New Overtime Changes on Hold… For Now

Less than two weeks before the Department of Labor’s new federal overtime rule was scheduled to take effect on December 1, a federal judge in Texas issued a nationwide preliminary injunction postponing its implementation. The new rule would have raised the minimum salary threshold to qualify for overtime pay under the Fair Labor Standard Act’s white collar exemption from $23,660 to $47,476 per year, with automatic adjustments to the threshold every three years going forward.

In his ruling granting the preliminary injunction, U.S. District Judge Mazzant stated, “Congress defined the [white collar] exemption with regard to duties, which does not include a minimum salary level.” He found that, “[w]ith the Final rule, the Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test.”

Following this ruling, the overtime rule will not take effect on as scheduled and employers may continue to follow the existing overtime regulations until a final decision is reached by the court. Because a preliminary injunction is not permanent, it is possible that the rule will be implemented at a later date. However, the judge could not have issued a preliminary injunction without determining that the states had established a substantial of likelihood of succeeding on their claims.

We are monitoring this matter closely. Please feel free to contact our attorneys for further guidance or analysis.

Kindling Print’s Spirit: A Guide To E-Publishing

Since the release of Amazon’s Kindle in 2008, e-publishing has slowly transformed from an indie alternative into a viable mainstream distribution outlet for both new and established authors.

According to Fortune 500, e-book sales increased by a remarkable 1,260% between 2008 and 2010. With the emergence of this new market, multiple new e-publishing companies have materialized, allowing authors to self-publish their novels online and quickly share their work with the public. Although e-publishing completely bypasses many traditional aspects of book distribution, it is still smart for potential authors to consider consulting with lawyers regarding negotiation of their e-publishing contracts. In fact, most e-publishers will refuse to finalize a deal unless legal counsel is involved.

When negotiating contracts with e-publishers, it is imperative that lawyers and authors be wary of subsidiary rights.  E-publishers typically request the authority to create book clubs and adopt an author’s work into foreign language translations. Although these rights can help increase an author’s target audience, they typically don’t benefit clients monetarily and should be reasonably limited. Additionally, when bargaining, it is essential that legal counsel be considerate of miscellaneous legal provisions, such as arbitration and matters of jurisdiction, which are mechanical in nature but practically important in the event dispute resolution becomes necessary.

When working with authors, it is imperative that counsel educates clients about the publishing laws that affect their business. For example, before pitching to e-publishers, it is essential that an author’s work contains no copyrighted quotations, song lyrics, or images. Unless the author obtains a license, the exclusion of these elements may lead to an expensive and time-consuming lawsuit. It is also important for authors to understand that e-publishers almost never sign a multi-book deal. Instead, contracts usually state that renewals are completely contingent on a first book’s sale performance.

In the e-publishing industry, lawyers typically act as an author’s agent. As such, it is the attorney’s job to make sure that authors recognize the differences between each major e-publishing company. For example, Amazon Kindle Direct Publishing (KDP) offers a 35% royalty rate on their standard contract, while BookBaby advertises an 85% royalty rate for their free agreement. Additionally, each e-publishing company will offer different packages of services. Continuing with the previous example, Amazon KDP Select allows authors to earn royalties every time their book is borrowed from the Kindle Owner’s Library. In exchange, the author must agree to distribute their piece exclusively through Amazon for 90 days. In contrast, BookBaby’s package will transfer an author’s novel into an e-pub file and give authors access to a social media marketing guide, coupons for book trailer productions companies, and guaranteed book reviews. Additionally, different companies allow authors to set their own prices while others limit who an author can publish under. Understanding the difference between each e-publisher’s services and package terms determines how an author gets paid for his/her work and what he/she gets in return for allowing a given e-publisher to take royalties. When searching for the correct e-publishing company, all of these considerations are paramount in determining which option is best for a given author.

As the e-publishing market becomes more expansive, it will become even more important for authors to appreciate the publishing industry’s complexity. With a strong knowledge base regarding the legal and practical implications of e-publishing, lawyers can help their clients find the right distributer while assuring that their work is well-protected.

Matt Wagner is a law clerk at Berenzweig Leonard, LLP who is currently studying Music Business and Songwriting at Belmont University.

