In this series of Social Media and the Law I have touched upon some of the major legal areas of concern when dealing with social media and employment.  To see what was talked about or for a refresher click on the following links:

Having a Social Media Policy

First of all, let me say I understand that a lot of this can be overwhelming.  You may feel that even crafting a Social Media policy is not even a part of the bottom line and seems to be difficult endeavor, especially if you are a small business owner worried about inventory or keeping customers, now you have to think about Facebook, Twitter, and blogs?  So you have one of these initial responses: a) close your eyes and hope for the best; b) create a social media policy that is so general that it is unenforceable or has no meaning; or c) completely ban social media use.

I find a lot of smaller organizations feel this way because they feel they do not have the resources to be effective in this matter.  First of all, smaller organizations are closer to their employees and can directly work with them to craft a good policy.  Secondly, there are many affordable attorneys that can either review what you create or draft something as a pat of your handbook and employee agreements package.

With that being said let’s look at some of the things you should think about when creating a social media policy.  I will start out with the legal landmines you want to avoid when crafting a policy.  It will be followed with some business questions you should ask yourself.

Legal Considerations

One of the goals of a good media policy is one that should help protect the employer from lawsuits.  I will do a brief run through of the various laws that affect your policy, and use examples of what might be considered a good response or way to handle the situation.

Employment Law

Protected Statuses and Discrimination – remember that certain demographics of the population have protected statuses under both federal and state laws.  Therefore, in this area you should avoid using an applicant’s Facebook page to make the decision to hire them.  Once again, remember Hawaii now protects gender expression.

Harassment – as an employer you are legally obligated to create a safe work environment for your employees.  Therefore, if you have a case of “sexting” (sexual texts) or cyberbullying you need to take action or run the risk of violating the law.

Fair Credit Reporting – remember if you use a third party to obtain background information on a potential employee you must get their permission.  As part of the hiring process you could have potential hires fill out authorization forms.

National Labor Relations Act (NLRA) – the National Relations Board, which enforces the NLRA has been keen on clamping down on employers that have broad social media policies that ban protected activities or respond to negative postings on Facebook/Twitter by firing the offending employee.  A couple things about this situation:

  1. Narrow the scope of your social media policy.  Avoid blanket policies that prohibit everything and implement a review policy if you find an offending comment by an employee on a social network site.  Be careful and make sure the comment is offensive and not a commentary on the working environment.
  2. Create a grievance process. If your employees are bad-mouthing your company or managers you may not have a good venting mechanism or allow them to air their grievances.  So they are turning to an outlet, which gives them control over their complaints.  You might need to investigate where the tension is coming from.

Intellectual Property

Trade Secrets – remember that if an employee discloses protected information to a new employer, that new employer could be faced with liability from the former employer.  In general, all companies that have an employee who has access to sensitive information should have that employee sign non-disclosure and non-compete agreements.  In addition, if you are in the habit of providing electronic communication devices (i.e cellphones, laptops, etc . . .) you should remind the employee that the equipment is company property along with all the data contained on it.   You also want to make sure your employees do not post things that are supposed to be secret.

While, this is not a trade secrets situation, this video report by KITV news on a Honolulu Liquor Commission employee highlights the problems of Facebook posting when an employee has access to sensitive information (which includes the identity of fellow employees).

Specific Professions

HIPAA – if you are medical provider or a business affiliate of one should be highly sensitive to staff having access to protected health information on their computers that have Internet access.  Recall that a woman got in trouble for posting a patient’ HIV status on her MySpace.  Excellent training and careful security protocols are a must in this area.

Legal Ethics – attorneys, your paralegals and secretaries should avoid talking about what they are doing at work.  If you have a client who does not want to be identified, and a paralegal inadvertently identifies them through a Tweet or posting a picture you will be in violation of legal ethical rules.  Similar to HIPAA, a lot of training and explicit policies should help you prevent such problems.

Business Considerations

This is not meant to be a comprehensive list, but from a business owner/manager’s perspective these are some questions you should consider when crafting your social media policy:

  • What is your corporate culture?
  • What is the function/nature of your business?  Does it require a lot of confidentiality?
  • Who would you like to have access to the company’s information?
  • Does your company use social media for its advertising and marketing?
  • What is the size of your company?
  • When (during the day/week) is your company in operation?  What is your break-time policy?
  • How sophisticated is your workforce?
  • How important is computing, Internet access, and mobile usage to your company?

You should have some realistic expectations about creating a social policy and then implementing it.  Having absurd goals, like you are going to check all your employee’s Facebook pages at the end of the workday does not do you any favors.   Your policy should be fair and practical because at the end of the day you are are the one who has to get it to work.

Before I get to implementation considerations I will touch upon another aspect of creating a Social Media policy.  As we have seen Facebook, Twitter, and the like do not solely affect your relationship with your employees.  These platforms are sometimes integrated into a company’s marketing strategy and there are certain legal concerns of their use when you engage the world outside the organization.  So next time, (which will be July 5th due to 4th of July celebrating) I will discuss Crafting a Social Media Policy and the Outside World.

