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.

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.

Gone are the days of bashing your boss in the breakroom. Now, colleagues gather online to anonymously air their grievances.  A group of disgruntled Demand Media, Inc. employees did just that with their website DemandStudiosSucks.com.  Then Demand Media struck back.

Late last month, attorneys for Demand Media, a content production company whose properties include eHow, LIVESTRONG.com, Cracked.com, typeF.com, Trails.com and GolfLink, sent a letter to DemandStudiosSucks.com asking it to remove content that had been copyrighted by Demand Media.

The media company accused the people behind this censorious website of creating and maintaining “a forum in which users can, and do, post and misuse Demand Media’s trademark, copyrighted material, including confidential and proprietary copy editing tests.”  The letter also referenced “an internal presentation regarding the company’s business plans”, published without permission on DemandStudiosSucks.com.

Immediately, of course, the letter was posted on DemandStudiosSucks.com.

The next day, a user named “Partick O’Doare,” who has posted the majority of the content on the site, published an open letter addressing the claims made by Demand Media’s attorneys.  Although the website removed the content addressed in the letter, O’Doare explained that the site’s creators had not acknowledged any infringement in removing the content.

Instead, those behind the website claimed that their use of the Demand Media content fell under fair use guidelines, specifically protections for commentary and criticism.  “Let’s be honest,” the open letter says, “if ever there was a case of unequivocal fair use, this would be it.”  A statement which should raise flags to anyone who previously felt similarly.

Fair use is a defense to a claim of copyright infringement, but not other claims.  A fair use argument cannot simply succeed on its merits where other legal rights are violated.  Context matters.  So, for example, as seen in some Facebook “suck site” cases, fair use will not protect against a claim of defamation.  Employees who publish company trade secrets and other proprietary information cannot rely on fair use to defend against claims of violations of corporate and employment law.

O’Daire’s letter proudly boasts that the voices behind DemandStudiosSucks.com were fully prepared to defend themselves, citing the fair use cases Lenz v. Universal Music Corp. and Online Policy Group v. Diebold, Inc.

What’s the solution? There’s always the most traditional and perhaps the most primitive solution: Lock up the idea. Meaning: Do everything you can to make sure that anything that anyone does for you as a developer, contractor, employee, business partner, vendor or whatever is owned by you or your new company.

And that can certainly involve “work for hire” and similar agreements, but it also involves noncompete agreements. Or in other words, “I own everything, but just to be clear, in case you think that I don’t own everything, don’t even think of going to one of my competitors or opening up your own shop across the street.”

How sweet.

Actually, putting aside the quaintness (and crassness?) of that approach, its bigger problem is a dependence on contracts rather than trust. No, that’s not quite right – contracts are fine, but they miss the point. Reliance on contracts ignores key realities of how innovation happens.

And in certain rather important technology locales in the United States (READ: California), it also ignores the law. In California, for example, courts have routinely refused to enforce noncompetition agreements.

To the first point: Innovation is collaborative. Look no further than the invention of the telephone, which as everyone knows was invented by Alexander Graham Bell. Or … was it? Well, Bell did file the first successful (and successfully defended) patent for the telephone. But as Malcolm Gladwell wrote several years ago in The New Yorker,

[Elisha] Gray was working on the telephone at the same time that Bell was. In fact, the two filed notice with the Patent Office in Washington, DC, on the same day – February 14, 1876. Bell went on to make telephones with the company that later became AT&T. Gray went on to make telephones in partnership with Western Union and Thomas Edison, and – until Gray’s team was forced to settle a lawsuit with Bell’s company – the general consensus was that Gray and Edison’s telephone was better than Bell’s telephone.

Gladwell’s story about Bell and Gray and the telephone is an anecdote to paint the scene for an “invention session” organized by Nathan Myhrvold, formerly research director at Microsoft. Myhrvold’s idea was the innovation could by organized and “fabricated” (in a not-quite fair characterization) through modeling on the lesson of the telephone invention controversy: Namely, innovation could be – is – collaborative.

Which brings us to present-day California: What really happens if a noncompete is unenforceable? This week’s Washington Post published a fascinating story on Silicon Valley’s “culture of cooperation”. (“In a cutthroat world, some Web giants thrive by cooperating”, Washington Post, Saturday February 19, 2011.)

Emblematic of the view is that of Google’s soon-to-be former CEO Eric Schmidt, quoted by the Post from a Google blog post saying “How do you be big without being evil? We don’t trap end users. So if you don’t like Google, if for whatever reason we do a bad job for you, we make it easy for you to move to our competitor.”

The Post goes on to profile some of the more obvious West Coast tech giants, including (in addition to Google) Microsoft, Twitter, Facebook and Apple. Apple is presented as the counter example to the culture of cooperation, of course, with CEO Steve Jobs recently quoted saying “Open systems don’t always win.”

And yet, that one quote is really the extent of the Post story’s Apple bashing, with an insightful discussion of what works for different companies and cultures.

The California story – and the history behind the story – began to accelerate in the 1990s when California courts refused to enforce noncompetition agreements, which particularly affected the dot-com companies of Silicon Valley seeking to lock up talent and ideas. Talent mixed and mingled, traveling wide and far, as did ideas and, ultimately, innovation. The Post cautions that Google’s self-promoted reputation for open-system may be significant and influential, but it is also limited to services whose viral promotion drives traffic for Google’s core search advertising business. And Google search does not participate in the same open-system practice.

On the other hand, Gladwell’s and Myhrvold’s point about the nature of technical innovation seems to buttress policy support for the courts’ disdain for noncompetes. The gray area involves what constitutes “general knowledge, skills, techniques and learning”, which this more expansive view of innovation suggests should never be bottled up. It is not always easy to distinguish general knowledge from company-specific ideas, facts and techniques.