What Employers Need to Know About the New Defend Trade Secrets Act

Trade secret issues arise daily in the workplace with nearly every employment decision, from employee hiring and firing, to every contract that contains a non-disclosure or confidentiality provision. President Obama today signed the Defend Trade Secrets Act (“DTSA” or the “Act”), with huge implications for employers, companies, and other trade secret owners. For the first time, the Act offers trade secret owners greater access to federal court, as well as broadly impacts employee whistleblower rights. The law is designed to go into effect on the day it is enacted and will apply to any misappropriation that occurs on or after that date. Since this new law is right around the corner, it is important to be aware of its various key provisions.


Access to Federal Court

First, the DTSA extends the current Economic Espionage Act, which criminalizes certain trade secret misappropriations, to create a private civil cause of action. Trade secret owners now have the option to bring trade secret lawsuits in federal court, whereas before trade secret misappropriation was purely a matter of state law. While the DTSA does not preempt the various state trade secret rights, it provides an additional layer of protection to help safeguard companies’ unique formulas and know-how. Because of the DTSA and state law overlap, employers need to understand and conform their practices to both the new and existing laws.

Whistleblower Immunity

Second, the Act gives new immunity to certain whistleblowers who turn trade secrets over to the government to investigate potentially illegal activity. This provision grants both criminal and civil immunity to those whistleblowers under both federal and state trade secrets laws. The DTSA also requires employers to notify workers in any contract that is related to trade secrets or confidential information of their rights to turn over confidential information or trade secrets to the government if illegal conduct is suspected.

Employers should especially keep this notice provision in mind if they are planning to pursue trade secret theft. Employers will not be able to obtain either punitive damages or attorneys’ fees if such notice was not given to employees. Besides whistleblowers, employers will also need to advise employees going forward that they may turn over confidential information to their attorneys or a court in a retaliation suit, provided the disclosure is filed under seal. In light of the DTSA’s new requirements and potential consequences, employers should review their policies for handling confidential information and whistleblowers that are provided to employees.

Civil Seizure Clause

Third, the DTSA also contains a novel seizure provision that in "extraordinary circumstances" allows plaintiffs to ask courts to order the seizure of any property "necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action" without a hearing or answer from the defendant. While this provision will be beneficial in providing employers with a forceful method to recover trade secrets from misappropriators, it should be used with caution. If a seizure is later found to be wrongful, the individual who was the subject of the seizure can seek damages such as lost profits.

Injunctive Relief against Former Employees

Lastly, while the DTSA does allow for injunctive relief, the Act makes clear that former employees cannot be restrained from working for a competitor unless it is clearly needed to protect the trade secret, and that the DTSA does not circumvent state law on restrictive covenants. One of the concerns raised against early versions of the Act was that it would empower employers to prevent employee competition. Specifically, the Act provides that injunctive relief that would “prevent (or place conditions on) a person from entering into an employment relationship” must be “based on evidence of threatened misappropriation and not merely on the information the person knows.” In addition, the injunctive relief cannot “otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade or business.”

While it is yet to be seen how the law will be interpreted, the DTSA has major implications for employers who possess and protect trade secrets. As such, employers should be mindful of the need to develop an approved process for handling the various provisions under the DTSA.

Sara Dajani is an Attorney with Berenzweig Leonard, LLP. She can be reached at sdajani@berenzweiglaw.com.

Judge Was Not Amused By Supervisor’s Smiley Face Emoticon

An executive secretary at insurance company Munich Re in New Jersey took extended leave under the federal Family and Medical Leave Act (FMLA) citing her asthma condition.  The company became suspicious that the employee was not really too sick to work, and hired a private investigator to follow her and videotape her public activities.  The investigator captured the asthmatic employee on video shopping at a mall and carrying boxes as she moved into a new home.  When the company saw this video footage, it made the decision to fire the employee for abusing its FMLA leave policy.

