Wage Notice Requirements

Starting with 2012, the Act requires that employees must be given a pay notice between January 1 and February 1 of each year or at any time a worker’s wages change.  If an employee is hired after February 1, he or she must still be given notice upon hire as well as the annual notice with other employees.

Notices must provide the following information: An employee’s wage, including the rate of wage including the hour, shift, day, week, salary and frequency of payment.  Additionally, the notice must include allowances and whether or not allowances are included in pay, for example tips, meals and other accommodations.  Lastly, the employer’s name, address, telephone number and other reasonably appropriate information must be included in notices.

The Act’s notice requirements apply to workers in the private sector as well as charter schools, private schools, and non-profit corporations; however, federal, state and local government workers are not covered by the Act.  And to be clear, the Act makes no distinction among types of workers – professionals, executives and administrators are not exempt or excluded from the Act’s notice rights.  Notices must be provided in English as well as an employee’s primary language.  Notices may be given electronically, though the employee must have a way to print the document for his or her personal records.  Lastly, the employer must also keep records of the notice for up to six years.

Protections Against Retaliation

The Act addresses what constitutes retaliation as well as penalties for retaliation, which the Act defines as “any action which negatively affects workers … because a worker has engaged in a protected activity.”  Retaliation includes any penalty brought upon an employee for expressing concern over working conditions.  Reducing shifts or wages or termination of employment are obvious examples of workplace retaliation.  The Act also provides protection from threats of retaliation or discrimination, not just actual retaliation or discrimination.

The Act specifies certain protected employee activities, including employee rights to submit complaints about working conditions to employers without being subject to retaliation.  As one commentator has correctly noted, the Act protects employees that make complaints about wages r working conditions, and does not require that a complaint “make specific reference to the Labor Law [nor] be made to any particular person.”

An employer accused of retaliation will be entitled to an opportunity to defend itself; if the complaint is confirmed, an employer can be fined up to $10,000 and an additional $10,000 for damages.  The Act allows for reinstatement of employees terminated in retaliation for protected activities, in addition to payment for lost wages.

NLRA Comparison

New York State’s protections may be viewed together with similar protections under the National Labor Relations Act.  The NLRA provides that companies that meet a certain revenue threshold may not retaliate or discriminate against employees seeking to organize unions and collectively bargain over working conditions or wages.  Protected employee activities include strikes, picketing, walkouts, complaints, petitions, or “other concerted activities”, where “concerted” is typically understood as an activity with two or more members of a group participating.  As long as an employee is acting in accordance with at least one other employee in a concerted activity, he or she is protected against retaliation or discrimination under the NLRA.  Therefore, like the NLRA, New York State’s Wage Theft Protection Act lawfully protects concerted activities of employees with the assurance of penalties for acts of retaliation.

First, what current requirements – laws, agency regulations and quasi-laws – require obtaining consent, even if not “uniformly applicable”?

1. Government Enforcement.  The Federal Trade Commission’s November 2011 consent decree with Facebook user express consent to sharing of nonpublic user information that “materially exceeds” user’s privacy settings.  The FTC was acting under its authority under Section 5 of the FTC Act against an “unfair and deceptive trade practice”, an authority the FTC has liberally used in enforcement actions involving not just claimed breaches of privacy policies but also data security cases involving managing of personal data without providing adequate security.

2. User Expectations Established by Actual Practice.  The mobile space offers some of the most progressive (and aggressive) examples of privacy rights seemingly established by practice rather than stated policy.  For example, on the PrivacyChoice blog, the CEO of PlaceIQ explained that “Apple and Android have already established user expectations about [obtaining] consent.  Location-based services in the operating system provide very precise location information, but only through a user-consent framework built-in to the OS.  This creates a baseline user expectation about consent for precise location targeting.”  (emphasis added)

3. User Expectations Established by Widely-Adopted Self-Regulatory Standards.  Again, not a government-issued mandate, so for example, the Network Advertising Initiatives (NAI) Principles provide for transparency – in disclosure – of how information is collected and to be used (including in particularly, for online behavioral advertising targeting) and for opt-in consent for collection and uses of sensitive personal information (and opt-out consent for any other type of personal information).

A challenge here is determining what constitutes a widely-adopted standard, and what “standard” is (effectively) legal guidance.  While government may not provide guidelines or “safe harbors” for best practices, the marketplace will tend to migrate toward adoption of standards.  This is potentially perilous for businesses because in a rapidly-changing industry dealing with constantly evolving technologies, who’s to really say what practices are “best practices” or industry standard?