Don’t forget if you enjoy this series or any of the other series on my blawg feel free to subscribe in the right-hand corner of this page to receive e-mail updates on posts.  If you are on Facebook be sure to “Like” “Ryan K. Hew” to get updates there as well.  See you next time.

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*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

*The Social Media and the Law Post for today will come out tomorrow.  Instead, enjoy a special post about Hawaii Access to Justice.
** 6/28/11 – CORRECTION – When I first made this post, I mistakenly made it seem that it was the Mediation Center of the Pacific (located on Oahu) handled all cases in the statistics section.  This is NOT the case.  In actuality it was the Mediation Centers of Hawaii (MCH), which includes all community mediation centers across the State, not just the Mediation Center of the Pacific.  The text has been edited to show this change.  – RKH

I was fortunate this past Friday (6/24/11) afternoon to have time to attend the 2011 Hawaii Access to Justice Conference, hosted at the University of Hawaii’s William S. Richardson School of Law.  It was a very interesting and informative Conference filled with a lot of great participation from big law firms to non-lawyers who care about access to justice.

Mediation

I was able to go to the Mediation Effectiveness: When to Use and How to Make it Work workshop facilitated by Tracey Wiltgen, Executive Director of The Mediation Center of the Pacific.  Tracey was able to highlight the serious need of Hawaii to turn to mediation, especially for those in a lower income situation.  With the costs of going to court high, the cutbacks to the Judiciary’s funding, and other governmental services reduced a lot of societal problems have increased.

Here are some interesting Hawaii statistics on mediation, which relate to the Mediation Centers of Hawaii (MCH), which includes all mediation community centers statewide :

  • During the fiscal year of 2009-2010 the MCH served a total of 3,677 cases.
  • During the first three quarters of fiscal year 2010-2011 the MCH served 3,326 cases.
  • Of the FY10-11 cases, 77% of them were court related and they included:
    • 156 Domestic (divorce and paternity)
    • 207 landlord/tenant
    • 182 consumer/merchant
    • 80 Temporary Restraining Order (TRO)

Among the subject matter of the cases, the rate at which the parties were able to reach written agreement varied, but in general it was between 45% to 64%. These are very good statistics considering many of these are contentious situations.

For the public, you should ask about mediation.  It is a very good alternative to start with rather than going to court immediately.  Consider that it is less formal, costly, and time-consuming.  The focus of mediation is to facilitate communication and work out an agreeable situation between the two parties, which is sometimes lost in court battles.  It is confidential and you still have the option of walking out on the mediation and going to court.  However, with fees being so high isn’t it worth the close to 50-50 chance that you could workout something you agree with?

For attorneys, I think this is a prime opportunity for many of us to look for new skills and the way we approach situations.  Indeed, we should always have trial attorneys, but that should not be the only image that the public conjures when you say the word “lawyer.”  It is true that non-lawyers look to us for answers and help with their legal problems and mediation is certainly one extra tool to help fulfill that task.

Elder Law

Finally, I want to give a shout-out to my fellow solo practitioner and 2011 Leadership Institute member, Scott Suzuki.  I was able to go to his workshop on Access to Justice for the Elderly and I was shocked to find out that Hawaii did not have elder abuse laws or caregiver neglect.  At best you would have to cobble together different parts of the law to establish a claim.  In addition, the state has no filial responsibility law, which establishes the duty for adult children to care for their indigent elderly parents.

Now, I most people would already have the inclination of, “this Hawaii, we already do that in our culture,” which I agree wholeheartedly.  Having a strong culture that cares about family and friends is what makes Hawaii an awesome place.  However, we should have the laws to back it up.

Lastly, with you many attorneys separate health care planning out from estate planning.  You should consider an attorney that can handle both because consider as you are aging, money does become an issue as does your health, to think that the two are unrelated, and that once you die the medical bills and estate will be resolved by the people you leave behind is disjointed.  I fully agreed you should seek out an estate planner that has empathy for caring for an aging parent and sets up and estate plan that works for not just the parent, but all takes into account the reality of family dynamics.

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For more information:

See the Hawaii Access to Justice Commission

Draw the Law” is a weekly short post where I try to visualize a legal concept.  It is designed to be helpful to small business owners and give them a quick overview of various aspects of the law that affect them.  For the next couple of posts I will detail how to finance a start-up.
In the prior post we discussed personal sources of getting money for your start-up.  However, let’s say you have exhausted all personal sources that you know to get money from.  You have drained all your bank accounts on Oahu, asked all your siblings on the mainland, and asked your Aunties and Uncles on the Big Island, and you are still short for your dream bakery.  What do you do now to raise capital?

You should start consider contacting private lenders and/or investors.

Lenders

Your typical lender will be a bank.  While there are other types of lenders I am going to mainly focus on what the banks do.  The process of securing a loan is typically a lengthy one involving a lot of paperwork and discussion with your banker.  Especially, given the state of the economy many banks are wary to loan out money to endeavors they deem to risky.  It is here that a solid business plan is key to convincing banks.  If you are more an idea person, I do suggest seeking consultants, such as attorneys, financial advisors, accountants, and experts to help your business planning needs.  If the bank approves the loan it will still seek personal guaranties and collateral from you.

