Low bar for conditional certification of FLSA collective actions doesn’t mean automatic grant of certification
January 19th, 2012 | Ron Miller | Add a Comment
Invariably whenever a court is faced with a plaintiff’s request for conditional certification of a collective action under the FLSA, it routinely recites the two-step analysis that courts use in evaluating such requests. The threshold issue in deciding whether to authorize a class in an FLSA collective action is whether the plaintiffs have demonstrated that potential class members are “similarly situated.” Typically, courts require the plaintiffs to show a modest factual nexus between their situation and that of the proposed class members. However, in spite of the modest factual nexus evidentiary standard, courts have not hesitated to deny conditional certification when evidence is lacking.
A review of some recent court decisions give insight into the rationale of courts that find that a named-plaintiff has failed to show that he or she is similarly situated to the members of the putative class.
Assistant store managers. In Guillen v Marshalls of MA, a federal district court in New York found that an assistant store manager (ASM) for Marshalls retail store was not similarly situated to a nationwide class of ASMs he claimed were improperly classified as exempt from the overtime provisions of the FLSA. According to the plaintiff, he and other ASMs were required to perform tasks that rendered them non-exempt and that Marshalls had a uniform expectation of ASM’s duties and responsibilities that applied to all stores nationwide. However, the plaintiff provided no evidence that could plausibly lead to the inference that ASMs nationwide were performing non-exempt tasks, the court concluded, where all of the ASMs who submitted affidavits were employed in the New York City area. Thus, the court agreed with the recent conclusion, in Vasquez v Vitamin Shoppe Industries, Inc, that a geographically concentrated cluster of store managers whom the plaintiff claimed were assigned duties inconsistent with the exempt classification was “too thin a reed to rest a nationwide certification.” Consequently, the employee failed to provide any proof that he was similarly situated to ASMs across the nation.
Cable installation technicians. Cable installation technicians employed by a Comcast Cable contractor were denied conditional certification of an FLSA collective action alleging overtime pay violations ruled a federal district court in New Jersey in Rogers v Ocean Cable Group, Inc. The plaintiffs alleged that they were not paid adequate overtime during certain weeks where they were not permitted to record all of the time in which they actually performed work. They also alleged that they were required to work through lunch and did not receive lunch breaks. Here, class certification was found not appropriate because the named plaintiffs failed to equate their personal situations with other putative class members. While some employees alleged that they could only record 30 minutes of pre- or post-shift work, others noted that they were permitted to record up to one hour. Thus, the court found that there was a lack of a factual nexus between the plaintiffs’ situation and a uniform company policy affecting all workers adversely.
Field auditors. Field auditors for Liberty Mutual Insurance were also denied conditional certification of a nationwide class in an FLSA collective action for unpaid overtime in Yerger v Liberty Mutual Group, Inc. The field auditors worked in three commercial insurance businesses that operated as semi-independent business units. While the field auditors performed similar work, each of the three business units was “a distinct and separately managed” organization. Moreover, they each had different methods of assigning audits, different reporting software, different audit review processes and different timekeeping requirements. Additionally, the units had varying levels of field auditor positions and distinct job descriptions. Consequently, despite the named plaintiff’s assertions that auditors routinely worked more than 40 hours per week and the employer provided remote access to its computer network to facilitate their after-hours work, a federal district court in North Carolina ruled that the plaintiff failed to rebut Liberty Mutual’s evidence that her specific duties were different from the work of other field auditors. Because her job duties were substantially different from the class members she sought to represent, the court denied conditional certification.