And quite quickly, industry codes can take on the clothes of actual law.  In its March 26, 2012 privacy report, the FTC stated that it “will work with the Department of Commerce and stakeholders to develop industry-specific codes of conduct.  To the extent that strong privacy codes are developed, when companies adhere to these codes, the FTC will take that into account in its law enforcement efforts.  If companies do not honor the codes they sign up for, they could be subject to FTC enforcement actions.” (emphasis added)

On the other hand, the technology industry is certainly familiar with “best practice” guidelines used to benchmark “commercially reasonable” practices for contract breach disputes.  Some examples are here, here and here.

Second, even if legal requirements for obtaining consent are not uniformly applicable, it may still be a good idea to get user consent before collecting users’ personal information.  Here’s are six reasons why:

1. The FTC has frequently and increasingly demonstrated its interest in pursuing privacy enforcement for activity areas well beyond egregious data security breaches.  The Commission’s enforcement cases against Facebook (see above), Twitter and Google are high-profile but hardly aberrations.

2. State Attorneys General, acting under their states’ “baby FTC” versions of the FTC Act, have also become increasingly interested in using their enforcement arms to advance user expectation and information collection consent rights.

3. Congress is interested, and various user disclosure and consent legislative efforts have advanced in the House and Senate, with some sort of legislative enactment all but certain following the 2012 elections.  (See for example, Justin Brookman’s analysis of the McCain-Kerry Privacy Bill here, and Arent Fox’s good discussion of Representative Boucher’s House bill here.)

4. Brand reputation, or put in plainer terms. When privacy is so prominently in the news, when companies are increasingly promoting themselves as privacy-sensitive, when for-profit businesses are sprouting everywhere promoting privacy “seal” certification services, ignoring privacy concerns is becoming bad business.  Put another way, why piss people off?  Good privacy practice bespeaks good business practice and risk management.

5. Class action and common law.  Forget the FTC and federal and state laws, because even without these, businesses are still exposed to all sorts of common law rights of action under tort law particularly when it comes to handling of personal information.  As John Heitman recently wrote, in a fine discussion of the controversy involving Groupon’s recent aggressive changes to its privacy policy:

An online marketing business using consumers’ personal information must do so carefully in order to limit its exposure to private class action litigation, Federal Trade Commission (FTC) investigations and enforcement, state attorneys general actions, and more.  Groupon’s changes won’t satisfy everyone, but they certainly take the company in the right direction and much of what’s been done can serve as an example for others mindful of (or needing to be mindful of) their corporate privacy posture and the risks that come with it.

Put another way, is it simply a question of disclosure – so long as a business tells users what it intends to do with their personal information, can the business pretty much do anything it wants with personal information?  This would be the privacy law equivalent of the “as long as I signal, I am allowed to cut anyone off” theory of driving.

Much high-profile enforcement (via the Federal Trade Commission and State Attorneys General) has definitely focused on breaches by businesses of their own privacy statements.  Plus, state laws in California and elsewhere either require that companies have privacy policies or require what types of disclosures must be in those policies, but again focus on disclosure rather than mandating specific substantive actions that businesses must or must not take when using personal information.

As The Economist recently noted in its Schumpeter blog, “Europeans have long relied on governments to set policies to protect their privacy on the internet.  America has taken a different tack, shunning detailed prescriptions for how companies should handle people’s data online and letting industries regulate themselves.”   This structural (or lack of structural) approach to privacy regulation in the United States can also been seen – vividly – in legal and business commentary that met Google’s recent privacy overhaul.  Despite howls of displeasure and the concerted voices of dozens of State Attorneys General, none of the complaints relied on any particular violations of law.  Rather, arguments (by the AGs) are made about consumer expectations in advance of consumer advocacy, as in “[C]onsumers may be comfortable with Google knowing their search queries but not with it knowing their whereabouts, yet the new privacy policy appears to give them no choice in the matter, further invading their privacy.”

Again, there’s little reliance on codified law because, for better or worse, there is no relevant codified law to rely upon.  Google, Twitter and Facebook have been famously the subjects of enforcement actions by the states and the Federal Trade Commission, and accordingly Google has been careful in its privacy rollout to provide extensive advance disclosures of its intentions.

As The Economist also reported, industry trade groups have stepped in with self-regulatory “best practices” for online advertising, search and data collection, as well as “do not track” initiatives including browser tools, while the Obama Administration last month announced a privacy “bill of rights” that it hopes to move in the current or, more realistically, a future Congress.

This also should not ignore common law rights of privacy invasion, such as the type of criminal charges successfully brought in New Jersey against the Rutgers student spying on his roommate.   These rights are not new and for the time being remain the main source of consumer recourse for privacy violations in the absence of meaningful contract remedies (for breaches of privacy policies) and legislative remedies targeted to online transactions.

More to come on this topic shortly.

