Hospitality Employers: Prepare for NLRB Social Media Policy Scrutiny

In a recent Law360 article, "NLRB Social Media Push Looms Large for Hospitality Sector" (subscription required), our colleague Mark Trapp comments on the importance for unionized and non-unionized hospitality employers to review their social media policies.

Following is an excerpt:

With the National Labor Relations Board increasingly interjecting into non-union issues, hotels, restaurants and other labor-intensive hospitality companies need to brace for potential claims and tread carefully when crafting social media policies for employees, experts say.

Over the last few years, the NLRB has been extending its reach — traditionally centered on union or collective bargaining matters — to include the actions and speech rights of groups of employees, even when those groups are not unions, according to a report released Wednesday by the the Cornell Institute for Hospitality Labor and Employment Relations. In these actions, the NLRB often targets companies' broad social media policies for limiting the rights of employees to band together over wrongful job conditions, wages or terms, experts say.

"Certainly you want to take a look at your policies for social media, take a look at your handbook ... and take a look at disciplinary policies," said Mark Trapp of Epstein Becker & Green PC. "It used to be that you didn't have to pay attention to that as a non-union employer, but now you do."

Are Employer Social Networking Accounts Protectable Trade Secrets?

By: Kara M. Maciel and Matthew Sorensen

Social media has become an increasingly important tool for businesses to market their products and services. As the use of social media in business continues to grow, companies will face new challenges with respect to the protection of their confidential information and business goodwill, as several recent federal district court decisions demonstrate.  

Christou v. Beatport, LLC (D. Colo. 2012), Ardis Health, LLC v. Nankivell (S.D. N.Y. 2011), and PhoneDog v. Kravitz (N.D. Cal. 2011) each involved former employees who took the login credentials for their employers’ business social media accounts when they left their employment. In each case, the companies alleged that the removal of the login credentials for their social media accounts by their former employees had significant negative consequences on their ability to effectively compete and market their products and services.

Earlier this year, the U.S. District Court for the District of Colorado addressed whether a nightclub owner’s MySpace page and its connections could constitute a protectable trade secret. In Christou v. Beatport, LLC, Bradley Roulier, a former partner in a business that ran two Denver nightclubs kept the login credentials for the clubs’ MySpace pages when he left the partnership to start his own competing nightclub. According to the complaint, the nightclubs’ MySpace pages each had over 10,000 “friends.” After leaving to start his own competing club, Mr. Roulier used the login credentials that he had taken to post updates to his former partner’s MySpace pages promoting his new night club. His former partner then sued him for misappropriation of its trade secrets – namely the login credentials for its MySpace pages and the “friend” connections for those pages. On Mr. Roulier’s motion to dismiss, the court found that the MySpace login credentials and the “friend” connections could constitute protectable trade secrets. The court concluded that the MySpace pages were password protected, that the “friend” connections for the clubs’ MySpace pages were more than just lists of potential customers, they also provided personal information about the “friends” and their preferences, and the clubs’ lists of “friends” could not be duplicated without a substantial amount of effort and expense.

In a similar case, Ardis Health, a former employee effectively froze her former employer out of its business social media websites by taking the login credentials for the accounts and refusing to return them to the former employer. The employee had formerly been responsible for creating and updating the company’s social media websites and was in sole possession of the login credentials for those websites at the time her employment was terminated.  Accordingly, when she refused to return the login credentials after her termination, the employer could no longer access or update its websites. The employer was ultimately able to obtain a preliminary injunction requiring the former employee to return the login credentials for its social media websites based on the theory that the former employee’s unauthorized retention of that information constituted conversion. In finding that the company owned the rights to the login credentials for its social media sites, the court noted that the former employee had entered an agreement in which she had agreed that any work she created or developed during her employment would be the property of the company.

