April 25, 2019

Social Media Policies: Permissible Employer Regulation

Joel Jacobson_pictureBy Joel Jacobson

Social media use is rapidly increasing and has become central to the workforce. Employers recognize that public information posted online is useful for monitoring employee activity and the portrayal of the company. However, new technologies result in unintended, legal consequences. Recently, an Applebee’s waitress was terminated after posting a customer’s receipt on reddit and the SEC warned Netflix’s CEO that his Facebook post might trigger securities regulations. Colorado attorneys should pay attention to legal developments within the social media context because the appropriate level of employer regulation of employee social media use remains unsettled.

Many laws are potentially implicated when an employer improperly regulates or misuses information from social networking sites. Notably, Anti-Discrimination laws (ADA, Title VII, ADEA), Stored Communications Act, National Labor Relations Act (protecting concerted activities for the purpose of collective bargaining or other mutual aid or protection), Lawful Off-Duty Conduct, and common law privacy claims should be considered. Recent decisions have targeted social media policies that are wide sweeping and impinge on protected employee action. In fact, rulings by the NLRB led large, publicly traded companies including GM, Target, and Costco to rewrite their social media policies.

The chairman of the NLRB explains that social media is the “new water cooler” and that current government regulation results from “applying traditional rules to new technology.” Application of the traditional rules takes place on a case-by-case basis and the NLRB found it permissible to terminate a single employee whose internet posts harmed the company and had no relation to protected activity. Workers have the right to talk with each other for the goal of improving pay, benefits, and working conditions. As such, social media policies should be revisited to determine whether they are too restrictive. Courts will look to company policies, procedures, and conduct so it is essential that Colorado attorneys help draft guidelines tailored to accomplish a specific, lawful end.

Employers will continue to turn to lawyers for guidance in this developing area of law. To this end, Colorado lawyers should know that employers must not access employee, online information by deceitful means. Also, common law privacy claims can be addressed with a written policy that defeats an employee’s reasonable expectation of privacy. Finally, a savings clause in a social media policy can explicitly state that the policy is not meant to prevent employees from engaging in protected, concerted activity.

Joel Jacobson is a Contracts and Operations Associate with H.B. Stubbs Company, LCC – a national design and fabrication firm headquartered near Detroit, MI for exhibits displayed by technology and automotive companies. He focuses on contracts, employment law, and a variety of non-legal business issues. Joel serves on the Executive Council of the Denver Bar Association Young Lawyers Division and has an interest in topics impacting start-up companies in the Denver entrepreneurial community. He can be reached by email at jmjacobson1@gmail.com or on Twitter @J_m_Jacobson.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

Coworking: A New Means For Startup Real Estate

Joel Jacobson_pictureWhen deciding on commercial real estate, new entrepreneurs and solo attorneys should consider coworking as a viable real estate model. Coworking presents the opportunity for individuals from diverse fields to work daily or monthly in a shared, commercial environment at a reasonable price despite being employed by different industries or companies. Unlike some traditional commercial arrangements, one need not commit to a term of several years. Lawyers should know that coworking is an exciting and attractive real estate arrangement that brings together quality, low cost, and flexible exit options. This is a trend on the rise in Colorado uniting individuals in small businesses.

Recently, I began spending time at one such space in Denver – Creative Density.  This space is not only populated by technology entrepreneurs and free-lance website developers, but also attorneys and writers. At its core, coworking is not only about shared office space, but also about fostering a collaborative community. The less experienced and boot-strapped entrepreneurial client may be best advised to consider real estate that takes into account shared community, price sensitivity, and flexibility surrounding lease terms in the event that the business does not succeed. When asked why attorneys should care about coworking, the owner of Creative Density, Craig Baute said, “When advising clients on starting a business, coworking is an excellent way for them to reduce risk, expenses, and grow their network and skill set. Since it is a flexible option it grows with them and starts at a much lower rate compared to other office solutions for small businesses.”