Justin Shaffer, the defendant in Home Paramount Pest Control, signed an employment agreement in connection with his hiring by the pest control company in January 2009.  The agreement contained a non-competition clause forbidding Shaffer for two years from engaging in a pest control business in any area that he had worked as an employee of Home Paramount, specifically:

The employee will not engage directly or indirectly or concern himself/herself in any manner whatsoever in the carrying on or conducting the business of exterminating, pest control, termite control and/or fumigation services … in any city, cities, county or counties in the state(s) in which the Employee works and/or in which the employee was assigned during the two (2) years from and after the date upon which he/she shall cease for any reason whatsoever to be an employee of [Home Paramount].

Shaffer resigned from Home Paramount in July 2009, and soon thereafter began work at a competing pest control business.  Home Paramount then filed a complaint against Shaffer claiming he had violated his non-compete clause.  Shaffer responded by filing a plea contending that the provision was legally overbroad and therefore unenforceable.  The circuit court of Fairfax County ruled in favor of Shaffer, holding that the provision was indeed overbroad and therefore unenforceable.  On appeal, the Virginia Supreme Court affirmed.

As held by the Fairfax County court and by the Virginia Supreme Court on appeal, the provision could prevent Shaffer from working in any position at a competing business, regardless of whether his work would negatively impact the legitimate business interests of Home Paramount.

A non-compete clause is intended to protect the legitimate business interests of employers by forbidding past employees from sharing confidential or sensitive information with competing companies.  Employers will often require that employees sign a non-compete as a condition of employment.  A cautionary lesson from Home Paramount Pest Control, however, is that overreaching in a non-compete can cause the entire clause to be invalidated.

By failing to use narrowly limiting language, employers may face successful challenges to non-compete clauses, and narrow drafting can be effective to resist challenges.  One commentator on the case, Marcus Mintz, blogged that, in affirming the lower court, the Supreme Court found that the non-compete’s restriction was “facially over-broad because it could prevent Shaffer from performing any duties at a competitor, irrespective of whether such duties were similar to the duties Shaffer held at [Home Paramount] Pest Control or would have any effect on Pest Control’s legitimate business interests.” Once the language itself was held to be overbroad, the employer faced the burden of showing that the restriction nonetheless furthered its business interests and did so without unduly burdening the employee’s right to work at a different job.  Here, Home Paramount Pest Control was unable to win that argument.

The Virginia Supreme Court also rejected Home Paramount’s contract interpretation argument that even if overbroad, the clause should essentially be re-written by the court itself if a narrowing could render it enforceable.  “Although we weigh the function element of a provision that restricts competition together with its geographic scope and duration elements,” the court wrote, “the clear overbreadth of the function here cannot be saved by narrow tailoring of geographic scope and duration.”  This, too, is a cautionary lesson, this time against a contract drafting approach of throwing everything in the contract and expecting a judge to enforce it anyway.

As for reluctance in enforcement of non-compete, the Virginia case may in fact be bucking the national trend, as discussed last month in an excellent survey report by Robert Milligan of Seyfarth Shaw.  Milligan reports on cases from the Illinois and Texas Supreme Courts (among others) which – as compared with Virginia’s – spent a good deal more energy in exploring what might constitute an employer’s “legitimate business interest”.  In the Texas case, for example, Marsh USA, Inc. v. Cook, the court looked to more than simply the protection of employer confidential information as justifying (and limiting) the enforceability of a non-compete, explaining that other considerations such as the grant of stock options should weigh in the evaluation.  To be clear, though, the non-compete in the Marsh case was contained in the stock option grant agreement, not an employment agreement.

In December, the Illinois Supreme Court, in Reliable Fire Equipment Co., v. Arredondo, held that Illinois courts must review “the totality of the facts and circumstances of the individual case” in weighing the an employer’s “legitimate business interest”.  And as Scott Humphrey of Seyfarth Shaw noted in his post about the Reliable Fire Equipment case, Illinois appellate courts had already been moving to expand the legitimate business interest” test to include more than just protection of employer trade secrets and customer relationships.

Casey Pladus, a Research and Social Media Intern with Mirsky & Company, contributed to this post.

The artist, Richard Prince, based his works on photographs from a book about Rastafarians “to create the collages and a series of paintings based on [those photographs],” reported Randy Kennedy in the Times.

Then ensued a discussion of the degree to which material must be transformed to fall under copyright law’s “fair use” protection, which would allow use of copyrighted material if, as the article explains, “the new thing ‘adds value to the original’ so that society as a whole is culturally enriched by it.”  (The reference is to a 1990 Harvard Law Review article by Federal Judge Pierre Leval.  I previously discussed fair use’s 4-prong analysis in the context of photographs and artwork, here and in mashups here.)

In the Prince case, Judge Deborah Batts of New York Federal Court held that Prince infringed the photographer’s copyrights.