What is Collateral?

Collateral is the borrower’s (you, the business owner’s) pledge of some specific property that you own to the lender in order to secure loan repayment.  Basically, they typically want some sort of assurance that they can get back the value of the loan should your business go under.  Typically, it is going to be your house.  This means if your business goes under and you have no ability to repay the loan the bank could foreclose on your house to recover its money.

Investors

Investors, in exchange for their money, will have you give them a “slice of the pie” and you will consider them a partner, member, or shareholder depending on the type of entity organization you have chosen.  Investors fall into two general categories of co-ownership. They are either active or passive.

Active

The active investor is the owner that comes in and runs the shop.  They run the day-today operations and are active in managing the business.  They don’t just throw money at you and make check back on you later when they are seeking their return they are actually helping you run.  Raising money this way is more flexible because you don’t have to worry about state and federal securities laws.  When securing money this way you should have someone help you negotiate how much ownership you are willing to give up for what amount of money, what the duties are of each partner or member, and reduce many of these conditions to an agreement.

Passive

Passive owners or investors do not help run the business.  They give you money for ownership, and typically you pay them back in dividends of off the stock you have issued.  Stock represents ownership of your corporation.

However, there are many securities laws designed to protect investors from frauds.  Look at it from the public’s view, they do not want someone to say they are starting a business, sell them shares of a business for thousands of dollars, and then skip out on town never starting the business or giving a return to those people.  If this is the route you are seeking to raise capital, which is generally for very, large scale projects.  The laws and processes are extremely complex and you should seek an attorney for help.

A Word on Crowdfunding on the Internet

In this day and age of the Internet a new trend has taken place for many small businesses.  They turn to the Internet to raise funds for them.  Crowdfunding is a concept that many politicians are familiar with; it is basically asking for a small donation from a lot of people to raise large amounts of money.  With the Internet’s reach that becomes easier and many online businesses have based their model on this concept.

Most of the crowdfunding websites are not investment type sites, where you would put your business up and sell ownership.  Most of them are donation-based or allow you to conduct a pre-sale of products or services to the people who give you money.  Typically, businesses give specials to these people who helped them start-up.  While, generally easy to do you should be aware that these sites charge small fees to set you up, your business model while getting marketing, also is exposed to a large group of people, and the amount of money you raise is typically low, around $2000 – $10,000.

Many of these crowdfunding sites though are great for charities, non-profits, arts projects, and the like if you are seeking to do something to that effect.

Some Helpful Definitions of Financial Terms

In business you have probably heard certain words use time and time again, like “angel investor.”  Those terms tell you a lot about how the business interacts with its financing. To help round out the legal information I have given you are some of the definitions of those terms.  Please note that certain words in financial terms do not have the same meaning in legal terms.

Angel Investor – generally, a wealthy individual who provides capital for a startup in exchange for convertible debt or equity

Equity – in financial terms, equity is the ownership interest by shareholders of a corporation

Securities – in financial terms, a certificate of creditorship or property carrying the right to receive interest or dividend, such as shares or bonds

Seed Money – capital needed to set up a new business or enterprise

Venture Capital – is financial capital provided to early-stage, high-potential, high-risk, growth startup companies.  Venture capital funds or capitalists make money by owning equity in the company. Usually, this type of investing occurring after the seed money and the investor hopes to make a return by being a part owner when a company sells the company or sells stock of the company on a stock exchange.

Next post will be about getting money from the government for your business.  Don’t forget to subscribe to have new posts e-mailed to you and I will see you on the next draw!

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*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Admit it, you have checked your Facebook or Tweeted something on your phone while you are at work.  I bet you are even doing it now as you read this blog!  There are some legitimate concerns that an employer, employee, and in general people should be concerned about when working and using social media.
Your boss may use social media at work, but it may be a part of their job.  For you, it may be a different story.  What can an employee do with their social media accounts on the job?  Off the job?

In this post I will discuss what an employee can expect out of an employer’s social media policy, some of the laws surrounding social media policy, and the limitations of a policy.

Handbooks and Social Media Policy 

Most workplaces have an electronic communications, e-mail and internet usage, or some kind of policy in their handbooks that deals with communications in the digital age.   An employee should be aware what the company’s policies are regarding their behavior when it comes to using social media, and often it will be in the handbook.  For an employer, they should be aware that crafting a social media policy is not always easy and should read the following posts in this series where I will discuss crafting such a policy.

In addition, remember from the prior post that Hawaii is an employment-at-will state.  So long as the employer does not fire the employee under protected statuses or activities they can choose any reason or no reason at all to fire you.  Therefore, if they do not want you texting, checking your Facebook, and/or Tweeting about how the surf is up on company time and resources (i.e. their computers) then you should not be.  They can fire you for breaking workplace policy and just because they do not like that behavior.

Employee Must Remain Loyal to their Employer

An employee should be loyal to their employer.  This legal concept has a clear foundation in common law, meaning its been around a while, and a generally accepted view in the legal system.  Specifically, an employee has a duty to act for the sole benefit for his or her employer while engaged in any conduct related to employment.  Generally, social media enters into this equation when it comes to the sharing of company trade secrets and confidential information.