Further, attorneys starting their own solo practice should consider this type of real estate arrangement for themselves if concerned about location, price-point, or future growth. Coworking is a flexible option that can quickly respond to new law practice dynamics and aid client development along the way. Mr. Baute agrees, noting that “lawyers have been sharing offices for years to lower costs, but this is a way to get to work with people outside of the industry, expand your network, and learn new valuable skills.” Similarly, a recent piece from the Harvard Business Review highlighted an attorney successfully utilizing a coworking arrangement to develop his new company. The attorney founded a business offering a transparent way to disclose legal terms within the social media context and was quite satisfied with coworking because the arrangement presented “ultra-flexibility and low overhead.”

It is important for Colorado attorneys to be aware of the coworking real estate model when advising entrepreneurial clients or considering a solo practice. To understand a client’s real estate desires, a lawyer must assess the client’s financials, business savvy, and likelihood of success. Coworking presents an arrangement that is affordable, permits one to quickly build out a diverse social network, and is flexible. Such a model can potentially lead to new clients, new investors, or new resources to aid in completing work. These characteristics certainly increase the probability of business success. In sum, coworking should be considered because the arrangement hits the mark of affordable pricing and early exit options.

Joel Jacobson is a Contracts and Operations Associate with H.B. Stubbs Company, LCC – a national design and fabrication firm headquartered near Detroit, MI for exhibits displayed by technology and automotive companies. He focuses on contracts, employment law, and a variety of non-legal business issues. Joel serves on the Executive Council of the Denver Bar Association Young Lawyers Division and has an interest in topics impacting start-up companies in the Denver entrepreneurial community. He can be reached by email at jmjacobson1@gmail.com or on Twitter @J_m_Jacobson.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

Crowdfunding: A New Means For Start-up Capital (Part 2 of 2)

This is Part 2 of a two-part series. Click here for Part 1.

On April 5, 2012, President Barack Obama signed The JOBS Act (“Act”) into law and Title III of the Act empowers the SEC to set rules for companies to raise capital through crowdfunding. Crowdfunding will permit entrepreneurs to advertise and seek financing from the general public in relatively small amounts in exchange for an interest in their company. These provisions present great opportunity for new companies and investors alike because start-ups can seek capital from a broad pool of investors and investors can seek financial return through the internet from a company that resonates with them. Permitting a diverse group of unaccredited investors as a shareholder base in a company is a large change in securities regulation.

However, there are significant concerns as to whether the SEC will set rules providing adequate flexibility. Currently, Title III of the Act substantially burdens both issuers and funding portals. Regarding issuers, a sweeping scope of individuals in the company must sacrifice limited liability: directors, partners, principal executive officers, principal financial officers, controller, or any person who offers or sells the security in the offering.  Regarding funding portals, there will be financial costs in providing administrative aid to investors and registering with the SEC. Finally, the language in the Act provides for much disclosure and many regulations that do not significantly depart from current requirements for companies at the IPO stage. For both issuers and funding portals, the regulatory costs may be too great.

Additionally, companies will face uncertainties surrounding later rounds of financing and subsequent restructuring if they decide to crowdfund. It will be vitally important for a company to consider the impact that crowdfunding will have on its projected funding model and its ultimate exit strategy. First, companies should consider whether they plan to seek funding from angel investors, venture capitalists, or other traditional sources because such sources might balk at getting involved with a broad base of unaccredited investors. Second, companies should consider that many restructuring plans require a degree of shareholder approval and such shareholder approval could prove difficult and expensive with a crowdfunded shareholder base. Although speculative, these concerns should be contemplated with each client.

Crowdfunding is an exciting legal development that attorneys should monitor as they advise their business clients. The interest surrounding this funding model is justified because crowdfunding has the potential to change the capital raising landscape for start-up companies overlooked by traditional funding sources. Yet, it remains to be seen whether the SEC will implement rules that address current concerns regarding financial costs and issuer liability. Additionally, companies who seek angel or venture capital funding need to be aware of the pragmatic consequences from accepting funds from the general public. In sum, when the rules are promulgated by the SEC crowdfunding should be considered as a potential funding source for start-up companies, but careful scrutiny should be paid to clients’ future plans.