Prince has his defenders.  “The part that really troubles me about these discussions,” commented one such defender on TechDirt, “is a rather simple point about fair use: if the new work does not, in any way, harm the original work, it seems positively insane to me to think that it shouldn’t be seen as fair use.”

And it is true that fair use does look to whether the later work harms the market for the copyrighted original work.  But market harm (or lack thereof) is only one part of the test: After all, fair use is an exception to copyright, a creator’s exclusive “right to copy” (literally), and prevent others from doing so.  A proposed copying must show more than simply that the originator’s market was unharmed.  It may be true, but by itself that doesn’t overcome society’s determination that a grant of exclusive right of copying was justified.

More indeed is what Marina Galperina, a commentator on the AnimalNewYork website, describes in distinguishing between material that has and has not been adequately (for fair use purposes) “transformed”.  As “good” fair use, Galperina cites an art exhibit that made liberal use of Disney copyrighted images. “When 0100101110101101.org lynched Mickey Mouse, they stole a recognizable commercial visual and re-invented it in their own sick context,” she says. “That’s cool.”

Galperina next offers another art exhibit featuring panda designs in which a designer sampled patterns from other designers.  She writes, “When [the panda culprit] ‘borrowed’ a design from a designer and essentially wallpapered it into his design piece without updating the context, adding meaning or doing anything but putting squiggly lines around it …. That’s weak.”

Galperina and Kennedy both make the point that attitudes about artistic fair use – or “the borrowing ethos” – seem to change as technology allows images to be gathered, manipulated and disseminated easily and without attribution.  So, for example, Galperina cites the iPad app Mixel, which bills itself as “the first social art app.”  The app, created by a former New York Times staff writer, allows users to make and share collages, using any web-based images.

Although Mixel’s Terms of Service do not overtly restrict use of previously copyrighted material, Mixel does encourage users to submit complaints if they think intellectual property has been improperly used. “If you believe that your work has been copied in a way that constitutes copyright infringement, or that your intellectual property rights have been otherwise violated,” the policy reads, “you should notify Mixel of your infringement claim.”

Digital capabilities notwithstanding, what is not new about “fair use” is how difficult it remains to articulate outside of actual examples.  The Prince case is high-profile because of the notoriety of the artist, media sensitivity to decisions of the New York federal courts and yet another example of the increasing ease of access via digital technology.  All art is available instantly – and effortlessly – to all other artists not only for study and inspiration, but for incorporating, manipulating and, yes, transforming.  At the National Gallery’s fine exhibit on Picasso’s early drawings, an information board describes how Picasso’s formative years coincided with the emergence of the great museum retrospectives in Europe.  Picasso made brilliant use of these experiences, referentially incorporating into his works the ideas of his contemporaries and great predecessors.

Digital technology does not change any of this, and probably at worst just rapidly accelerates – and escalates the tradition.  As Kennedy writes in the Times,

[T]oday’s flow of creative expression, riding a tide of billions of instantly accessible digital images and clips, is rapidly becoming so free and recycling so reflexive that it is hard to imagine it being slowed, much less stanched, whatever happens in court. It is a phenomenon that makes Mr. Prince’s artful thefts … look almost Victorian by comparison, and makes the copyright battle and its attendant fears feel as if they are playing out in another era as well, perhaps not Victorian but certainly pre-Internet.

But it is nowhere clear how these developments should be cause for change in fair use law, or more specifically why existing fair use analysis cannot govern the changed landscape.  If the test remains whether a use is “transformative”, then the problem may be with the meaning of “transformative”.  Defendant Prince was asked in his deposition “What is the message [of his art]?”  To which Prince replied, “The message is to make great art that makes people feel good.”

That kind of honesty itself may be worthy of some protection, although his lawyers may have preferred that he simply tell the judge what she may have wanted to hear.  What she may have wanted to hear was the standard for “transformative” use stated by the Supreme Court in 1994:

… whether the new work “merely supersede[s] the objects” of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is “transformative.” Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 575, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994).

Which itself was merely illustrative of the main text of the fair use law, which states:

the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. (emphasis added)

As reported in the Times, Prince “also made it clear that he was not making art that commented on Mr. Cariou’s work itself. (Judge Batts ruled that for a work to be transformative it must “in some way comment on, relate to the historical context of, or critically refer back to the original works” it borrows from, a test she said Mr. Prince’s work failed.)”

Kate Tummarello, a Research and Social Media Intern with Mirsky & Company and a reporter at Roll Call/Congressional Quarterly, contributed to this post.

These kinds of disclaimers, disassociating the tweets from the people who retweet them, are common. The Twitter bio belonging to Brian Stelter of the New York Times (@brianstelter) notes, “RT & links aren’t endorsements.”