Noncompetes (where enforceable) are often used to get around this problem by simply saying, “You can’t work for our competitors. Period.” Which left Hewlett-Packard having to challenge former CEO Mark Hurd’s move to Oracle based on claimed breaches of confidentiality commitments, rather than noncompete. Hard to do.

The New York Times reported yesterday that the company had reached a settlement with the NLRB. In particular, The Times reported that the company agreed to modify its workplace policies “to ensure that they do not improperly restrict employees from discussing wages, hours and working conditions with co-workers and others while not at work, and that they would not discipline or discharge employees for engaging in such discussions.”

It is believed that this case was the first of its kind, where the NLRB took action against an employer related to an employee’s comments and conduct on a social media site like Facebook.

According to the San Jose Business Journal, the company reached a separate private settlement with the fired employee, the terms of which were not disclosed by the NLRB, the company or the employee.

Interestingly, while the case obviously did not get to a full precedent-setting decision, a publicly-acknowledged condition to the settlement was the company’s acknowledgment that outside discussions of work conditions could not be acted upon detrimentally by the company. And without explicitly stating so, these outside discussions obviously included facebook and other social media outlets.

For a group that tends to dispute everything even a position that would presumably only side in their own interest, academics too must concede the legal ambiguity of the copyright law’s “work for hire” doctrine when applied to the academic setting.  What is probably not in dispute is, as one commentator describes it, that “Traditionally, it was presumed that educators owned copyrights to academic work they have authored or created.”

True, it was (and is still) assumed, but it was never codified in the Copyright Act and never directly established by caselaw.  That too is not in dispute.  Thus to characterize a theoretical university’s position, on the bare facts of the employment relationship: “Educational institutions … claim an interest in the work and point to the faculty’s use of their resources in its creation.  Institutions also can assert that producing such work is part of the educators’ employment obligation.” (http://ow.ly/18O9A)

To be sure, with exceptions for adjuncts and other guest lecturers, most teachers would be considered employees of their colleges and universities.  It is hard to imagine that most teachers would care to dispute that claim, as evidenced by their benefits eligibility, academic protections and broad use of school resources, among other obvious indicia.

The reality is – or, until recently, was – that none of this really mattered.  Not much was at stake in the pre-online and –distance education days.  In one of the rare but prominent pre-internet era cases addressing the issue at all, an “academic exception” to the copyright work for hire doctrine was acknowledged based both on tradition and policy.  The University of Chicago’s and Federal Judge Richard Posner wrote for the 7th Circuit in Hays v. Sony Corp. of America (847 F.2d 412, 416 (7th Cir. 1988)):

“Although college and university teachers do academic writing as part of their employment responsibilities and use their employer’s paper, copier, secretarial staff, and (often) computer facilities in that writing, the universal assumption and practice was that (in the absence of an explicit agreement as to who had the right to copyright) the right to copyright such writing belonged to the teacher rather than to the college or university.

“Nevertheless it is widely believed that the 1976 Act abolished the teacher exception [citations omitted] – though, if so, probably inadvertently . . . .  To a literalist of statutory interpretation, the conclusion that the Act abolished the exception may seem inescapable . . . .  But considering the havoc that such a conclusion would wreak in the settled practices of academic institutions, the lack of fit between the policy of the work-for-hire doctrine and the conditions of academic production, and the absence of any indication that Congress meant to abolish the teacher exception, we might, if forced to decide the issue, conclude that the exception has survived.”

In any event, a university’s hard-line position on this might only be ‘theoretical’ because, as noted by the Sloan Consortium, “[m]any institutions have created policies that formally recognize the academic exception and have voluntarily given faculty ownership of scholarly and teaching works.”

Any actual kerfuffle over this issue was one of recent making, illustrated by a dispute about ten years ago between Harvard Law School and Harvard law professor member Arthur Miller.  Without permission from Harvard, Miller had contracted with Concord University School of Law to videotape law lectures for use by Concord’s students.  This despite Harvard’s policy prohibiting faculty from outside teaching without permission.  (Miller evidently argued that, since the sessions were videotapes only and not live lectures, he was not technically “teaching” and not thereby violating the Harvard policy.)

As already noted, this issue hardly mattered until the relatively recent rise of the internet and the accompanying explosive commercial growth of online education.  In 2000, for example, the New York Times described this venture involving Williams College:

“Global Education Network, a company founded partly by Herb Allen, the president of the venture-capital firm Allen & Co., has approached Williams and Brown University, among others, with an invitation to contribute course material to a proposed for-profit Web site providing on line liberal arts education for adults.  Officials at Williams have said that the venture could earn the institution upwards of $250,000 per year, per course, for up to 10 courses.”

The looming academic food fight was noted only in parenthetical, discussing a different venture involving the University of Chicago where “Payment to participating professors has not yet been set.”

So, then, there is academic research and publishing tradition, there is copyright “work for hire” doctrine, there is caselaw including from one of the foremost conservative federal judges (and, not incidentally, academic heavy-weight).  There is analogy from patent law and university technology transfer practices, where inventions and discoveries are almost always owned by the institution for which a researcher works.  But there is no “academic exception” to “work for hire” doctrine, leaving faculty and non-faculty researchers and teachers potentially subject to the uncertainties of a fast-changing academic and commercial marketplace.  Academic copyright and research policies have attempted to allay faculty concerns, as have teacher participation in commercial ventures like those described above for Williams and Chicago.

I will write more on this subject shortly.