, while those without the vote in Britain were generally without substantial property. The Founders, by the way, also had no intention (at least not most of them) of granting the vote to people without property.

In the 1760s and 1770s, very few people thought that every person deserved the right to vote. The liberal position was, and would be for decades, that only property owners, as responsible citizens, deserved the right to vote. The problem was the disconnect between the specific situations in the colonies and mother country. Cheap land in America meant that they had developed in meaningfully different ways without developing language that acknowledged the differences. They both spoke the language of "representation" while meaning different things by it. The colonists said that they were demanding their rights as Englishmen, and the Brits saw it as demanding much more than their subjects at home had.

As a result, the colonists thought that they were just demanding the rights of Englishmen, while the British government saw them as advancing a radical idea of majority vote and rule. The problem was that since in the colonies property owners were a majority (at least if you only consider, as they would have, adult white men), they often used majoritarian rhetoric (which sounds more noble than "protect my property!") that made it sound like the colonists wanted much more than property rights--majority rule, which was unthinkable in Britain (the Reform Bill of 1832 expanded the franchise in Britain but still left something like 90% of the people without the vote--this at a time when the US had virtually, if not literally, done away with all property qualifications). And, of course, words matter, so many people took the rhetoric to mean universal suffrage and some states expanded it during and after the Revolution (New Jersey gave women voting rights in its 1776 state constitution, for example). By the 1820s, property qualifications were being phased out all over the U.S., without harmful repercussions for property because most voters were still property owners.

With modern universal suffrage, we have a system wherein a propertyless majority theoretically can tax those with property (this is one of the things that Madison was afraid of when he talked about possible tyranny of the majority). So, to bring it back around to the tea party of today, the best face to put on their opposition to taxes is that they believe people without property can elect a "socialist" president to seize the property of the "successful" and force them to provide say, health care, to people who didn't "earn it" through their own hard work.

Ultimately, I think the tea party claim to the legacy of the Founders would require them to admit that what really bothers them is that their property is not adequately represented, that the "interests" (by which they sometimes mean big powerful corporations and sometimes mean the "minorities") can violate their property rights. But they can hardly say that in this day and age (though Rand Paul came close in explaining his problems with the Civil Rights Act and his opposition to the Obama administration’s treatment of BP over the Deepwater Horizon spill). As a result, when they claim the mantle of the original Boston Tea Party, they make no logical sense, because they are not really saying what they mean (and may not, most of them, even know what they mean).

Mark Byrnes is an associate professor of history at Wofford College in Spartanburg, SC. His blog, The Past isn't Past, frequently draws on American history to elucidate the meaning of current political events.

Taxes

I don't understand why people get so worked up about the mere idea of taxes.

I'm not a historian, but I love reading about early US political history.

As you may know, the American Revolutionary War had a lot to do with taxes being imposed by Great Britain on the American colonies.

But, based on the reading I have done, colonial opposition to taxes was nuanced, it was not knee-jerk.

The justification for opposing Britain's taxes didn't lie in any philosophical objection to taxes, per se. Nor did it lie in the view that Britain was a foreign power that had no legitimacy to tax the colonies (indeed, consensus for political independence was relatively slow to form, and was not proposed in the Continental Congress at all until, I think, more than a year into the conduct of the war).

Instead, colonists objected to the taxes imposed by Britain because the colonists believed that they, as subjects of the King, ought to have rights of representation in the British legislature as other Englishmen had. It had to do with their property rights as English subjects and with restrictions on royal power that, they believed, had been settled in the making of the modern British constitution.

I'm reading a book right now, Declaration, by William Hogeland, that tells a conspiratorial story. It opens with Samuel and John Adams, famously of Massachusetts, decamped in Philadelphia, meeting secretly with Pennsylvania radicals -- actual believers in popular suffrage, which the Adamses themselves detested -- in order to de-legitimize and overthrow a recently elected Pennsylvania Assembly.