A Social Media Policy Addressing RTs and Linking

But for some, those disclaimers are not enough.  Last fall, the Associated Press introduced an updated social media policy for its reporters and editors.  As recently reported in Yahoo! News, the AP memo advised reporters and editors that “Retweets, like tweets, should not be written in a way that looks like you’re expressing a personal opinion on the issues of the day. A retweet with no comment of your own can easily be seen as a sign of approval of what you’re relaying.” The guidelines note, “[W]e can judiciously retweet opinionated material if we make clear we’re simply reporting it.”

Members of the media might want to be careful, however, that statements like “No comment” or “without comment” before tweets do not take on meanings of their own. Often, retweeting something “without comment” can indicate an unwillingness to comment due to an either enthusiastic support for of disapproval of the content of the original tweet.

Take, for instance, this example, where a user named @ProgressiveMich, whose bio indicates that he (or she) is against corporate money and for progressive politics for Michigan, retweeted “without comment” a tweet by conservative political commentator Dick Morris (@DickMorrisTweet) that said, “To gain the younger vote I think Republican candidates need to pick up Cain’s 9-9-9 plan.” In retweeting “without comment,” @ProgressiveMich might be saying (who knows?) that the content of the tweet is not worth commenting on. Rather than using “without comment” to avoid expressing an opinion, the retweet-er is in fact expressing an opinion.

A Broader Perspective

This may be just the application of an old-school standard to a new medium. Just because you throw up a vanilla disclaimer of “nonendorsement” on your website or in the fine print, that may not cut it as effectively communicating nonendorsement.

In consumer protection law, this is the analogous problem with buried, “fine print” legal disclaimers, which have generated a whole rash of regulatory responses requiring “clear and conspicuous” disclosures.  So, for example, California’s recently amended security breach notification law requires disclosures be made via “conspicuous posting” of breach information “written in plain language”.

Various state Attorneys General have initiated legal actions against consumer websites, magazines and other subscription-type services, claiming deceptive practices from insufficient disclosure of billing practices, particularly automatic credit card renewal billing of subscriptions and other service purchases. American Journalism Review reported in 2002 on Florida’s Attorney General looking into Time Inc.’s re-enrollment practices that often forced subscribers to re-subscribe without their knowledge.

And perhaps most directly on point, the Federal Trade Commission (FTC) last year issued extensive rules requiring more prominent disclosures of commercial endorsements and affiliations by bloggers and other social media endorsers of commercial products.  The FTC’s blogger rules make clear the Commission’s view that the inadequacy of prior disclosures wasn’t limited to misleading or insufficient disclosure statements, but equally so the common practice of burying disclosures.

Big Pharma is quite familiar with this problem, which is why you find such seemingly awkward disclaimers (i.e. taking this drug may put you at risk of death!”) blithely stated by wistful lovers at the ends of Viagra and other sexual performance drug ads.  The US Food and Drug Administration requires “clear, conspicuous and neutral” presentation of risk information in pharmaceutical advertisements. And not leaving things to chance, the FDA has published highly detailed commentary on these practices, with examples such as this:

A seven-page sales ad devotes the first six pages to effectiveness claims, which are prominently presented with colorful graphics, abundant white space, and large, colorful headers. Three of these pages also include a footnote referring readers to “Important Information on page 7.” The seventh page summarizes some risk information from the PI in single-spaced paragraph format without headers or other presentation elements to emphasize to the reader that it is important risk information.  Such a presentation creates problems regarding the adequate presentation of risk. The important risk information about the drug should instead be integrated into the piece and presented with similar prominence to the effectiveness claims.

Back to RTs

Does a catch-all “RTs and Links aren’t endorsements” (per Brian Stelter of the New York Times) really make the case?  In my post last year about the FTC blogger guidelines (“FTC Blogger Rules: Why Not Disclose Advertising?“), I noted that the guidelines limit disclosure requirements to cases where the sponsorship relationship is not “reasonably expected by the audience.”  And perhaps followers on Twitter should really know better than to assume a RT is an endorsement.  But in that sense, the AP’s guidelines are quite reasonable, especially for professional writers for whom care is assumed to have been taken with choice words.

Kate Tummarello, a Research and Social Media Intern with Mirsky & Company and a reporter at Roll Call/Congressional Quarterly, contributed to this post.

Despite the fact that this practice is officially frowned upon in the Federal Trade Commission’s 2009 endorsement guidelines, companies will often engage paid individuals – either employees on the payroll or outside bloggers who receive compensation in the form of a free sample – to post positive reviews online, including to places like Twitter, personal blogs, or online public forums without identifying the connection between the commenter and the product being commented on.