HR generalists. In this instance, because the uncontroverted evidence established that a plaintiff’s position was dissimilar from the vast majority of other employees and that only one or two employees performed the work of HR generalists for her employer, her motion for conditional certification of an FLSA collective action was denied by a federal district court in Arkansas in Harris v Southwest Power Pool, Inc. The plaintiff alleged that she was denied overtime compensation when she worked in excess of 40 hours in a week. She also asserted that the employer did not treat any of its employees as nonexempt, that her claims were typical of the proposed class, and that the common issue of the employer’s classification of all employees as nonexempt predominated over individual issues. However, the employer offered uncontroverted evidence that very few of its employees held positions similar to the named plaintiff’s and that the majority worked in positions that required technical knowledge. Despite the employee’s contention that the employer had a policy of misclassifying employees, that fact did not obviate the rule that certification is inappropriate where determining whether putative class members are nonexempt will depend on a fact-intensive inquiry into the duties performed by different types of employees.
While there has been a proliferation of FLSA collective actions in recent years, and the vast majority of those cases move past the initial conditional certification stage, it is far from automatic that plaintiffs bringing claims on behalf of themselves and similarly situated employees will be granted conditional certification by the courts.
While there is “continued silence” on blue penciling, Virginia high court clarifies other noncompete questions
January 18th, 2012 | Sheryl Allenson | Add a Comment
The withdrawal of a long-anticipated Virginia Supreme Court opinion will lead to “continued silence” by the state’s high court with respect to blue-penciling, explained Linda M. Jackson, a partner in the Virginia law firm of Venable, LLP. The court was expected to issue an opinion in the case of BB&T Insurance Services v. Thomas Rutherford, Inc, to address head on the applicability of blue-penciling in Virginia. While practitioners are left wondering how to treat blue-penciling, another state supreme court decision clarified questions about the enforceability of a noncompete provision, ruling that a blanket prohibition against working for a competitor was overbroad and unenforceable, thereby highlighting the evolution of noncompete jurisprudence.
In Home Paramount Pest Control Cos, Inc v Shaffer, (November 4, 2011, Mims, W). the state supreme court analyzed a provision identical to one found enforceable in litigation that included an entity related to Home Paramount. Although the provision was found enforceable by the state high court in 1989, in this instance, the court reasoned that the provision that restricts competition is enforceable if it “is narrowly drawn to protect the employer’s legitimate business interests, is not unduly burdensome on the employee’s ability to earn a living, and is not against public policy.” To evaluate that burden, the court considers “function, geographic scope and duration” of the agreement. Although the elements are to be considered together, when one factor is overbroad, the agreement must be found unenforceable. “Although we weigh the function element of a provision that restricts competition together with its geographic scope and duration elements, the clear overbreadth of the function here cannot be saved by narrow tailoring of geographic scope and duration,” the supreme court stated. The court did not, however, address blue-penciling. “If the court was looking for a chance to apply blue pencil it could have done it here. It would have been a stretch, but they could have done it,” said Jackson.
In Home Paramount, the employee was prohibited from engaging “directly or indirectly or concern[ing] himself/herself in any manner whatsoever in the carrying on or conducting” of a competing business. In this instance, the geographic scope and duration were not at issue, however, the function element was considered overbroad. The employer pointed out that the geographic scope was relatively narrow and the duration, two years, was commonly accepted for such provisions, so that those elements compensated for the breadth of the function element. However, the state high court disagreed that the provision, as a whole, was not broader than necessary to protect its legitimate business interests.
Citing precedent in which provisions with broad functional limitations were deemed unenforceable, the supreme court reasoned that “[b]ecause Home Paramount did not confine the function element of the Provision to those activities it actually engaged in, it ore the burden or proving a legitimate business interest in prohibiting [the employee] from engaging in all reasonably conceivable activities while employed by a competitor.
Furthermore, the supreme court was not compelled by the employer’s suggestion that stare decisis barred the court from finding against enforceability. Instead, while acknowledging that the provision at issue was identical that the one upheld previously, the supreme court reasoned that it had “incrementally clarified the law” since that case was decided. Consequently, to the extent that Paramount Termite conflicts with the current holding, the supreme court expressly overruled it.