Under Hogeland's thesis, it is good that the Adamses did so, because the duly elected Pennsylvania assembly, led by a man who had been famous for opposing Benjamin Franklin's attempts to replace Pennsylvania's independent charter with a royal one, yet stood for reconciliation with England.

A year or more into the war, as I understand Hogeland, the meaning of the Revolution was not yet clear. Was it to correct injustices and reaffirm and restore rights as propertied Englishmen under the British constitution? Or was it to separate, politically, from Great Britain altogether? The answer was not a foregone conclusion, and it took Samuel and John Adams, and others, to stir up leftist radicals to overthrow Pennsylvania's government, to clear the way for colonial consensus for independence.

Now, I know some today say we have taxes without representation or the consent of the governed, but that view is not credible.

I think what people may mean when they say taxes are illegitimate is that they do not like the representation they have; or else, they do not like what happens when their elected representatives, of whom they may approve, get together with the representatives elected by everyone else.

They may also be objecting, philosophically, to the redistribution of wealth that is effected through the collection of taxes and government spending on the military, drugs, schools, etc.

Whatever the objections, though, I don't think those who oppose all taxes can reasonably claim to be hearkening back to the origins of US political history. They may be emulating somebody or something in history, alright, but not American patriots.

But I stray from my point. I don't think a citizen can reasonably object to all taxes. Though a citizen can and should be concerned with the business of how taxing power is used to favor certain interests and behaviors over others.

The mortgage interest deduction is an example. Surely today it should be clearer that favoring leveraged ownership of residential real property over the financing or ownership of anything else is an idea whose time has passed? But many believe the mortgage interest tax credit may be sacrosanct, as difficult to reform as the government subsidies now paid to older people (a powerful special interest that votes!) for drugs. (Imagine a Congress that would say, let's replace subsidized drugs with subsidized local farm produce, green vegetables and fresh fruit, and then only for children!)

Scott Shane had an article last week about a proposed tax credit that would apply to angel investments made in startups that receive a certain kind of grant from the federal government. Scott's article dispassionately lays out how the credit is problematic, may not effect the desired consequences, and may have negative consequences. His bottom line was this:

"Much as I would like to see policymakers encourage more high-growth entrepreneurial activity, I don't believe that an angel tax credit for SBIR recipients is the way to do it. A capital gains tax cut for shareholders in startups (including angel investor holders of equity) would stimulate more high-growth entrepreneurship with fewer adverse effects than the proposed angel tax credit."

I don't have an opinion on this particular angel tax credit, but the idea that taxes -- necessary! -- should be simple and the rates consistent . . . that may be a wise way both to avoid mischief and mitigate political corruption.

Professional Bloggers, Amateur Journalists

Over time, words change meaning.

Take the words "amateur" and "professional." Today, the former is pejorative, the latter generally an adjective of appropation.

But in other times, places and contexts, those two words almost trade connotations.

I'm reacting to a Chris Dixon tweet of Thursday morning in which he said, absolutely rightly,

"biggest misconception re blogs is they 'amateurs'. would you rather hear about VC from @fredwilson or non-VC trying to understand fred."

Without taking any issue with what Chris meant, it does occur to me that the amateur/professional dichotomy won't work, long term, to describe the changes in publishing and journalism that are on the way.

Because, in terms of subject matter expertise, Fred is the professional. He makes his living practicing what he is writing about, indeed, engages in what he does at least in part through his daily, public journaling. A trained, professional journalist with a general or even financial education who covers private equity -- or even more specifically venture capital -- as a beat may get to know a lot about the business, may even come to have a position of influence in the industry; but when it comes to the covered subject, that reporter remains a relative amateur.

Might there be conventions, techniques and values developed by "professional" journalists over the last 40+ years that could be useful to the blogger who knows her subject but has never filed a story for a living? Might it make sense for actual professionals (those who practice a trade or have real, inside industry knowledge as a matter of regular practice) to take stock of that epoch in history known as accountability journalism and derive lessons from it? (It's important, too, to not fetishize those conventions. They were functional as much as idealistic; they served to build and preserve credibility by appearing to insulate journalism from influence by the very business model that sustained it.)