The FTC’s endorsement guidelines seek (among other things) to ensure that unbiased positive reviews online can be considered credible, while also ensuring that positive reviews that are partially the result of some sort of compensation be acknowledged as such. The FTC’s guidelines encourage not just that bloggers acknowledge compensation, but also that the companies offering the promotion notify bloggers of the guidelines and then ensure that the guidelines are followed.

The New York Times reported last summer on a settlement reached between the FTC and Reverb Communications.  According to the report, employees of Reverb, a public relations firm, were posting positive iTunes Store reviews about Reverb client products. “[Reverb] engaged in deceptive advertising by having its employees write and post positive reviews of clients’ games in the Apple iTunes Store, without disclosing that they were being paid to do so,” according to the article.  The FTC’s settlement with Reverb reportedly included an agreement to remove all inadequately identified iTunes Store reviews, but no monetary penalties or admission of illegal activity.

Also last year, as reported in a post on the Citizen Media Law Project blog, clothing retailer Ann Taylor LOFT sent invitations to bloggers, offering a “fall fashion preview” and “special gift” to bloggers who agreed to write about the event.  The FTC commenced an enforcement proceeding against Ann Taylor LOFT for violation of the blogger guidelines, but ultimately chose not to pursue action, instead noting that the company had incorporated a written policy prohibiting similar conduct in the future.

K&L Gates’ blog on technology, media and technology, ”TMT Law Watch”,  reported earlier this year on another FTC enforcement.  As reported, a musical instruction company called Legacy paid “Review Ad Affiliates” to give positive reviews for site’s musical instruction services.  Those affiliates subsequently failed to provide adequate notice of their material connection with the promoter. “Affiliates received substantial commissions (20-45%) on sales of each product resulting from a referral,” TMT Law Watch reported.  Although Legacy required affiliates to sign a contract committing to follow FTC guidelines, there was no monitoring system in place to ensure that the guidelines were followed.  In its enforcement complaint the FTC stated “that the Affiliates’ reviews were false and misleading, that the failure to disclose the financial relationship was a deceptive practice, and that these acts and practices constituted unfair or deceptive acts or trade practices in violation of Section 5(a) of the FTC Act,” according to the post.

Under its administrative settlement with the FTC, Legacy agreed to monitor and conduct monthly reviews of 100 of its “Review Ad Affiliates,” including the top 50 review producers and a random sampling of 50 more affiliates. Legacy must also institute a system through which payment will be stopped to any affiliate that does not adequately disclose its material connection to Legacy when posting reviews. In addition to a civil penalty of $250,000 and a requirement to notify its employees of the settlement, the Legacy must carry out these reviews of its affiliates and report them to the FTC for the next 20 years.

Some companies have taken measures to preemptively ensure compliance with the FTC guidelines. For example, AdAge reported earlier this month on an undertaking by the social media influence ranking site Klout to provide free products to people with significant social media influence. Aan ccording to AdAge, the initiative would provide products, or “Perks,” to those with large influence on social media outlets. “Klout addresses the FTC rules by sending a card along with the ‘Perk’ that states that recipients aren’t required to do anything at all,” AdAge reported, “but they should disclose that they’ve received a sample if they decide to write about it.”

A question is whether this kind of passing the buck to bloggers (“you’re on notice that you shouldn’t do anything we wouldn’t do”) really complies with the guidelines, much less the spirit of the guidelines.  The Legacy case raises the specter of enforcement proceedings against companies for failing to adequately monitor compliance.  But generally, evidence of compliance should be able to be found in actual resulting conduct. As Forbes noted last year, it can be difficult to measure the impact of the guidelines when the intent isn’t clear. An FTC director was quoted by Forbes, “Our goal is not to bring enforcement actions. [Our goal is] to help people be educated so we don’t have to bring enforcement actions.”

***

Kate Tummarello, a Research and Social Media Intern with Mirsky & Company and a reporter at Roll Call/Congressional Quarterly, contributed to this post.

By definition, citizen journalism’s inherent difference from the traditional editorial process is the dispersion of responsibility for editorial choice.  Nonetheless, “trustiness” in journalism is a concept still heavily dependent on a reporter’s or editor’s reputation.  Is the New York Times trusted because it’s trustworthy?  Or is it trustworthy because it’s trusted?

The “Generated By Users” journalism blog recently reported the results of its reader poll, “Do you TRUST user generated content in news?”

[O]verall we like [user-generated content] but remain skeptical and need to know that it is trustworthy and adding value and perspective to reports. In an ever more connected world we can rely on UGC for immediate breaking news, but we want experienced journalists to sum up the day; if that requires using some UGC then we are fine with that, but it must be combined with original professional content.