Finally, in PhoneDog, a former employee who had been responsible for establishing and operating a Twitter account for his employer that was designed to increase traffic to his employer’s website kept the login credentials for the account after he terminated his employment with the company, renamed the account, and kept its Twitter following. PhoneDog alleged its Twitter following was the equivalent of a proprietary customer list. PhoneDog also alleged that, by taking the account, the employee effectively decreased the number of visitors to the company’s website and thereby reduced the number of advertisers who were willing to purchase space on its website. On the former employee’s motion to dismiss, the U.S. District Court for the Northern District of California held that the Twitter account, its login credentials, and its followers could potentially constitute protectable trade secrets and that the unauthorized taking of the account and its login credentials constituted misappropriation. 

It should be noted that the courts in both PhoneDog and Christou did not find that the plaintiffs had established that their social media accounts were trade secrets. Rather, the courts simply held that they had alleged sufficient facts to state a claim that those accounts were trade secrets. The question of whether the employers will be able to prove the facts necessary to prevail on their claims was left open and both plaintiffs may very well encounter difficulties in proving the facts necessary to prevail on their trade secrets claims later in their respective cases.

These cases demonstrate the importance of careful planning to protect a company’s social media presence and its business connections. Employers should ensure that they maintain a log of their social media account login credentials and that the log is appropriately updated. Further, companies are well advised to require employees who establish and maintain such accounts on behalf of the company to enter agreements that provide that the accounts and their login credentials are the sole property of the company. Departing employees should also be interviewed in connection with their exit to ensure that all company social media login credentials to which they had access have been returned. Finally, in the event that an employee takes the login credentials for the employer’s social media accounts when he or she leaves the company, it is essential for the employer to take prompt action to recover the information. Delay can result in the loss of legal protections for the accounts and any connections that they hold.

Doing It Right: New Considerations for International Hospitality Groups

By: Jay P. Krupin and Dana Livne

Historically, the United States has continuously attracted international commerce and investment. In recent years, in spite of a challenging economic situation, international hospitality groups continue to seek opportunities in the US for financial growth, promotion, and strategic reasons. When they do so, they must comply with unfamiliar and complex labor and employment laws which are constantly changing. In the US especially, the increasingly litigious environment can affect every step of the enterprise – right from the start. Particularly, in a presidential election year, international hospitality groups that are planning to hire and employ a workforce in the US are advised keep apprised of legal shifts in these three important areas:

Health Care Reform

The Patient Protection and Affordable Care Act, also known as “Health Care Reform,” was enacted into law to extend and amend health insurance coverage to employees in the United States. Earlier this month, the U.S. Supreme Court heard oral arguments on the law’s validity, and a decision is expected in June 2012. Hospitality groups, in particular, will need to plan ahead in light of the decision and prepare to manage significantly increasing costs of coverage.

Management-Labor Relations

In the United States, trade unions have reemerged as a power base to ostensibly represent employees’ interests. The current state of the US economy, concerns about job security, the critical status of pension funds, and recent health care reforms will continue to collectively strengthen the unions’ hands in 2012 and 2013. Unsurprisingly, there have been recent waves of pressure from the National Labor Relations Board (“NLRB”) on employers.

A number of updates in this area will have major implications for hospitality providers in the US, including:

  • New notice posting requirements obliging employers to display posters informing workers of their right to unionize.
  • The appropriate standard to be applied in determining the scope of a bargaining unit is undergoing radical changes.
  • The NLRB amending its rules to make it easier for unions to organize employees through changing its election process.

Social Media

No business sector is immune to the profound impact social media is having on the workplace. Hospitality employers seeking to hire may be tempted to base employment assessments on data attained through social media. However, there is a very thin line that must be carefully navigated when basing employment decisions on information gathered through the use of social media. Any social media policies an employer may wish to enforce on its workforce in the US will also need to be crafted creatively and be cognizant of content which is legally protected “concerted activity.” Such a policy will ensure that seemingly disproportionate social media policies do not result in charges of discrimination on the basis of union membership, while effectively protecting the valid business interests of the employer.

It is no surprise that international hospitality groups can become the target of government scrutiny, especially in the run-up to the Presidential Elections. When setting up operations in a new country, hiring and employing a new workforce is a crucial process. Early planning and preparation will put the employer in a much stronger position to steer these upcoming waves of change and ensure the success of the operation in the US. Doing it right – from the start – will have positive consequences for business productivity and, ultimately, the bottom line.