Trade Secrets, NDAs, Non-competes and Customer Lists

 

What is a trade secret? It is a formula, practice, process, design, instrument, pattern or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers.

While an employee is working for an employer they should be loyal, and not be utilizing information they are entrusted with to the detriment of their employer.  To strengthen this concept, employers typically have employees sign Non-Disclosure Agreements (NDA) and Non-Compete Agreements.  An obvious violation of the law and these types of agreements would be if an employee responsible for mixing delicious island pineapple soda, then posted the secret formula on their Facebook for all their friends to be able to make for potluck at the beach.

However, the situation becomes a little bit more unclear when it has to do with customer lists and the connections made through social media.  Recently, two cases touched upon this issue.  The general situation of both cases was an ex-employee would gather information about clients and then leave their job for a competitor.  They would retain that client information and bring it with them to their new job.  The issue that the courts never fully dealt with was that it was through their use of social media, LinkedIn, that they were able to keep this client information.

Businesses usually like to keep their customer/client lists protected, partly for the clients’ privacy, but more for the fact that the business used resources and put together information to keep those clients.  Specifically, with LinkedIn, the service is designed to create connections and for the most part the information about the “links” or “connections” are freely accessible.  In the past, employees that were leaving would turn in their files, Rolodex, Blackberry, etc . . . . keeping no company information, but with LinkedIn, your account stays with you.

For the employer, you should draft a well coordinated social media policy based on your company’s industry and use of information.  For the employee, read the handbook policy, any non-disclosure, non-compete, and non-solicitation agreements you sign.  The general rule of thumb that both parties should be aware of is if the information is readily accessible, easily attainable, and anyone can find it, then it will be less likely to be considered a protected trade secret.  That being said companies should still take active steps to protect any information they gather.

What About Complaints about the Company or Bashing the Boss?

So you hate your boss and like complain about him on Twitter?  Can he fire you?  Are you being disloyal?  This is where the legal water is still a little murky.  Recently, the National Relations Labor Board (NLRB) has filed a string of complaints against company’s that have sacked employees based on their social media posts.  Specifically, the contents of these posts constitute protected activities, as asserted by the NLRB.  Oh good, I don’t have a union, you must be thinking.  No, sorry, rights of employees (union or non-union) are still under the NLRB’s power.

In one situation an employee was fired for basically calling her boss a psych patient on her Facebook page.  The company subsequently fired her, citing their blogging and Internet posting policy.  However, the policy was considered overboard and specifically:

contained unlawful provisions, including one that prohibited employees from making disparaging remarks when discussing the company or supervisors and another that prohibited employees from depicting the company in any way over the Internet without company permission.  Such provisions constitute interference with employees in the exercise of their right to engage in protected concerted activity.

“Protected concerted activity” means the following: discussion of wages, working conditions, and employment related matters and employees are allowed to post, blog or Tweet their opinions on such things, even though the boss or company may not like what you are saying.   However, what does that mean?

In the following situation the NLRB sided with the employer, a newspaper, who fired a reported for posting inappropriate and offensive Twitter.  The NLRB felt that the remarks of the reporter did not involve protected concerted activity.  If you as an employee, post offensive and inappropriate comments that are not work-related, then it is okay to let you go.

However, during the disciplinary meetings management also gave the following restrictions:

  • to stop airing his grievances or commenting about the employer in any public forum; and
  • to not Tweet about anything work related; and
  • to refrain from using derogatory comments in any social media forums that may damage the goodwill of the company.

Ultimately, the NLRB sided with the employer because the newspaper had fired the reporter for Tweeting offensive remarks.  However, the NLRB made clear that if any of these prohibitions were to appear in a social media policy they would be an unlawful restriction and constitute a violation the employee’s rights.  As an employer, do you have some of this kind of broad language in your social media policy?  What are you to do?

That will be the topic for next time, Creating a Social Media Policy: Thoughts and Tips for the Employer-Employee Relationship.  While, social media policy concerns much of itself with a company’s relationship between it and its employees a social media policy is not just for an employee handbook.   A company’s policy position also contains broad implications about how the company interacts with social media, its customers, its competitors, and its own image.  I will also touch upon these subjects in future posts.

See you next time on Social Media and the Law!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

I would just like to inform my readers that this blawg post will be delayed till later tonight, as I have been busy working on some other projects.  However, it will definitely be up today (6/21/11) and will discuss more from the employee’s perspective about their social media usage at work.

Access to Justice Means Giving People the Tools to Get There

In the mean time, here is some food for thought.  Lately, I have been trying to get more involved with access to justice here in Hawaii.  If you read my Civil Beat article, then you know I supported the passage of the increase to ILAF to fund organizations that do good work in terms of making justice accessible for the community.

However, as I stated I believe that there is an information gap as we continue to expand our laws and create a civil society.  Those who do not have access typically are also behind the curve when it comes to technology use because let’s face it, obtaining computers and smartphones may be relatively inexpensive for professionals, but not for others.   The Governor of Hawaii has made a drive to adopt and upgrade our technologies, and I support him in this endeavor.