Crowd-sourced citizen journalism attempts to bridge the gap between the historical (back to 2003 or so) understanding of “citizen journalism” and more recent efforts to create “virtual” news operations.  So, for example, in 2007 the US State Department’s blog America.gov wrote thoughtfully about the movement of established news organizations – the BBC, CNN and Le Monde were favorably cited – to integrate video, blogging and other raw reporting coverage of breaking news events into regular news reporting.  This trend had “becom[e] more of a dialogue between the providers and receivers of information, rather than an imposition of opinions and perspectives by an elite caste.”

Still, reporting is being collated (an unfair characterization?) by established media into seemingly traditional reporting.  Or, better yet, the explosion of number, variety and depth of sources of news could make the producing of established reporting – digesting, analyzing, summarizing and storytelling – that much better-sourced in the hands of writers, reporters and editors who know how to bring it all together.

Crowd-sourced journalism is not without downsides.  From America.gov’s 2007 report:

On the negative side, the Internet has opened up extraordinary new possibilities for the widespread and sometimes dangerous manipulation of information, which is difficult, if not impossible, to stem.  This phenomenon will increasingly place a heavy responsibility on professional journalists to maintain high standards of fact-checking, honesty, and objectivity. Editors are already spending enormous amounts of time verifying and authenticating user-generated pictures and text, and this will only become a more time-consuming part of their jobs. Blog posts and comments require careful and regular scrutiny.

It is true that the explosion of sources of information – just like the avalanche of the raw information itself via wide, public availability of data – makes the jobs of journalists more complex, but that may not be all that much of a change.  Reporting has always required judgment calls by reporters on the quality of and proper weight to be given to sources.  The difference now is the number of sources of where information is coming from, and who has the ability to monitor how it is used.

If a structural problem for “citizen journalism” is an inability to generate consistency in quality – “editorial standards” – why not remedy that problem with some of the same technology that makes citizen journalism possible in the first place?

That is the approach of a number of projects discussed in a recent Columbia Journalism Review article, including “Citizenside”, “Digital Journal” and “NowPublic”.  These sites use concepts from online gaming, including point tallies, rankings and accompanying cash and non-cash rewards.

Borrowing these techniques from online gaming may prove advantageous to reward those who produce quality content.  A recent panel during Washington, DC’s “Digital Capital Week” (DC Week), on “The Future of Publishing”, featured Washington, DC-based NewsIt, a self-described “mobile sharing network for creating and sharing news”.  Like its competitors discussed by CJR, NewsIt espouses the “gamification” of news, using math to rank “top citizen correspondents”.  The technology is built on an algorithm, and the distinguishing characteristic seems to be the strength (or weakness) of that particular algorithm to discern quality reporting.

Such an algorithm necessarily chooses different factors from the comparable calculi of competing services, and then weights those factors in whatever unique way chosen by its proponent.  The idea is terrific for setting up predictability for news sourcing, though it seems also vulnerable to its own being “gamed” (irony not intended) by users who can figure out the system.  Of course, that, too, is hardly news, as demonstrated by other algorithm-based services like Google Search, constantly tweaking its formula to stay ahead of the gamers.

Kate Tummarello, a Research and Social Media Intern with Mirsky & Company and a reporter at Roll Call/Congressional Quarterly, contributed to this post.

Ebbole claimed that Demented Needle owner Paul Averette had been telling customers and others that Ebbole’s shop used equipment infected with diseases such as Hepatitis C and HIV, claiming also that Averette had told the world that Ebbole had infected herself.

Ebbole also reported that Demented Needle boasted at least two defamatory objects in the parlor: a poster displaying an image of one of Ebbole’s tattoos, meant to discourage customers from visiting Ebbole’s shop, and a body cast decorated in demonic symbols and used to model Demented Needle’s apparel.  Ebbole claimed that Averette told customers the body cast was supposed to be Ebbole.

In his defense, Demented Needle owner Averette claimed that the poster was not defamatory because it was protected commercial speech and the body cast was not recognizable as Ebbole. The court held that Averette did not present adequate evidence to prove that the poster was protected speech. The court also held that, because Averette routinely told customers that the body cast was supposed to represent Ebbole, his speech was defamatory.

Ebbole also claimed that a co-defendant of Ebbole had defamed her through a MySpace posting, which included a video of Ebbole performing a body piercing.

The MySpace post read:

I came across this video during my recent health inspection of all [things]. I was certified to do microdermal anchoring in October of 2008…. [Ebbole's method] is disrespectful to what I do and what I love … allegedly. I ask you, people of the interweb … what should I do about it?

FYI: [Ebbole's method] is NOT the method I use or would suggest to be used for any implant procedure.

The post was followed by comments from third party MySpace users, some of which contained threatening and defamatory language.

