Think Twice Before Firing an Employee for Facebook Posts

Social media continues to play an important role in all aspects of a company’s internal and public communications (see this Doug’s Note).  Companies are utilizing social media to make SEC disclosures, coordinate targeted advertising and marketing campaigns and locate potential employees.  Employees, on the other hand, are using social media to network, seek new jobs and communicate with the people around them. This article discusses two recent National Labor Relations Board (NLRB) cases that provide guidance in determining the extent to which employee speech on social media is protected under the National Labor Relations Act (NLRA). Employees may file certain employment-related charges against their employer with the NLRB, which administers and enforces the NLRA.  The NLRB then investigates whether the charge has any merit.  Oftentimes, the employee and employer settle the dispute during the NLRB’s investigation.  For those charges that are not settled, the NLRB typically conducts a hearing in front of an Administrative Law Judge (ALJ).  Decisions by an ALJ are subject to the NLRB’s Board review, and Board decisions may be appealed to a federal appellate court. Three D, LLC d/b/a Triple Play Sports Bar and Grille In August 2014, the NLRB found that an employer unlawfully discharged two employees who participated in a Facebook discussion criticizing the employer’s handling of state withholding taxes.  See Three D, LLC d/b/a Triple Play Sports Bar and Grille.  The Facebook discussion was ignited by a former employee’s post about owing taxes due to an error in the employer’s calculation of withholding taxes. Two current employees participated in the discussion.  One employee “liked” the former employee’s initial post and the other...

Re-evaluating the Board Evaluation

Board evaluations have long been standard practice among public companies. With shareholder interest in corporate governance practices at an all-time high, the focus on board evaluations is expected to increase.  Given that board evaluations can be an effective tool to improve board and company performance, now may be a good time to review your company’s current board evaluation process and the disclosure of that process. The Evaluation Process A recent study by PwC found that 63% of directors believe self-evaluations are mostly a “check the box” exercise.  This attitude may stem from the fact that NYSE listed companies are required to conduct evaluations on an annual basis.  (See NYSE Rule 303A.09; NASDAQ does not require an annual evaluation.)  That means that a significant number of boards may be missing out on a valuable opportunity to identify issues with and improve on various board functions.  Evaluations may provide helpful information about how the board conducts its meetings and interacts with management, what type of board education programs are needed in the upcoming year and whether the current structure of the board is appropriate in guiding and executing the company’s strategy.  The evaluations may identify small changes, like changing the order of items on board meeting agendas, or more substantive areas for improvement, like a gap in expertise and the need to add a new director. Because the process should fit the board’s culture, there is no one-size-fits-all approach to designing effective board evaluations.  Furthermore, a process designed years ago may no longer fit the company’s current culture and strategic goals.  Therefore, it is necessary to re-evaluate from time to time...

Three New Weapons to Combat Shareholder Litigation

Over the past several years there has been an overwhelming abundance of class action shareholder litigation.  A study by Cornerstone Research found that in 2013 alone, 94% of mergers and acquisitions worth over $100 million were challenged by shareholders.  Many shareholder actions are multi-forum suits where companies are forced to defend against claims in several jurisdictions.  These suits are, of course, expensive, and typically the only winner is the plaintiffs’ attorney.  Recently, courts have been chipping away at aggressive shareholder litigation, and companies now have more options in defending against these suits. Curbing Frivolous Suits With a Fee-Shifting Provision One potential option in combating shareholder litigation would be to enact a fee-shifting bylaw provision.  A fee-shifting provision shifts litigation expenses to a shareholder plaintiff who did not obtain a judgment that substantially achieves (in substance and amount) the full remedy sought. The aim of this provision is to deter shareholder litigation that typically results in significant monetary and other costs to a company by forcing potential plaintiffs to more thoughtfully assess the merits of the suit at the outset. In May, the Delaware Supreme Court in ATP Tour, Inc. v. Deutscher Tennis Bund held that fee-shifting provisions in a corporation’s bylaws are facially valid and enforceable against shareholder plaintiffs under Delaware corporation law.  While facially valid, the enforceability of such provisions “may turn on the circumstances surrounding [the provision’s] adoption and use” and would not be enforceable if it was adopted for an “improper purpose.”  The court did not provide much guidance on what would constitute an “improper purpose,” but it did clarify that an attempt to deter litigation...

How the Payment Systems Revolution Impacts Disclosure

Companies face increasingly higher cybersecurity risks when they gather, store or have access to customer information (look no further than the recent Target breach and countless other data breaches).  As a result, the focus on cybersecurity disclosure has intensified.  One tangentially related topic that hasn’t been discussed and deserves some attention is how the future of money and the revolution occurring in the payment system industry may impact your business and disclosures. Payment Systems in the 21st Century The way people pay for things is changing.  Whether it’s virtual currencies or mobile payment systems, multiple players in the payment industry are competing and advancing a different vision for how people will pay for goods in the future.  For discussion sake, let’s take a look at Bitcoin and Google Wallet. Bitcoin is a virtual currency that can be transferred globally from person to person without a bank or third party intermediary.  Not surprisingly, the fees on a Bitcoin transaction are much lower than using a credit or debit card.  In addition, Bitcoin transactions are irreversible once they are made.  Unlike credit card transactions, where personal information is provided to the merchant, in a Bitcoin transaction an electronic code is generated and no personal information is transmitted.  Accordingly, no personal information can be intercepted or decoded by hackers, and no personal information is stored by the party accepting Bitcoin.  While this level of privacy and protection is welcomed by many, the anonymity of Bitcoin transactions has been seen as one of the major challenges of the currency due to the money laundering and illicit activities that accompany such anonymity.  Other drawbacks...