Category Archives: Business Law

Social Media Research by Employers

Employers Run Risks by Researching Potential Employees on Facebook

There are significant risks for employers who use Facebook and other social media to research potential employees.

According to one study conducted by Carnegie Mellon University a small percentage of employers, between ten percent and a third of companies, use social media to research potential employees. While most employers are likely to deny that they violate discrimination laws, the study suggests that researching social media information may result in unlawful discrimination, whether consciously or not.

Information that potential employees post may present or suggest factors that if used to disqualify them from employment might violate federal and state laws Social Media to Research Potential Employeesdesigned to prevent specific acts of discrimination. Such information may be used intentionally by potential employers or unconsciously may influence hiring decisions. Once the employer has the information, particularly when that information relates to gender, religious preferences, age, marital status, or sexual orientation, it may prove a liability in any defense against unlawful discrimination.

A second more recent study conducted by North Carolina State University presents another liability of using social media research for potential employees: it alienates the very individuals that the employer seek to hire. Will Stoughton, a Ph.D. student at the university and the lead researcher, notes that the hiring process is an applicant’s first impression of an employer and serves to indicate how the employer treats its employees. Further, he suggests that if potential employees believe an employer has compromised their personal privacy it will place the employer at a competitive disadvantage for quality personnel.

One might question whether a potential employee should have any expectation of privacy for information shared on social media, particularly since they determine what information to share and with whom. However, legislation was proposed in North Carolina during this past year to prevent employers from requiring applicants to disclose access information for social media accounts precisely because the practice of using social media as a research tool so has gained momentum.

According to the study, most participants deemed the act of accessing their Facebook profiles by potential employers to be inappropriate even when that information is public. Further, they reported a negative impression of the company for doing so.

In the end, using social media as a screening tool can create more liabilities than benefits for employers. Employers may be well served to develop and enforce human resource policies that seek information directly from applicants, former employers and references instead of resorting to research tactics used by private investigators.

Ivie Law Firm can help you design and implement human resource policies and procedures to avoid unlawful discrimination, potential litigation and alienation of personnel. Call, email or use the Contact Form for additional information.

 

Copyright Infringement

Blurred Lines in Copyright Protection

Robin Thicke sues for declaratory judgment that his hit summer song, “Blurred Lines,” doesn’t cross the line on copyright infringement.

In the same month of 1977 as Robin Thicke’s birth, Marvin Gaye released what would become a chart topping hit single, “Got to Give it Up.” Fast forward to the summer of 2013, and Thicke’s “Blurred Lines” has reached the number one spot.

Thicke is on record as stating that Gaye’s hit is his all-time Copyrightfavorite song and influential upon his recent composition. The Gaye family and the copyright owner of Gaye’s hit allege that Thicke’s composition crosses the line of copyright infringement, because it feels or sounds the same. According to the complaint filed by Thicke, they asked for a cash settlement in lieu of a lawsuit.

Instead of writing a check, Thicke, who admits that his song was intended to evoke an era and be reminiscent of a particular sound, has filed his own a preemptive lawsuit asking the court to declare that his song does not infringe on Gaye’s hit. His complaint alleges that the Gaye family is claiming ownership of an entire genre instead of a specific work.

When it comes to copyright in music, the line is sometimes blurred. Gaye’s hit, originally titled “Dancing Lady,” was inspired by the Johnnie Taylor hit “Disco Lady.” The song depicts a shy man who was once too nervous to dance but is eventually emboldened by the music and the possibility of romance. The Copyrightlong play version sums it up the sentiment with the words, “Let’s dance; let’s shout; get funky what it’s all about.” These lyrics were altered by Michael Jackson and his brother Randy to “Let’s dance, let’s shout; shake your body down to the ground” in the Jackson’s classic released in late 1978, “Shake Your Body.” Michael Jackson borrowed even more of Gaye’s “Got to Give It Up” style in his song released in mid-1979, “Don’t Stop ’til You Get Enough” which also uses percussion instruments and a constant guitar riff as a foundation.

Apparently during the 70′s artists did not feel infringed upon by others who found inspiration in their music. So, in the words of Marvin Gaye, what’s going on? Obviously attitudes have changed. That may be understandable given the music industry’s status and profits. Even so, absent similar lyrics or melodic progression, any claim by Gaye’s family that Thicke has got to give it up may be misplaced. On the other hand, they are likely to benefit from all the publicity given to a 70′s hit that has not received this much attention since disco died.