NLRB Increases Scrutiny of Employer Restrictions on Employee Social Media Usage

By:      Ana S. Salper

No governmental body has been more active in addressing social media’s impact on the workplace than the National Labor Relations Board (“Board”). For both unionized and non-unionized employers, the Board has been aggressively scrutinizing the contours of employer discipline of employees for their activities on social media sites, and has regulated and constricted the scope and breadth of employer social media policies. Following his first report in August 2011, National Labor Relations Board Acting General Counsel Lafe Solomon has now released a second report describing social media cases reviewed by his office.

Solomon’s report covers 14 cases, half of which address issues regarding employer social media policies, the other half of which involve discharges of employees after they posted comments to Facebook. The report underscores two main points:   

1)      Employer social media policies must be narrowly tailored enough so as not to prohibit protected concerted activity under the National Labor Relations Act (the “Act”), such as the discussion of wages or working conditions among employees, and

2)      Mere “gripes” made by an employee on a social media site are generally not protected if they are not made in relation to group activity among employees.  

One of the cases highlighted by the report is of particular relevance to hospitality industry employers.  The employer, a restaurant chain operator, had a section in its employee handbook entitled “Team Member Conduct & Work Rules.” The rules provide that “insubordination or other disrespectful conduct” and “inappropriate conversation” are subject to disciplinary action. The Charging Party was a bartender at one of the employer’s restaurants. The employer hired a new General Manager for the restaurant, who in turn hired a personal friend as a bartender.   The Charging Party and other bartenders immediately began having various problems with the new bartender. One such problem involved the new bartender receiving preferential shifts over the Charging Party, who was the most senior bartender and until then had been able to secure the more profitable weekend shifts based on her seniority. 

A few months after the new bartender began working at the restaurant, the Charging Party learned that the new bartender was serving customers drinks made from a pre-made mix while charging them for drinks made from scratch with more expensive premium liquor. The new bartender was spoken to about this and a note was made in his personnel file. Following this incident, the Charging Party posted various updates on her Facebook page indicating that a coworker was a “cheater” who was “screwing over” the customers, and that dishonest employees and management that “looks the other way” will be the “death of business.” The Charging Party was Facebook “friends” with coworkers, former coworkers, and customers. 

In the days that followed, several coworkers complained to the General Manager about the Charging Party’s Facebook posts, worried that customers would see them. The Employer then discharged the Charging Party for violation of the work rules, specifically for communicating unprofessionally to fellow employees on Facebook. 

In reviewing the case, the Board concluded that the employer’s work rules were unlawfully overbroad because the prohibitions on “disrespectful conduct” and “inappropriate conversations” would reasonably be construed by employees to preclude protected activity under Section 7 of the Act. “Protected concerted activity” is generally found when an employee is engaged in discussions about his or her wages, hours, and terms and conditions of employment with, or on the authority of, other employees, and when such activity is the logical outgrowth of concerns expressed by the employees collectively. The Board upheld the Charging Party’s discharge, however, because it found that her posts on Facebook regarding her fellow bartender’s job performance had only an attenuated connection with terms and conditions of employment.

The case accentuates the line the Board has drawn between: 

1)                          employee protests over quality of service provided by an employer, which are unprotected where such concerns only have a tangential relationship to employee terms and conditions of employment, and

2)                          employee protests addressing the job performance of their coworkers or supervisors that adversely impacts their working conditions, which are protected under the Act.  

If, for example, in this case, the Charging Party had made the posts because she had a reasonable fear that her failure to publicize her coworker’s dishonesty could lead to her own termination, her activity would have been protected. Instead, the Board found that she made the posts because she was upset that he was passing off low-grade drinks as premium drinks and management condoned the action. 

Thus, hospitality employers should be on notice: if you have not done so already, it is time to carefully craft and review your social media policies and any other handbook policy that is broad enough to encompass social media site usage. In addition, be mindful of your disciplinary and discharge decisions based on employee conversations that you may deem inappropriate or unprofessional – for the Board may view them otherwise. 