In what Jackson labeled “a very spirited and very direct dissent” Justice McClannahan reasoned that stare decisis required an opposite conclusion. “With today’s decision, the majority fails to give due respect and deference to a basic tenet of stare decisis, which is that ‘in a well ordered society it is important for peopled to know what their legal rights are, not only under constitutions and legislative enactments but also as defined by judicial precedent, and when they have conducted their affairs in reliance therein, they ought not to have their rights swept away by judicial decree,’” stated the dissent, citing a Virginia Supreme Court decision.
Regardless of the court’s express rejection Paramount Termite, Jackson noted that Home Paramount didn’t change the state of the law, but instead reinforced it. She explained that on the function component, the law came to be known as the ‘janitor defense.” In other words, “[the provision] really had to prevent [the employee] from doing something they had done for the [the employer],” she explained. Noting the court’s heed about evolution in the law, Jackson suggested that employers review noncompete provisions with a fresh eye. “The law keeps changing. We have to look at in through that lens,” Jackson explained.
Class is in recess
January 12th, 2012 | Matt Pavich | Add a Comment
On January 4, 2012, President Barack Obama wielded his recess appointment power to name three new Members to the NLRB. A firestorm of controversy erupted and while some of the criticism is well-founded, much of it misses what is most important to the story.
First, let’s look at what the critics may have gotten right. One of the immediate responses was that because the President waited until December 15 to nominate Sharon Block and Richard Griffin to the Board, the Senate had virtually no time to consider their qualifications and potential conflicts of interest. This criticism, in my opinion, works on a variety of levels. First, it points out that the nominees have not been fully vetted and it appears as though at least Griffin may have some skeletons in his closet. Reports surfaced today alleging that in his position as General Counsel for the International Union of Operating Engineers, Griffin may have blocked reform rules aimed at cleaning up corrupt locals. There is, undoubtedly, much more to the story, but this allegation would have certainly been explored during confirmation hearings.
Which brings me to another point about the criticism, this time from the left. Why did the President wait until December to nominate Block and Griffin. He surely knew that a confirmation vote on any of his nominees was unlikely, so why wait? If the point was to slide the nominees past public scrutiny, then the President and his team deserve all the condemnation that comes their way. If, however, the delay was due to a White House that often seems unconcerned with labor matters and only recently realized that they were about to face a Board that couldn’t perform its duties, then such a delay was bush league and, again, deserves all the complaints that critics can muster.
While critics of the recess appointments are right to point to the lack of vetting, they completely miss the boat on the nature of the appointments themselves. First, the Recess Appointments Clause does not specify the length of time that the Senate must be in recess before the President may make a recess appointment. Critics of the move argue that the Senate never actually entered a recess, because the House never gave its approval. As Representative Sharon Black said after introducing a resolution disapproving of the appointments:
“It’s astounding to me that the president is claiming these are recess appointments and within his authority, when Congress was not in fact in recess. I hope the House considers my resolution as soon as we return to Washington so we can send a message to President Obama.”
Wait, what? If Congress isn’t in recess, then why must the House delay consideration of the resolution until its members “return to Washington?” Because while Congress may not technically be in recess, the only reason it’s not is because the House, fearful of the potential for recess appointments, never gave its approval. The members just left town and have been forcing pro forma sessions in which no work gets done ever since.
Which, cynics would argue, doesn’t make this period all that different than when the Senate is in full session.
The point is that if it’s acceptable for the House to play procedural games to block the President’s powers, it may be acceptable for the President to say that since it’s not doing any work, Congress is indeed in recess.
Regardless of whether one agrees with the notion that a legislative body that leaves and returns without working is in technical recess, no-one could deny that Congressional Republicans have made it their goal to deny the President his choices for the NLRB. Senate Republicans have refused to allow hearings or votes on the President’s last four nominations to the Board, all in the hope that the Board would fall under its three-member quorum and be unable to perform its job of regulating labor-management relations. House Republicans have held hearings exploring whether the Board is in hoc to labor unions and some have introduced legislation to abolish the Board altogether.
