Liability to Employers

by Jeffrey A. Cohen, Cohen & Richardson

Blackberrys, iPhones, Palms, Droids… the list goes on. Smartphones  are becoming a staple in everyday life and in many industries it is virtually expected by your customers that your employees will be able to access their email during the day regardless of whether they are in their office or not. Furthermore, it is often assumed that workers will have access to their email after hours, on weekends, on holidays and even when they are on vacation.

In the world of employment law there was a time when the claims De Jure typically involved issues surrounding work breaks, lunch breaks, travel time and expenses. Increasingly, however, plaintiff’s lawyers are looking at PDA usage as fodder for their latest claims strategy. We see this issue as particularly important for Internet and technology companies to pay special attention to because the level of employee connectivity tends to rank well above other industries.

The issue involves non-exempt, hourly employees and whether you have established a company policy that requires your employees to check their emails and/or respond to them in their off hours. Such a policy could open your company up to liability for this new brand of employment claim. One solution is not issuing PDAs to hourly employees at all. Another might be altering your employment manual to make it clear that checking and/or responding to emails after hours is purely voluntary and is not required by the company.

Regardless, we expect to see new litigation claims presented on this issue and eventually new legislation to deal with the issue.

Copyright (c) 2010 – JACO Product Development LLC – All Rights Reserved.

Jeffrey A. Cohen is the founder of InternetLitigators and a partner in the El Segundo, California office of Cohen & Richardson, LLP. Mr. Cohen can be reached at JCohen [at] InternetLitigators.com. Mr. Cohen’s practice is focused upon the representation of Internet and technology companies. The reader is cautioned that the information contained herein is not legal advice and is not a substitute for legal advice. There is no attorney client relationship created by this information.

The U.S. Court of Appeals threw out the Federal Communications Commission’s 2008 cease and desist order against Comcast on Tuesday, thereby ruling that the FCC does not have the legal authority to enforce Net neutrality regulations on Internet providers.

In August 2008, as a part of their effort to regulate providers and promote Net neutrality, the FCC issued a cease and desist order to stop broadband provider Comcast from favoring certain sites and services over others. Specifically, the FCC order was aimed at Comcast’s 2007 interference with BitTorrent, an online file-sharing service. Comcast had attempted to control BitTorrent’s access to bandwidth, claiming that BitTorrent’s subscribers were using too much bandwidth and subsequently were slowing Internet traffic. The FCC stepped in to prevent Comcast from interfering with the FCC’s Net neutrality policies, doing so by issuing an order forbidding Comcast from blocking these subscribers’ use of bandwidth.

Comcast complied with the order, but then responded by suing the FCC, arguing that the FCC’s order was illegal and that the FCC lacked the authority to enforce such an order in the broadband sector, which had been deregulated by law under President George W. Bush. The FCC maintained, however, that it had the authority under existing law to set certain rules for information services, such as broadband, and that these rules could include Net neutrality rules.

On Tuesday, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the FCC had no such authority to enforce this policy, rejecting the FCC’S reasoning and making future litigation in this area likely.

This ruling has placed a roadblock in front of the FCC’s pending initiative to draft formal Net neutrality rules, which it announced last October. According to the FCC, whose policies are committed to promoting open and affordable broadband to all of the U.S., such rules are necessary to prevent phone and cable companies from restricting online access to users.
The Court stated that the FCC’s regulatory behavior was not backed by Congressional law and that the FCC did not have the power to regulate the neutrality of Internet providers. Judge David Tatel’s Opinion on Petition for Review of an Order of the FCC of April 6, 2010, states that the FCC does not have “authority to regulate an Internet service provider’s network management practices” unless “it demonstrates that its action…is reasonably ancillary to the…effective performance of its statutorily mandated responsibilities.” In this case, the Court has ruled that the FCC’s cease and desist order is does not meet such qualification and is outside the FCC’s legal authority.

This ruling also has an effect on some of the other plans that the FCC has, such as its National Broadband Plan, which it announced last month. This plan, headed by FCC Chairman Julius Genachowski, is intended to make high-speed Internet widely accessible and affordable across the U.S. Actions through which the FCC assumes some level of regulatory power now appear to be under the threat of litigation.

Although this decision has implications on the FCC’s ability to control and enforce Net neutrality, the Opinion issued by Judge Tatel did not contain any assessment of the importance of Net neutrality as a policy. Neither did the Opinion express any judgment or acquittal of Comcast’s interference with broadband use. The ruling was specific to this case, but still set a precedent for future FCC regulation disputes. The Court has found Net neutrality, in this instance, to be unenforceable, at least by the FCC.

Copyright (c) 2010 – JACO Product Development LLC – All Rights Reserved.