If you have need of legal advice or representation in the area of copyright law, contact Ivie Law Firm by phone, email or the Contact Form on this website.

Food Trucks

Food Trucks Are Small Businesses Too

As small businesses, food trucks in the Triangle face legal challenges

Interest in and support of food trucks has exploded in the Triangle over Food Trucksthe past few years. This Sunday, August 11th, Downtown Raleigh will sponsor its third food truck rodeo of the year from 4 to 9 p.m. Over 70 food trucks will line Fayetteville Street for some 10 blocks to provide consumers a wide variety of dishes. A fourth food truck rodeo in downtown Raleigh is scheduled to be held on October 13th. What makes these events remarkable is the historic opposition by the city of Raleigh to food trucks. City officials worried that the trucks might threaten the business of downtown restaurants and create congestion, litter and noise.

Durham, on the other hand, embraced mobile cuisine long before the first food truck was welcomed on Food Trucksthe streets of Raleigh. The initial success in this city can be attributed in large part to the owner of Only Burger, Brian Bottger, who coined the phrase “food truck rodeo.” Unlike Raleigh, Durham took the position that food trucks are small business owners like their brick and mortar counterparts and deserve a shot at pursuing their gastronomical dreams.

Like most small business ventures, food trucks require hard work and some risk. It’s hard enough to achieve success when you know what you’re doing and do everything right.

In 2010, Mike Strenke invested $19,000 into a pizza truck and supplies only to discover that he couldn’t operate in Raleigh. Strenke, in the Klausie’s Pizza truck, rode out the opposition, championed a change in the city’s attitude and gained a large following. Recent posts on Klausie’s Pizza social media, however, indicate that the truck has been sold and plans are being made to open a brick and mortar location.

Strenke’s story serves to emphasize the need for small businesses to make sure that they understand and comply with the laws that govern formation, organization and operation and plan for the challenges and transitions that come with success as well as failure.

Whatever small business opportunity or dream you may wish to pursue, the Ivie Law Firm can help you navigate the law and implement a business structure to facilitate success. Call, email or use the Contact Form for additional information.

One final note – a group of local film makers working for Creative IllusionsFood Trucks Productions spent the summer creating a series of videos entitled Street Foodie Diaries about the area’s food trucks. The first episode, which features Mama Duke’s, was released on YouTube this morning and can be viewed HERE. You can find and like Street Foodie Diaries on Facebook HERE.

Non-Compete Agreements

Recent Court Decision Emphasizes Need for Restraint in Non-Compete Clauses

North Carolina Court of Appeals finds franchisor-franchisee non-compete agreements to be a hybrid of employer-employee and sale of business agreements but places emphasis upon reasonableness of agreement in protecting legitimate business interests.

Non-compete agreements are valid in North Carolina. Traditionally they are used by employers who fear that an employee may leave the company and create direct competition using the training, information, strategies and customer relations that the employee acquires as a part of the job. They are also used in situations where one purchases an existing business to insure that the previous owner does not open a new competing business across the street by using these same resources.

According to the North Carolina Court of Appeals in a recent decision, Outdoor Lighting Perspectives Franchising, Inc. v. Harders, the level of scrutiny given by a court that is assessing the validity of a non-compete agreement is not the same in an employment context as it is in a sale situation. In reality the distinctions are not as clear. In the Non-Competeemployment context the non-compete has to be in writing, part of the employment contract, based on valuable consideration, reasonable as to time and territory, and designed to protect a legitimate business interest of the employer. In a business sale context the first three elements are not listed, however it would be hard to imagine a sale without a written contract and valuable consideration. An additional element considered by the court in the sale context is whether the non-compete agreement interferes with a public interest.

Regardless of the various reasons that have been ascribed, the difference in scrutiny seems warranted. One can appreciate that an employee has less control over the circumstances under which a job is lost than does an owner over the sale of a business. An owner, at least in theory, negotiates the terms of a non-compete from a stronger position and can avoid the issue completely by deciding not to sell.

The recent decision required the Court of Appeals to consider the validity of a non-compete clause in a situation that does not fall within either category – a franchisor-franchisee relationship. The Court determined that this type of relationship is a hybrid of the employment and sale situations.