In my humble opinion, I would like to see as his term continues on a stronger an investment in tools and infrastructure.  Namely,  I really think that we need to get cheap laptops and computers into our impoverished communities, and set-up free wifi spots throughout the State.  Why?  I don’t believe you get to access justice if you do not even know what is going on or where to look.  With infrastructure in place, kids are pretty smart once you give them some educational training, they can then begin seeking out all the knowledge that the web has to offer (i.e. like the information on this blawg).

Communication devices and the infrastructure to support them will bring greater access to justice because the population will be more knowledgeable and have skills needed to survive in this age of digital information.  Simple searches on an easy to use laptop through a public wifi network will bring them one step closer to getting answers or at least asking the right questions, which as many attorneys know all apart of the law.  Just my thoughts on social justice and public expenditures.

Anyway, see you later with my Social Media and the Law post!

Draw the Law” is a weekly short post where I try to visualize a legal concept.  It is designed to be helpful to small business owners and give them a quick overview of various aspects of the law that affect them.  For the next couple of posts I will detail how to finance a start-up.
In the prior post of this series we finished up with the variety of entity organizations, namely, sole proprietorship and partnership.

Now, that we have a business drawn up and have its “skeleton” outlined we will talk about the “blood” of the business or the financing of it.  What we need now is money!

Sources of Capital

There are a variety of methods of funding your business.  I like to divvy up those sources of money into three distinct categories.  They are as follows:

  1. Personal – what can you leverage on your own to raise money?
  2. Private – lenders and investors
  3. Government

Today, I will solely focus on personal methods of securing capital and then in Part II, I will discuss Private and Governmental sources.

Personal Sources

Let me list the personal methods first and I will turn to each one and briefly discuss them.  They are as follows:

  • savings
  • life insurance
  • retirement plans
  • home equity
  • stocks and bonds
  • credit card debt
  • loans from family friends

All of these represent the variety of personal sources that you could go to for money needed for starting your business.  I will now handle each one.

Savings

Savings is one of the easiest methods.  You just take what you have and spend it on the business.  All your cash in the bank use it on purchasing equipment, supplies, etc . . .  and it is as simple as that.  However, the reality is unless you are starting a business that has very little capital needs you are going to need to turn to other sources that draining your checking and savings accounts.

Borrowing Against Various Assets

In the case of life insurance, certain types of retirement plans, home equity, and stocks and bonds many people end up borrowing against these assets to raise the cash they need.  While, it is true you could cancel your life insurance policy, sell your home or condo, or sell your stocks and bonds most people would like to keep these assets for the long-term.  Instead they opt to borrow against the value of the item.  Typically, the loan that you are get will not be the full value of the item being borrow against, but some percent.

For the life insurance loan you would need to contact your insurance company.  For a home equity loan the bank that you owe your first mortgage on would be the first to turn to.  To use any stocks or bonds you own as collateral contact your broker.

Credit Cards

This method is as close to using your own savings to generate the buying power you need for equipment and the like for your business.  However, everything that goes on credit generally faces high interest rates if you cannot pay the balance of immediately.  In general, a credit card for the business is a good thing to purchase office equipment, make quick small payments, and emergency purchases, but should not be the primary method of financing the business as the interest rates will drain you over the long run.

Family and Friends

Here in Hawaii, we generally have a good family system where mom and dad, aunts and uncles, grandparents, and even calabash cousins will loan us some money to help our dreams come true.  While we like to trust in our family and friends, and hope for the best, it is also smart to just put the terms down in writing.  It should not be taken as an insult, but help avoid the creation of two different stories and future conflict should the business be unable to pay back the loan.  In addition, by having a promissory note, your relative or friend is in a better position to tell tax authorities that the money given to you was really a loan and not a gift, which have differing tax consequences.

Promissory Notes

These  are simple legally binding documents.  All they need to do is outline the terms of the loan, which includes the following parts:

  • identifies the parties;
  • how much money will be received;
  • what the interest rate is;
  • the amount of time you have to repay;
  • and the rate at which you will repay.

You can draft a promissory note yourself, so long as it has all the above components.  Just be sure to sign it, make a copy (to remind yourself of the repayment), and have the appropriate family member or friend hold onto the note.

If you are either party, the business owner or the family member or friend, and really concerned about such a loan you can always speak to attorney to make sure everything is in order. In addition to seeing a lawyer, for any method of financing you will probably want to meet with a financial adviser and accountant to make sure you have a firm grasp of how you will raise the money, expend it, and any debt obligations attached to it, as you get your business off the ground.

See you on the next draw!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Admit it.  You have posted something on Facebook or Tweeted on your phone while you are at work today.  I bet you are even doing it now as you read this blog!  However, there are some legitimate concerns that an employer and employee should have when dealing with the workplace and social media usage.

The Employer and Social Media Use by Employees

As an employer should I be concerned that my employees are using social media on the job?   The answer to this question is a definite, “yes.”  Today, we will focus on an employer’s liability for the actions of their employees, what that means for social media use by an employee, and the various laws that come into that type of situation.