Jeffrey A. Cohen is the founder of InternetLitigators and a partner in the El Segundo, California office of Cohen & Richardson, LLP. Mr. Cohen can be reached at JCohen [at] InternetLitigators.com. Mr. Cohen’s practice is focused upon the representation of Internet and technology companies. Miss Pfaff is a Law Clerk for the firm. The reader is cautioned that the information contained herein is not legal advice and is not a substitute for legal advice. There is no attorney client relationship created by this information.

Another factor that can greatly effect your overall tax liability is the allocation of gross revenue between operations that you may have within the City and outside the City. With regard to web hosting, the city may argue that it is the location of your web hosting servers that is determinative and not your sales, customer service or web design services. This is an unpleasant reality currently facing Los Angeles Data Centers. Specifically, the City of Los Angeles has become aggressive not only in increasing its audit percentages but in attempting to reclassify businesses previously accepted as falling within reduced tax classifications. In addition, the City of Los Angeles has become aggressive in expanding the definition of revenue that is earned within the City. For businesses in the City of Los Angeles this can be a shocking combination. There are numerous reports of companies simply leaving the city rather than deal with these reclassifications thereby resulting in what appears to be a net loss to the City as the result of their efforts.

The InternetLitigators team of attorneys recently prevailed against the City in an administrative hearing against just such a claim. Our litigation team successfully argued that web hosting, when combined with the standard web development services provided by most if not all web hosting companies does fall within the definition of a “multimedia business” according to the City of Los Angeles guidelines and historical notes for that exception despite the City’s assertion to the contrary. If the City complies with the ruling of the hearing officer we will successfully have avoided the trouble and expense of litigation against the City for our client.

Bottom Line: In the event of an audit, we recommend that you closely evaluate the purported gross revenue which serves as the basis for any assessment and the methodology used for reaching those figures. We recommend that you evaluate your “out of city” operations and perform your own allocation between “in city” and “out of city”  revenue sources. Finally, we recommend that you closely evaluate your possible entitlement to classification within any of the reduced tax classification categories.  Seek the assistance of a CPA and legal counsel familiar with the city’s administrative procedures and classification guidelines.

The 2009 City of Los Angeles Tax Classification Table can be found here.

Copyright (c) 2010 – JACO Product Development LLC – All Rights Reserved.

Jeffrey A. Cohen is the founder of InternetLitigators and a partner in the El Segundo, California office of Cohen & Richardson, LLP. Mr. Cohen can be reached at JCohen [at] InternetLitigators.com. Mr. Cohen’s practice is focused upon the representation of Internet and technology companies.  The reader is cautioned that the information contained herein is not legal advice and is not a substitute for legal advice. There is no attorney client relationship created by this information.

Increased Complexity in Transactions

The world of Internet content development, marketing, traffic and lead generation is entering its adolescence and as a result deals in these areas are becoming more and more mature and complex. As a result of these changes, our office is seeing a larger than ever increase in the number of unrepresented companies on the opposite side of deals and transactions. This means that these unrepresented parties are being placed at a greater and greater disadvantage.

Read Every Word

We are constantly surprised at how many, thus far, very successful business owners are so willing to simply sign an agreement seemingly without spending the time to have it reviewed by an attorney with their best interests in mind or even apparently reading it themselves. Our advice this month hopefully serves as a reminder more than any earth-shaking new advice. That is that in any business transaction that you enter into, read what you sign carefully before you sign it and ask questions about anything that is not perfectly clear. Where possible, form a relationship with a qualified attorney familiar with the Internet and with your company so that you have efficient and immediate access to someone that can answer your questions and suggest alternatives on a moment’s notice.

Raise only Appropriate Issues

Just as dangerous to themselves is the unrepresented party that makes a far bigger deal out of a term in an agreement than is necessary. Almost as if these individuals feel that they cannot sign a document without making some sort of fuss to make them feel as though they have accomplished something, they argue a point that needs no arguing and wind up signing a document that includes a difference with no distinction from the original. Having business counsel can avoid this situation and the extra expense and delay that arises by wasting everyone’s time – not to mention the actual loss of reputation that is created for these individuals when everyone else realizes what has occurred. The party develops a reputation for being difficult and the changes he or she proposes in the future begin to lack credibility.

At a minimum, read what you are signing and ask questions about the terms that you do not understand. By this we mean read it – not skim it to see if anything jumps out – we mean actually take the time to sit down and read every word. There have been very few agreements that we have ever approved without any change or correction.

Copyright (c) 2009 – InternetLitigators – All Rights Reserved.

Jeffrey A. Cohen is a partner in the El Segundo, California office of Cohen & Richardson, LLP. Mr. Cohen can be reached at JCohen [at] InternetLitigators.com. The reader is cautioned that the information contained herein is not legal advice and is not a substitute for legal advice. There is no attorney client relationship created by this information.