Lest one fear that this distinction might create a third set of elements used to assess the validity of a non-compete, the Court focused its attention on the element that is already shared by employment and sale situations: the reasonableness of the time and territory protections carved out by the agreement. The Court did not have to reach the issue as to time, which in this case was 2 years, since it found that the territorial prescriptions were too broad given the range of business in which the franchisor was involved.

The case dicta appears to maintain the possibility of blue penciling by the Court, though the wording of the non-compete agreement did not permit such in this situation. The opinion also discusses the element of good will as a legitimate business interest.

In the end, the opinion emphasizes the need for restraint in drafting a non-compete agreement. Once again, it appears that over reaching results in an unenforceable agreement.

If you have questions about or a problem with a non-compete clause, contact Ivie Law Firm by phone, email or the Contact Form on this website.

What You Don’t Know Can Hurt Your Business

Recent Scam Targets North Carolina Businesses

According to the North Carolina Secretary of State Corporations Division, companies in our state were recent targets of a scam. Businesses were mailed an official looking form entitled “2013 – Annual Minutes Form.” The instructions ask for the form to be completed and retForm Seeks to Scam NC Businessesurned along with payment in the amount of $125.00 to the Corporate Records Service that mailed the solicitation. To bolster its authenticity, the solicitation cites North Carolina statutes that address the need for corporations to keep accurate records.

Maintaining corporate records is an important requirement that is mandated by state law. Corporations are required to keep minutes of all meetings of incorporators, shareholders, or board of directors and records of all actions taken by the same without a meeting. However, there is no statutory requirement to file these minutes with the Department of the Secretary of State. In other words, the service being offered for a fee is not, as the solicitation implies, a requirement for North Carolina corporations.

Understanding what is required of your business under the laws of North Carolina is important. Many of the legal problems faced by businesses, particularly small businesses, can be traced to a failure to understand and fulfill these requirements. This lack of knowledge is what made the scam possible. The solicitation was created with the hope that many businesses would simply complete the form and pay the requested fee.

The Ivie Law Firm can help your business do all that is required and avoid doing, and paying for, things that are not. We can review your business records and your procedures for maintaining those records to insure that you are operating within the law. If we find that your business is lacking in some aspect, we can update your records and revise your system to bring your business into full compliance.

Unintended Consequences of a Casual Corporation

The Importance of Maintaining Corporate Formalities

How casual is your workplace? Some businesses observe casual Fridays. Some extend casual Fridays to include the entire workweek. Some provide great flexibility in terms of schedule and allow employees to work from home, though that’s the sort of thing that Yahoo just nixed. There is a limit, however, as to how casual a company should be in terms of governance and the maintenance of business records.

The primary benefit of forming a corporation is the protection that such provides to investors. The risk for each investor is limited to the amount of his or her investment. If corporate assets cannot cover liabilities, creditors and those who obtain judgment against the company are out of luck.

However, the protections provided by this type of business organization require the corporation to observe what are called corporate formalities. Failure to do so may open up the investors, officers, and even directors to personal liability.

For example:

  • Failure to maintain corporate formalities may be pointed to as evidence that the corporation was not an independent entity but merely an alter ego of the sole or dominant shareholder who merely used the corporation to hide inappropriate conduct. If a court finds that conduct to be in violation of public policy, state law or some positive legal duty, or deems the conduct to be fraudulent, dishonest or unjust, it may treat the corporation and the shareholder as one in the same and hold the shareholder liable.
  • Failure to timely file annual reports or pay taxes can result is the state administratively dissolving the corporation. A debt incurred by a corporate officer after dissolution of the corporation may make that officer personally liable for the debt. Further, if vendors or suppliers discover that the entity no longer legally exists, they may refuse to conduct further business with the company for fear of default.
  • Failure to maintain corporate formalities may be used to suggest that directors breached their fiduciary duties to the corporation by making unsound decisions. If a breach of fiduciary duty can be shown, then the directors may be held liable for any damages that result from their actions.

For all these reasons, and more, a corporation needs to keep it formal where it matters. The Ivie Law Firm can help you ensure that your business is not taking unnecessary risks for investors, shareholders, officers and directors. We can help you correct any deficits and bring your records up to date. We are here to help make sure that you don’t suffer unintended consequences, no matter what you wear on Fridays or any other day of the week.