Employer Responsibility for the Actions of Employees: Respondeat Superior

Remember, how I mentioned in the last post that it is part of your due diligence to research qualified applicants?  Well, the reason is that you, the employer, is responsible for actions by your employees during work.  In the law we call it respondeat superior and it means “let the master answer” in Latin.

For example, let’s say a local moving company’s careless truck driver crashes the company truck into another car during rush hour in Downtown Honolulu.  The car driver will sue the moving company for hiring such a terrible employee.  It is due to respondeat superior that the driver can sue the employer (the master) for the negligent action of their employee.

How Social Media Fits into this Employer-Employee Relationship

With social media replace that truck with tools like Facebook and Twitter, and you see how you could be on the hook for your workers.  For example, let’s say you are a Honolulu marketing firm, and one of your employees decides to help your company by blasting your Maui competitor via Facebook;  they make false claims and are using the Maui company’s images in their Facebook attack.  They also then spend a better part of the working day harassing the Maui company’s Twitter feed by tweeting lewd questions.  Are you in big trouble for their actions?

Yes.  Now, let’s briefly look at some of the legal concerns that you should worry about when dealing with employees that use social media.

Trademark, Copyright and Patent Infringement

In the example story of the employee who used social media to attack the Maui company, they used another company’s image.  Whenever, you use another company’s intellectual property (trademarks, copyrights, and patents) without authorization you will face an infringement claim.  Let’s say an employee uses a rival company’s logo and crosses it out by using a digital media editor.  He then shares the picture through Facebook to proclaim that your company’s brand is better.  The use of their logo is a violation of their property right. Posting photographs, published works, or video clips owned by someone else can also present legal risk to the employer.

Defamation

An employee that is Tweeting or posting false statements that hurt another person or business’s reputation opens you up to a potential lawsuit.  Your employee that spends half her day attacking another company and making false claims about their products or services is a problem for you.

Harassment/Discrimination

We have heard in the news about “cyberbullying” in the schools, but apply those same behaviors to workers.  The employer has a duty to create a safe working environment and if one guy is “textually harassing” other workers it could open you to harassment claims by those workers.  If this bully is also singling out someone of a protected class (race, religion, sexual orientation, etc . . .) that also can lead to a discrimination claim.

Invasion of Privacy

Now, let’s say one of your managers accesses a worker’s private file and discovers that worker is a recovering alcoholic.  He then posts something to the effect of, “Did you know that so-and-so had alcohol problems?” to his friends on Facebook or tweets about it.  This would be an invasion of privacy of the worker.

Endorsements: Too Much of a Good Thing

Endorsements?  Isn’t it a good thing that my employee is helping me out?  It can be, sometimes.  However, in Hawaii were there are tons of workers who love their company like a family, the employer has to watch that their employees are not gushing over the company’s products and services and not disclosing their allegiance.  The Federal Trade Commission (FTC) has issued several rules and guidelines regarding employees promoting their employer’s services and products via social media.  Basically, if they do not disclose their relationship and reader of the post that gets injured because of it the employer may be sued even though it was the employee who wrote the post.

For Medical Providers: HIPAA Concerns

This is a special note for medical practitioners and those in medical-related fields that handle patient information.  I’m sure you all are aware of HIPAA.  Then you should realize that the following combination of a patient’s private information, an unhappy employee, and that unhappy employee’s access to social media is a potentially explosive legal situation.

In fact, a similar situation has already occurred in Hawaii, where in 2009 a hospital worker was sentenced to a one-year jail term for accessing a patient’s medical record and posting the patient’s HIV status on her social media account.  While, the state was suing the employee, you should remember that employers are responsible for their employees and medical employers should always be concerned with a breach in Protected Health Information (PHI). In the case of posting a patient’s medical condition on a social media site, such an action is a definite breach.

For Lawyers and their Staff: Violating Attorney-Client Confidentiality

Those in the legal industry should already be able to see the headache that social media means for attorney-client confidentiality.  It easily takes one tweet or Facebook post by a legal secretary or paralegal that discusses what they are working on to violate legal ethics and rules.  Lawyers should take pains to train their staff from posting or tweeting about anything related to cases and clients.

Last Words

While, these things should of be concern to any business owner with employees in this day of social media there are steps they can take to deal with the situation.  Other than having a good screening and hiring process for thoughtful employees and employer can fashion a social media policy.  An attorney can investigate your workplace, make recommendations, and draft such a policy to be added to your handbook.  A rational and coherent social media policy would discourage many of the aforementioned behaviors and allow you to explain to workers what is acceptable with regard to social media and its use.  Finally, it may allow you to take steps to possibly terminate or punish that employee for violating your policy.  However, there are certain boundaries of what can be enforced in a social media policy.

With that, see you in the next Social Media and the Law where we will continue with Part II of Using Social Media at Work.  We will discuss the situation more form the employee’s side and some of the boundaries of what an employer can do with their social media policy.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

This post and the next several posts will be about social media and its use in the workplace and the various laws that govern that interaction.  Today’s post discusses using social media during the job application process from the employer and potential employee’s perspectives.