Top Legal Issues for the Hospitality Industry to Watch in 2012

by:  Matthew Sorensen

 1.      Deadline For Compliance With New ADA Accessibility Rules Approaching:

 On March 15, 2012, hospitality establishments will be required to be in compliance with the standards for accessibility set by the Department of Justice’s final regulations under Title III of the ADA (2010 ADA Standards). The regulations made significant changes to the requirements for accessible facilities, and will require additional training of staff on updated policies and procedures in response to inquiries from guests with disabilities. Among the most significant changes for hospitality businesses are:           

·         New structural and communication-related requirements for automatic teller machines (“ATMs”);

·         Accessible means of entry for pools and spas – for pools, a sloped entry or a pool lift is required for the primary method of entry, and for spas, the means of entry may be a pool lift, transfer wall, or transfer system;

·         At least 60% of public entrances must be accessible as compared with 50% under the former standards;

·         A new requirement to modify hotel policies to ensure that individuals with disabilities can make reservations for accessible guest rooms during the same hours and in the same manner as individuals who do not need accessible rooms;

·         Golf facilities must have either an accessible route or golf cart passages with a minimum width of 48 inches connecting accessible spaces of the golf course.

2.      Tip Credit and Tip Pooling Lawsuits Remain The Lawsuit Du Jour:

 In recent years, the number of individual and collective action lawsuits involving allegations of tip credit and tip-pooling violations by hospitality businesses has significantly increased. Given the ever changing web of state, federal and local laws regarding tip credit and tip pooling arrangements, it is important that hospitality employers with tipped employees periodically audit their pay practices to ensure compliance with all applicable rules. To minimize the risk of tip credit and tip pooling violations employers should ensure that:

·         They inform tipped employees of any tip credit claimed against their wages;

·         Employees report their tips and that proper records of tips are maintained; and

·         Management and other categories of workers who are precluded from participating in tip pools by federal, state or local law do not participate in such pools.

3.      Increase In Organizing Efforts By UNITE HERE:

The NLRB’s new rule amending the procedures for union election cases introduces a number of union-friendly changes to the election process, including the elimination of the right to seek NLRB review of regional directors’ pre-election rulings. These changes increase the risk that unions will seek approval of smaller units for elections that are based on the extent to which employees in such units support union representation. 

In addition, the NLRB has also announced that its new rule requiring employers to post a notice describing employee rights under the NLRA will go into effect on April 30, 2012. The notice has the potential of generating more discussion of unionization among employees as well as more employee and union-initiated representation campaigns. 

It is anticipated that groups like UNITE HERE will likely attempt to capitalize on these recent changes to increase unionization in the hospitality sector.

4.      Social Media Remains A Hot Topic With The NLRB:

As the use of social media has steadily grown among restaurants and hoteliers, so too has the NLRB’s interest in cases involving social media policies and social media-related discipline. While employees do not receive protection under the NLRA merely by posting a work-related complaint on a social media website, under some circumstances employee complaints made using social media may be found to constitute protected concerted activity. 

As such, hospitality employers need to remain cautious when crafting social media policies and any time they contemplate taking adverse action against an employee for social media activity. 

5.      U.S. Supreme Court to Address The Patient Protection and Affordable Care Act (PPACA):

The U.S. Supreme Court is scheduled to address the challenges to the constitutionality of PPACA in 2012 and it is possible that the Court will issue an opinion on the matter before its June break. If the statute, or at least the portion of the statute that applies to employers and insurance companies, is found to be constitutional, hospitality employers with more than 50 employees will be required to provide certain mandated levels of healthcare coverage to all employees who regularly work more than 30 hours per week by 2014, or face penalties. 

Lessons Learned: 

In light of these issues, it is important that hospitality employers take action to evaluate their policies and practices, including those related to pay, social media, employee handbooks, and health insurance to ensure that they are compliant with applicable legal requirements. It is equally important that they plan proactively to address the potential business challenges posed by the NLRB’s new union-friendly election and notice rules and PPACA.