The employee sued Munich Re for violating her federal right to take FMLA leave for her asthma condition, claiming that the real reason the company fired her was because it was perturbed that she needed to be out on medical leave from time to time.  In explaining the damaging videos, the employee said her doctor had ordered her to stay active while out on leave, which was why she felt she could go shopping and help with the house move.  ]

During the litigation, the employee’s lawyer requested internal company e-mails sent during the timeframe leading up to the employee’s termination.  In one such e-mail, which was sent the day the employee was fired, her supervisor began with a smiley face emoticon, and asked “:-)) did Ray chat with you about Elaina?”.  Another supervisor responded with, “Yes he did.  Thank you for your help.  That deserves a big :-))!!!”  

The employee argued that the smiley face emoticons in the supervisors’ e-mails showed that the supervisors were all too happy to get rid of her, and merely used the videos as a way to make that happen.  But the company moved to dismiss the case, claiming that the smiley faces in the e-mails were innocuous at best, and that the company had solid grounds to fire the employee for abusing FMLA leave.

A federal judge in Camden, New Jersey refused to dismiss the fired employee’s lawsuit against the company for FMLA retaliation.  In doing so, the judge specifically called out the smiley face emoticons in the e-mails sent between the supervisors on the day of termination, and found that a jury could conclude that Munich Re was happy to terminate the employee because the FMLA leave was inconvenient for them—which is unlawful.  

This case is a timely reminder for companies that snarky remarks and unprofessional digs, whether expressed verbally or obliquely by use of emoticons (or their more refined cousins the emoji—i.e., J), have no place in workplace communications dealing with company business. 

Posted by Declan Leonard, Managing Partner of Berenzweig Leonard, LLP, DLeonard@BerenzweigLaw.com

Telecommuting Employees Can Pose Certain Legal Risks For Employers

United Excel Corporation, a Kansas company in the hospital construction business, employed a sales representative to solicit business from hospitals throughout the country.  At some point, the sales representative asked to work out of his home, which was located in Massachusetts.  During the three years that he worked from his Massachusetts home for United Excel, the sales representative never closed any business with hospitals in that state.

After closing a big deal for a hospital located in California, the sales representative got into a dispute over how much commission was owed to him by United Excel.  He sued United Excel in a Massachusetts state court, but the company sought to dismiss the case on the ground that the Massachusetts court had no jurisdiction over the Kansas-based United Excel for a dispute involving a project in California.  From the company’s perspective, the sales representative could well have worked from a home office in Timbuktu, as long as he closed business with hospitals around the United States.  The mere fact that the representative happened to live in a small town in Massachusetts shouldn’t mean that the company could be sued in that town’s courts, United Excel argued.

But a federal appeals court in Massachusetts recently decided that the home office where the sales representative worked was akin to a remote sales office for United Excel.  The court noted that United Excel provided equipment for the sales representative’s home office, and it placed phone calls and sent emails to the sales representative in Massachusetts during his employment tenure. The court said the fact that the sales representative never actually closed a deal for a project located in Massachusetts was not at all determinative, and that his actions in soliciting business all across the country (including Massachusetts) from his home office was enough for that state’s court to have jurisdiction over the employment case.

The key missing ingredient in this case was the fact that United Excel did not have a forum selection clause in its employment agreement with the sales representative dictating where a lawsuit must be filed.  If the agreement had said all disputes must be brought in Kansas where United Excel was headquartered, the Massachusetts case would likely have been dismissed.  All companies, and particularly those who allow employees to work remotely or who otherwise employ people out of state, should strongly consider having a forum selection clause as well as a choice of law provision.

Posted by Declan Leonard, Managing Partner of Berenzweig Leonard, LLP, DLeonard@BerenzweigLaw.com

Company and CEO Held Jointly Liable for Minimum Wage Violations

A federal district court in Pennsylvania has held American Future Systems, Inc., and its CEO jointly liable for Fair Labor Standards Act (“FLSA”) violations arising from the company’s break policy. That policy required employees to log off of their computers and forgo compensation for all breaks, even short ones lasting fewer than 20 minutes. The CEO, as a 98% owner of American Future Systems and the “final authority” for compensation and break policies, was found to be a joint employer and therefore personally on the hook for these FLSA violations.