They may be justified in their opposition to the Board. They may be correct in their belief that this Board has bent over backwards to favor unions and organized labor. They may be correct that the Board’s rulemaking has been rushed and improperly conducted.
But it’s time to end the bickering. The President has made his appointments. The Board will, barring any quick judicial resolution, operate for the remainder of the President’s term, issuing decisions and making rules. Congress now has an obligation to ensure that the Board does its job properly because that job is nothing less than ensuring harmonious labor relations. And given the state of the economy, that job has never been more important.
Contrary to OFCCP assertions, proposed hiring goal for individuals with disabilities is a quota, says expert, but it would not be unlawful
January 12th, 2012 | Cynthia L. Hackerott | Add a Comment
Despite the OFCCP’s statements to the contrary, the proposed national utilization goal for individuals with disabilities contained in the OFCCP’s proposal to amend its regulations implementing Section 503 of the Rehabilitation Act of 1973 is a quota, OFCCP expert John C. Fox stated during a webinar on the proposal presented by the National Employment Law Institute (NELI). He explained, however, that hiring quotas for the disabled are lawful because individuals without disabilities are not a protected class. Disability law expert David K. Fram joined Fox for the January 10, 2012, webinar on the OFCCP’s Notice of Proposed Rulemaking (NPRM) that was published in the Federal Register on December 9, 2011 (76 FR 77056-77105).
Specifically, the OFCCP is suggesting that federal contractors would be required to set a hiring goal of having seven percent of their employees be workers with disabilities in each job group of the contractors’ workforce, but it is soliciting comments on the potential use of a utilization range between four and ten percent. To annually evaluate their utilization of individuals with disabilities, the NPRM proposes that contractors use the job groups established for utilization analyses under their Executive Order (E.O.) 11246 affirmative action programs (AAPs). The proposed goal is derived primarily from disability data collected as part of the Census Bureau’s American Community Survey.
In an agency statement announcing the NPRM, OFCCP Director Patricia A. Shiu said, “What gets measured gets done.” This statement reveals that the “goal” is actually a quota because measuring the disabled makes hiring the disabled in like proportion implied, according to Fox.
The proposal would also require each covered contractor, on an annual basis, to review the outreach and recruitment efforts it has undertaken over the previous twelve months and evaluate their effectiveness in identifying and recruiting qualified individuals with disabilities. Fox noted that, in the preamble to the NPRM, the OFCCP states “The primary indicator of effectiveness is whether qualified individuals with disabilities have been hired” (Fox’s emphasis). This statement means that 51 percent or more of the effectiveness calculation for each contractor would be whether a contractor has met the hiring goal, according to Fox. Thus, the statement renders the goal a quota and moves the requirement from recruitment to hiring.
Homogenization with ADAAA. The NPRM would also incorporate updates to the OFCCP’s Section 503 regulations made necessary by the ADA Amendments Act of 2008 (ADAAA). The ADAAA amends both the ADA and the Rehabilitation Act with respect to the definition of “disability” and related issues. Consequently, the proposal includes revisions that are needed to make the Section 503 regulations consistent with the ADAAA and with the revisions to the ADAAA implementing regulations made by the EEOC in March 2011.
Fram presented a detailed discussion on how the definition of disability has greatly expanded under the ADAAA. Both Fram and Fox said that the OFCCP did a good job of proposing amendments to the current Section 503 regulations designed to homogenize it with the changes made to the statute by the ADAAA.
Three invitations to self-identify. Fox pointed out that, under the proposals, contractors would be required to extend three types of invitations to self-identify, one “pre-offer” and two “post-offer.” The pre-offer invitation would gather self-identification data alerting the contractor to the number of individuals with disabilities applying for jobs with the contractor and its purpose would be to help the OFCCP start building an “availability” database and to help the contractor set hiring goals, he explained. Under the proposal, a contractor would be required to extend the first post-offer invitation after it extends an offer of employment but before the applicant begins his/her job duties. Contractors would also be required to annually survey employees to provide them with the opportunity to voluntarily and anonymously self-identify, thus creating a second post-offer invitation requirement.