Hiring the Right Person for the Job Requires Information

Accurate information about potential hires is valuable and social media businesses know that fact.  Just look at LinkedIn’s S-1 Filing with the SEC, in which they state that the limiting of access to their website and updating of users’ information would negatively impact their business model. (Source: LinkedIn’s S-1 Filing, See pg. 24)  They realize that up-to-date information is a must for the hiring of skilled workers.

The reality is that information about potential and current employees is valuable to any small business whether it is in Honolulu or somewhere else, but there are legal boundaries that both employers and employees should know of.

Employers using Social Media to Check Backgrounds of Potential Hires

Let’s say you just graduated.  You are applying to some business or firm in downtown Honolulu.  You submit your resume.  What happens?  Well, the person responsible for the hiring will likely peruse it and if interested do a precursory Internet search on your name to determine if they want to interview you.  Why?

Employers want to hire the best people to meet their goals.  Legally, employers are also responsible for their employees, so they want to know they are hiring someone they can trust and act responsibly.  Like it or not your social media is a representation of you, especially considering you are the one that updates it.

Employment-At-Will

Hawaii is an employment-at-will state, what that basically means so long as a business does not violate a specific law, that downtown Honolulu firm you are applying to can choose not to hire you for any list of reasons or no reason at all.  So posting that you are getting drunk every night of the week might give an employer pause and ask themselves would you behave the same when employed?  It will probably affect the businesses hiring decision.

Discrimination

Discrimination is one of those specific laws that a business cannot violate. In regard to today’s topic, employment discrimination includes hiring practices, such as application forms, interviews, and selection.  In general, Hawaii and federal law, specifically protect the following statuses:

  • Sex
  • Race
  • Ancestry/national origin
  • Religion
  • Color
  • Disability
  • Age
  • Marital status
  • Income for child support obligations
  • Arrest and court record
  • National Guard participation
  • Sexual Orientation
  • Breast Feeding

Finally, do not forget that Hawaii recently added gender expression as a protected status in regards to employment matters. If you want to know more read my earlier post.

An example of violating discrimination laws would be if you, as a business owner, only checked Facebook or the Internet on applicants of a certain race or gender.  Another type of discrimination is if you as the employer searched social media accounts on all applicants, but you used the same information differently against one particular type of applicants.  For example, if all your applicants had pictures of themselves of drinking alcohol in public, but you viewed that fact more negatively against the female, or White, or gay applicants against the rest of the group that would be considered discrimination.

Privacy

Besides discrimination an employer should also be concerned with an invasion of privacy claim by a potential employee.  Generally, the potential employee has a tough time asserting this claim because you need a “reasonable expectation of privacy” and a lot of people keep their social media profiles open and to the public.  However, it is clear that if the applicant is using the highest privacy settings and the employer somehow gets pass all these barriers the claim is stronger.

Fair Credit Reporting Act

In addition, to revealing protected statuses like race or religion, intruding on their privacy, an employer’s simple act of searching social media may run them afoul with the Fair Credit Reporting Act (FCRA).  This federal law does not just cover credit reports, but cover the simple act of surfing the net for information on the potential employee.  Essentially, this compiled information is considered a “consumer report” and an employer cannot use this information unless it was obtained from a credit reporting agency, consented to by the applicant, or that applicant has been provided written notice of such a search.  Oft times a small business utilizes a third-party to its hiring because it is more cost effective, but what they do not realize that the background checks (which includes social media searches) need to be authorized by the applicant unless it violates the FCRA.

Violating Terms of Use

I want to make a quick mention of violating terms of use on a social media site.  Those conditions that Twitter, Facebook, LinkedIn, etc . . . dictate how users, including people just stopping by to search someone out may use their sites.  You may run into trouble with those rules when you conduct searches and use that information incorrectly.  This in turn may expose you to other various lawsuits by the potential employee or even by the social media company itself.

Some Quick Tips and Last Words

For Potential Employees:

  1. Use the Privacy Settings on Facebook;
  2. Watch what you say on Twitter;
  3. Get a LinkedIn account;
  4. Search yourself on Google and make note what pops up; and
  5. Take steps to clear up negative impressions on the Web.

Basically, assume that any business you are applying to will search for information on you.  It is helps them evaluate you for the job.  If the information that you make public casts a negative light on you chances are they will not consider you for the job.  I suggest getting a LinkedIn Profile, as it can act as a professional resume and is readily accessible online, and it can easily be the first thing that pops up in a Google search on your name.  Also it can give more details in your profile than in your paper resume.  It also gets you in the habit of updating information about yourself for business purposes regularly.

*This one is for law students.  In recent years, the Florida Board of Bar Examiners filed their recommendation to search a bar applicant’s social media profile for the character and fitness investigation part of the application.  While Hawaii Bar does not consider that part of its application process yet, you all should be aware that a lawyer’s reputation is a key element to the practice of law.  With social media becoming part of our daily lives it is likely that many other bars will follow the FBBE’s recommendation.

For Employers:

  1. Review employment/hiring laws;
  2. Review hiring practices and polices, if you do not have any, now is the time to create some;
  3. Review the terms of use on any social media site you use for hiring;
  4. Implement/update a hiring policy so that is consistent with the law and terms of use agreements.