On the other hand, how the legacy of accountability journalism is passed on may sort itself out in daily practice. This is because one cannot write without thinking new thoughts that are the product of the writing. (An exception is political writing, which is like proselytizing or else preaching to the choir.) Professionals who blog, or who find other ways to disseminate what they know and extend the means by which they learn, will, necessarily, in the very process of working to communicate, shape new conventions. Not only will journalistic values of the late 20th Century be re-worked, but conventions of essay writing and other genres, ones that pre-date accountability journalism, may be revived or reinvented.

There is most certainly a place in the future for those we used to call "professional journalists." And it will be glorious to follow and learn from them, too. Many will do it purely for the love of writing and daily engagement with people and news and ideas -- even if they manage to figure out how to make a living at the same time. Their readers will be legion because their energy and curiosity and critical faculties will show. They will be the new amateurs, and the term will not be pejorative.

Tips for Directors

For the last many months the topics of the day for board directors (e.g., the credit crunch, dramatic sales declines and painful layoffs) were too immediate and too overwhelming to need commentary on recent changes to board processes. But as the outlook is no longer so bleak in many industries, talking about Boardsmanship seems to be a reasonable use of time again.

Here are a few nuggets on current Board changes:

  1. For those companies that are already public or are thinking about going public, the new Dodd-Frank “Wall Street Reform and Consumer Protection Act” mandates additional executive compensation disclosure. It also contains a requirement that companies to develop and disclose a claw back policy for incentive compensation when they restate their financial statements. I’m a skeptic on additional compensation disclosure as I side with the commentators who believe that the previous disclosure requirements played a big part in the “arms race” of ever increasing executive pay. What Board looked their executives in the face and said “You deserve to be paid under the median for executives in similarly situated companies”? Instead, like in Lake Woebegone where all children were above average, all executives were above the median and the median went inexorably up. Maybe this time it will be different. We can hope that this time “regulation by public embarrassment” will work, but its track record isn’t great.
  2. With only slightly less cynicism in my typeface, who could be against independence? So Dodd-Frank’s requirement the compensation committee of the Board, after much rule making by the SEC and the exchanges, be independent and empowered to hire their own compensation consultants is a second major development. From reading many, many proxy statements, I believe that the companies that have been paying attention to best practices are already there, but sometime in the near future the best practice will turn into a legal bright line. Did I say that? No, the line probably will not be bright, it will be qualified and commented on, debated and tortured, but maybe somewhere in there it will help remind us that really good leaders are motivated by creating a lasting enterprise and by building great products that customers want, not by incrementally more dollars after their basic needs are met. I recommend Daniel Pink’s eminently readable book Drive as an upbeat reminder of how good people can be motivated and rewarded in ways that don’t have the word “million” after them.
  3. Finally, if you missed it, Washington State needs your money, so they’ve “clarified” that director fees are subject to B&O tax.

Kris Stred is a former securities lawyer, who earned her gray hairs and cynicism as the general counsel of HomeGrocer.com and Shurgard Storage Centers. She currently is an executive recruiter specializing in in-house lawyers and retired CEOs (whose wisdom is bigger than their egos) for corporate Boards of Directors. You can find her bio here.

Cable Industry to FCC: "First Amendment Protects Us From Net Neutrality"

Google and Verizon, in their wisdom, have deigned to support net neutrality. Well, excepting mobile broadband. And excepting "enhanced services."

Let's try this again: Google and Verizon support net neutrality for the "public Internet" carried on "wireline broadband."

How does the cable industry like being offered up this way?

It doesn't. And it thinks Google itself is as much or more of a threat to net neutrality, in any event.

The Cable Industry's Position on Net Neutrality

According to a public policy page on the National Cable and Telecommunications Association (NCTA) website, 

"[t]hose who call for regulation of the Internet in the name of 'network neutrality' are offering a solution in search of a problem since there is no evidence of a market failure justifying the imposition of common carrier-like regulation on broadband services."

The NCTA lists among its members cable systems (e.g., Comcast and Time Warner), cable channels (e.g., MTV and C-Span) and even law firms (e.g., Davis Wright).

