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Some issues for a company lawyer to keep in mind (DCT notebook)

Author’s note: I’m using this page to collect rough notes on issues that a general counsel likely would want to know about.

Distributor / reseller agreements

See generally this blog posting and this Pillsbury Winthrop memo.

Employment law

Background checks that have disparate impact on minorities, etc., can lead to EEOC troubles  — see this Oct. 2009 Wildman Harrold memo.

Federal-government contractors must use the E-Verify program to confirm their employees’ citizenship- or immigration status.

California employers must maintain copies of certain agreements listed in this article. [Added 2009-10-26]

New hires in New York must be advised in writing of their pay rates and overtime pay — see this Buchanan Ingersoll memo. [Added 2009-10-21]

Monitoring employees’ private MySpace complaint page without authorization leads to liability: See this note.

Noncompetition clauses in employment agreements are almost per se illegal in California — that state’s law prohibits employee noncompetition agreements and penalizes companies that have their employees sign them. See, e.g., Edwards v. Arthur Andersen LLP, No. S147190 (Cal. Aug. 7, 2008) (accessed Aug. 8, 2008).

Noncompetition clauses for key employees might be less vulnerable to invalidation (and might have a greater deterrent effect), if the employer’s remedy were defined as liquidated damages, instead of injunctive relief. This Davis & Gilbert memo describes one case, GFI Brokers LLC v. Santana, No. 1:2006cv03988 (S.D.N.Y. Aug. 13, 2009), in which such a liquidated-damages clause was upheld, in part because the amount of liquidated damages was proportional to the remaining time left on the noncompetition covenant. [Added 2009-10-23]

Overtime pay is regulated by the U.S. Fair Labor Standards Act

Commission agreements: See this article for a useful overview and checklist of issues to consider. [Added 2009-10-26]

E-Verify program for verifying employability

E-Verify basics: The Buchanan Ingersoll firm has posted a frequently-asked-questions page, which addresses when a U.S. Government contractor or subcontractor must use E-Verify to check employability for existing employees. [Added 2009-10-21]

See also the court’s discussion of the executive order that imposed the E-Verify requirements, in Chamber of Commerce v. Napolitano, No. AW-08-3444 (D. Md. Aug. 25, 2009) (granting defendant’s motion for summary judgment).

Fair Labor Standards Act

FLSA primer: See this memo by lawyer Donald Keller of Bricker & Eckler LLP. [Added 2009-10-20]

Settling out: An employer hit with a class action for overtime may be able to deprive the court of jurisdiction by settling for full relief with the named plaintiff(s) — the courts are split on that point. See this Wage &Hour Defense Blog posting. [Added 2009-10-21]


Payment systems (credit cards, PayPal, etc.): See Ian Landsman, What They Never Told You About Handling B2B Transactions, for a readable overview, by a self-funded solo software entrepreneur, of how credit cards, purchase orders, and invoices work for small businesses. He also has a piece from 2005 on starting a micro-ISV.

Government contracting

Federal-government contractors must use the E-Verify program to confirm their employees’ citizenship- or immigration status.


UK libel tourism: See this DLA Piper memo comparing the very different U.S. and U.K. approaches to libel. [Added 2009-10-28]


Corporate Internet commenters must identify their company connections — an FTC rule seems to prohibit corporate “sock puppets“; that is, if a company’s employees post comments about the company’s products or services on blogs, etc., they might be required to disclose their connection with the company. See FTC Guidelines and this Hunton & Williams memo. [Added approx. 2009-10-19]

A company with a Facebook business page might want to include terms of service and DMCA take-down contact information, so that the company can take advantage of the safe-harbor provisions of the Digital Millennium Copyright Act if users should ever post content that infringes a third party’s copyright — see this Dorsey & Whitney memo. [Added 2009-10-19]

Franchise law can trip up companies with marketing programs, because such companies can accidentally become franchisors. That can cause enormous problems, including possible civil- and/or criminal liability. See this memo by Strasburger & Price attorney John Tang for a useful overview. [Added 2009-10-23]

Patent law

N.D. Ill. adopts local rule for patent cases: See this Veder Price summary of the local rule for patent cases adopted by the U.S. District Court for the Northern District of Illinois (which includes Chicago) and the text of the local rule. [Added 2009-10-21]


The FTC Red Flags Rule “requires many businesses and organizations to implement a written Identity Theft Prevention Program to detect the warning signs — or ‘red flags’ — of identity theft in their day-to-day operations.” U.S. Federal Trade Commission, Fighting Fraud with the Red Flags Rule: A How-To Guide for Business. [Added 2009-10-21]

The U.S. Safe Harbor Framework gives U.S. businesses a way to comply with the European Commission’s Directive on Data Protection, which “prohibit[s] the transfer of personal data to non-European Union nations that do not meet the European ‘adequacy’ standard for privacy protection.” U.S. Dept. of Commerce, Welcome to the Safe Harbor. [Added 2009-10-21]

WiFi wireless networks may be vulnerable to cracking due to a recent exploit by a Moscow-based ‘password-recovery’ company. Consequently, companies subject to the FTC Red Flags Rule or the EU Directive on Data Protection may need to consider enhanced security measures such as the use of an encrypted virtual private network (VPN) — see this memo by Foley & Hoag lawyer Gabriel M. Helmer [Added 2009-10-21]

Monitoring employees’ private MySpace complaint page without authorization leads to liability: Two employees of a Houston’s restaurant in New Jersey created a MySpace page as an invitation-only forum for complaining about their employer. The restaurant’s manager heard about the page and used another employee’s access rights to monitor the page — then fired the two employees who created it. Because the other employee testified that she felt she had to give the manager her password, the manager’s actions were held to be without authorization, and therefore to violate the Stored Communications Act. The jury awarded compensatory and punitive damages against the restaurant. See Pietrylo v. Hillstone Restaurant Group d/b/a/ Houston’s, No. 06-5754 (Sept. 25, 2009) (not for publication; denying motion for judgment as a matter of law and motion for new trial). [Added 2009-10-22]

IP addresses might or might not constitute ‘personally identifiable information’: A U.S. district court granted summary judgment that Microsoft did not violate its end user license agreement (EULA) — specifically, the EULA’s statement that Microsoft would not transmit personally-identifiable information from the user’s computer — when the company recorded the user’s IP address. But other courts have ruled differently – see this July 2009 article. [Added 2009-10-28]

Reseller / distribution agreements

For an excellent overview of legal- and business issues associated with reseller and distributor agreements, see this Pillsbury Winthrop memo.

UK issues

Libel tourism: See the discussion under the libel topic.

Web site terms of service and privacy policies

Web site TOS violations are not necessarily criminal: A federal judge overturned the misdemeanor convictions of Lori Drew, who was accused of using a false-name MySpace account to engage in ‘cyber-bullying’ of 13-year-old Megan Meier, which allegedly led to Meier’s suicide. The judge ruled that, if violating a Web site’s terms of service automatically constituted a violation of the Computer Fraud and Abuse Act, then the Act would be unconstitutionally vague. [Added 2009-10-28]