Joel Jacobson is a Contracts and Operations Associate with H.B. Stubbs Company, LCC – a national design and fabrication firm headquartered near Detroit, MI for exhibits displayed by technology and automotive companies. He focuses on contracts, employment law, and a variety of non-legal business issues. Joel serves on the Executive Council of the Denver Bar Association Young Lawyers Division and has an interest in topics impacting start-up companies in the Denver entrepreneurial community. He can be reached by email at jmjacobson1@gmail.com or on Twitter @J_m_Jacobson.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

Crowdfunding: A New Means For Start-up Capital (Part 1 of 2)

This is the first part of a two-part series. Stay tuned for Part 2.

Between the Colorado Business Law Institute and Denver Startup Week, October was ripe with exciting events for attorneys in Denver interested in the entrepreneurial community. After speaking with attorneys and entrepreneurs alike, it is clear that great interest exists surrounding the forthcoming federal regulations in The JOBS Act (“Act”) pertaining to “crowdfunding.”  Although there is hope that this funding model will be a great source of capital for wanting entrepreneurs, legitimate concerns exist that regulations will be too strict when implemented at the Federal level.  This two-part piece will briefly introduce the idea of crowdfunding, explore how it fits with traditional start-up financing options, and identify potential issues.

Crowdfunding will enable companies to raise capital by seeking funding from a large number of unaccredited investors in relatively small amounts without violating SEC registration and solicitation rules. Title III of the Act specifically permits companies to leverage the internet for this purpose through “funding portals.” At its core, crowdfunding is a simple idea. By way of example, it will enable entrepreneurs from various geographic locations to advertise the efficacy of their start-up entity through social media outlets to individuals in Denver, among other locations, and an interested Denverite could then invest limited funds with that start-up entity. As a result, a wider base of capital will exist for start-up companies to tap into, thereby complementing traditional funding avenues. This is important because less than two percent of start-up companies are ultimately funded by traditional angel investors or venture capitalists.

Crowdfunding rules and regulations are currently being debated and will be issued by the SEC in 2013 – nothing is final yet. As it stands, Title III of the Act will permit participating companies to sell up to $1 million in securities while remaining exempt from the requirements of Section 5 of the Securities Act. In addition to this cap, proposed restrictions on investors will limit crowdfunding investing to an amount tied to their annual income or net worth. Despite these restrictions, this is an exciting shift in the investment paradigm for entrepreneurs because the new rules will remove the strict restrictions on companies advertising and selling securities to unaccredited investors. Instead, companies will be able to solicit investments directly from unaccredited investors through an intermediary funding portal.

Crowdfunding is not a new idea. Rewards-based crowdfunding has been in existence for years without violating SEC rules and is popular for philanthropic and entrepreneurial causes. In this model, individuals invest money with a company or individual, but only as a donation or for some type of reward – there is no expectation of financial profit. Additionally, some companies are beginning to use existing state securities laws which exist in many states, including Colorado, to setup investment crowdfunding platforms that carefully work within the federal framework. This is a detailed topic beyond the scope of this entry.

This is Part 1 of a two-part series. Stay tuned for Part 2.

Joel Jacobson is a Contracts and Operations Associate with H.B. Stubbs Company, LCC – a national design and fabrication firm headquartered near Detroit, MI for exhibits displayed by technology and automotive companies. He focuses on contracts, employment law, and a variety of non-legal business issues. Joel serves on the Executive Council of the Denver Bar Association Young Lawyers Division and has an interest in topics impacting start-up companies in the Denver entrepreneurial community. He can be reached by email at jmjacobson1@gmail.com or on Twitter @J_m_Jacobson.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.