Fram and Fox both agreed with the OFCCP assessment that requiring contractors to invite applicants to self-identify as disabled would not violate the general prohibition, contained in the ADA and Section 503, against pre-offer disability-related inquiries because the ADA and Section 503 regulations permit the contractor to conduct a pre-offer inquiry into disability status if it is made pursuant to a federal, state or local law requiring affirmative action for individuals with disabilities.
The NPRM provides that the OFCCP will prescribe the language that contractors will be required to use when inviting self-identification and publish it on the OFCCP website. Fox noted that NPRM does not contain a suggestion for what this language would be. He said that uniform invitation language may be difficult because what works for one company may not work for another. He reported that contractors have found that invitations to self-identify as to race and sex (as currently required by the regulations implementing E.O. 11246) need to vary geographically in order to maximize response rates, and wondered if the same might be true regarding individuals with disabilities.
Documentation. Fox said, and Fram agreed, that seven percent is a “modest” goal relative to the percentage of available applicants and employees who are in fact disabled because under the ADAAA and the EEOC regulations implementing the ADAAA, the definition of “disability” is now very broad. However, there is a “big disconnect” between this modest goal and the requirement for documenting it, Fox observed, and Fram again agreed. Fox explained that documenting the percentage of applicants, hires and incumbent employees with disabilities is going to be very difficult because people often hide disabilities because they consider them to be private or fear disclosing them. Fox said that real world experience among federal contractors for the last 30 years of inviting those who have been offered a job to self-identify is that usually only one to three percent report they are disabled.
Sub-goal. The OFCCP is also considering the possible inclusion of a two percent sub-goal for individuals with certain particularly severe or targeted disabilities (such as: total deafness; blindness; missing extremities; partial and complete paralysis; epilepsy; severe intellectual disability; psychiatric disability; dwarfism). But Fox said that documenting this sub-goal would be problematic because the OFCCP states that the pre-hiring offer invitation to self identify contractors would be required to use is only for general self identification as to the existence of a disability and does not seek information as to the nature or type of disability the person has.
Linkage agreements. The proposal would require a contractor to enter into three kinds of “linkage agreements.” A “linkage agreement” means an agreement describing the connection between the contractor and appropriate recruitment and/or training sources. The first required linkage agreement would be with the local State Vocational Rehabilitation Agency office nearest the contractor’s establishment, or a local organization listed in the Social Security Administration’s Ticket to Work Employment Network Directory. The second would be a linkage agreement with at least one of six other listed organizations involved in recruitment and developing training opportunities for individuals with disabilities. Third, the contractor would be required to establish a linkage agreement with one disabled veterans service organization listed in the National Resource Directory (a partnership and online collaboration among the Departments of Labor, Defense, and Veterans Affairs).
The OFCCP has placed a lot of focus on these agreements as a means for contractors to find qualified individuals with disabilities, Fox said, but he added that history has shown employers rarely find good candidates from these sources. In addition, contractors generally do not have difficulty finding job seekers; more often, they have to wade through large numbers of applicants for a given opening.
Reasonable accommodation. The proposed revisions would require that contractors develop and implement written procedures for processing requests for reasonable accommodation. In addition, certain disability accommodation “best practices” would become mandatory, Fox said. Among these new requirements, contractors would be required to provide a statement of reasons explaining the circumstances for rejecting disabled individuals for vacancies and training programs and a description of considered accommodations. This requirement would necessitate consultation with legal counsel and will be substantially time-consuming, Fox noted, adding that sourcing would be difficult because most accommodations are accomplished locally, with no documentation, and no “bally-who.”
Contractors would also be required to catalogue the nature and type of accommodations for disabled individuals who were selected for hire, promotion, or training programs. This requirement raises confidentiality concerns, Fox said.