The bottom line is do not consider factors that have no relevancy to job performance, such as race, age, and sexual orientation.  They all are protected statuses by the law and using them as your criteria for hiring is discriminatory.  In addition, you should realize that a lot of social media information, but up my individual users is not always reliable.  In fact, people like to put up jokes, stories, and other forms of untrue information.  Finally, if you are unsure about the hiring policies or decisions that you are making have an attorney review them.

As a measure of practicality remember to take into account business factors too.  You should think about things like employee morale and public when you consider your hiring practices.  You may consider using social media as a beneficial recruitment tool rather than trying to search out every flawed characteristics of a candidate, especially with how LinkedIn is formatted.

Next time on Social Media I’ll discuss using social media use on the job.  Admit it.  You have checked your Facebook at work today!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

New Series of Posts: Social Media and the Law

Later today I will be posting the first in a series of posts detailing Social Media and its interaction with the law.  Generally, it is geared toward small businesses, law students, and social media users.  In particular, for those groups of people living, working, and playing in Hawaii. However, everyone is welcome to read for their own education.

Let me give you a quick overview of the five major topic areas that I will be covering in posts over the next couple of months. They are as follows:

  1. Social Media and the Workplace
  2. Creating and Implementing a Social Media Policy
  3. Using Social Media as Evidence
  4. Social Media and Legal Miscellany

Today’s post will be under Social Media and the Workplace, specifically the hiring and background checks of potential employees by employers.  Please note that I will be switching the schedule of my postings.  The Social Media and the Law posts will come out Mondays or Tuesdays of the week and Draw the Law will be on Fridays or Saturdays of the week.

In the mean time, look below and check out some interesting facts on social media.

Just Some Facts about Social Media

Social media is quickly becoming a part of our everyday lives.  Many of us check our social media accounts at least once during the day.  Here are a few interesting facts:  (1) Facebook has more than 500 million active users and 50% of their active users log on Facebook in any given day (Source: Facebook) and (2) Twitter users send out about 55 million Tweets per day.  All of that adds up to an avalanche of information. (Source: DigitalBuzzBlog)

For some more interesting facts, information, and graphics from other sources on social media check out the following links:

Draw the Law” is a weekly short post where I try to visualize a legal concept.  It is designed to be helpful to the laymen and for a quick understanding.  For the next several posts I will be detailing organizing and operating a business.
In the prior post in this series we talked about how in a corporation or limited liability company (LLC) a business owner’s identity is separate from the organization.  Today we will focus on the other type of ways one could organize a business, namely a sole proprietorship or partnership.

Flying Solo: Sole Proprietorship

Quick, easy, and simple that is a sole proprietorship.  One day did you decide to make things and sell them online?   You are a sole proprietor.  You are the business and the business is you.  Unlike, the LLC and corporation there is no separate legal entity status, and why?  Consider the fact that you did not take steps to formalize such an entity and because of it you need not do any of the formalities associated with corporations and LLCs.  One of the basic formalities that you may have to do is register a “Doing Business As Certificate” if you are utilizing a name other than your own to conduct the business.

The Ugly Side of Sole Proprietorship

Without the limited liability shield your business assets and obligations are not separate from your personal ones.  Your stuff will be used to satisfy debts and other liabilities of your sole proprietorship.  Your home, personal savings, car and everything else you own could be used to pay for a court judgment or creditor claims.

To highlight how personal assets become entangled with a sole proprietorship consider the situation if you are married.  You and your spouse’s stuff that are owned together are all personal assets and therefore, they would be used satisfy debts and claims.  It would be hard to say, which things are exclusively yours when you jointly own many things together.

It Takes Two to Tango: Partnerships

In the case of a general partnership it takes two or more persons, who have not incorporated, and are carrying on a business for profit as co-owners.  If all these conditions are met you are in a partnership even if you did not intend or know it.   No formal documentation is needed, all you need to is work together with another person, and try to make some money, and you will be considered in a partnership.

Similar to the sole proprietor of a proprietorship, each partner in the general partnership has unlimited liability for the debts and obligation of the partnership.  However, in the case of the sole proprietor it is just the one person on the hook.  In a partnership each general partner’s assets can be used to satisfy a debt or obligation even if that partner disagreed with transaction that led to the debt or obligation.

Limited Partners, Limit their Risk and Work

However, there are ways to limit liability.  In a limited partnership, there must always be one general partner and one limited partner.   The limited partner gets all the benefits of limited liability, but loses out on the ability to manage the business.  They cannot actively manage the business.  As you might have guessed, this kind of relationship needs to be filed with the state through a certificate of limited partnership.  In addition, the partners should have a documented partnership agreement detailing their arrangement, which an attorney can help you with.

 

Now you know all the types of business organizations that exist.  They are as follows: sole proprietorship, partnership, corporation, and limited liability company.   Next time I will do a quick recap of the four different types, highlight some interesting features, and the time after that we will get into the laws that may affect the operations of a small business.

See you on the next draw!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.   No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.   Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.