The company’s written compensation policy, which had been in place since 2009, required employees to log off of their computers during all breaks, including short personal breaks to use the restroom or get a cup of coffee. Because the company only compensated employees for the time they spent logged into their computers, all breaks were rendered unpaid. Such a policy clearly contradicts the FLSA, which states that short breaks between 5 and 20 minutes are considered compensable work hours. As a result of failing to pay employees for their short personal breaks, American Future Systems allowed employee compensation to dip below minimum wage over the course of each pay period, prompting the lawsuit, which was brought by the U.S. Department of Labor.

While a company facing liability for violating FLSA minimum wage and recordkeeping requirements is nothing new, the fact that the CEO was held personally on the hook as a joint employer is an interesting wrinkle that business leaders should take note of. In this case, American Future Systems’s CEO was a principal owner of the company, had hiring and firing authority, controlled compensation and break policies, and was ultimately responsible for company strategy and the activities of its employees. By having that level of control over the day-to-day operations of American Future Systems, the CEO was liable, along with the company itself, as a joint employer. Complying with the FLSA is always imperative, but for owners who exercise a high degree of control over their businesses, this decision provides a new sense of urgency in the form of potential personal liability. It also highlights the importance of having employee handbooks and workplace policies reviewed from time to time, as seemingly innocuous policies such as “always log off from your computer before going on break” could result in significant consequences for the company as well as its owners.

Frank Gulino is an attorney with Berenzweig Leonard, LLP. He can be reached at FGulino@BerenzweigLaw.com.

"Don't Ask, Don't Tell:" New Virginia Law Limits Access to Employee’s Social Media Accounts

The use of social media has become pervasive in today's workplace. As a result, employers have a strong interest in making sure employees are following company policies and preserving the confidentiality of company information while online, and in maintaining a positive public image on social media−while being careful not to interfere with employees’ rights under Section 7 of the National Labor Relations Act. In addition, employers have a responsibility to investigate social media behavior if they become aware of alleged misconduct and to exercise due diligence to protect other employees. In a press release last year, the EEOC noted that employers’ oversight responsibilities to monitor and remedy workplace harassment could extend to social media. For example, if an employee uses a company laptop to post harassing or discriminatory comments about a co-worker, the employer may not escape liability under Title VII merely because the harassment happened online.

Concerned with their employees’ potentially detrimental social media activities and also in order to screen potential job candidates, many employers require access to their applicants’ and employees’ social media accounts. However, Virginia is now the nineteenth state to impose limits on employer access to such accounts. The new law, Va. Code 40.1-28.7:5, which took effect July 1, 2015, prohibits employers in Virginia from requiring current or prospective employees to disclose the usernames and passwords for their social media accounts. The law also prevents employers from requiring employees and applicants to permit managers and supervisors to "follow" them on social media. The law’s definition of “social media account” is broad and includes any personal account where users can create, share or view: videos, photographs, blogs, podcasts, messages, emails or website profiles or locations.

However, the law does carve out employer activities associated with compliance with federal, state, or local laws and employer investigations of certain misconduct. Therefore, an employer’s right to request username and password information is not affected where such information "is reasonably believed to be relevant to a formal investigation or related proceeding by the employer of allegations of an employee's violation of federal, state, or local laws or regulations or of the employer's written policies." Yet, if an employer exercises its rights under this investigatory exception, the employer is prohibited from using the employee's information for any other purpose.

If an employer inadvertently receives an employee's username and password to the employee's social media account through the use of an electronic device provided to the employee by the employer, the employer will not be liable for having the information.  However, the employer is required to refrain from using the information to gain access to an employee's social media account.

Employers should review their social media policies and hiring procedures to confirm they are in compliance with this new law. Employers should not ask for, or seek access to, employee and/or applicant social media accounts unless there is a solid business justification that fits squarely within the exceptions provided. Employers should also remember that just because an action may not violate this new law, it does not insulate the employer from liability under the NLRA or other employment laws.  Facebook, Twitter, and other social media comments can be protected concerted activity or union activity under the NLRA.

Sara Dajani is an associate attorney with the business law firm, Berenzweig Leonard, LLP. Sara can be reached at sdajani@berenzweiglaw.com.