And the NCTA appears to be previewing the legal arguments that the cable industry's law firms will be making in court to challenge net neutrality. The NCTA submitted a brief (pdf copy here) to the FCC last month that runs through a variety of perceived constitutional, statutory and regulatory impediments to FCC and even Congressional authority to promote net neutrality.

The arguments of the NCTA's brief against net neutrality include an alleged First Amendment right to exploit the "inherent advantages" in public discourse that flow from owning the pipes by which speech is transmitted.

The NCTA's First Amendment Argument Against Net Neutrality

I know I've already quoted it within the last week, but, it's short, it's fascinating, and we might as well start memorizing it for the arguments now being made and those to come. Here again in full is the First Amendement to the US Constituion:

"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."

Citing Supreme Court precedent, the NCTA argues that freedom from government abridgment of speech under the Amendment quoted above extends, not just to those who speak, but also to those that provide a forum for communicating speech to the public.

From that premise, the NCTA reasons that net neutrality is an impermissible government objective:

"First of all, even those government interests that have been held, in certain circumstances, to be sufficiently 'important' to justify intrusions on protected speech – such as an interest in preventing anti-competitive conduct where there is a 'bottleneck' controlling access to speech – cannot provide the basis for such intrusions unless such circumstances do, in fact exist. The government 'must demonstrate that the recited harms are real, not merely conjectural, and that the regulation will in fact alleviate these harms in a direct and material way.' . . .

"But to the extent that a common carrier regime that requires nondiscriminatory treatment of Internet speakers is intended to enforce parity among content and application providers on the Internet by eliminating any differential treatment based on their different ability to pay for enhancements to their transmission, their different value, and their attractiveness to consumers, that is simply not a legitimate government interest. The Supreme Court has made clear that it is not the business of government to level the playing field so that speakers with inherent advantages cannot benefit from them. Under the First Amendment principle established by Buckley and its progeny, the government is not free to impose restrictions on speech out of a fear that, if the speech is left in private hands, some speakers will prevail at the expense of others."

(Pages 33-34 of the brief; emphasis added.)

The "Discrimination Is a Good Thing" Argument

Elsewhere in the brief, the NCTA allows that the FCC may have "ancillary jurisdiction" to address anti-competitive behavior by broadband providers, but insists

"[t]here is no justification for precluding broadband Internet service providers from engaging in differential treatment in furtherance of pro-competitive or consumer welfare enhancing objectives."

(Pages 44-45 of the brief.) Footnote 118 in the brief clarifies that beneficial discrimination might include efforts to improve security, improve service quality, and allocate resources "to those who benefit the most from them." (This makes me think of what Edward Felten said in the NYTimes colloquy, that it's going to be necessary to allow the industry to manage their networks but it's going to be hard to discern between legitimate network management and nefarious discrimination against disfavored or less-remunerative speech.)

We're Not the Bad Guys, Anyway; Google Is

The brief ends with the observation of how "arbitrary and capricious" it would be of the FCC to tag cable providers with the burden of effecting net neutrality while leaving Google alone:

"There is a growing concern over the control that the 'big three' search engines, Google, Yahoo and Bing, have over content and applications providers. NCTA’s comments in the Open Internet rulemaking explained the critical role now being played by such entities. As we noted there, '"search engines like Google, Yahoo and Microsoft’s new Bing have become the Internet’s gatekeepers, and the crucial role they play in directing users to Web sites means that they are now as essential a component of its infrastructure as the physical network itself."' Google can effectively undermine application providers by removing them from Google’s search results or placing them so far down the rankings that they are never found, and Google has the ability and incentive to favor its own services in search rankings – for example, by placing Google Maps ahead of MapQuest. While Google complains about ISPs potentially favoring certain content, Google 'doesn’t seem to find anything wrong with giving preferential treatment to its own content.' Google 'picks winners every time, and it’s surprising how often the winner is Google.'"

(Pages 83-84 of the brief; multiple citations omitted.)

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