Required policy statement. Under the proposal, contractors would be required to re-draft the Equal Employment Policy statement in their Section 503 AAPs, which under current regulations ‘‘should indicate the chief executive officer’s attitude on [affirmative action for individuals with disabilities],’’ so that the statement indicates “the chief executive officer’s support for the affirmative action program.’’ This aspect of the proposal presents a “profound First Amendment problem,” Fox observed, in that the government would be dictating what federal contractor CEOs should say they think.
Suggestions for writing comments on the proposal. Comments on the proposal are due by February 7, 2012. Fox told the webinars listeners that the federal contractor community is, in essence, “at trial” during this comment period. The purpose of NPRMs is not just to inform the public and gather comments, he said. Rather, the Administrative Procedure Act has created this process to allow a mass, visible and public trial of agency proposals. Courts have been striking down substantial regulations elsewhere, Fox noted, and they may to do so here as well if contractors submit comments that will provide courts, upon subsequent legal challenge, with evidence to support striking down the regulations at issue. Evidence, Fox explained, means detailed information of the costs and time burdens that would be placed on contractors by these regulations. It does not mean “pabulum whining,” he emphasized.
The OFCCP’s calculation, submitted to the Office of Management and Budget, of total first year costs of these proposed regulations is $473 per contractor establishment, but many in the contractor community have accused the OFCCP of either outright lying about the costs, or being incredibly naive, he said. However, it is up to the contractor community, via written comments on the proposal, to provide specific evidence regarding how the OFCCP’s estimates about the projected burden of the proposal are flawed.
Fox recommended that contractor comments:
(1) be clear – the comments should either (a) support, (b) oppose, unless specified modifications are made, or (c) oppose unqualifiedly, the proposal;
(2) be succinct;
(3) be focused; and
(4) provide evidence supporting the commenter’s position.
Fox is the President and a founder of Fox, Wang & Morgan P.C. He leads large and complex litigation matters in state and federal courts, in cases involving wage-hour and discrimination class actions, trade secret claims, employment contract disputes, wrongful termination, corporate investigations, and the use of statistics in employment matters. Fox previously served as Executive Assistant to the Director of the OFCCP, where he was responsible for all enforcement and policy matters.
David K. Fram is NELI’s Director of ADA and EEO Services. Fram has trained tens of thousands of HR professionals and attorneys, and testified before Congress about the ADA Amendments Act. Prior to joining NELI, Fram served as Policy Attorney at the EEOC, where he helped formulate the federal guidelines implementing the ADA.
Social networking: proprietary considerations can weave a tangled web
January 6th, 2012 | Lisa Milam-Perez | Add a Comment
While social networking has fast become a powerful marketing tool for companies, it’s proven equally valuable to employees as a vehicle for professional development. But with the typically ill-defined terms of ownership in a company’s social media presence, and the significant value that an employee’s own professional stature brings to that presence, social networking can potentially turn quite anti-social indeed. Several court rulings in recent months have tackled the legal issues that arise when these often competing interests collide.
The case of the stand-in Tweeter. A Chicago interior design firm found itself defending against federal claims because it posted updates to the private Facebook and Twitter accounts of its marketing chief after she was hit by a car and seriously injured (Maremont v Susan Fredman Design Group, NDIll, December 7, 2011). As director of marketing, public relations, and E-commerce for the design firm, social media was a key function of the plaintiff’s role, and her social media efforts to promote the firm’s sales qualified her for bonuses. The employee created a design blog hosted on the firm’s website and opened a Facebook account for the firm. The employee had her own personal Twitter and Facebook accounts as well, which were not for the benefit of the firm, although she used her personal posts and updates to promote the firm by linking them to the firm blog and website. Her efforts also generated a considerable following among the city’s design community, and her personal Twitter account boasted 1,250 followers.