In his commentary about the case, Eric Goldman questioned the court’s malice finding: “The court ruled the plaintiff was a public figure, so the plaintiff [would have] had to show defendants’ malice to support the defamation claim.  I am especially interested in its application to [the co-defendant’s] MySpace posting.” Goldman then questioned evidence of malice based on the MySpace posting.

Goldman discusses the specifics of the MySpace posting, wondering who had originally posted the video and noting that the statements that seemed to be most defamatory were made by third party commentators, not any defendant.  And in any event, Goldman thinks defendants’ MySpace comments were clearly opinion, not factual.  “I’m failing to see anything defamatory in this statement at all,” he concludes.

Goldman then discusses the case in light of 47 USC 230, the Communications Decency Act of 1996 (CDA). Section 230 of the CDA states that no user of an interactive web service can be held responsible for the postings or another user.  Goldman argues that this principle should have applied here. “Inferring malice from a site operator’s failure to remove third party comments should be preempted by [CDA Section 230] because it treats the operator as a publisher/speaker of those comments,” he writes.

“My vision for our city is to become the technology capital of the world….  We want to attract and retain leaders in the fields of e-government, e-commerce, e-business, and technology,” said then-mayor Anthony Williams.

New E-Conomy Transformation Act

The District’s final rulemaking for the Act, setting out terms of qualification for the Act’s various tax benefits to qualifying businesses, can be found here.

Among many other tax incentives, the Act granted tax benefits to “Qualified High Technology Companies” (QHTCs), those DC-based, for-profit organizations that make most of their revenue from the sale of products and services related to information technology.  The category includes a large list of broadly defined “high technology activities”, for example (from the Act):

“Website design, maintenance, hosting, or operation; Internet-related training, consulting, advertising, or promotion services; the development, rental, lease, or sale of Internet-related applications, connectivity, or digital content; or products and services that may be considered e-commerce”.

Other qualifying activities include:

“Internet-related services”, “Information and communication technologies”, “operating and application software”, “Advanced materials and processing technologies”, and “Engineering, production, biotechnology and defense technologies that involve knowledge-based control systems and architectures”.

DC Tax Credits

QHTCs can claim tax benefits related to the “high technology” aspects of their businesses.  Those aspects include employees, and specifically “disadvantaged” employees of these companies, defined by the Act as District of Columbia residents who currently receive or have recently received benefits under the District’s “Temporary Assistance for Needy Families” program or who were released from prison within 24 months before gaining employment at the company.  Also included are employees who qualify for the District’s “Welfare to Work Tax Credit” or “Work Opportunity Tax Credit”, background on both of which can be found here.

QHTCs may claim tax credits for training programs completed by disadvantaged employees, including programs at accredited colleges and universities and programs conducted by nonprofit organizations.  These credits are limited to $20,000 per qualifying employee during the first 18 months of employment.

QHTCs may also claim tax credits for relocation expenses provided for employees, not limited to disadvantaged employees.  The amount of the credits varies from $5,000 to $7,500, depending on whether the employee relocates his or her residence to the District in addition to employment with the QHTC.

In addition, QHTCs may claim tax credits for up to 50% of wages paid to disadvantaged employees, capped at $15,000 per year per employee.  Similar credits may be claimed by QHTCs for up to 10% of wages paid to non-“disadvantaged” employees, capped at $15,000 per year per employee.  The credits are limited to the first 24 months of employment.

Most of the above credits apply only for employees working at least 35 hours per week, may be taken only after the relevant employee(s) have worked at least 6 months with the company, and require at least 2 employees for eligibility.   In addition, the above credits are not available with respect to employees who are “key employees”, including owners of the business (or relatives) or members of a company’s board of directors.

Reduced Corporate and Franchise Taxes

Another benefit for QHTCs is a reduced DC corporate franchise tax rate of 6%, and complete exemption from the corporate franchise tax for the first 5 years of business for QHTCs located in certain defined geographic areas known as “High Technology Development Zones” (listed geographically in this DC Government publication).   QHTCs that are LLCs and other non-corporations are exempted permanently from the District’s unincorporated franchise tax.  QHTCs also need not include capital gains from sales of capital assets in gross income for purposes of DC’s corporate income tax.

Exemption from DC Sales Taxes

Lastly, QHTCs are exempt from most sales taxes, including most purchases of computer software and hardware of all kinds.

Additional Materials and Applying for Credits

Businesses that wish to qualify for QHTC status and applicable credits and reduced taxes should review and complete the information and forms available through the District’s Office of Tax and Revenue, particularly Publication 399, available here.

Kate Tummarello is a Research and Social Media Intern with Mirsky & Company and a reporter at Roll Call/Congressional Quarterly.  Follow Kate on Twitter @ktummarello.  Andrew Mirsky of Mirsky & Company contributed to this post.