Both parties appeared to be enjoying the fruits of the employee’s social media labors until one day, during a work-related errand, she was struck by an automobile and suffered serious brain trauma. While she was hospitalized for her injuries, another employee at the firm posted Facebook updates and tweets on her accounts, promoting the firm. The first of the tweets was linked to the firm’s blog, which ran an entry written by the firm’s owner informing readers of the employee’s accident and announcing that, in her absence, a guest blogger would assume the employee’s duties. Subsequent tweets also promoted the firm and, in some cases, linked readers to the firm’s blog or website. Although the employee requested that the firm refrain from posting updates to her Facebook page and Twitter account while she was out, it continued to do so, prompting her to change her passwords.
Six months later, the employee came back to work part-time, announcing her presence on the firm’s blog, “Your editor is back!” Her triumphant return was short-lived, though; still suffering the lingering effects of ongoing post-concussion syndrome, her doctor urged her to stop working completely. When she attempted to come back again a year later, her position had been filled. Contending that she suffered severe emotional distress from the firm’s posting of tweets and Facebook updates from her personal accounts to promote its business, she filed suit, alleging a false association claim (or false endorsement claim) under the Lanham Act, along with a Stored Communications Act (SCA) cause of action and state law statutory and common law privacy claims.
Under the Lanham Act, a plaintiff does not have to be in direct competition with the defendant in order to state a claim; all that is required is for the party to have a “reasonable interest to be protected” against activities that violate the Act. To have standing, a plaintiff simply must show “an intent to commercialize an interest in her identity,” the court wrote. The employee made that showing here. While promoting the firm on Facebook and Twitter had been part of her duties for the firm, it was undisputed that the employee also “created a personal following on Twitter and Facebook for her own economic benefit,” the court noted. It was clear that if she left her employment at the firm, she would promote a different employer with her Facebook and Twitter followers. As such, the employee had a protected commercial interest in her name and identity within the Chicago design community, and she satisfied the standing requirement.
The employee also asserted a potentially viable SCA claim. Without permission or authorization, the court observed, the firm used her personal Twitter password to access her personal account and authored 17 tweets, and similarly accessed her Facebook account, entered Facebook postings, and accepted at least five friend requests. This undisputed conduct raised genuine issues of material fact as to whether the firm exceeded its authority in obtaining access to the employee’s social media accounts.
Left to be seen with respect to both claims was whether the employee could prove actual damages. To establish a Lanham Act violation, she must show actual injury resulting from “actual consumer reliance on the misleading statements,” such as a loss of sales, profits, or goodwill, or that the firm was unjustly enriched. Noting that both parties had informed the court that expert discovery was necessary on this issue, the court deemed it premature for it to determine at this stage whether there was actual injury or unjust enrichment. Because the parties had yet to complete discovery as to damages, summary judgment was denied.
The court disposed of the plaintiff’s claims under the Illinois Right to Publicity Act, however. With only the contents of the tweets available for review, the court concluded that the firm and its employees had not passed themselves off as the plaintiff. The employee herself recognized publicly that the firm did not appropriate her identity by acknowledging in her blog post upon her brief return that the employer had temporarily replaced her during her absence. The employee’s common law privacy claim (asserting intrusion upon seclusion) was ill-fated as well, because she could not show that she made any attempt to keep private the matters discussed in her Facebook and Twitter posts. To the contrary, she endeavored to publicize this content widely throughout the local design community. As such, the employee failed to identify any private information upon which the firm defendants intruded.
What’s a Twitter worth? What about the Twitterer? Who owns a company Twitter account, and its followers—the employer or the Tweeter? What’s a Twitter account worth, and what—or who—creates its value? Of what effect is Twitter’s own prohibition on buying or selling accounts? Concluding these increasingly salient questions could not be resolved on a motion to dismiss, a federal magistrate judge refused to dispose of an employer’s misappropriation and conversion claims against a former employee whom it sued for continuing to use the company Twitter account after his departure (PhoneDog v Kravitz, NDCal, November 8, 2011).
As a product reviewer/video blogger, the defendant’s job had been to provide written and video commentary via a variety of media, including the company website and Twitter account. When he left the company, he simply changed the Twitter account’s handle to his own name, continued to use it, and took his 17,000 followers with him, refusing the company’s demand that he relinquish the use of the password and Twitter account. The employer argued that the Twitter account contained trade secrets in the form of the subscribers’ names and the account password. As the employer saw it, all “@PhoneDog_Name” Twitter accounts used by company employees, as well as the passwords to such accounts, constituted proprietary, confidential information.
The employer alleged that it suffered $340,000 in damages when the former employee absconded with the Twitter account. To reach this calculation, it asserted that according to industry standards, each of the 17,000 followers was valued at $2.50 and that its damages amounted to $42,500 ($2.50 x 17,000) for each month that the defendant continued to use the account. The employee countered that according to Twitter’s terms of use, all Twitter accounts are the exclusive property of Twitter and its licensors. He also suggested that followers have the right to subscribe and unsubscribe and that, as human beings, they cannot be categorized as property. Moreover, he argued that any value attributed to the account came from his efforts in posting tweets and each follower’s interest in following him, not from the account itself.
Whether the employer had any property interest in the Twitter account or the password and follower list, and what the proper valuation methodology would be, could not be resolved on the limited record before it, the court ruled. Refusing to dismiss the misappropriation and conversion claims, the court was satisfied that the employer had sufficiently described the subject matter of the “trade secret” in likening the list of Twitter followers to a customer list in which a company had an intangible property interest. That was enough, at this stage, to proceed.
Irreparable harm and the cyber-slacker. The next employee-turned-defendant in our story is a former video and social media producer for CYC, the primary online entity within a group of closely affiliated online marketing companies that develop and market herbal and beauty products (Ardis Health, LLC, et al v Nankivell, SDNY, October 19, 2011). Her duties included maintaining websites, blogs, and social media pages. As part of her responsibilities for the company’s online presence, she also maintained account passwords and other login information for websites, email accounts, and social media accounts, as well as the third-party servers where the company stored content.
When CYC saw fit to fire the employee, it requested that she return the access information to the various online accounts and servers. She refused to do so, leaving the company unable to gain access to their online accounts and websites to update them as needed for marketing purposes. CYC filed suit and was granted its motion for preliminary injunctive relief. It was uncontested that CYC owned the rights to the access information, and the employee’s unauthorized retention of the information thus formed the basis of a claim of conversion. The likelihood of the company’s success on the merits, therefore, was “unquestioned,” the court held.
Moreover, CYC satisfied the court that it would suffer irreparable harm if the access information were not returned while the case was pending. CYC relied heavily on its online presence to advertise its businesses, the court noted, which requires the ability to continuously update their profiles and pages and react to online trends. “The inability to do so unquestionably has a negative effect on plaintiffs’ reputation and ability to remain competitive, and the magnitude of that effect is difficult, if not impossible, to quantify in monetary terms,” wrote the court. “Such injury constitutes irreparable harm.”
The court rejected the former employee’s argument that CYC would not suffer irreparable harm absent return of the access information because the websites and blogs to which the information pertained had gone unused for the two years preceding her discharge. However, the defendant was a CYC employee throughout that two-year period, and it was her responsibility to post content to those websites, an incredulous court noted. “Defendant cannot use her own failure to perform her duties as a defense.” Moreover, any past failure to utilize the websites did not preclude a finding of irreparable harm here. Without the access information, CYC would be unable to pursue new opportunities that may arise. For example, CYC had recently embarked upon “daily deal” promotions, the court observed, “the success of which depends heavily on tie-ins with social media.” Thus, the court ordered the defendant to turn over the information.
“Tweets” and “updates” and “daily deals”— what a tangled web we weave. As the employment law implications of social networking continue to unspool, these proprietary squabbles promise to ensnare employers and employees alike.
